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PEPKOR LIMITED - INCREASE OF THE OFFER PRICE TO R11 FOR EACH PEPKOR ORDINARY
SHARE
PEPKOR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1965/007765/06)
JSE Share Code: PEP
ISIN: ZAE 000005344
("Pepkor" or "the Company")
INCREASE OF THE OFFER PRICE TO R11 FOR EACH PEPKOR ORDINARY SHARE
1. INTRODUCTION
Shareholders are referred to the Pepkor announcement of 23 October 2003
which contained details of an offer by Castellina Investments (Proprietary)
Limited ("Castellina") to, by way of a scheme of arrangement in terms of
Section 311 of the Companies Act (Act 61 of 1973) as amended ("the Scheme),
acquire the entire issued share capital of Pepkor, resulting in the
redemption of all the preference shares of Pepkor ("preference shares").
The salient dates and times and supplementary information relating to the
Scheme were announced in the press on 26 November 2003, whilst a circular
containing full details of the Scheme and the actions required by Pepkor
ordinary shareholders was posted to those shareholders on the same day
("the Circular").
2. INCREASE OF THE OFFER PRICE
2.1 On Thursday, 4 December 2003, Castellina advised the board of
directors of Pepkor (the "Pepkor Board") that it has increased its
offer price from R10 per Pepkor ordinary share to R11 for each Pepkor
ordinary share.
2.2 The payment to the preference shareholder for the loss of rights
attaching to the preference shares as a result of their redemption by
Pepkor will not change as a result of the increase in the offer price.
2.3 Pepkor ordinary shareholders will still have the opportunity to elect
a cash consideration or reinvestment alternative, as follows:
2.3.1 to receive R11 per share for each Pepkor ordinary share
("the Cash Consideration"); or
2.3.2 for every 100 Pepkor ordinary shares to receive:
2.3.2.1 60.885 ordinary shares in the issued share capital
of Castellina, issued at R1 per share;
2.3.2.2 class "A" loan claims of R787.699 against
Castellina ("Class "A" Loan Claims"); and
2.3.2.3 bridging loan claims of R251.416 against
Castellina ("Bridging Loan Claims"),
which will be equivalent to R1 100 for every 100 Pepkor ordinary
shares held (collectively the "Reinvestment Alternative").
2.4 To part fund the increase in the offer price, Castellina has arranged
to borrow R42 million from the underwriters, being South African
Private Equity Fund III LP and South African Private Equity Trust III,
both private equity funds under the management of Brait S.A. and Old
Mutual Life Assurance Company (South Africa) Limited (collectively
referred to as "the Underwriters")
2.5 The main terms of this top-up loan are as follows:-
2.5.1 Castellina will be charged interest on the amount of the top
up loan outstanding from time to time calculated at the
prime rate plus 2% nominal annual compounded monthly
interest from the operative date of the Scheme ("operative
date");
2.5.2 the interest will accrue on a day-to-day basis and will be
capitalised monthly on the last day of each calendar month;
2.5.3 the top-up loan and interest thereon is subordinated to and
will not be repaid prior to the repayment in full of the
Bridging Loan Claims and accrued interest thereon. However,
the top-up loan, together with interest thereon, will be
repaid within 12 months of the operative date;
2.5.4 the top-up loan will rank ahead of the Class "A" Loan Claims
and Castellina will under no circumstances be entitled to
repay any of the Class "A" Loan Claims or any accrued
interest thereon prior to the repayment in full of the top-
up loan, together with accrued interest thereon;
2.5.5 any repayment of the top-up loan will first be applied to
the repayment of accrued interest and thereafter to capital;
2.5.6 if the top-up loan, together with accrued interest thereon,
is not repaid within the aforementioned 12 month period
then, without prejudice to the underwriters" other rights
arising form such default, Castellina will repay and
discharge same either in cash or, at the written election of
the underwriters, by way of the delivery and transfer to the
underwriters of such ordinary shares of companies listed on
the JSE as were held by Pepkor or its subsidiaries which
remain after any repayment and discharge contemplated in the
Bridging Loan terms details of which are set out in the
Circular, mutatis mutandis, on the same terms as are set out
in such terms;
2.5.7 the top-up loan will be due and payable immediately in the
event of the liquidation of Castellina, other than for
purposes of re-organisation of Castellina and/or its
subsidiaries and/or its/their underlying businesses and
assets.
