| Fri 17 Oct 2003, 9:15 | | Company Announcement and withdrawal of cautionary |
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NAIL - Company Announcement and withdrawal of cautionary
NEW AFRICA INVESTMENTS LIMITED
(Registration number 1993/002467/06)
Share codes: NAI and NAN
ISIN: ZAE00033338 and ZAE00033346
("NAIL" or "the Company")
1. INTRODUCTION
1.1 The independent board of directors of NAIL (being the directors of NAIL
tasked with evaluating the various bids received by NAIL (the "independent
directors")) today approved a circular for release, which will be posted to
shareholders on Friday, 17 October 2003, (the "NAIL board circular") in
accordance with their obligations in terms of the Securities Regulation Code on
Takeovers and Mergers ("the Code"). The NAIL board circular contains amongst
other requirements of the Code, the independent directors" views on the offer
(the "Tiso offer") made by the consortium comprising Multidirect Investments 180
(Proprietary) Limited ("Tiso"), Safika Holdings (Proprietary) Limited
("Safika"), Newshelf 730 (Proprietary) Limited (to be renamed Capricorn Capital
Partners Holding Company (Proprietary) Limited) ("Capricorn"), Investec Bank
Limited ("Investec") and Mineworkers Investment Company (Proprietary) Limited
("MIC") ("the Tiso consortium") as contained in the circular issued by the Tiso
consortium on 2 October 2003 (the "Tiso circular").
1.2 The purpose of this announcement is to:
1.2.1 provide NAIL shareholders ("shareholders") with summary views of the
independent directors on the Tiso offer as well as the status of the offer ("the
Kagiso offer") made by a consortium comprising Kagiso Media Limited, Johnnic
Communications Limited and Caxton and CTP Publishers and Printers Limited (the
"Kagiso consortium"); and
1.2.2 make known to shareholders the substance of the advice given to the
independent directors by its external independent advisors in relation to the
Tiso offer.
1.3 The contents of this announcement provide a summary of the matters
contained in the NAIL board circular and shareholders should read that circular
in full for a proper and complete understanding thereof. Copies of the NAIL
board circular can be collected at the registered office of NAIL at 1st Floor,
Fulham House, 20 Georgian Crescent, Bryanston, South Africa, 2194, during
business hours from Monday, 20 October 2003.
2. BACKGROUND
2.1 On 28 May 2003, it was announced on SENS that the board of NAIL had
mandated a sub-committee of the board to engage in a formal process with a view
to procuring acquisition bids or offers to merge from interested parties ("the
bid process").
2.2 The sub-committee"s mandate is to oversee the entire bid process and make
recommendations to the independent directors as to appropriate courses of action
in this regard. The sub-committee of the board consists of T Curtis (chairman
of the sub-committee), A Mabogoane, J Mdlalose and G Williams.
2.3 On 24 July 2003, NAIL announced that it had received, outside of the bid
process, an unsolicited notification of a firm intention to make an offer for
NAIL shares for a consideration of R9,00 per share from a consortium comprising
Tiso, Safika, Investec and MIC.
2.4 Following the 24 July 2003 announcement, it became evident that, insofar as
the bid process was concerned, certain board members were either conflicted or
could become conflicted at a later stage and would therefore not be seen as
being independent when considering the sub-committee"s recommendations. As a
result, the following members of the board recused themselves from attending
board and sub-committee discussions concerning the bid process; S Macozoma, G
Chadwick, L Mojela, M Ngoasheng, G Serobe and G Snelgar. The remainder of the
board, being R Kevan, K Setzin, A Mabogoane, T Curtis, M Katz, J Mdlalose and G
Williams, comprise the independent directors, as defined.
2.5 On 17 September 2003, NAIL announced that it had received a letter from the
then Tiso consortium indicating that, following the successful completion of the
due diligence exercise in relation to NAIL, the offer consideration contained in
the original firm intention would be increased from R9,00 to R10,50.
2.6 On 22 September 2003, NAIL announced that it had concluded deliberations
around the bid process and arising therefrom had received and, subject inter
alia to the obtaining of the requisite shareholder approval, had accepted the
Kagiso offer.
2.7 At the time that the independent directors made the decision to support the
Kagiso offer, no reliable information was available concerning the speed of
payment incorporated in the Tiso offer or NAIL"s controlling shareholder"s,
Phaphama Holdings (Propriety) Ltd ("Phaphama"), position with respect to the
Kagiso offer.
