| Wed 26 May 2004, 18:04 | | TERMS ANNOUNCEMENT |
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MERCANTILE LISBON BANK HOLDINGS - TERMS ANNOUNCEMENT
Mercantile Lisbon Bank Holdings
(Incorporated in the Republic of South Africa)
(Registration number 1989/000164/06)
JSE Share code: MTL
ISIN: ZAE000027082
(`Mercantile` or `the company`)
TERMS ANNOUNCEMENT
1. INTRODUCTION
Shareholders are advised that, further to the announcement on SENS on
Wednesday, 31 March 2004, Mercantile will be recapitalised by means of a
rights offer, in an aggregate amount of R555 million at an issue price of
18 cents per share (`the rights offer`), which rights offer is to be fully
underwritten by Caixa Geral de Depositos S.A. (`CGD`) pursuant to approval
by Mercantile minority shareholders of the release by Mercantile of CGD
from its obligations under certain guarantees (`the release`).
2. RESTRUCTURING OF THE SHARE CAPITAL OF MERCANTILE
Mercantile has insufficient authorised but unissued shares available to
implement the rights offer. Accordingly, steps will be taken to ensure the
availability of sufficient authorised but unissued shares for this purpose.
Mercantile`s shares have traded below their par value of 25 cents per share
for a period of at least two years. Furthermore, the rights offer price of
18 cents represents a discount to the par value of Mercantile`s shares. Any
issue of shares below their par value requires a special resolution of
shareholders and Court sanction. This process is unwieldy for a listed
company and will constrain Mercantile in respect of any future issues of
shares. Accordingly, prior to the launch of the rights offer, Mercantile
will seek the approval of shareholders:
- to reduce its issued share capital of R213 896 297.50, divided into
855 585 190 ordinary shares of 25 cents each, by R205 340 445.60 to R8
555 851.90, divided into 855 585 190 ordinary shares of 1 cent each,
without a return of capital to shareholders and with the creation of a
distributable reserve, by way of a scheme of arrangement in terms of
section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended
(`the scheme`); and
- to subdivide the authorised but unissued ordinary share capital of
Mercantile of R36 103 702.50 divided into 144 414 810 ordinary shares
of 25 cents each into 3 610 370 250 ordinary shares of 1 cent each, by
way of a special resolution (`the subdivision`). As a consequence of
the subdivision, Mercantile will have sufficient unissued shares
available with a par value below that of the rights offer price of 18
cents to implement the rights offer. The purpose of the scheme is to
ensure that Mercantile`s shares currently in issue will rank pari
passu with the authorised but unissued shares after the subdivision.
The subdivision is conditional upon the sanctioning by the High Court
of South Africa (Witwatersrand Local Division) (`the Court`) of the
scheme. The scheme, subdivision, release and rights offer
collectively and indivisibly comprise the recapitalisation of
Mercantile (`the recapitalisation`).
3. EFFECTIVE DATE
The effective date of the scheme and subdivision is expected to be on or
about Monday, 2 August 2004.
4. SUSPENSIVE CONDITIONS
The scheme and subdivision are subject, inter alia, to the following
suspensive conditions:
- the receipt of the necessary approval of shareholders in respect of
the scheme and the sanctioning thereof by the Court; and
- the receipt of the necessary approval of shareholders for the
subdivision. The subdivision is further subject to the necessary
approval of shareholders for the release.
5. PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects set out below have been prepared to assist
shareholders to assess the impact of the recapitalisation on the earnings,
headline earnings, net asset value and tangible net asset value per
Mercantile ordinary share. The material assumptions are set out in the
notes following the table. These pro forma financial effects have been
disclosed in terms of the Listings Requirements of the JSE Securities
Exchange South Africa (`JSE`) for illustrative purposes only and do not
constitute a representation of the future financial position of Mercantile
on completion of the recapitalisation.
Before the After the
recapitalisation recapitalisation Change
(cents) (cents) (%)
Earnings per share (6.9)(1) (5.0)(2) 27.9
Headline earnings per share (6.6)(1) (4.9)(2) 25.7
Net asset value per share 19.2(3) 13.4 (4) (29.8)
Tangible net asset value per share 17.7(3) 13.1 (4) (25.7)
Notes:
1. The earnings and headline earnings per share in the `Before the
recapitalisation` column of the table are based on the audited income
statement of Mercantile for the financial year ended 31 December 2003
and 855 585 190 Mercantile shares in issue (being the weighted average
number of shares in issue for the year ended 31 December 2003).
