| Fri 5 Dec 2003, 17:01 | | ACQUISITION OF AN EFFECTIVE 10,76% |
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BRIMSTONE INVESTMENT CORPORATION LIMITED - ACQUISITION OF AN EFFECTIVE 10,76%
INTEREST IN SEA HARVEST CORPORATION LIMITED ("SEA HARVEST") AND FURTHER
CAUTIONARY ANNOUNCEMENT
BRIMSTONE INVESTMENT CORPORATION LIMITED
(Registration number 1995/010442/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277
Share Code: BRT
ISIN Number: ZAE000015285
Share Code: BRN
("Brimstone" or the "Company")
ACQUISITION OF AN EFFECTIVE 10,76% INTEREST IN SEA HARVEST CORPORATION LIMITED
("SEA HARVEST") AND FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
Holders of ordinary shares and "N" ordinary shares in Brimstone ("Brimstone
shareholders") are advised that Brimstone has, through its wholly-owned
subsidiary, Brimco (Proprietary) Limited ("Brimco"), acquired an effective
10,76% interest in Sea Harvest from Coronation Capital Limited ("Coronation
Capital") for a total consideration of R85,1 million subject to the
fulfilment of the conditions precedent set out in paragraph 7 below ("the
Sea Harvest Acquisition"). Brimstone has been involved with Sea Harvest as
a shareholder and on a strategic level since 1998 and already holds an
effective 10,76% of Sea Harvest.
Pursuant to the Sea Harvest Acquisition, Tiger Brands Limited ("Tiger
Brands") will own 73,16%, the Sea Harvest Employees Share Trust (2001) and
employees will own 5,32% and Brimstone will own 21,52% of Sea Harvest.
2. Nature of business of Sea Harvest
Sea Harvest is involved in deep-sea trawling, primarily of hake, and the
processing and marketing of frozen and chilled seafood. Sea Harvest has
the ability to catch and process over 80 000 tons of fish annually and
employs approximately 2 400 full-time employees
3. Rationale
Brimstone is a black controlled and managed investment company focused on
acquiring and adding value to strategic investments, mainly in the
financial services and industrial sectors. The increase of Brimstone"s
interest in Sea Harvest to 21,52% will further enhance Sea Harvest"s black
empowerment credentials. Brimstone is of the view that Sea Harvest has good
long-term growth prospects given its strong brands and market position,
increased focus on value added products and decades of experience.
4. Consideration
The aggregate consideration payable for the Sea Harvest Acquisition is
R85,1 million which will be funded as set out in paragraph 5 below and will
be settled in cash upon fulfilment of the conditions precedent set out in
paragraph 7 below.
5. Funding
Subject to the fulfilment of the conditions precedent set out in paragraph
7 below, Rodina Investments Proprietary Limited ("Rodina"), a wholly-owned
subsidiary of Old Mutual Life Assurance Company (South Africa) Limited will
subscribe for 137 preference shares in Brimco ("the Brimco preference
shares") for an aggregate subscription price of R137,0 million ("the
subscription agreement"). Of this amount, R85,1 million will be utilised to
settle the Sea Harvest Acquisition and R51,2 million will be lent to
Brimstone to settle the consideration for Brimstone"s acquisition of an
effective 25% plus one share interest in Lenco Holdings Limited (" the
Lenco Acquisition"), the terms of which were announced to Brimstone
shareholders on 3 November 2003 ("the Lenco Acquisition terms
announcement"). The Brimco preference shares are expected to be issued at a
fixed coupon rate of 9,22% per annum.
6. Financial effects
Based on the published consolidated unaudited results of Brimstone for the
6 months ended 30 June 2003, the pro forma financial effects of the Sea
Harvest acquisition on Brimstone"s earnings, headline earnings, net asset
value ("NAV") and tangible NAV per share are set out below. The pro forma
financial information has been prepared for illustrative purposes only and
because of its nature may not give a true picture of Brimstone"s financial
position and results of operations.
Per Brimstone Before the After the Percentage
ordinary and "N" Sea Harvest Sea Harvest change
ordinary share acquisition(1) acquisition
(2)
Earnings (cents) 7,4 4,7 (3) (36,5)%
Headline 8,6 8,1 (3) (5,8)%
earnings (cents)
NAV (cents) 124,7 124,7 0,0%
Tangible NAV 121,0 91,3 (4) (24,5)%
(cents)
Notes:
1) Based on the published consolidated unaudited results of Brimstone for
the six months ended 30 June 2003.
2) Based on the assumption that the Sea Harvest acquisition has been
effected on 1 January 2003 for income statement purposes and 30 June
2003 for balance sheet purposes.
3) Earnings and headline earnings have been adjusted to include the
equity accounted income attributable to Brimstone from the additional
10,76% holding in Sea Harvest. Earnings and headline earnings were
also adjusted by the interest on the Sea Harvest consideration, based
on the expected interest payable on the Brimco preference shares of
9,22% and to take into account the amortisation of goodwill of R3,6
million relating to the Sea Harvest Acquisition.
4) This takes into account the effect of goodwill arising from the Sea
Harvest Acquisition of R35,7 million.
