| Tue 6 Apr 2004, 18:00 | | - Firm intention by Kersaf to make an offer to |
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Kersaf Investments Limited - Firm intention by Kersaf to make an offer to
acquire the issued share capital of Sun International (South Africa) Limited
("SISA") that it does not already own and further cautionary announcement
Kersaf Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1967/007528/06)
Share code: KER ISIN: ZAE000003844
("Kersaf")
Firm intention by Kersaf to make an offer to acquire the issued share
capital of Sun International (South Africa) Limited ("SISA") that it does
not already own and further cautionary announcement
1. INTRODUCTION
Shareholders are referred to the cautionary announcement released on the
Securities Exchange News Service of the JSE Securities Exchange South
Africa ("the JSE") on Thursday, 11 March 2004 in terms of which Kersaf
expressed its interest in acquiring the issued share capital of SISA that
it does not already own ("the SISA minority shares") from the minority
shareholders of SISA ("SISA"s minority shareholders"). Investec Bank
Limited is authorised to announce that Kersaf has now expressed a firm
intention to the board of directors of SISA to make an offer to acquire the
SISA minority shares ("the proposed acquisition").
The implementation of the proposed acquisition is subject to the
fulfilment of certain conditions precedent as set out in paragraph 4 below.
2. RATIONALE AND BENEFITS
Pursuant to Kersaf"s ongoing assessment of the Kersaf group structure, its
various investments and operations and in accordance with its stated
objective of unlocking shareholder value, the Kersaf group has concluded a
number of strategic transactions including, inter alia:
- the acquisition of the 26,7% minority interest in Sun International
Management Limited ("SIML") in November 2002;
- the disposal of a 12,2% holding in Kerzner International Limited ("KZL")
in December 2002 and further disposals of its shareholding in KZL,
resulting in its current effective holding in KZL of only 3,7%;
- the acquisition of an effective 18,6% interest in SISA from the North
West Development Corporation (Proprietary) Limited ("NWDC") in September
2003, bringing its total effective interest in SISA to 62,4%; and
- the continued disposal of the Ster Century cinema assets.
The Kersaf board of directors believes that the proposed acquisition will:
- further simplify the corporate and operating structure of the Kersaf
group;
- allow SISA shareholders to continue to own, as the most significant part
of their investment, the existing SISA businesses, and in addition thereto,
to share in the wider spread of the Kersaf group"s casinos, hotels and
resorts throughout southern Africa as well as the management of these
operations through SIML;
- remove the conflicts of interest that exist between SISA and Kersaf
relating to corporate opportunity, resulting mainly from the sharing of
executive board members and the limited resources available to SISA to
pursue opportunities;
- enable SISA shareholders to participate in the new opportunities
currently being considered by the Kersaf group;
- improve the free float and liquidity of Kersaf"s shares on the JSE;
- create a single point of entry into the Kersaf group whilst
simultaneously increasing Kersaf"s exposure to its core gaming and resorts
activities;
- position Kersaf to be valued as an operating company and not as an
investment holding company and thereby reduce the discount at which it
currently trades relative to the value of its underlying assets;
- improve the enlarged Kersaf group"s financial leverage, financial
capability and critical mass; and
- allow Kersaf greater control over its cashflows and to gear its
operations more effectively.
3. THE PROPOSED ACQUISITION
3.1 Introduction
It is contemplated that the proposed acquisition shall take the form of
either a scheme of arrangement in terms of section 311 of the Companies
Act, 1973 (Act 61 of 1973), as amended ("the Act"), between SISA and SISA"s
minority shareholders ("the scheme"), or should the scheme not be proposed
or be unsuccessful, then Kersaf will make an equivalent offer in terms of
section 440K of the Act to acquire the SISA minority shares.
Pursuant to the successful implementation of the proposed acquisition, it
is anticipated that SISA"s shares will be delisted from the "Leisure,
Entertainment and Hotels" sector of the JSE lists.
