| Wed 23 Jun 2004, 15:50 | | FIRM INTENTION AND FURTHER CAUTIONARY ANNOUNCEMENT |
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ELLERINES/ RELYANT - FIRM INTENTION AND FURTHER CAUTIONARY ANNOUNCEMENT
Ellerine Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1968/013402/06)
JSE Share Code: ELH
ISIN: ZAE000022752
(`Ellerines`)
Relyant Retail Limited
(Incorporated in the Republic of South Africa)
(Registration number 1937/010108/06)
JSE Share Code: RLY
ISIN: ZAE000016457
(`Relyant`)
FIRM INTENTION AND FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the joint cautionary announcement published by Ellerines and
Relyant on 17 May 2004, Andisa Capital is authorized to announce that on 22
June 2004 Ellerines delivered written notice to the Board of Relyant of
Ellerines` firm intention to make an offer (the `Offer`) to Relyant and/or
Relyant shareholders pursuant to which Ellerines and Relyant will merge (on
a basis more fully discussed in paragraph 3 below) with Relyant
shareholders becoming shareholders in Ellerines (the `Proposed
Transaction`). The Offer and Proposed Transaction are subject to the
conditions set out in paragraphs 2 and 4 below.
Although the joint cautionary announcement dated 17 May 2004 indicated
otherwise, Ellerines has decided to deliver the notice of its intention to
make the Offer prior to Ellerines and Relyant having completed reciprocal
due diligence investigations. The Offer and the posting of the Offer
documentation, however, remain subject to the satisfactory completion of
the reciprocal due diligence investigations as more fully described below.
2. Pre-Conditions
The making of the Offer is subject to the pre-conditions (the `Pre-
Conditions`) that:
* reciprocal due diligence exercises to be conducted by both Ellerines
and Relyant in respect of each other are duly completed to the
satisfaction of the entity carrying out such due diligence exercise .
Ellerines and Relyant have undertaken in favour of each other that a
party may only withdraw from the Proposed Transaction if the due
diligence exercise reveals that (in the opinion of the entity carrying
out such due diligence exercise, acting reasonably) the assumptions
upon which the net offer consideration of 42 856 875 new ordinary
shares in the share capital of Ellerines (`Ellerines shares`) is based
(having regard to the information available to Ellerines and Relyant
at the time that the Offer consideration was determined) are not
achievable, or, that there are material facts or information which
differ from the facts or information known to the other entity prior
to the commencement of the due diligence investigation which
objectively disprove in material respects important assumptions made
about the financial position of the other entity.
Both Ellerines and Relyant have agreed to proceed with the due
diligence exercises as expeditiously as possible and are co-operating
with one another in this regard; and
* the Proposed Transaction is approved by the shareholders of Ellerines
in general meeting.
3. Terms of the Proposed Offer
3.1 The Offer
Subject to the Pre-Conditions being satisfied, Ellerines will make an
offer to Relyant shareholders in accordance with section 440K of the
Companies Act, 61 of 1973, as amended (the `Companies Act`),
alternatively to propose a scheme of arrangement in terms of section
311 of the Companies Act between Relyant and its shareholders,
alternatively to acquire the underlying business of Relyant pursuant
to section 228 of the Companies Act.
3.2 The Offer Consideration
The offer consideration will be in the form of Ellerines shares and
will result in Relyant shareholders receiving a net total of 42 856
875 new Ellerines shares (the `Consideration Shares`). Each Relyant
shareholder will receive 10 Consideration Shares for approximately
every 225 Relyant shares which they hold. No cash alternative will be
offered.
On the basis of a 30-day volume weighted average Ellerines share price
of R33.85 at the close of business on 14 May 2004, being the last
business day prior to the publishing of the joint cautionary
announcement referred to above, this would represent an offer price of
R1.50 per Relyant share, representing a premium of 33% to the 30-day
volume weighted average Relyant share price of R1.13 at the close of
business on 14 May 2004.
The Consideration Shares will not be entitled to participate in any
dividend to be declared by Ellerines in respect of its financial year
ending 31 August 2004. The quantum of any such dividend will be in
line with Ellerines` existing dividend cover ratio of approximately 4
(four) times cover.
Given that the offer consideration comprises Ellerines shares, the
implied consideration per Relyant share will fluctuate in accordance
with movements in the Ellerines share price. The table below sets out
the implied consideration per Relyant share at varying Ellerines share
price levels.
Ellerines share price Implied consideration per Relyant share
(Rand) (Rand)
31.50 1.40
32.00 1.42
32.50 1.44
33.00 1.47
33.50 1.49
34.00 1.51
34.50 1.53
35.00 1.56
Upon receipt of the Consideration Shares, the Relyant shareholders
will, in the aggregate, hold 36% of the issued share capital of
Ellerines (net of the 2 214 200 Ellerines treasury shares).
A total of 42 856 875 new Ellerines shares will be issued to Relyant
shareholders which, based on a 30-day volume weighted average
Ellerines share price of R33.85 per share at the close of business on
14 May 2004, corresponds to an equity value for Relyant of R1 451
million.
