| Tue 2 Mar 2004, 12:31 | | Announcement To Primedia Shareholders |
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Primedia - Announcement To Primedia Shareholders
Release Date: 02/03/2004 11:53:58 Code(s): PMA PMN
Primedia - Announcement To Primedia Shareholders
Primedia Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/003355/06)
Share code: PMA ISIN: ZAE000035119
Share code: PMN ISIN: ZAE000035127
("Primedia")
ANNOUNCEMENT TO PRIMEDIA SHAREHOLDERS
1. INTRODUCTION
Primedia shareholders are referred to the cautionary announcement published by
Primedia on 20 February 2004 ("the cautionary announcement").
Pursuant to the cautionary announcement Primedia shareholders are advised that
Primedia has entered into an agreement on its own behalf or on behalf of its
nominee(s) relating to the acquisition and acceptance of the cession by Primedia
of all the rights held by Hosken Consolidated Investments Limited ("HCI") in
Francolin Investments (Proprietary) Limited which represents an effective 42,5%
indirect economic interest in Africa On Air (Proprietary) Limited ("the AoA
acquisition"), which owns the licence of 94.7 Highveld Stereo. Details of the
AoA acquisition are set out below.
2. The AoA acquisition
2.1 Nature of business of AoA
94.7 Highveld Stereo, which is owned by AoA, is South Africa"s leading
commercial radio station with approximately 1,2 million listeners in Gauteng.
HCI has an effective economic interest of 42,5% of AoA ("the HCI interest").
2.2 Details of the AoA acquisition
In terms of the AoA acquisition, Primedia or its nominee(s) will, with effect
from 1 January 2004, acquire and accept cession of all HCI"s effective 42,5%
economic interests in AoA.
Subject to the Mineworkers Investment Company (Proprietary) Limited ("MIC"),
increasing its shareholding interest in Primedia as set out in paragraph 2.3.2
below, Primedia has agreed to nominate MIC to acquire from HCI, a portion of the
HCI interest equivalent to an effective economic interest of 12,0% in AoA ("the
MIC interest") for R50,9 million payable in cash. The remaining HCI interest,
which will be acquired by Primedia, equates to an effective economic interest of
30,5% of AoA ("the Primedia interest").
2.3 Purchase consideration
The purchase consideration payable by Primedia in terms of the AoA acquisition
for the Primedia interest is R129,1 million ("the AoA purchase consideration").
In terms of the agreement relating to the AoA acquisition Primedia has elected
to settle a portion of the AoA purchase consideration by the issue of Primedia
shares. The AoA purchase consideration will be settled on 1 July 2004 as
follows:
2.3.1 R100 million in cash free of interest;
2.3.2 R29,1 million by Primedia issuing 3 174 603 Primedia `N" shares
to HCI at an issue price of R6,30 per share and 1 449 580 Primedia ordinary
shares at an issue price of R6,30 per share ("the vendor placing"), the right to
which shares will be renounced by HCI to MIC for an amount of R29,1 million
payable in cash, free of interest, on 1 July 2004.
The purchase price is subject to a limited downward adjustment pending the
resolution of certain outstanding matters.
2.4 Rationale for the AoA acquisition
94.7 Highveld Stereo is Primedia"s largest contributor to operating profits and
free cash flow. However, due to the financing structure put in place by Primedia
for empowerment partners in 1996 when the station was acquired from the South
African Broadcasting Corporation, an increasing proportion of its earnings and
soon to be a material amount of free cash flow is and would have been lost to
Primedia in the future due to the repayment of this financing structure. The AOA
acquisition will result in Primedia significantly mitigating this loss of
earnings and free cash flow.
Through the entering into arrangements with MIC referred to in paragraph 2.6
below and through MIC increasing its ownership in Primedia in terms of the
vendor placing, Primedia"s strategic objective of increasing its black economic
ownership and control will be significantly advanced.