3.2 The approach to the proposed acquisition consideration
In arriving at the proposed acquisition consideration, the following key
factors were taken into account in finalising the proposed acquisition
consideration for it to be fair to the respective shareholders of Kersaf
and SISA:
- the proposed acquisition consideration should, to the extent possible,
comprise either cash or Kersaf shares, or a combination of the two;
- the proposed acquisition consideration should be reflective of the
inherent values of the underlying assets of both Kersaf and SISA and should
take cognisance of market prices of both shares over the past 12 to 18
months;
- Kersaf currently controls SISA;
- SISA"s minority shareholders must be afforded the opportunity to
effectively reinvest into SISA and, in addition, to invest in SIML, whose
underlying performance correlates closely with that of SISA. SISA and SIML
combined will account for approximately 80% of Kersaf"s inherent underlying
value;
- any cash alternative provided should be at a premium to the historic
SISA market price but should be at the election of the SISA minority
shareholder;
- the SISA share price has outperformed the Kersaf share price by 7% over
the past 12 months and by 52% over the 18-month period to March 2004, which
may be partly due to the market"s expectations of this proposed acquisition
subsequent to the acquisition by Kersaf of the NWDC"s stake in SISA.
The relative switch ratio should therefore not only take cognisance of
the points set out above but also that the market switch ratio over the
past 12 months varied between 12 and 13 SISA shares to 1 Kersaf share,
while the switch ratio, based on the inherent underlying asset values,
varied between 15 and 16 SISA shares to 1 Kersaf share.
3.3 The proposed acquisition consideration
The proposed acquisition consideration will therefore comprise 1 Kersaf
share for every 13 SISA shares held by SISA"s minority shareholders ("the
share consideration"). As an alternative, SISA"s minority shareholders may
elect to receive cash of 350 cents per SISA share ("the cash
consideration"), limited to a maximum aggregate cash outflow from Kersaf of
R400 million.
On the basis of a R400 million cash outlay, the proposed acquisition
consideration would equate to approximately 75% being payable in Kersaf
shares with the balance of 25% being payable in cash.
SISA minority shareholders will be entitled to elect to receive the share
consideration and/or the cash consideration in any proportion of their
choice. All such elections will be allocated on a pro rata basis by Kersaf
in its sole and absolute discretion, with a maximum of R400 million cash
being made available by Kersaf for this purpose.
3.4 Irrevocable undertakings and support for the proposed acquisition and
scheme
Kersaf shareholder undertakings
Kersaf shareholders collectively representing approximately 37,9% of the
voting rights of the issued ordinary share capital of Kersaf have
irrevocably undertaken to vote in favour of the resolutions of Kersaf
required to implement the proposed acquisition ("the Kersaf irrevocable
undertakings").
In addition to the Kersaf irrevocable undertakings, which include
commitments provided by Allan Gray on behalf of a portion of its client
base, Allan Gray has undertaken to recommend to its remaining clients on
behalf of which it manages Kersaf shares, which represent approximately
25,6% of the voting rights of Kersaf"s entire shareholder base, that they vote
in favour of the resolutions of Kersaf required to implement the proposed
acquisition.
SISA shareholder undertakings
Certain SISA shareholders representing approximately 26,4% of the voting
rights of SISA"s minority shareholders have irrevocably undertaken to vote
in favour of the scheme, while 19,3% of SISA"s minority shareholders have
undertaken to accept the share consideration in full settlement of the
proposed acquisition consideration and have accordingly waived any rights
to the cash consideration to be offered by Kersaf to SISA"s minority
shareholders ("the SISA irrevocable undertakings").
In addition to the SISA irrevocable undertakings, which include
commitments provided by Allan Gray on behalf of a portion of its client
base, Allan Gray has undertaken to recommend to its remaining clients on
behalf of which it manages SISA shares, which represent approximately 19,3%
of the voting rights of SISA"s entire shareholder base, or 51,3% of the
voting rights of SISA"s minority shareholders, that they vote in favour of the
scheme and to accept the share consideration in full settlement of the
proposed acquisition consideration.