2.6 The suspensive conditions and terms, as contained in the Circular,
will remain the same.
2.7 A revised table of entitlements will be included in the Surrender and
Election Circular, which will still be posted to Pepkor ordinary
shareholders on or about Monday, 26 January 2004, whilst a copy of
this announcement will be posted to all Pepkor shareholders today.
2.8 A copy of the revised Scheme including details of the increased offer
price is available free of charge at the offices of Pepkor, at 36
Stellenberg Road, Parow Industria 7490, Pepkor"s sponsor Barnard
Jacobs Mellet Corporate Finance (Pty) Limited, at 2nd floor, Barnard
Jacobs Mellet House, 5 Sturdee Avenue, Rosebank, 2196 or at the lead
and transaction sponsor Exchange Sponsors (Proprietary) Limited at
Hyde Park Manor, 79 Hyde Park Lane, Hyde Park, 2196.
3. IMPORTANT DATES AND TIMES
The important dates and times remain as previously published. Therefore,
the scheme meeting at which Pepkor ordinary shareholders will be requested
to vote on the Scheme, will still be convened at 10:00 on 11 December 2003
at Pepkor"s registered offices.
4. REVISED FINANCIAL EFFECTS OF THE SCHEME
The following tables illustrate the financial effects for a Pepkor ordinary
shareholder should the Scheme be implemented.
4.1 Revised Unaudited Pro Forma Financial Effects Of The Cash
Consideration
Before After the
the Scheme Change
Scheme (cents)(1 (%)
(cents) )
Market prices:
Monday, 11 August 2003 650.0(2) 1 100 69.2
30-day weighted average
preceding
Monday, 11 August 2003 633.7(3) 1 100 73.6
Wednesday, 22 October 2003 850.0(4) 1 100 29.4
Net asset value per share 531.4(5) 1 100 107.0
Net tangible asset value per 489.4(5) 1 100 124.8
share
Earnings per share
Headline earnings 54.0(5) 69.3 (6) 28.3
Before exceptional items 53.6(5) 69.3 (6) 29.3
Before exceptional items -
excluding finance exchange 104.4(5) 69.3 (6) (33.6)
rate difference
After exceptional items 3.4(5) 69.3 (6) 1 938.2
Dividend per share 34.0(5) 69.3(6) 103.8
Notes:
1. The Cash Consideration offered to Pepkor ordinary shareholders in
terms of the Scheme.
2. The closing market price of a Pepkor ordinary share on the last
trading date prior to the publication of the first cautionary
announcement on Tuesday, 12 August 2003.
3. The volume weighted average of the closing price of a Pepkor ordinary
share over the 30 trading days preceding the publication of the first
cautionary announcement on Tuesday, 12 August 2003.
4. The closing market price of a Pepkor ordinary share on Wednesday,
22 October 2003.
5. Extracted from the published audited results of Pepkor for the year
ended 30 June 2003.
6. For purposes of calculating the pro forma earnings per Pepkor ordinary
share, it was assumed that:
* the Scheme was implemented on 1 July 2002;
* interest at an after-tax rate of 6.3% per annum was earned on the
Cash Consideration for the year ended 30 June 2003.
7. No effect has been given to Capital Gains Tax that may be applicable
to Pepkor ordinary shareholders.
4.2 Revised Unaudited Pro Forma Financial Effects Of The Reinvestment
Alternative
Before the After the
Scheme Scheme Change
(cents)(1) (cents) (%)
Net asset value per share 531.4 1 107.0
100.0(2)
Net tangible asset value per 489.4 394.4 (2) (19.4)
share
Earnings per share
Headline earnings 54.0 (29.0)(3) (153.8)
Before exceptional 53.6 (29.4)(3) (154.9)
items -
Before exceptional
items -
excluding finance 104.4 14.1 (3) (86.5)
exchange rate difference
After exceptional items 3.4 (97.1) (2 954.9)
(3)
Interest per share
Interest received - 50.3 (5) 100
Interest accrued on the Loan - 140.0 (4) 100
Claims (pre-tax)
Interest accrued on the Loan - 98.0 (4) 100
Claims (after tax)
Dividend per share 34.0 -(6) (100)
Notes:
1. Extracted from the published audited results of Pepkor for the year
ended 30 June 2003.
