| Thu 6 May 2004, 16:53 | | DISPOSAL OF THE ENTIRE TANZANITE BUSINESS OF AFGEM |
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African Gem Resources Limited - Disposal Of The Entire Tanzanite Business Of
AFGEM
African Gem Resources Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/007292/06)
JSE share code: AFG ISIN: ZAE000025540
("Afgem" or "the company")
DISPOSAL OF THE ENTIRE TANZANITE BUSINESS OF AFGEM ("the disposal")
1. Introduction
On 5 December 2003, Afgem announced the details of an offer by TanzaniteOne SA
(Proprietary) Limited ("TanzaniteOne SA") to acquire the entire tanzanite
business undertaking ("Tanzanite Business") of Afgem ("the disposal"). Fisher
Hoffman PKF (Jhb) Inc. ("Fisher Hoffman") have now provided their fair and
reasonable opinion. Afgem have subsequently concluded an agreement with
TanzaniteOne SA, governing the terms and conditions of the disposal on 29 April
2004, and now wishes to provide its shareholders with further details of the
disposal.
2. Pro forma financial effects
2.1 The tables below set out the pro forma financial effects of the disposal on
Afgem and on an Afgem shareholder. Full details are contained in the circular
which was posted to Afgem shareholders (see 5.2 below) on 6 May 2004
("circular").
2.2 Pro forma financial effects of the disposal on Afgem
Before After Change
(cents) (cents) (%)
Earnings per Afgem share 8.701 21.242 144
Headline earnings per Afgem share 8.701 (1.01)3 (112)
Net asset value and net tangible asset value
per Afgem share 114.141 14.154 (88)
Weighted average number of
Afgem shares in issue (000"s) 139 952 140 202 0.2
Number of Afgem shares in issue (000"s) 142 256 142 506 0.2
Notes:
1. The "Before" financial information has been extracted, without adjustment,
from the published, reviewed results of Afgem for the period ended 31 December
2003.
2. The "After" earnings per Afgem share has been adjusted to exclude the income
items relating to the tanzanite business, include the profit on the disposal
thereof, the estimated additional transaction costs, the Capital Gains Taxation
arising as a result of the disposal and the additional Afgem shares issued as a
result of the exercise of 250 000 share options as detailed in the circular.
3. The "After" headline earnings per Afgem share has been calculated as for note
2 above with the exception of the exclusion of the profit on the disposal and
the Capital Gains Taxation arising as a result of the disposal.
4. The "After" net asset value and net tangible asset value per Afgem share have
been adjusted to exclude the assets and liabilities relating to the tanzanite
business, include the provision of the Capital Gains Taxation arising as a
result of the disposal, include the receipt of the proceeds on the disposal and
the subsequent distribution of those proceeds to Afgem shareholders and payment
of the special dividend as detailed in the circular and includes the payment of
the estimated additional transaction costs and the
additional shares issued as a result of the exercise of the aforementioned 250
000 share options.
2.3 Pro forma financial effects on an Afgem shareholder of the cash
distribution and receipt of the special dividend in cash
Before After Change
(cents) (cents) (%)
Earnings per Afgem share 8.701 27.602 217
Headline earnings per Afgem share 8.701 5.352 (39)
Net asset value per Afgem share (excluding the
estimated value of the Diamonds Business, as
detailed in the circular), and cash received 99.991 120.813 21
Net asset value of the Diamonds Business
per Afgem share 14.151 14.15 -
Net asset value and tangible net asset value of
the tanzanite business per Afgem share
and cash received 114.141 134.964 18
Notes:
1. The "Before" financial information has been extracted, without adjustment,
from the published, reviewed results of Afgem for the period ended
31 December 2003.
2. The "After" earnings and headline earnings per Afgem share assume that an
Afgem shareholder has invested the cash of 120.81 cents received on deposit with
a bank at an average compounded after tax rate of 6.79% for nine months.
The earnings and headline loss of 21.24 and (1.01) cents, respectively, per
Afgem share relating to the Diamonds Business have been added to the interest
earnings associated with the aforementioned deposit.
3. The "After" net asset value per Afgem share (excluding the estimated value of
the Diamonds Business) reflects the cash proceeds of 120.81 cents per Afgem
share, received by an Afgem shareholder.