3.5 Effects of the proposed acquisition consideration
The effects of the proposed acquisition consideration on a SISA and
Kersaf shareholder are set out below and are based on the following
assumptions:
- Kersaf and SISA closing share prices at 10 March 2004, being the day
before the release of the joint cautionary announcement, of R36,49 and
R3,02 ("the market price") respectively; and
- using underlying asset valuations as carried out by Investec Bank
Limited and the Kersaf board of directors for both Kersaf and SISA applying
consistent valuation methodologies.
Share consideration Cash
consideration
On a SISA On a Kersaf On a SISA
Description shareholder shareholder shareholder
Proposed switch ratio/cash offer 13 13 350
(Discount)/Premium to the
market price (%) (7) 8 16
Premium/(Discount) to Kersaf/SISA
inherent asset values (%) 14 (4) n/a
On the basis of a R400 million cash outlay, and all SISA"s minority
shareholders electing their pro rata share of the cash consideration, the
proposed acquisition consideration to a SISA minority shareholder would
equate to 299 cents per SISA share, which represents a discount of 1% to
the market price.
In addition, on the basis of a R400 million cash outlay and assuming that
the 70,7% of the SISA minority shareholders referred to in paragraph 3.4
above elect the share consideration, the proposed acquisition consideration
potentially available to the remaining SISA minority shareholders would
equate to 342 cents per SISA share (of which 90% would be payable in cash),
representing a premium of 13,2% to the market price.
4. CONDITIONS PRECEDENT
The proposed acquisition is subject to the fulfilment of the following
conditions precedent:
- the passing by Kersaf shareholders of the requisite resolutions required
to implement the proposed acquisition at a general meeting of Kersaf
shareholders including an increase in the authorised share capital of
Kersaf;
- in accordance with the requirements of section 311 of the Act and in the
likely event that the proposed acquisition is implemented by means of a
scheme:
* the scheme being approved at the scheme meeting by the requisite number
of votes of SISA minority shareholders;
* the High Court of South Africa sanctioning the scheme; and
* a certified copy of the Order of Court sanctioning the scheme being
lodged with, and registered by, the Registrar of Companies;
- all relevant provincial gaming licensing authorities approving of the
proposed acquisition; and
- insofar as may be necessary all regulatory consents being received,
including the consent of the JSE, the South African Reserve Bank, the
Securities Regulation Panel ("SRP") and such other regulatory authorities
as may be necessary for the implementation of the proposed acquisition.
5. FUNDING
The SRP has been furnished with an independent written confirmation that
Kersaf has sufficient cash resources and/or facilities with which to meet
its obligations in terms of the cash consideration portion of the proposed
acquisition consideration.
6. NAME CHANGE
It is anticipated that the name of Kersaf Investments Limited will be
changed to Sun International Limited.
7. FAIR AND REASONABLE OPINION
Nedbank Capital ("Nedbank") has been appointed by the SISA board of
directors to consider whether or not the terms of the proposed acquisition
are fair and reasonable to SISA"s minority shareholders ("the fair and
reasonable opinion"). SISA has advised that Nedbank anticipate that they
will be in a position to furnish the fair and reasonable opinion to the
SISA board of directors early in May 2004.
8. DOCUMENTATION AND FURTHER CAUTIONARY ANNOUNCEMENT
A further announcement setting out the detailed terms, salient dates and
financial effects of the proposed acquisition ("the detailed terms
announcement") will be made to Kersaf shareholders in due course.
Shareholders of Kersaf are advised to exercise caution when dealing in
their Kersaf shares until the detailed terms announcement is made.
A circular to Kersaf shareholders setting out the final terms of the
proposed acquisition is anticipated to be posted on or about Wednesday, 12
May 2004, while the proposed acquisition is anticipated to be completed by
the end of July 2004. The salient dates of the proposed transaction will be
included in the detailed terms announcement and Kersaf shareholders will be
kept informed in this regard.
Sandton
6 April 2004
Transactional advisor and sponsor to Kersaf
Investec Bank Limited
(Registration number 1969/004763/06)
Legal advisor to Kersaf
Hofmeyr Herbstein & Gihwala Inc.
(Registration number 1997/001523/21)
Date: 06/04/2004 05:53:07 PM Produced by the JSE SENS Department