2.8 On 2 October 2003, the Tiso consortium announced that it had made a
conditional offer to acquire all or any of the issued shares of NAIL, other than
the NAIL shares held by Investec and Safika. Initially, the Tiso offer was
conditional on an acquisition by the Tiso consortium pursuant to the Tiso offer
of so many NAIL "N" ordinary shares as would, when added to the NAIL "N"
ordinary shares held directly by the Tiso consortium members, exceed 50% of the
NAIL "N" ordinary shares in issue. The Tiso consortium subsequently announced on
3 October 2003 that this condition has been fulfilled and, as this was the only
condition precedent to the Tiso offer, the Tiso offer is accordingly
unconditional.
2.9 The Tiso offer is a revision of the original firm intention of the Tiso
consortium referred to above and is different to this original firm intention in
the following key respects:
2.9.1. the Tiso offer is stated to be no longer conditional upon approval by
regulatory authorities, including the Competition Commission.
2.9.2 the Tiso offer is no longer conditional upon a minimum acceptance
level by shareholders and therefore gives those shareholders who elect not to
accept the offer the right to remain as shareholders of NAIL and to participate
in the benefits and risks arising from the continued operations of NAIL,
including the implementation of the future plans for NAIL which are more fully
described in paragraphs 4.7 and 8 of the Tiso circular.
2.9.3 the Tiso offer is supported by Phaphama and Phaphama has undertaken
not to accept the Tiso offer in respect of the ordinary shares held by it
constituting 52.5% of the ordinary share capital of NAIL unless, inter alia, a
subsequent bid approved or recommended by the board of NAIL is made (whether for
the shares in or assets of NAIL). Furthermore Phaphama has undertaken to vote
against the Kagiso consortium"s offer; and
2.9.4 the Tiso consortium"s offer was extended to include Capricorn, which
is related to Hollard Holdings (Pty) Ltd and its subsidiaries, a significant
shareholder in NAIL. Investec and Safika decreased their respective interests
in the Tiso consortium to accommodate the entry of Capricorn.
2.10 Subsequent to the issue of the Tiso offer, the Kagiso consortium brought an
urgent application before the Competition Tribunal seeking, inter alia, a series
of orders whose purpose was to interdict the Tiso consortium from further
implementing the Tiso offer. The basis of the application was that the Tiso
offer constituted a scheme by the Tiso consortium to implement a merger with
NAIL and that such scheme is unlawful because mergers may not be implemented
until they have been approved by the relevant Competition authority. The Tiso
consortium denied that its scheme constituted a merger and hence alleged that it
was under no obligation to notify the relevant Competition authorities. The
Competition Tribunal, in a judgment delivered on 13 October 2003, dismissed the
Kagiso consortium"s application for urgent relief on the basis inter alia that
the Tiso consortium had, as at the date of the application, effectively acquired
81.9% of the "N" ordinary shares in NAIL and 31.8% of the ordinary shares in
NAIL and accordingly that it was too late to grant the relief sought.
Accordingly, NAIL shareholders who accept the Tiso offer will not be constrained
from receiving the consideration for their NAIL shares within the period set out
in the Tiso circular subject to what is stated in 0 below. Shareholders are also
referred to paragraph 0 below where certain consequences of the Competition
Tribunal"s ruling in this regard are set out.
3. STATUS OF THE KAGISO OFFER
3.1 The objective of the Kagiso offer was to provide shareholders with
approximately R7.60 per share (based on the closing prices of NAIL"s listed
investments at close of trade on Monday, 13 October 2003) by way of a
decapitalisation of the Company at the earliest practical date following
shareholder approval and thereafter to allow shareholders to accept a fixed
share offer of R3.45 per share, equating to a total payment to shareholders of
approximately R11.05 per share, or to retain their shareholding or any portion
thereof, and to participate in any upside after the aforementioned initial
decapitalisation. In this regard it was the intention of the board and the
Kagiso consortium to embark on a process to return capital to shareholders
through a series of distributions.
3.2 Further details of the Kagiso consortium"s offer were set out in an
announcement which appeared on SENS on 22 September 2003.