4. The "After" net asset value and net tangible asset value per Afgem share
reflects the cash proceeds received by an Afgem shareholder of 120.81 cents per
Afgem share and the net asset value of the Diamonds Business of
14.15 Cents per Afgem share.
2.4 Pro forma financial effects on an Afgem shareholder of the reinvestment
alternative (as detailed in the circular) and the reinvestment by Afgem
shareholders of their special dividend proceeds
Before After Change
(cents) (cents) (%)
Earnings per Afgem share 8.701 24.012 176
Headline earnings per Afgem share 8.701 1.762 (80)
Net asset value per Afgem share (excluding the
estimated value of the Diamonds Business) 99.991 117.943 18
Net asset value of the Diamonds Business
per Afgem share 14.151 14.15 -
Net asset value and tangible net asset value
of the tanzanite business per Afgem share
and cash received 114.141 132.094 16
Notes:
1. The "Before" financial information has been extracted, without adjustment,
from the published, reviewed results of Afgem for the period ended
31 December 2003.
2. The "After" earnings and headline earnings per Afgem share are based on
1.0902 TanzaniteOne Limited, the holding company of TanzaniteOne SA
("TanzaniteOne") shares, with an earnings and headline earnings per TanzaniteOne
share of 2.54 Cents, which each Afgem shareholder will receive for every Afgem
share held and the earnings and headline loss per Afgem share of 21.24 and
(1.01) cents, respectively, attributable to the Diamonds Business after the
implementation of the disposal. The TanzaniteOne earnings per Afgem share have
been calculated based on a weighted average number of issued TanzaniteOne shares
of 171 160 611 and earnings relating to the tanzanite business amounting to
R4.354 million, after adjusting for the amortisation of mineral rights of R4.627
million arising on the acquisition by TanzaniteOne SA of the tanzanite business,
the write-back of the deferred taxation relating to the amortisation of the
mineral rights amounting to R1.388 million and the payment of the estimated
transaction costs amounting to R4.500 million. The
171 160 611 issued TanzaniteOne shares have been calculated as follows:
* shares issued to Afgem shareholders who have elected the
reinvestmentalternative (assumed 100% take-up as is underwritten) 142 506 182
* shares issued to Afgem shareholders who have elected to reinvest the
proceeds of their special dividend (assumed 100% reinvestment) 12 860 957
* shares issued to fund the estimated transaction expenses of R4,5 million
4 061 179
* shares issued for cash of R13 million 11 732 294
Total issued TanzaniteOne shares 171 160 611
3. The "After" net asset value per Afgem share (excluding the estimated value of
the Diamonds Business) is based on the 1.0902 TanzaniteOne shares with a net
asset value of 108.18 cents per TanzaniteOne share, which each Afgem shareholder
will receive for every Afgem share held.
4. The "After" net asset value and net tangible asset value per Afgem share are
based on the 1.0902 TanzaniteOne shares, with a net asset value of 108.18 cents
per TanzaniteOne share, which each Afgem shareholder will receive for every
Afgem share held and the net asset value per Afgem share of the Diamonds
Business of 14.15 cents per Afgem share.
2.5 Pro forma financial effects on an Afgem shareholder of the reinvestment
alternative and receipt by an Afgem shareholder of its special dividend proceeds
in cash
Before After Change
(cents) (cents) (%)
Earnings per Afgem share 8.701 24.312 179
Headline earnings per Afgem share 8.701 2.062 (76)
Net asset value per Afgem share (excluding the
estimated value of the Diamonds Business) and
cash received 99.991 118.183 18
Net asset value of the Diamonds Business
per Afgem share 14.151 14.15 -
Net asset value and tangible net asset value per
Afgem share and cash received 114.141 132.334 16
Notes:
1. The "Before" financial information has been extracted, without adjustment,
from the published, reviewed results of Afgem for the period ended 31 December
2003.
2. The "After" earnings and headline earnings per Afgem share are based on a
TanzaniteOne share with earnings and headline earnings per TanzaniteOne share of
2.54 cents, which each Afgem shareholder will receive for every Afgem share held
and the earnings and headline loss per Afgem share of 21.24 and (1.01) cents,
respectively, attributable to the Diamonds Business after the implementation of
the disposal. The TanzaniteOne SA earnings per TanzaniteOne share have been
calculated as per note 3 in 2.4 above. The weighted average number of issued
TanzaniteOne shares will remain at 171 160 611 as the number of TanzaniteOne
shares to be issued pursuant to the special dividend has been underwritten by
Jade Pacific Resources Limited. In addition, it has been assumed that an Afgem
shareholder has invested the cash proceeds of the special dividend of 10 cents
per Afgem share on deposit with a bank at an average compounded after tax rate
of 6.79% for nine months.
