| Fri 5 Dec 2003, 16:47 | | OFFER TO ACQUIRE THE ENTIRE TANZANITE BUSINESS |
|
AFRICAN GEM RESOURCES LIMITED - OFFER TO ACQUIRE THE ENTIRE TANZANITE BUSINESS
UNDERTAKING OF AFGEM AND CAUTIONARY ANNOUNCEMENT
AFRICAN GEM RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/007292/06)
Share Code: AFG
ISIN: ZAE000025540
("Afgem" or "the company")
OFFER TO ACQUIRE THE ENTIRE TANZANITE BUSINESS UNDERTAKING OF AFGEM AND
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1 Brait Corporate Finance, a division of Brait South Africa Limited
("Brait") and Java Capital ("Java"), are authorised to announce that
Bonheur 19 General Trading (Proprietary) Limited, to be renamed
Tanzanite One (South Africa) (Proprietary) Limited ("T-One SA"), has
submitted an offer to the board of directors of Afgem ("the Afgem
Board") to acquire Afgem"s entire tanzanite business and assets ("the
Tanzanite Business"), with effect from 1 October 2003 ("the Proposed
Transaction"). The Proposed Transaction is subject to the conditions
precedent set out in 5 below ("Conditions Precedent") and is
structured to enable all existing shareholders of Afgem to elect to
participate in the future development of the Tanzanite Business.
1.2 T-One SA is a wholly-owned South African subsidiary of Tanzanite One
Limited ("T-One"), a company registered in Bermuda, which is funded by
a British and Australian-led group of investors specializing in mining
projects who are investing via Jade Pacific Resources Limited, and
funds managed by Blakeney Asset Management, a UK-based investment
house specializing in emerging markets. Both T-One SA and T-One are
special purpose vehicles established to facilitate the Proposed
Transaction.
1.3 Subsequent to the implementation of the proposed transaction, Afgem
will continue to operate its diamond business and, subject to approval
of the JSE, will remain listed on the JSE.
2 RATIONALE
2.1 T-One SA and parties related to it own approximately 22.8% of Afgem"s
issued share capital and, as investors, have tracked Afgem"s
development and performance. Notwithstanding the progress of Afgem"s
existing management team, which T-One SA views as an integral part of
the Tanzanite Business"s future, the current rating of Afgem shares on
the JSE Securities Exchange South Africa ("JSE") restricts the ability
of Afgem to cost effectively raise capital on the JSE for future
expansion of the tanzanite mine and to develop the international
market for tanzanite.
2.2 The Rand reporting of the Tanzanite Business, which is primarily a
US$-based business, has meant that the true performance of the
business is affected by unrealized foreign exchange losses/gains. This
has been apparent in previous reporting periods. The listing of T-One
on the Alternative Investment Market ("AIM") of the London Stock
Exchange and the Dar es Salaam Stock Exchange ("DSE") will remove this
discrepancy as T-One will report in US$, the operating currency of the
Tanzanite Business.
2.3 Although the tanzanite mine is still at an early stage of its
development and reserves are limited, there is very good medium-term
potential for the future development of this resource.
2.4 The mining expertise available to T-One SA will, with the expertiseand
detailed knowledge of the ore body which Afgem"s existing management
team has acquired, maximise the return from the tanzanite mine.
2.5 T-One SA, through its ability to raise capital, will enable the
existing management team to further develop the Tanzanite Business and
to take advantage of future business development and acquisition
opportunities and expose the Tanzanite Business to an investment
community which is more likely to appreciate its intrinsic value by T-
One expeditiously dual listing the Tanzanite Business on both: -
2.5.1. AIM, which is:
* a recognized market for junior mining
companies;
* a leading source of funding for senior and
junior mining companies;
* a market where institutions and investors
have a consistent appetite for junior mining
stocks; and
* the market rating for junior mining companies
is significantly higher than the JSE;
2.5..2 and the DSE, which will allow Tanzanian
individuals and institutions to invest in and own
the Tanzanite Business.