3.3 The Kagiso offer has ceased to be of any further force or effect.
Accordingly, there is currently no binding offer between NAIL and the Kagiso
consortium and currently NAIL has no intention to conclude a similar transaction
with the Kagiso consortium.
4. VIEWS OF THE BOARD
4.1 The independent directors have considered the terms of the Tiso offer and
are of the view that, in light of the fact that payment of the consideration
offered of R10,50 will be made (bearing in mind the decision of the Competition
Tribunal to refuse, in the interim, to interdict payment of such consideration
as referred to in paragraph 0 above) within a relatively short period, and the
relative certainty attached to such payment, the consideration of R10,50 is fair
and reasonable to NAIL shareholders. The independent directors accordingly
recommended to NAIL shareholders to accept the Tiso offer but in doing so
express no view as to the correctness or otherwise of the adherence by the Tiso
consortium to correct regulatory procedures and notification requirements
(including and in particular the regulatory procedures and notification
requirements of the Competition authorities and ICASA), and shareholders are
cautioned that in making their decision whether to accept the Tiso offer
shareholders should consider (amongst other things):
4.1.1 that shareholders who do not accept the Tiso offer will remain
shareholders in the Company and will participate in the ongoing realisation of
the Company"s assets as part of the special arrangements referred to in the Tiso
circular to the extent that these in fact occur. Payments made to shareholders
in pursuance of this process may take several months and contain an element of
risk in that while shareholders may realise in excess of R10,50 per share (being
the offer consideration), it may be that shareholders realise a substantially
lower figure than this as a result of, inter alia:
4.1.1.1 the exact realisation value of the various assets of NAIL not being
determinable or guaranteed at this stage;
4.1.1.2 the costs involved in continuing to operate the Company, or wind down
its operations, not being determinable with guaranteed accuracy at this stage;
and
4.1.1.3 the possibility that the regulatory authorities (in particular
Competition authorities and ICASA) could inter alia order administrative
penalties, divestiture of the shares in or assets of NAIL and other penalties
and sanctions, both against NAIL and the Tiso Consortium. In this regard,
shareholders are advised of paragraph 26 of the Competition Commission
Tribunal"s judgment which is repeated hereunder:
"It would be imprudent of us, notwithstanding our reticence at this stage to
decide any of the other points in issue, not to point out ... that if the
transactions are notifiable as (the Kagiso consortium) and, it appears,
tentatively at least, the (Competition) Commission contends (the Tiso consortium
and NAIL) would be regarded as parties to the merger with an obligation to
notify. ... The consequences for failing to notify may involve both
administrative penalties and divestiture ...";
4.1.1.4 it is pointed out in respect of the above extract in 4.1.1.3 from the
Competition Tribunal"s judgement that:
(a) NAIL has undertaken to abide by the decision of the Competition Tribunal as
regards the notifiability of the transaction/s resulting from the Tiso offer;
and
(b) NAIL has offered to the Competition Commission, if considered necessary and
appropriate by the Commission at this stage, to file with the Commission a
merger filing in the statutory form;
4.1.2 the special arrangements set out in the Tiso offer read with the NAIL
board circular. In this regard shareholders attention is specifically drawn to
the details of the SRP ruling set out in paragraph 0 below in terms of which the
SRP has held inter alia that certain of these arrangements are "in conflict with
SRP Rule 13";
4.1.3 as at 15 October 2003, the Tiso consortium has acquired 88.3% of all N
ordinary shares and 68.2% of all ordinary shares in NAIL not held by Phaphama
and accordingly any shareholder who does not accept the Tiso offer will (subject
to the determination of the Competition Tribunal regarding the notifiability of
the Tiso offer and the sanction, if any, imposed by the Tribunal for
implementation of the Tiso offer prior to notification of the transaction and to
approval from the Competition authorities) remain a small minority shareholder
in the Company which may be delisted; and
4.1.4 the possibility that the Competition authorities may, subsequent to a
hearing to be held by them on 29 October 2003, prohibit the further
implementation of the Tiso offer to the extent that it has not yet then been
implemented.
4.2 PricewaterhouseCoopers Corporate Finance (Proprietary) Limited has
considered the terms and conditions of the Tiso offer and has expressed an
opinion that such offer, whilst lower than the sum-of-the-parts valuation
performed by them, and agreed to by the independent board, is nevertheless fair
and reasonable to the NAIL shareholders due to the timeliness and relative
certainty of payment, as well as the position that Phaphama has taken with
respect to the Kagiso and Tiso offers.