2. For purposes of calculating the pro forma net asset value and net
tangible asset value per Pepkor ordinary share, it was assumed that:
* the Scheme was implemented on 30 June 2003;
* there will be 153.3 million Castellina ordinary shares in issue
at 30 June 2003;
* a Pepkor ordinary shareholder will receive 0.60885 Castellina
ordinary shares for every Pepkor ordinary share held, a Class "A"
Loan Claim of R7.87699 per share and a Bridging Loan Claim of
R2.51416 per share;
* the net tangible asset value per Pepkor Ordinary Share was
calculated after taking into account the net shareholders deficit
that arose after eliminating the goodwill arising from the
acquisition of Pepkor by Castellina.
3. For purposes of calculating the earnings per Pepkor ordinary share it
was assumed that:
* the Scheme was implemented on 1 July 2002;
* a weighted average number of Castellina ordinary shares in issue
of 153,3 million;
* the goodwill is written off over a period of 20 years;
* the loan from Old Mutual Specialised Finance taking into account
refinancing bears interest at an after tax rate of 7,04%;
* the Class "A" Loan Claims and Bridging Loan Claims bear interest
at an after tax rate of 9,8%
* the Bridging Loan Claims were repaid after six months and the
proceeds therefrom were invested at an after tax rate of 6,3%;
* the loan of R42 million from the Underwriters bears interest at
an after tax rate of 9.6%;
* cash received from the management subscription was invested at an
average after tax rate of 6,3%;
* a tax rate of 30% was applied.
4. This represents the interest that will accrue to a Castellina ordinary
shareholder in terms of his Class "A" Loan Claims and Bridging Loan
Claims. For the after tax effect a tax rate of 30% has been applied.
5. Interest received is calculated as follows:
* On the Bridging Loan Claims at a pre tax rate of 14% for the
first six months and after the repayment of the Bridging Loan
Claims at a pre tax rate of 9% for the last six months (on the
capital and interest);
* On the Class "A" Loan Claims at a pre tax rate of 14% based on
the pro-forma earnings of Castellina and the formula referred to
in the Circular, Annexure B to the Scheme.
6. No dividend will be paid to Castellina Ordinary Shareholders after the
implementation of the Scheme until the Loan Claims have been repaid.
7. No effect has been given to Capital Gains Tax that may be applicable
to Pepkor ordinary shareholders.
5. FAIR AND REASONABLE AND RECOMMENDATIONS
5.1 Absa Corporate and Merchant Bank, Corporate Finance, a division of
Absa Bank Limited ("ACMB") has considered the increased offer price
and in respect of the Cash Consideration of R11 per Pepkor Ordinary
Share and in respect of the Reinvestment Alternative is of the opinion
that the revised offer price is fair and reasonable.
5.2 In respect of the payment of R33,3 million for the Pepkor preference
shares, and after giving cognisance to the ruling by the Executive
Director of the SRP, ACMB is of the opinion that this payment is fair
and reasonable.
5.3 The Pepkor Board agrees with the opinion of ACMB and, accordingly,
recommends that scheme members vote in favour of the Scheme.
Cape Town
4 December 2003
Corporate Joint attorneys to Transaction and lead
advisor to Castellina sponsor
Castellina
Brait Read Hope Phillips Exchange Sponsors
Thomas & Cadman
Inc.
Corporate Joint attorneys to Sponsor to Pepkor
advisor to Castellina
Pepkor
Javelin Mallinicks Inc. BJM
Attorneys to Independent advisor Tax advisor
Pepkor to Pepkor
Jan S de ACMB Deloitte & Touche
Villiers
Auditors and Debt financier
reporting
accountants
Pricewaterhous Old Mutual
eCoopers Inc. Specialised Finance
Date: 04/12/2003 05:25:07 PM
Produced by the JSE SENS Department
