| Fri 29 Aug 2003, 8:25 | | Merger Of Avasa And African Harvest Capital Holdi |
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AVASA - Merger Of Avasa And African Harvest Capital Holdings (PTY)LTD
AVASA HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/013637/06)
Share Code: AVA ISIN: ZAE000040622
("AVASA")
MERGER OF AVASA AND AFRICAN HARVEST CAPITAL HOLDINGS (PTY) LTD THROUGH THE
ACQUISITION BY AVASA OF THE SHARES IN AND CLAIMS AGAINST AFRICAN HARVEST CAPITAL
HOLDINGS (PTY) LTD ("AHC")
1. Introduction
Ernst & Young Sponsors (Pty) Ltd is authorised to announce that further to the
cautionary announcement of 7 August 2003, AVASA has entered into an agreement
with inter alia, Metallon Capital (Pty) Ltd and certain key executives of the
AHC management team ("the sellers") in terms of which AVASA has acquired all the
shares in and claims against AHC with effect from 1 October 2003.
The purchase consideration is an amount of R121 957 500 which will be settled by
way of the issue of 871 125 000 shares in AVASA at an issue price of 14 cents
per share.
2. Background to and rationale for the merger
In September 2002 African Harvest (Pty) Ltd acquired the operating subsidiaries
and certain assets from the then listed African Harvest Limited for R324
million. The operating subsidiaries acquired were African Harvest Fund Managers
Holdings (Pty) Ltd ("AHFM") and AHC.
AHC is the investment banking and corporate advisory arm within the African
Harvest Group. Its activities include corporate finance , structured solutions,
stockbroking and principal investing.
AVASA"s directors are of the view that the merger of AVASA and AHC will
strengthen the asset base of AVASA as the new entity will have three significant
investments namely Sage, Airports Company South Africa Ltd and Uthingo
Management Ltd, which manages South Africa"s national lottery. AVASA will
benefit from significantly enhanced cash resources as a result of the merger and
will thus be better positioned to follow its activist investment strategy.
The merger is also in line with AHC"s strategy of positioning itself as a
dominant financial services player within selected markets. Its existing
securities, advisory and property activities will be further complemented by the
proven investment banking capabilities within AVASA. This will enhance AHC"s
service offering to its clientele while improving its access to high value deal
flow.
Furthermore, AVASA"s status as an empowerment company will be strengthened with
its empowerment shareholding being in excess of 60% as a result of the merger.
3. Terms of the proposed merger
The proposed merger is to be implemented by way of the acquisition by AVASA of
the entire issued share capital of and all shareholder claims against AHC from
the sellers.
The purchase price is to be settled through the issue to the sellers of 871 125
000 new AVASA shares. The effect of such issue will be that existing AVASA
shareholders and sellers will respectively hold 40% and 60% of the issued share
capital in AVASA.
The effective date for the proposed merger is 1 October 2003.
4. Recommendations and undertakings
The directors of AVASA have considered the terms and conditions of the agreement
and are of the unanimous opinion that such terms and conditions are fair and
reasonable to AVASA shareholders and accordingly they recommend that AVASA
shareholders vote in favour of the resolutions required to implement the
proposed transaction at the AVASA general meeting which will be convened for
this purpose.
The directors of AVASA intend to vote all shares beneficially owned by them or
under their control, in favour of the resolutions necessary to implement the
proposed transaction.
5. Board of directors
The board will continue to comprise those directors that are currently on the
existing board, including Brian Myerson and Julian Treger as joint chairmen,
Andrew Bonamour as Chief Investment Officer, with the additions of Ethan Dube
and Mark Anderson who are currently directors of AHC. A representative of
Metallon Capital (Pty) Ltd will also be appointed to the board. A reconstituted
board will be announced in due course.
6. Pro forma financial effects
The financial effects of the merger of AHC on AVASA"s published financial
interim results for the six months ended 28 February 2003 are set out in the
table below.
Audited Pro forma After the Change (%)
interim results as merger with
results as at 28 AHC(3)
at 28 February (cents)
February 2003(2)
2003(1) (cents)
(cents)
(Loss) / (0.82) (0.54) 0.40 174%
Earnings per
ordinary share
Headline (0.82) (0.54) 0.40 174%
(Loss)/Earning
s per ordinary
share
Net asset 2.43 3.89 11.21 188%
value per
ordinary share
Tangible net 2.43 3.89 11.21 188%
asset value
per ordinary
share
Number of 505 000 580 750 1 451 875 150%
ordinary
shares used to
calculate
tangible net
asset value
per share
(`000)
The table has been prepared on the following basis:
1. As extracted from the published audited interim results of AVASA for the
six month period ended 28 February 2003.