2.5 Conditions precedent to the AoA acquisition
The AoA acquisition is subject to the approval by the shareholders of Primedia
and HCI, to the extent required, by no later than 30 June 2004 and, to the
extent necessary, other regulatory approvals.
The acquisition by MIC of the MIC interest and the Primedia `N" shares and
Primedia ordinary shares in terms of the vendor placing are subject to MIC
raising the necessary funding by 31 March 2004, failing which Primedia will
acquire the entire HCI interest.
2.6 Arrangements between MIC and Primedia
The acquisition by MIC of the MIC interest will result in MIC increasing its
effective economic interest in AoA from its current 2,2% to 14,2% ("the total
MIC interest"). In terms of the agreement reached between MIC and Primedia, MIC
will have a put and Primedia will have a call in respect of the total MIC
interest with effect from 30 June 2007 ("the MIC put and call arrangements") on
the following basis:
2.6.1 the purchase price payable will be the greater of:
R60 million for the total MIC interest plus a holding cost of no more than 12%
per annum (multiplied by (1 - tax rate), if MIC"s funding is by way of
preference shares) ("the base price"); and
2.6.2 the value of the total MIC interest based on the Profit Before
Interest and Tax ("PBIT") multiple paid in terms of the AoA acquisition based on
the average of the PBIT of AoA for the years ended 30 June 2003 and 30 June
2004, applied to the PBIT of AoA for the year ending 30 June 2007; and
the base price will be settled by Primedia in cash and Primedia will be entitled
to settle the excess, if any, of the purchase price for the total MIC interest
over the base price, in cash or in Primedia shares. Primedia will be entitled to
elect to settle the purchase price in two tranches over two years including
interest at a holding cost of no more than 12% per annum (multiplied by (1 - tax
rate), if MIC"s funding is by way of preference shares);
The implementation of the MIC put and call arrangements will be subject, to the
extent necessary, such fair and reasonable opinion and shareholder approvals
which may be required in terms of the Listings Requirements of the JSE
Securities Exchange South Africa, failing which, the MIC put and call
arrangement s will not be implemented.
3. Financial effects of the AoA acquisition
The table below sets out the financial effects of the AoA acquisition based on
the unaudited interim results of Primedia for the six months ended 31 December
2003:
Per Primedia share Before After (5) Change
(cents) (cents) (%)
Basic earnings (1) (3) 39.6 41.4 4.5
Headline earnings(1) 32.1 35.5 10.6
(3)
Net asset value (2) 157.3 167.2 6.3
(4)
Net tangible asset 67.0 20.3 (69.7)
value (2) (4)
Notes:
1. The "Before" column reflects the basic earnings and headline earnings per
Primedia share for the six months ended 31 December 2003 calculated on the basis
of a weighted average number of 216,364 million shares in issue throughout the
period.
2. The "Before" column reflects the net asset value and net tangible asset
value per Primedia share at 31 December 2003 calculated on the basis of 216,364
million shares in issue at 31 December 2003.
3. The "After" column assumes that the AoA acquisition was implemented on 1
July 2003 and reflects the after tax earnings of Primedia which would have been
earned had the after tax earnings of AoA been included for the six months ended
31 December 2003, adjusted for the amortisation of goodwill relating to the AoA
acquisition over 20 years and calculated on the basis of a weighted average
number of 220,988 million shares in issue throughout the period, which includes
the Primedia `N" shares and Primedia ordinary shares to be issued in terms of
the vendor placing.
4. The "After" column assumes that the AoA acquisition was implemented on 31
December 2003 and includes the consolidated value of AoA at 31 December 2003
calculated on the basis of 220,988 million shares in issue at 31 December 2003,
which includes the Primedia "N" shares and Primedia ordinary shares to be issued
in terms of the vendor placing.
5. The "After" column assumes that MIC will take up the MIC interest.
Sandton
2 March 2004
Investment Sponsor Corporate law
bank Investec Bank advisers and
Investec Bank Limited consultants
Limited ENF
Corporate
Finance
Date: 02/03/2004 11:54:12 AM Produced by the JSE SENS Department