3. PURCHASE PRICE AND PAYMENT
3.1 T-One SA has offered to pay Afgem R157,904,362 for the Tanzanite
Business ("Purchase Price"). The Afgem Board will consider the
Proposed Transaction and the Purchase Price and appoint an independent
advisor to advise on the fairness and reasonableness of the Proposed
Transaction (see 7 below). On completion of this investigation, the
Afgem Board will be in a position to comment on the Proposed
Transaction and the Purchase Price.
3.2 Subject to compliance with all regulatory requirements, T-One SA will
discharge the Purchase Price after the fulfillment and/or waiver of
the Conditions Precedent.
3.3 The Purchase Price will be discharged by T-One SA paying a maximum of
R45 418 261 in cash and by issuing renounceable letters of allotment
("RLA"s") for a minimum of 101 338 830 ordinary shares in the share
capital of T-One SA ("T-One SA shares").
3.4 If the Proposed Transaction is approved by Afgem shareholders and on
the fulfillment and/or waiver of the Conditions Precedent, Afgem will
distribute the Purchase Price as a dividend in specie to Afgem
shareholders where each Afgem shareholder will be entitled to -
3.4.1 receive R1,11 in cash for each share in the share capital of
Afgem ("Afgem shares") ("the Cash Distribution"); or
3.4.2 reinvest in T-One SA, where Afgem shareholders will receive
RLA"s giving them the right to subscribe for T-One SA shares
at an issue price of R1,11 each ("the Reinvestment
Alternative").
3.4.3 Afgem will also declare and distribute to all Afgem
shareholders surplus cash not required for its existing
diamond business, by way of a special dividend of
approximately 10 cents per Afgem share.
3.5 The net effect of the distributions in 3.4 above is that Afgem
shareholders will, for each Afgem share they own -
3.5.1 if they elect the Cash Distribution:
3.5.1.1 receive approximately R1,21 in cash; and
3.5.1.2 retain their share in Afgem, which will focus on
its remaining diamond business;
3.5.2 if they elect the Reinvestment Alternative:
3.5.2.1 receive one T-One SA share (worth R1,11);
3.5.2.2 receive approximately 10 cents in cash which they
will have the opportunity to reinvest into T-One
SA at a share price of R1,11 per T-One SA share;
and
3.5.2.3 retain their share in Afgem, which will focus on
its existing diamond business.
4. THE REINVESTMENT ALTERNATIVE
4.1 Afgem shareholders who elect the Reinvestment Alternative will:
4.1.1 effectively have "swopped out" their "tanzanite"
shareholding in Afgem for a shareholding in T-One SA; and
4.1.2 remain shareholders in Afgem, with its remaining diamond
business.
4.2 T-One SA, prior to the implementation of the Proposed Transaction,
will have an authorised share capital of 142 256 182 shares, being
similar to the total number of Afgem shares in issue.
4.3 Afgem, on implementation of the Proposed Transaction, will issue RLA"s
to the Afgem ordinary shareholders who elect the Reinvestment
Alternative, whilst T-One SA will also issue the remaining balance of
its authorised share capital of T-One SA ordinary shares to T-One.
4.4 T-One will offer T-One SA shareholders ("the T-One Offer") the right
to sell their T-One SA shares to T-One at a price equivalent to the
price of T- One shares once T-One is listed. This offer will remain
open to T- One SA shareholders for an extended period of several
years. Full details of the T-One offer, including the manner in which
T-One SA shareholders could dispose of their T-One SA shares and how
the price at which such a disposal could be effected, will be set out
in a circular to Afgem shareholders (see 10 below).
4.5 T-One will issue ordinary shares in its share capital equal to the
number of T-One SA shares issued to Afgem shareholders who elect the
Reinvestment Alternative. These shares will be held by a company
established for the sole purpose of holding those shares and will be
used to support the T-One Offer.
4.6 The articles of association of T-One SA and the constitutional
documents of T-One will ensure that the rights of shareholders in T-
One SA will, be similar to the rights of T-One shareholders given that
T-One SA will not be listed.