3. The "After" net asset value per Afgem share (excluding the estimated value of
the Diamonds Business) reflects a net asset value per TanzaniteOne share of
108.18 cents and the special dividend cash proceeds of 10 cents per Afgem share.
4. The "After" net asset value and net tangible asset value per Afgem share
reflect the net asset value per TanzaniteOne share of 108.18 cents per
TanzaniteOne share, the special dividend cash proceeds of 10 cents per Afgem
share and the net asset value of the Diamonds Business of 14.15 cents per Afgem
share.
3. Opinions, consents and recommendations
3.1 In accordance with Section 10.4(f) of the Listings Requirements of the JSE
Securities Exchange South Africa and in terms of Rule 3.1 of Section D of the
Securities Regulation Code. and Rules of the Securities Regulation Panel the
Afgem board appointed Fisher Hoffman to consider the terms and conditions of the
disposal, including the cash distribution, being the default cash alternative as
required by Rule 9.1(b) of the Securities Regulation Code on Take-overs and
Mergers.
3.2 Fisher Hoffman is of the opinion that:
3.2.1 the terms and conditions of the disposal are fair and reasonable to Afgem
shareholders;
3.2.2 the reinvestment alternative (as detailed in the circular) is fair and
reasonable to Afgem shareholders; and
3.2.3 the cash distribution is not fair but is reasonable to Afgem shareholders.
3.3 Shareholders are advised to refer to the circular which was posted to Afgem
shareholders (see 5.2 below) on 6 May 2004 to obtain an understanding of the
terms of the disposal and consider the fair and reasonable opinion in its
entirety.
3.4 The Afgem board agrees with the opinion of Fisher Hoffman and recommends
that Afgem shareholders vote in favour of the disposal. If the current share
price of Afgem continues to exceed the amount of the cash distribution and the
special cash dividend, any Afgem shareholder considering accepting the cash
distribution may also wish to consider selling their Afgem shares in the market.
3.5 The members of the Afgem board, in respect of their own holdings of Afgem
shares, intend to vote in favour of the disposal at the General Meeting. All the
members of the Afgem board will elect to receive the reinvestment alternative in
respect of their own holdings of Afgem shares.
4. Salient dates and times
The salient dates and times (full details are contained in the circular) are as
follows:
2004
Circular and notice of General Meeting posted
to Afgem shareholders on Thursday, 6 May
Election period commences Thursday, 6 May
Last day for receipt of forms of proxy from
Afgem shareholders for the General Meeting
by not later than 10:00 on Thursday, 20 May
General Meeting to be held at 10:00 on Friday, 21 May
*Announcement on SENS in respect of the
results of General Meeting released on Friday, 21 May
*Announcement in the press in respect of the
General Meeting published on Monday, 24 May
*Last day to trade in Afgem shares to be
recorded in the shareholders" register
of Afgem as an Afgem shareholder on the record date on Friday, 28 May
*Afgem shares start trading ex-distributions Monday, 31 May
*Election period closes, where elections of Afgem
shareholders must have been received by the
Registrars by not later than 12:00 on Friday, 4 June
*Record date to determine who qualifies for the distributions Friday, 4 June
*Electronic transfer of funds or cheques posted
by ordinary post to certificated shareholders on Monday, 7 June
*Dematerialised shareholders" accounts held at
their Central Securities Depository Participant
or broker credited and/or updated on Monday, 7 June
*These dates are subject to the fulfilment of the remaining suspensive
conditions and may change. Any change will be published in the press.
5. Circular to shareholders and general meeting
5.1 The General Meeting has been convened for 10:00 on Friday, 21 May 2004 in
the boardroom of Afgem, 3rd Floor, 10 Melrose Boulevard, Melrose North,
Melrose Arch, Johannesburg 2196, for the purpose of considering and, if deemed
fit, passing, with or without modification, the resolutions required to
approve and implement the disposal.
5.2 The circular was posted to Afgem shareholders on Thursday, 6 May 2004.
Johannesburg
6 May 2004
Corporate advisor to TanzaniteOne SA
BRAIT
Legal advisor to TanzaniteOne SA
Werksmans Incorporated
(Registration number 1990/007215/21)
Corporate advisor and sponsor to Afgem
JAVA CAPITAL
Auditors and reporting accountants
KPMG
Legal advisor to Afgem
H R LEVIN
Attorneys, Notaries and Conyeyancers
Independent expert
Fisher Hoffman PKF (Jhb) Inc.
Chartered Accountants (SA)
Registered Accountants & Auditors
(Registration number 1994/001166/21)
Date: 06/05/2004 04:13:24 PM Produced by the JSE SENS Department