4. Conditions Precedent to the Proposed Transaction
The Proposed Transaction will be subject to a number of conditions,
including the following:
* the Board of Relyant resolving to recommend the acceptance of the
Proposed Transaction to the shareholders of Relyant;
* if the Proposed Transaction is implemented by way of:
- an offer in terms of section 440K of the Companies Act, then
the acceptance of the offer by offerees holding in aggregate
not less than 90% of the issued share capital of Relyant
held by the offerees; alternatively
- a scheme of arrangement in terms of section 311 of the
Companies Act, then the approval of the scheme of
arrangement by the requisite majority of Relyant
shareholders and sanctioning of the scheme of arrangement by
the High Court of South Africa; alternatively
- the acquisition of the business conducted by Relyant, then
the approval of the shareholders of Relyant in general
meeting of the disposal in terms of section 228 of the
Companies Act and resolutions approving the voluntary
liquidation of Relyant and the distribution of the
Consideration Shares by Relyant to Relyant shareholders;
* the approval by the Boards of Ellerines and Relyant of all
matters necessary to implement the Proposed Transaction; and
* the obtaining of all regulatory approvals required to enable the
parties to implement the Proposed Transaction, including but not
limited to, the approvals required from:
- the Securities Regulation Panel (the `SRP`);
- the JSE Securities Exchange South Africa
- the Competition authorities;
- the Financial Services Board; and
- the Registrar of Companies.
The conditions precedent will be required to be fulfilled by not later
than 31 December 2004. Ellerines and Relyant may, however, by mutual
agreement in writing, extend the aforesaid date.
5. Arrangement between Poco International Holdings SA (`Poco`) and Ellerines
Poco, which owns 40.6% of the issued share capital of Relyant, and
Ellerines have entered into an arrangement between them, in terms of
which:
* they have agreed that they will use their best endeavours to
procure that:
- the current chief executive officer of Ellerines will
remain as such;
- the current chairman of Relyant will become the
chairman of Ellerines and the current chairman of
Ellerines will be appointed as deputy chairman of
Ellerines; and
- a nominee of Poco will be appointed to the Board of
Ellerines; and
* Poco intends to remain a long-term shareholder in Ellerines as a
result of the Proposed Transaction.
Furthermore, Ellerines, Relyant and Poco will use their best endeavours to
consider the implications and timing of any Black Economic Empowerment
initiatives appropriate for implementation as soon as possible after
completion of the Proposed Transaction.
Ellerines and Relyant have undertaken in favour of each other that they
will not, subject to the Securities Regulation Code on Takeovers and
Mergers (`the Code`), solicit offers from any third party for any of the
businesses forming part of the Relyant group or the Ellerines group, as the
case may be, and neither Relyant nor Ellerines will sell any assets
otherwise than in the ordinary course of its business and that neither
party will encourage any third party to make an offer to acquire any of the
shares in Relyant or Ellerines, as the case may be, from existing
shareholders.
6. Irrevocable Undertakings
Ellerines has received irrevocable undertakings from shareholders of
Relyant, representing 90.2% of the issued shares of Relyant, to accept the
offer for the implementation of the Proposed Transaction by way of an offer
in terms of section 440K of the Companies Act.
The Board of Ellerines has received irrevocable undertakings from
shareholders of Ellerines, including the directors of Ellerines,
representing 32.2% of the issued shares of Ellerines which are eligible to
vote, to vote in favour of the Proposed Transaction. In addition,
Ellerines has received verbal assurances from a number of other significant
Ellerines shareholders indicating that they intend to support the Proposed
Transaction and will vote in favour thereof at the meeting of Ellerines
shareholders.
7. Appointment of Independent Advisor
The Board of Relyant has appointed Java Capital to advise the Board on the
Offer and as to how the Offer affects all holders of Relyant securities.
Pursuant to the requirements of the Code, the substance of the advice
furnished to the Board shall be made known to the holders of Relyant
securities in a form and manner approved by the SRP.
8. General
As at the date of this announcement, Ellerines does not own or control any
of the issued shares in Relyant.
9. Timetable
It is anticipated that the Proposed Transaction will take a number of
months to complete in view of the Pre-Conditions referred to in paragraph 2
above and the Conditions Precedent referred to in paragraph 4 above, in
particular the joint merger filing with and the approvals of the relevant
competition authorities. As a result, the SRP has dispensed with the
normal timetable requirements as contained in the Code in regard to the
Proposed Transaction.
Further developments in regard to the timetable going forward will be
communicated to shareholders in due course, as and when they become known.
10. Further Announcements
Further announcements in respect of the Proposed Transaction will be
published in due course. Until publication of such further announcements,
shareholders of Ellerines and Relyant are advised to continue to exercise
caution when dealing in the securities of the respective companies.
Johannesburg
23 June 2004
Financial advisor to Ellerines
Andisa Capital
Legal advisor to Ellerines
Cliffe Dekker
Sponsor to Ellerines
Nedbank Capital logo)
Independent financial advisor to Relyant
Java Capital
Independent transaction adviser
Morgan Stanley
Legal advisor to Relyant
Sonnenberg Hoffman Galombik
Sponsor to Relyant
Investec Bank Limited
Date: 23/06/2004 03:43:09 PM Produced by the JSE SENS Department
