| Wed 6 Aug 2003, 16:13 | | Firm offer by Ellerines to acquire the entire issu |
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Ellerine Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1968/013402/06)
Share code: ELH ISIN: ZAE000022752
("Ellerines")
Wetherlys Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/016455/06)
Share code: WET ISIN: ZAE000013827
("Wetherlys")
Firm offer by Ellerines to acquire the entire issued share capital of Wetherlys
1. Introduction
Further to the announcements dated 23 July 2003 and the successful completion of
the due diligence review, shareholders of Ellerines and Wetherlys are advised
that Ellerines has submitted a firm offer ("the Offer") to the board of
directors of Wetherlys ("Wetherlys Board") to acquire the entire issued share
capital of Wetherlys ("the acquisition") for a cash consideration of 390 cents
per share ("consideration"), amounting to a total consideration of approximately
R507 million ("total consideration").
The acquisition will be implemented by way of a scheme of arrangement ("the
scheme") in terms of section 311 of the Companies Act No 61 of 1973, as amended
("the Act") to be proposed by Ellerines between Wetherlys and all of its
shareholders ("scheme members").
2. Opinion and recommendations
Standard Corporate and Merchant Bank, a division of The Standard Bank of South
Africa Limited ("SCMB"), in its capacity as merchant bank and independent
financial adviser to Wetherlys, has advised an independent committee of the
Wetherlys Board ("the independent committee") that although the consideration of
390 cents per share does not necessarily represent the full long-term potential
value of Wetherlys, SCMB is of the opinion that the Offer is reasonable. SCMB
recommends that the Wetherlys Board should advise the shareholders of Wetherlys
to vote in favour of the scheme. Full details of SCMB"s opinion will be set out
in the circular to be posted to the shareholders of Wetherlys on the date set
out in paragraph 7 below.
The independent committee is in agreement with the conclusion of SCMB as set out
in the preceding paragraph. Taking into cognisance that the consideration,
being a material premium to the market price, is reasonable with due regard to
market conditions, the Wetherlys Board, on the advice of SCMB and the
independent committee, recommends that shareholders of Wetherlys vote in favour
of the scheme.
3. Issue of shares to Wetherlys management
Ellerines and three key members of Wetherlys management, being Barry van der
Merwe, James Smith and Nick Davies ("key management"), have agreed that,
immediately after implementation of the scheme, key management will subscribe
for 2 872 000 new shares in Ellerines at a price of 2303 cents per Ellerines
share, being the average closing price of the Ellerines share over the 10 days
prior to 23 July 2003 ("share issue").
4. Pro forma financial effects
The pro forma financial effects have been prepared for illustrative
purposes only, to provide information about how the acquisition and share issue
(collectively "the transaction") might have affected the financial information
presented and, because of their nature, may not give a true reflection of
Ellerines" and Wetherlys" financial position.
4.1 Financial effects on Ellerines shareholders
The table below sets out the illustrative pro forma financial effects of the
transaction on Ellerines shareholders based on interim financial information and
assuming that the transaction had been concluded for income statement purposes
on 1 September 2002 and for balance sheet purposes on 28 February 2003.
Before the After the % After the Cumulative
acquisition acquisition change share issue % change
(1) and
acquisition
Basic earnings 165.0 158.7 -3.8% 156.7 -5.0%
per share (cents) (2,4) (6)
Headline earnings 162.4 174.7 7.6% 172.1 6.0%
per share (cents) (2,4) (6)
Net asset value 2023 2023 - 2033 0.5%
per share (cents) (3,5) (7)
Net tangible 2023 1649 -18.5% 1673 -17.3%
asset value per (3,5) (7)
share (cents)
Number of shares 73805 73805 - 76677 3.89%
in issue (000)
Notes:
(1.) The "Before the acquisition" financial information has been extracted,
without adjustment, from the unaudited interim results of Ellerines for the six
months ended 28 February 2003.
(2.) The basic and headline earnings per share calculations have been based on
the assumption that the acquisition was implemented on 1 September 2002 and that
it was effective for the six months ended 28 February 2003.
(3.) The net asset value and net tangible asset value per share calculations
have been based on the assumption that the acquisition was implemented on 28
February 2003.
(4.) Basic earnings per share have been adjusted to include 100% of the
attributable profit of Wetherlys for the six months ended 28 February 2003, the
amortisation of the goodwill as calculated at 28 February 2003 (over 10 years)
arising on the acquisition, the interest paid on borrowings of R459 million,
assuming an after tax interest rate of 9.1% per annum, and a decrease in
interest earned, at an after tax rate of 8.1% per annum, as a result of the
utilisation of R48 million of Ellerines" cash and cash equivalents to fund the
acquisition. Headline earnings per share exclude the amortisation of goodwill
arising on the acquisition.