2. The "pro forma" results take into account the issue of 75.8 million shares
in AVASA following the general issue of shares for cash as announced in the
press on 25 July 2003. The effect of that issue on earnings and headline
earnings per share has been calculated on the assumption that the new AVASA
shares were issued on 1 September 2002 (being the first day of AVASA"s last
reporting period). It has been further assumed that the net proceeds of that
issue were invested in an interest bearing account at an after tax rate of 8.4%
for the entire six month period ended 28 February 2003;
3. The "After the merger with AHC" column takes into account the operating
results of the AHC group for the five month period ended 28 February 2003 and
one month"s apportioned results from the audited accounts for the financial year
ended 30 September 2002. AHC"s year end is 30 September. The value of net assets
attributable to AHC is approximately R122 million. The profit attributable to
AHC is R7,3 million.
7. Suspensive Conditions
The proposed merger is subject to, inter alia, the following suspensive
conditions being fulfilled:
7.1 the AHC group being restructured in such a manner as may be
satisfactory to AVASA;
7.2 the granting of all regulatory approvals that may be required
including, inter alia, the JSE Securities Exchange ("JSE"), the Securities
Regulation Panel ("SRP"), the Competition Commission and specifically including
the granting of a dispensation by the SRP to waive any requirement for a
mandatory offer to be made to minority shareholders following appropriate
approval of such by the majority of independent shareholders of AVASA within the
meaning of Rule 8.7 of the Code;
7.3 the JSE granting approval for the listing of the consideration shares;
and
7.4 the approval of the proposed merger and the issue of the consideration
shares by the requisite majority of AVASA shareholders in general meeting.
8. Warranties and restrictions on trading of shares
The sellers have provided comprehensive warranties that are usual for a
transaction of this nature. In addition AVASA and / or AVSA Management Limited
have provided certain warranties to the sellers, as the sellers will be
acquiring a material shareholding in AVASA.
The parties have agreed that the consideration shares and those shares held by
AVSA Management Limited will be pledged as security for the warranties ("the
pledged shares").
Furthermore, only 25% of the pledged shares may be sold or disposed of after the
first anniversary of the agreement becoming unconditional ("the closing date").
Thereafter, the pledged shares may only be sold or disposed of such that not
more than:-
25% of the pledged shares are sold before the second anniversary of the closing
date; and
50% of the pledged shares are sold before the third anniversary of the closing
date.
Therafter, the sellers have agreed that any sale of consideration shares will be
conducted by the relevant seller in a systematic and co-ordinated manner after
consultation with AVASA.
9. Withdrawal of cautionary announcement and publication of circular
AVASA shareholders are advised that as a result of this announcement, the
cautionary announcement is now withdrawn.
A circular including full details of the transaction, revised listings
particulars and a notice convening the requisite AVASA general meeting will be
posted to shareholders in due course.
AVASA will make a further announcement to advise its shareholders once the
suspensive conditions referred to in paragraph 7 above have all been fulfilled
or waived, as appropriate.
The proposed merger will be considered a reverse take-over in accordance with
Rule 9.28 of the JSE"s listings requirements. Shareholders should therefore note
that the continued listing of AVASA will be subject to the JSE"s approval
thereof as if it were a new applicant.
Sandton
28 August 2003
Corporate Advisor to Metallon Capital (Pty) Ltd and key executives
African Harvest Capital (Pty) Ltd
(Registration number 1999/001469/07)
Legal advisors to AVASA
Read Hope Phillips attorneys
Sponsor
Ernst and Young Sponsors (Pty) Ltd
(Registration number 2000/031843/07)
The parties to the agreement are African Harvest (Pty) Ltd, AVASA Holdings
Limited, Metallon Capital (Pty) Ltd, AVSA Management Ltd, Ethan Gilbert Dube,
Butana Mangaliso Khoza, Nkosi-Yawo Gugushe and Neil Mark Anderson.
Date: 29/08/2003 07:49:12 AM
Produced by the JSE SENS Department