7. Conditions precedent
The Sea Harvest Acquisition is subject to the fulfilment of, inter alia,
the following conditions precedent:
* the subscription agreement becoming unconditional;
* the approval by the requisite majority of Brimstone shareholders at
the General Meeting referred to in 8 below; and
* the requisite regulatory approvals including, without limitation, the
Competition Authorities being obtained.
8. Circular to Brimstone shareholders
Subject to approval by the JSE Securities Exchange South Africa ("JSE"), a
circular containing full details of the Sea Harvest Acquisition will be
posted to Brimstone shareholders in due course (the "Circular"). The
Circular will also include a notice convening a general meeting (the
"General Meeting") for Brimstone shareholders to consider and, if deemed
appropriate, pass the resolutions necessary to approve the Sea Harvest
Acquisition. A further announcement regarding the date of the General
Meeting will be made once finalised.
9. Revised Lenco Acquisition financial effects
Shareholders are advised that the financial effects as set out in the Lenco
Acquisition terms announcement have been revised following the funding
arrangements as set out in paragraph 5 above. The revised financial effects
are set out below.
Based on the published consolidated unaudited results of Brimstone for the
six months ended 30 June 2003, the pro forma financial effects of the Lenco
acquisition on Brimstone"s earnings, headline earnings, NAV and tangible
NAV per share are set out below. The pro forma financial information has
been prepared for illustrative purposes only and because of its nature may
not give a true picture of Brimstone"s financial position and results of
operations.
Per Brimstone Before the After the Percentage
ordinary and Lenco Lenco change
"N"ordinary Acquisition(1 Acquisition (2)
share )
Earnings (cents) 7,4 9,7 (3) 31,1%
Headline 8,6 10,8 (3) 25,6%
earnings (cents)
NAV (cents) 124,7 124,7 0,0%
Tangible NAV 121,0 123,3 1,9%
(cents)
Notes:
1) Based on the published consolidated unaudited results of Brimstone for
the six months ended 30 June 2003.
2) Based on the assumption that the Lenco acquisition has been effected
on 1 January 2003 for income statement purposes and 30 June 2003 for
balance sheet purposes.
3) Earnings and headline earnings have been adjusted to include the
equity accounted income attributable to Brimstone from Lenco. This
amount was arrived at by pro-rating Lenco"s audited net profit before
tax for the year ended 31 March 2003 of R65 814 000 (a notional tax
charge of 30% was charged against this net profit as Lenco had a tax
credit of R51 339 000 which is not indicative of the earnings that
will be attributable to the Lenco investment going forward), for a six
month period, in order to make it comparable to Brimstone"s most
recent reported six-month period. Earnings and headline earnings were
also adjusted by the interest cost on the Lenco consideration for the
six-month period to 30 June 2003, based on the expected interest
payable on the Brimco preference shares of 9,22%.
10. Combined financial effects of the Sea Harvest and Lenco Acquisitions
Based on the published consolidated unaudited results of Brimstone for the
6 months ended 30 June 2003, the combined pro forma financial effects of
the Sea Harvest and Lenco Acquisitions on Brimstone"s earnings, headline
earnings, net asset value NAV and tangible NAV per share are set out below.
The combined pro forma financial information has been prepared for
illustrative purposes as the Sea Harvest and Lenco Acquisitions are not
inter-conditional and because of its nature may not give a true picture of
Brimstone"s financial position and results of operations.
Per Brimstone Before the After the Percentage
ordinary and "N" Sea Harvest Sea Harvest change
ordinary share and Lenco and Lenco
Acquisitions(1 Acquisitions
) (2)
Earnings (cents) 7,4 7,0 (5,4)%
Headline earning 8,6 10,2 18,6%
(cents)
NAV (cents) 124,7 124,7 0,0%
Tangible NAV 121,0 93,6 (22,6)%
(cents)
Notes:
1) Based on the published consolidated unaudited results of Brimstone for
the six months ended 30 June 2003.
2) Based on the assumption that the Lenco and Sea Harvest Acquisitions
were effected on 1 January 2003 for income statement purposes and 30
June 2003 for balance sheet purposes.
11. Recommendation of the Board of Directors of Brimstone and independent
advice
In terms of the JSE Listings Requirements, the Sea Harvest Acquisition is a
related party transaction. The Board of Directors of Brimstone has,
therefore, appointed Nedbank Corporate a division of Nedbank Limited to
advise it as to whether the terms and conditions of the Sea Harvest
Acquisition are fair and reasonable. This advice together with the Board"s
recommendation will be set out in the Circular referred to in paragraph 8.
12. Further cautionary announcement
Shareholders are referred to the cautionary announcement published on 17
November 2003 and are advised this cautionary announcement related, inter
alia, to the Sea Harvest Acquisition. Notwithstanding this, Brimstone is
still involved in other negotiations which, if successfully concluded, may
have a material effect on the price of the Company"s securities. In view of
this and pending a further announcement in regard to Business Venture
Investments No 790 (Proprietary) Limited"s offer to acquire the entire
issued share capital of Afrox Healthcare Limited, shareholders are advised
to continue exercising caution when dealing in the Company"s securities
until such further announcements are made.
Cape Town
5 December 2003
Sponsor and Independent Financial Adviser
Nedbank Corporate
Date: 05/12/2003 04:56:06 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
