| Wed 8 Oct 2003, 16:42 | | THE ACQUISITION BY CAPITAL ALLIANCE HOLDINGS |
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CAPITAL ALLIANCE HOLDINGS LIMITED - THE ACQUISITION BY CAPITAL ALLIANCE HOLDINGS
(AUSTRALIA) (PROPRIETARY) LIMITED ("CAHA") OF 100% OF THE SHARES AND CLAIMS IN
LUMLEY LIFE LIMITED ("LUMLEY LIFE")
CAPITAL ALLIANCE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1952/000756/06)
Share code: CPT
ISIN: ZAE 000011904
("Capital Alliance")
THE ACQUISITION BY CAPITAL ALLIANCE HOLDINGS (AUSTRALIA) (PROPRIETARY) LIMITED
("CAHA") OF 100% OF THE SHARES AND CLAIMS IN LUMLEY LIFE LIMITED ("LUMLEY LIFE")
1. INTRODUCTION
Further to the cautionary announcement dated 30 September 2003 and pursuant
to CAH"s stated strategy to increase its activities in the Australian life
insurance market, Investec Bank Limited is authorised to announce that
CAH"s controlled entity in Australia, CAHA, has concluded an agreement with
Lumley Insurance Group Limited for the acquisition, subject to the
conditions precedent set out in paragraph 2.4 below, of 100% of the shares
and claims in Lumley Life for a total purchase consideration of A$83.75
million (approximately R402 million) ("the acquisition"). It is anticipated
that CAH"s effective interest in the insurance operations of CAHA will
increase from 39% to 67% subsequent to the conclusion of a rights issue by
CAHA.
2. THE ACQUISITION
2.1 Introduction
Lumley Life is a specialist risk insurer operating in Australia and
New Zealand and operates in the same market as PrefSure Life Limited
("PrefSure Life"), a subsidiary of CAHA. Lumley Life was ultimately
owned by Edward Lumley Holdings Limited ("ELH"). In July 2003
Wesfarmers Limited ("Wesfarmers"), a large Australian diversified
conglomerate, entered into an agreement to acquire the shares in ELH.
That agreement contemplated the sale of Lumley Life, prior to or
following the acquisition of ELH. In August, Wesfarmers announced that
ELH had begun a sale process for Lumley Life.
Prefsure Life is a specialist risk insurer operating in Australia.
2.2 Rationale For The Acquisition
CAHA has concluded the acquisition primarily as:
* it provides an ideal platform for CAH to significantly increase
its presence in the Australian life insurance market;
* the integration of Prefsure Life and Lumley Life will yield cost
reductions, creating increased profits and embedded value; and
* it will boost CAH"s capability and credibility in its focused
third party administration markets.
2.3 Purchase Consideration For The Acquisition
The purchase consideration for the acquisition is A$83.75 million
(approximately R402 million), which equates to the embedded value of
Lumley Life. The purchase consideration is payable by CAHA in cash
upon the successful implementation of the acquisition.
CAHA will fund the acquisition as follows:
* a rights offer raising A$56 million (approximately R269 million)
from CAH and A$9 million (approximately R43 million) from other
CAHA shareholders; and
* the balance of A$20 million (approximately R96 million) from
internal cash resources.
2.4 Conditions Precedent
The acquisition is conditional on the fulfilment of the following
conditions precedent, inter alia:
a) the obtaining of the relevant regulatory approvals in Australia,
including the approval of the Australian Prudential Regulation
Authority and the Foreign Investment Review Board ; and
b) approval of the South African Reserve Bank and the JSE Securities
Exchange South Africa.
These approvals are required prior to the implementation of the
acquisition.
2.5 Financial Effects Of The Acquisition
The table below sets out the financial effects of the acquisition on a
CAH shareholder on the basis that the acquisition was effective from 1
April 2002 to 31 March 2003 for the calculation of the attributable
earnings per share and headline earnings per share and was effective
on 31 March 2003 for the calculation of net asset value per share:
Before Adjustments After Change
%
Attributable earnings 264,3 0,0 264,3 0,00
per share (cents) (1)
(2)
Headline earnings per 288,5 0,1 288,6 0,03
share (cents)(1) (2)
Net asset value per 9,89 -1,23 8,66 -12,44
share (Rand) (1) (2)
Value of in-force per 3,54 1,24 4,78 35,03
share (Rand) (3)
Embedded value per 13,43 0,01 13,44 0,07
share (Rand) (3)
Notes:
1. Assumes the CAH effective share of profits of the acquired operations for
the period 1 July 2002 to 30 June 2003, an exchange rate of R4.80 = A$1.00
and loss of after tax interest at 10% on the rights consideration for the
full period from 1 April 2002 to 31 March 2003.
2. Assumes that CAH holds an effective interest of 67% in the acquired
operations post the rights issue and that the amount paid in respect of the
rights issue is R268.8m (A$56m).
3. The figures above in respect of value of in force per share and embedded
value per share do not take into account the anticipated uplift in the
value of in force and embedded value per share resulting from the
integration of Lumley Life and PrefSure Life.
The effective date of the acquisition will be 1 July 2003.
3. DOCUMENTATION
A circular on the acquisition will be posted to CAH shareholders in due
course.
Sandton
8 October 2003
Lexicon Partners Limited, the London based corporate finance advisory business,
acted for the shareholders of Edward Lumley Holdings Limited and Lumley
Insurance Group Limited in relation to the sale of Lumley Life Limited. For
further information please contact Stuart Britton on +44 207 743 6330.
Merchant Bank: Sponsor:
Investec Corporate Finance Investec Bank Limited
Date: 08/10/2003 04:29:24 PM Produced by the JSE SENS Department