(5.) Net asset value and net tangible asset value per share have been adjusted
to include 100% of Wetherlys" net assets and the payment of the total
consideration amounting to approximately R507 million. Net asset value per
share has been further adjusted to include the goodwill of R275 million arising
on the acquisition.
(6.) The basic and headline earnings per share calculations have been based on
the assumption that the share issue was implemented on 1 September 2002 and that
it was effective for the six months ended 28 February 2003. Basic and headline
earnings per share have been adjusted to include the reduction in interest paid,
assuming an after tax interest rate of 9.1% per annum, as a result of the
utilisation of the share issue proceeds of R66 million to reduce the borrowings
and the new weighted average number of shares in issue of 76 677 200.
(7.) The net asset value and net tangible asset value per share calculations
have been based on the assumption that the share issue was implemented on 28
February 2003, the share issue proceeds being fully utilised to reduce
borrowings by R66 million and the new weighted average number of shares in issue
of 76 677 200.
4.2 Financial effects on Wetherlys shareholders
The table below sets out the illustrative pro forma financial effects of the
scheme on Wetherlys" shareholders assuming that the scheme had been concluded
for income statement purposes on 1 March 2002 and for balance sheet purposes on
28 February 2003:
Before After % change
the the
scheme scheme
(cents (cents
per per
share) share)
Market value per share (1) 281 390 38,8%
30-day volume weighted
average market value per
share (2) 282 390 38,3%
Earnings per share and
headline earnings per share
for the year ended 28
February 2003 (3) 41 21 -48,8%
Cash return to shareholders
(4) 9 21 133,3%
Net tangible asset value
per share as at 28 February
2003 (5) 178 390 119,1%
Notes:
(1). The "Before the scheme" column reflects the closing JSE Securities Exchange
South Africa ("JSE") market value per Wetherlys share on 2 July 2003, being the
day immediately preceding publication of Wetherlys first cautionary
announcement. The "After the scheme" column shows the consideration to be
received per Wetherlys share.
(2). The "Before the scheme" column reflects the 30 day volume weighted average
JSE market value per Wetherlys share calculated for the 30 days preceding 3 July
2003, being the day of publication of Wetherlys first cautionary announcement.
The "After the scheme" column shows the consideration to be received per
Wetherlys share.
(3). The "Before the scheme" column reflects the audited earnings and headline
earnings per share for the year ended 28 February 2003. The "After the scheme"
column shows the after tax interest income that a Wetherlys shareholder would
have earned had the consideration to be received per Wetherlys share been
invested at an after tax 12 month fixed deposit interest rate of approximately
5.5% per annum.
(4). The "Before the scheme" column reflects the dividend declared per share for
the year ended 28 February 2003. The "After the scheme" column shows the after
tax interest income that a Wetherlys shareholder would have earned had the
consideration to be received per Wetherlys share been invested at an after tax
12 month fixed deposit interest rate of approximately 5.5% per annum.
(5). The "Before the scheme" column reflects the audited net tangible asset
value per share at 28 February 2003. The "After the scheme" column shows the
consideration to be received per Wetherlys share.
5. Conditions precedent to the acquisition
The acquisition remains subject to the fulfilment, by no later than Wednesday,
31 December 2003 (or such later date as may be mutually agreed by Ellerines and
Wetherlys), of the following conditions precedent:
- the approval of the acquisition by the shareholders of Ellerines in general
meeting;
- the sanctioning of the acquisition by all regulatory authorities if and to the
extent necessary, including those of the South African Reserve Bank, the
Securities Regulation Panel ("SRP"), the JSE and the competition authorities;
- the approval of the scheme by a majority representing not less than 75% of the
votes exercisable by scheme members present and voting either in person or by
proxy at a meeting of scheme members;
- the High Court of South Africa sanctioning the scheme in terms of the Act; and
a certified copy of the Order of Court sanctioning the scheme being registered
by the Registrar of Companies in terms of the Act.
6. SRP confirmation
The SRP has received confirmation from Nedbank Corporate, a division of Nedbank
Limited, that Ellerines has sufficient resources to satisfy the total
consideration.
7. Further announcement and documentation
A further announcement setting out the salient dates of the scheme will be made
on or about Thursday, 4 September 2003.
A circular containing full details of the transaction and a notice of general
meeting will be posted to the shareholders of Ellerines and documentation
containing full details of the scheme and a notice of scheme meeting will be
posted to the shareholders of Wetherlys on or about Thursday, 4 September 2003.
Johannesburg
6 August 2003
Investment bank and sponsor to Ellerines
Nedbank Corporate
Attorneys to Ellerines
Cliffe Dekker
Reporting accountants to Ellerines
Grant Thornton Kessel Feinstein
Merchant Bank and independent financial adviser to Wetherlys
SCMB
Sponsor to Wetherlys
Nedbank Corporate
Joint legal advisers to Wetherlys
Moss Morris Derek H Rabin
Reporting accountants to Wetherlys
Fisher Hoffman PKF
Date: 06/08/2003 03:49:26 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