4.3 The independent directors of NAIL who own any beneficial interests in NAIL
intend, in respect of their own beneficial interests in NAIL, to accept the Tiso
offer.
5. SPECIAL ARRANGEMENTS
5.1 The Tiso consortium has obtained the undertakings, and the Tiso consortium
and Phaphama have agreed to use their best endeavours to enter into certain
arrangements which are set out in the Tiso circular and further clarified in the
NAIL board circular. Most of such special arrangements require the consent of
NAIL and its directors, which at this stage, has not been given nor has the
board of NAIL deliberated on the merits or otherwise of these arrangements.
Moreover, the Kagiso consortium applied for a ruling from the SRP requesting the
executive director of the SRP to rule, inter alia, that the Tiso consortium
should, in terms of the Code (as a result of certain of the special arrangements
referred to in paragraphs 8.1 to 8.5 of the Tiso circular), be obliged to
increase its offer to all shareholders. In a ruling by the executive director
of the SRP delivered on 14 October 2003 the SRP held, inter alia, in this regard
that:
5.1.1 "the "special arrangements" contained in paragraphs 8.1 to 8.5 of the
Tiso consortium"s offer circular to NAIL shareholders dated 2 October 2003
contain arrangements by the Tiso consortium and its concert parties including
Phaphama, in conflict with SRP Rule 13;
5.1.2 consent is given to those arrangements subject to the condition that
the Tiso consortium increases its offer to "NAIL minority shareholders" as
defined in the (Tiso) circular by an amount equivalent to the value of the
highest inducement to which reference is made above;
5.1.3 such increase in the offer price will be calculated after the "special
arrangements" have been carried out by the parties concerned. The aggregate
amounts received individually from the "special arrangements" shall be divided
by the attributable number of ordinary shares held through Phaphama added to the
number of ordinary and "N" ordinary shares held directly in NAIL respectively by
Safika and Hollard as at 17 September 2003;
5.1.4 the calculation of the increase in the offer price shall be verified
by Deloitte & Touche for the account of the Tiso consortium; and
5.1.5 on completion of this calculation such increase in the offer price
shall be paid forthwith, as an "agterskot" payment to those NAIL shareholders
who have accepted the Tiso consortium offer in terms of and in accordance with
that offer."
5.2 In terms of an announcement issued on SENS earlier today, the Tiso
consortium has stated that "if it were ever finally ruled by the SRP or any
court that any arrangement would result in the increased offer price in terms of
Rule 13 of (the Code), that arrangement would be null and void and would not be
implemented and accordingly can not result in any price increase to NAIL
shareholders who accept the offer.". Further the Tiso consortium has stated
that it will appeal the aforementioned ruling of the executive director of the
SRP.
5.3 Shareholders are advised that the SRP has ruled that any increase in offer
price as a result of the aforementioned ruling will only be available to those
shareholders that formally accept the Tiso offer and not to those shareholders
that sell their shares other than via a formal acceptance in terms of the Tiso
circular. Notwithstanding that:
5.3.1 the board reserves its rights to consider the merits of this aspect of
the SRP ruling and to take any appropriate actions in this regard; and
5.3.2 the information contained in the above SENS announcement issued by the
Tiso Consortium,
in the interim those shareholders that wish to accept the Tiso offer are advised
to do so via a formal acceptance in terms of the Tiso circular.
5.4 NAIL shareholders are referred to the NAIL board circular where the special
arrangements are set out in full.
6. WITHDRAWAL OF CAUTIONARY
6.1 Given that the information concerning the following is in the public
domain:
6.1.1 status of the various regulatory issues;
6.1.2 the Tiso offer;
6.1.3 status of the Kagiso offer; and
6.1.4 the recommendation of the independent board relating to the Tiso
offer,
shareholders are advised that caution is no longer required to be exercised by
shareholders when dealing in their securities.
Corporate and independent adviser Corporate law adviser and
and sponsor consultant to NAIL
PricewaterhouseCoopers Corporate Edward Nathan & Friedland (Pty) Ltd
Finance (Pty) Ltd
(Registration number 1970/003711/07) (Registration number 1999/026464/07)
Date: 17/10/2003 07:00:19 AM Produced by the JSE SENS Department