2. The earnings and headline earnings per share in the `After the
recapitalisation` column of the table are based on 3 938 918 524
Mercantile shares in issue and the assumptions that:
* the release and the rights offer became effective on 1 January
2003 and cash in respect of the rights offer was received on that
date; and
* the cash received as a consequence of the rights offer was
invested in Government bonds bearing a yield of 9.5%, which
income did not attract South African normal taxation due to the
magnitude of assessed tax loss in Mercantile`s subsidiary,
Mercantile Bank Limited.
3. The net asset value per share and tangible net asset value per share
in the `Before the recapitalisation` column of the table are based on
the audited balance sheet of Mercantile at 31 December 2003 and 855
585 190 Mercantile shares in issue.
4. The net asset value per share and tangible net asset value per share
in the `After the recapitalisation` column of the table are based on
the assumptions that:
* the release and the rights offer were completed on 31 December
2003; and
* the issue of 3 083 333 334 Mercantile shares in terms of the
rights offer took place on 31 December 2003.
5. The pro forma financial effects have been prepared according to South
African Generally Accepted Accounting Practice and have been reviewed
by Mercantile`s auditors, Deloitte & Touche.
6. INDEPENDENT EXPERT
In terms of the Listings Requirements of the JSE, as a consequence of CGD`s
64.83% interest in Mercantile`s issued share capital, the release
constitutes a related party transaction. Rand Merchant Bank, a division of
FirstRand Bank Limited (`RMB`), has been engaged as independent expert to
the board in relation to this related party transaction. RMB has in its
capacity as independent expert to the board, advised the board that it is
of the opinion that the terms and conditions of the recapitalisation are
fair and reasonable to the shareholders of Mercantile.
7. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS
7.1 The Scheme
The directors of Mercantile have considered the terms of the proposed
scheme and are of the unanimous opinion that they are not prejudicial
to scheme participants. Accordingly, the board of directors of
Mercantile recommends that shareholders vote in favour of the proposed
scheme.
7.2 The Release
The board, after due evaluation of the terms of the release and taking
into account the opinion of RMB, is of the view that the release,
which forms an integral part of the recapitalisation, is fair and
reasonable to the shareholders of Mercantile and recommends that
shareholders vote in favour of the release.
7.3 Undertakings
Sanlam Life Insurance Limited, Hollard Life Insurance Company Limited
and The Hollard Insurance Company Limited and Goldrush Investments No.
8 (Proprietary) Limited and Goldrush Investments No.11 (Proprietary)
Limited (the latter two of which, together, form SARHWU), who
collectively hold 139 234 072 Mercantile shares representing, at the
last practicable date, 16.27% of the Mercantile shares in issue and
46.28% of the total Mercantile shares in issue not held by CGD and its
associates, have irrevocably undertaken, inter alia, to vote in favour
of the resolutions necessary to implement the release and subdivision
and to vote in favour of the scheme. The resolution to release CGD
from the guarantees will only be regarded as having been validly
passed for the purposes of the Listings Requirements of the JSE if a
simple majority of the Mercantile minority shareholders, present in
person, or by proxy, or by letter of representation and voting at the
general meeting, vote in favour thereof. CGD has also irrevocably
undertaken to vote its 554 705 722 shares, constituting 64.83% of
Mercantile`s shares in issue, in favour of the resolution necessary to
implement the subdivision and vote in favour of the scheme.
8. DOCUMENTATION
A circular containing the details of the recapitalisation, including a
notice of general meeting, form of proxy for shareholders, details of the
scheme and related annexures, will be posted to shareholders on or about
Tuesday, 8 June 2004. A circular relating to the rights offer will be
posted to shareholders after the implementation of the scheme and the
subdivision.
9. NOTICE OF GENERAL MEETING
A general meeting of shareholders will be held at Mercantile Lisbon House,
142 West Street, Sandown, 2196 at 10:00 on Wednesday, 30 June 2004, for the
purposes of considering and, if deemed fit, adopting the requisite
resolutions to implement the release and subdivision.
10. SCHEME MEETING
In addition, a scheme meeting of scheme members will be held at Mercantile
Lisbon House, 142 West Street, Sandown, 2196 at 10:30 or ten minutes after
the completion of the general meeting, whichever is the later, on
Wednesday, 30 June 2004, for the purposes of considering and, if deemed
fit, adopting the proposed scheme.
Johannesburg
26 May 2004
Investment bank and lead sponsor
STANDARD BANK
Sponsor
BRIDGE CAPITAL
Attorneys
VORSTER PEREIRA
Independent expert
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Reporting accountants and auditors
Deloitte & Touche Chartered Accountants (SA)
Registered Accountants and Auditors
Date: 26/05/2004 05:33:06 PM Produced by the JSE SENS Department