5. CONDITIONS PRECEDENT
The Proposed Transaction is subject to the fulfillment and/or waiver of the
following Conditions Precedent:
5.1 Afgem shareholders approving the Proposed Transaction in terms of
Section 228 of the Companies Act, Act 61 of 1973, as amended ("the
Companies Act"). This requires over 50% of those Afgem shareholders
entitled to vote at the shareholders meeting on the Proposed
Transaction, to vote in favour of the Proposed Transaction;
5.2 Afgem and T-One SA ("the Parties") obtaining the necessary approval in
terms of the Competition Act, 1998 (89 of 1998), as amended;
5.3 the Parties obtaining the approval of the JSE and the Securities
Regulation Panel ("SRP");
5.4 T-One SA obtaining irrevocable undertakings from Afgem shareholders
beneficially holding not less than 50% of the Afgem shares entitled to
vote on the Proposed Transaction;
5.5 Afgem not making any payment to its shareholders in terms of section
90 of the Companies Act declaring or paying a dividend to shareholders
or purchasing, directly or indirectly, any shares issued by it prior
to completion of the Proposed Transaction;
5.6 the Parties entering into all agreements that are necessary to
implement the Proposed Transaction; and
5.7 T-One SA completing a comprehensive due diligence investigation ("the
due diligence") including, but not limited to, commercial,
operational, legal, financial and tax issues of Afgem and its
subsidiaries and T-One SA being satisfied with the outcome of the due
diligence investigation.
6. IRREVOCABLE UNDERTAKINGS
T-One SA, to date, has received:
6.1. irrevocable undertakings from Afgem shareholders
representing 62.7% of the Afgem shares entitled to vote on
the Proposed Transaction, to vote in favour of the Proposed
Transaction.
6.2 irrevocable undertakings from Afgem shareholders
representing 71.2% of the issued share capital of Afgem, to
elect the Reinvestment Alternative.
7. FAIR AND REASONABLE
The Board will appoint an independent advisor to report on the fairness and
reasonableness of the Proposed Transaction, including the Cash Distribution
and the Reinvestment Alternative, as required by the JSE Listings
Requirements and the SRP.
8. FUNDING CONFIRMATION
Brait has provided the SRP with the necessary written confirmation that
T-One SA has sufficient resources available to satisfy its cash obligations
under the Proposed Transaction in full.
9. ALTERNATIVE MECHANISM
If the Proposed Transaction is not implemented due to the failure of a
Condition Precedent, the proposed mechanism to implement it will be deemed
to have been amended so that it will no longer be an acquisition of the
Tanzanite Business, but that T-One SA will make an offer to acquire all the
issued shares in Afgem not owned by it ("Afgem shares") ("Default
alternative Mechanism"). If the Default Alternative Mechanism is used, T-
One SA will notify Afgem shareholders thereof in the press as the Proposed
Transaction may be implemented, inter alia, by way of a scheme of
arrangement in terms of Section 311 of the Companies Act, or by way of a
Section 440 offer with the option to invoke Section 440K of the Companies
Act.
10. SUPPLEMENTARY ANNOUNCEMENT, CAUTIONARY ANNOUNCEMENT AND CIRCULAR
10.1 A supplementary announcement will be published on the Securities
Exchange News Service of the JSE and in the press to provide
shareholders with, inter alia, details of the outcome of the due
diligence, the financial effects of the Proposed Transaction, the
independent adviser"s opinion on the fairness and reasonableness of
the Proposed Transaction and the opinion of the Afgem Board on the
Proposed Transaction. Afgem shareholders will then be advised of the
salient dates and times and any other relevant details of the Proposed
Transaction.
10.2 Accordingly, Afgem shareholders are advised to exercise caution when
dealing in their Afgem ordinary shares on the JSE until such further
announcement is made.
10.3 A circular will only be issued to Afgem shareholders after the
publication in the press of a supplementary announcement.
Johannesburg
5 December 2003
Corporate advisor to the offeror:
BRAIT
Legal advisor to the offeror:
Werksmans Incorporated
(Registration number 1990/007215/21)
Corporate advisor and Sponsor to Afgem:
JAVA CAPITAL
Legal advisor to Afgem:
HR Levin
Date: 05/12/2003 04:00:09 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
