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IST Group Limited - Proposed Scheme Of Arrangement To Acquire The Shares In IST
And Further Cautionary Announcement
IST GROUP LIMITED
(Incorporated in the
Republic of South Africa)
(Registration number
1998/011521/06)
Share code: IST
ISIN: ZAE000015798
(`IST`)
PROPOSED SCHEME OF ARRANGEMENT TO ACQUIRE THE SHARES IN IST AND FURTHER
CAUTIONARY ANNOUNCEMENT
1 Introduction
Further to the cautionary announcements published on 17 May 2004 and 28 June
2004, Rand Merchant Bank is authorised to announce that the board of directors
of IST (`IST board`) has been informed in writing by a consortium represented by
Ethos Private Equity (`the offeror`) that it is in the process of finalising the
funding arrangements that may result in it making an offer to acquire all the
shares in IST. However, as of the date of this announcement, no statement of a
firm intention to make an offer has been received by the IST board, although the
offeror has undertaken to notify the IST board of its firm intention to make an
offer once the funding arrangements have been finalised.
The potential offer would be implemented by means of a scheme of arrangement in
terms of section 311 of the Companies Act 1973 (Act 61 of 1973) as amended (`the
scheme`). Should the scheme be successfully implemented, the offeror would hold
100% of the IST shares in issue and IST`s listing on the JSE Securities Exchange
South Africa (`JSE`) would be terminated.
2 Rationale for the scheme
In order for IST to achieve its strategic objectives, it needs to have a
significant black economic empowerment (`BEE`) shareholding. Its existing BEE
structure is due to unwind this year and, after a thorough assessment of the
alternatives, the IST board concluded that IST`s BEE objectives could be
achieved more effectively if IST was a privately held company. Furthermore, IST
does not foresee a need to use its JSE listing to raise capital and the offeror
therefore does not believe that the costs of maintaining this listing are
justified.
Following the anticipated unwinding of IST`s existing BEE structure, Sanlam
Investment Managers (`SIM`) will control approximately 48% of IST`s issued share
capital. At the beginning of 2004, SIM indicated to the IST board that it would
be willing to dispose of these shares and has since given an irrevocable
undertaking in this regard to the offeror.
3 Details of the offeror
The offeror is consortium comprising Ethos Private Equity Fund IV and Ethos
Technology Fund I, certain members of the IST management team, Alastair Moffat,
Lindsay Robertson and ICT Investments (Proprietary) Limited, a BEE company.
4 Terms of the scheme
Consideration
In terms of the scheme, IST shareholders would be offered 180 cents in cash per
IST share held.
Conditions precedent
Implementation of the scheme would be subject to fulfilment of the following
conditions precedent:
* The finalisation of a facility agreement in respect of the senior debt
funding requirements for the scheme, the terms of which have been agreed in
principle;
* Consent to the scheme by counterparties to certain agreements entered into by
IST;
* The consent by counterparties to the assignment of certain agreements entered
into by IST to a new counterparty subsequent to implementation of the scheme;
* The conclusion of a shareholders agreement between the members of the
consortium, the key terms of which have been agreed to in principle;
* Approval of the scheme by the South African competition authorities;
* Approval of the scheme by the JSE and the Securities Regulation Panel
(`SRP`);
* The High Court of South Africa authorising the convening of a scheme meeting;
* The required majority of votes being cast in favour of the scheme at the
scheme meeting;
* The High Court of South Africa sanctioning the scheme; and
* Registration of the Order of Court by the Registrar of Companies.
5 Pro forma financial effects
The pro forma financial effects have been prepared for illustrative purposes
only based on the assumption that the scheme proceeds as discussed above.
Before the After the
scheme (cents) scheme (cents) Change (%)
Market value per
share -
14 May 2004 (1) 156.0 180.0 15.4
Market value per
share -
9 July 2004 (2) 164.0 180.0 9.8
Net tangible asset
value per share -
29 February 2004 70.4 180.0 155.7
Net asset value per
share -
29 February 2004 103.6 (3) 180.0 73.7
Diluted earnings per
share - 12 months ended
29 February 2004 17.2 (3) 10.1 (4) (41.3)
Diluted headline earnings
per share - 12 months
ended
29 February 2004 16.4 (3) 10.1 (4) (38.5)
Notes:
(1) The last day prior to publication of the first cautionary announcement in
respect of the scheme.
(2) Last practical date prior to publication of this announcement.
(3) Extracted from the audited financial statements for the year ended 29
February 2004.
(4) Pro forma earnings and headline earnings per share assuming that the scheme
consideration had been invested for 12 months and earned an effective after tax
interest rate of 5.6% per annum.
6 Irrevocable undertakings
The offeror has received irrevocable undertakings to vote in favour of the
scheme in respect of approximately 48% of IST`s issued share capital.
7 Opinions and recommendation
Deloitte & Touche, which has been appointed independent advisers to the IST
board, has advised the IST board that it believes that the terms of the possible
scheme are fair and reasonable to IST shareholders.
The IST board has considered the terms of the scheme and is of the opinion that
such terms would be fair and reasonable to IST shareholders. The IST board
recommends that shareholders vote in favour of the scheme if the offeror
notifies the board of a firm intention to make an offer on the material terms
contained in this announcement.
8 Further cautionary announcement
The offeror is not able to notify the IST board of its firm intention to make an
offer in terms of the Rules of the SRP until such a time as the facility
agreement in respect of the senior debt requirements has been finalised. A term
sheet has been signed with senior debt funders in respect of the facility
agreement and the necessary legal agreements are in the process of being
finalised. Accordingly, IST shareholders are advised to exercise caution when
dealing in their shares until such a time as a further announcement is made in
this regard.
Pretoria
12 July 2004
Merchant Bank :
Rand Merchant Bank Corporate Finance
A division of FirstRand Bank Limited
Sponsor:
Nedbank Capital
Attorneys :
Webber Wentzel Bowens
Technology adviser to the Consortium :
Ethos Technology
Independent adviser :
Deloitte & Touche Chartered Accountants (SA)
Registered Accountants and Auditors
Date: 12/07/2004 05:41:57 PM Produced by the JSE SENS Department
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