| Thu 26 Aug 2004, 18:03 | | Notification Of An Intention To Make An Offer |
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HCI - Notification Of An Intention To Make An Offer To The Minority Shareholders
Of Mettle Limited (`Mettle`) And A Specific Issue Of Shares For Cash
Hosken Consolidated Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1973/07111/06)
Share code: HCI ISIN: ZAE000003257
(`HCI`)
NOTIFICATION OF AN INTENTION TO MAKE AN OFFER TO THE MINORITY SHAREHOLDERS OF
METTLE LIMITED (`METTLE`) AND A SPECIFIC ISSUE OF SHARES FOR CASH
The offer
1.1 Introduction
HCI has notified the Board of directors of Mettle in writing of its intention to
make an offer to the minority shareholders of Mettle, via its wholly owned
subsidiary Merilyn Investments (Proprietary) Limited (`Merilyn`), to purchase
all or any part of their issued shares in Mettle (`the offer`) in terms of
Section 440 of the Companies Act, 61 of 1973, as amended (`the Act`).
Merilyn currently holds 244 524 229 Mettle shares (`the Merilyn shares`),
constituting approximately 65% of all the issued shares in Mettle. The offer
will exclude the Merilyn shares and will extend to the remaining 131 652 297
Mettle shares in issue (`the offer shares`).
1.2 Nature of business of Mettle
Established in 1995 as a specialist finance house, Mettle has built up a
reputation for innovation in the creation of tailored financial solutions.
Specialising in debt and equity, the two teams interact closely with one another
in order for Mettle to provide a more integrated and comprehensive service to
its clients. The debt division`s core focus is the generation and placement of
debt assets, including securitisation and structured finance while the equity
division has a portfolio of asset intensive companies with positive cash flows
and strong market positions.
1.3 Rationale for the offer
HCI currently owns approximately 65% of all the issued shares in Mettle and HCI
is of the view that it is commercially expedient for the HCI group for Mettle to
become a wholly-owned subsidiary of HCI. Following completion of the offer,
Mettle`s black empowerment status will be enhanced.
1.4 Compulsory acquisition of Mettle shares
HCI has indicated that if acceptances in respect of not less than nine-tenths of
the Mettle shares (excluding the Merilyn shares) are received, that it intends
to invoke the provisions of Section 440K of the Act to compel the remaining
Mettle shareholders to sell their Mettle shares to it, on the same terms and
conditions as the offer.
1.5 Irrevocable undertakings
To date, the following parties have provided HCI with written irrevocable
undertakings to accept t
Number of Mettle Percentage of the
shares held offer shares
%*
Old Mutual Asset Managers 28 429 300 21,59
(South Africa)
(Proprietary) Limited
Gavin OConnor 38 093 032 28,93
Heine Prinsloo 18 768 064 14,26
Certain other shareholders 1 777 000 1,35
Total 87 067 396 66,13
* based on 131 652 297 offer shares
1.6 The offer consideration
HCI will offer to purchase all or any part of the issued shares in Mettle for 37
cents per Mettle share, subject to the fulfilment of the conditions precedent
referred to in paragraph 1.7 below. Should acceptances be received regarding all
the offer shares or if the provisions of Section 440K of the Act are invoked,
HCI will be obliged to pay a total amount of R48.7 million to Mettle
shareholders. The offer consideration will be paid out of HCI`s existing cash
resources.
1.7 Conditions precedent
The implementation of the offer will be subject in its entirety to the
fulfilment of the following conditions precedent:
- an independent adviser appointed by Mettle confirming that the offer
price is fair and reasonable;
- the Mettle Board recommending the offer to its shareholders for
acceptance; and
- both Mettle and HCI obtaining all regulatory consents and approvals
required of them for the purposes of implementing the offer, either
unconditionally or on terms and conditions acceptable to each of them.
1.8 Financial effects of the offer
Based on the published consolidated reviewed results of HCI for the year ended
31 March 2004, the pro forma financial effects of the offer, should all the
conditions precedent in paragraph 1.7 above be fulfilled, on HCI`s earnings,
headline earnings and net asset value (`NAV`) per share are set out below. The
pro forma financial information has been prepared for illustrative purposes only
and because of its nature may not give a true picture of HCI`s financial
position and results of operations.
Per HCI Before the After the Percentage
ordinary share offer (1) offer (2) Change
Earnings 131,26 78,26 (3) (40,38%)
(cents)
Headline 2,96 (16,61) -
earnings (3)
(cents)
NAV (cents) 645 642 (4) (0,47%)
Notes:
1. Based on the published consolidated reviewed results of HCI for the year
ended 31 March 2004.
2. Based on the assumption that the offer was effected on 1 April 2003 for
income statement purposes and on 31 March 2004 for balance sheet purposes
and assuming that HCI acquires 131 652 297 Mettle shares at the offer
consideration of 37 cents per Mettle share.
3. Taking into account the after tax interest that would have been received on
the offer consideration at call rates applicable during the period 1 April
2003 to 31 March 2004, assuming a corporate tax rate of 30%.
4. The effect of the acquisition on net tangible asset value per share has not
been included as the effect thereon is not materially different to the
effect on NAV.
1.9 Related party transaction
As Gavin OConnor, Gavin Jones and Heine Prinsloo are current shareholders and
directors of Mettle, the offer is considered to be a `small related party
transaction` in terms of the JSE Securities Exchange South Africa (`JSE`)
Listings Requirements. HCI has therefore appointed PricewaterhouseCoopers
Corporate Finance (Proprietary) Limited (`PWC`) as an independent professional
expert to review the terms and conditions of the offer and the offer price from
an HCI perspective. PWC`s findings as to whether the offer is fair and
reasonable from an HCI perspective, will be made available to HCI shareholders
in due course.
2. The specific issue of shares for cash
2.1 Introduction
HCI proposes to issue an aggregate of 2 300 000 HCI ordinary shares for a total
cash consideration of R21,85 million to Messrs Gavin OConnor and Gavin Jones
(`the specific issue of shares for cash`) who are currently directors of Mettle.
Messrs OConnor and Jones will be issued with 2 200 000 and 100 000 HCI shares
respectively, at a consideration of R9.50 per share.
2.2 Rationale for the specific issue of shares for cash
As announced in paragraph 1.1 above, HCI has informed the Mettle Board of
directors of its intention to make an offer to the minority shareholders of
Mettle.
Should all Mettle minority shareholders accept the offer or should HCI invoke
the provisions of Section 440K of the Act, Mettle will become a wholly owned
subsidiary of HCI and in order to allow Gavin OConnor and Gavin Jones to hold an
equity stake in the HCI group, HCI proposes to make the specific issue of shares
for cash.
2.3 Conditions precedent
The specific issue of shares for cash is subject to the requisite majority of
HCI shareholders approving the specific issue of shares for cash, and the
obtaining of requisite regulatory approvals, to the extent required.
Financial effects of the specific issue of shares for cash
Based on the published consolidated reviewed results of HCI for the year ended
31 March 2004, the pro forma financial effects of the specific issue of shares
for cash on HCI`s earnings, headline earnings and net asset value (`NAV`) per
share are set out below. The pro forma financial information has been prepared
for illustrative purposes only and because of its nature may not give a true
picture of HCI`s financial position and results of operations, and is the
responsibility of HCI`s directors.
Per HCI ordinary Before the After the Percentage
share issue of shares issue of change
for cash (1) shares for
cash(2)
Earnings (cents) 131,26 129,63 (1,24%)
Headline earnings 2,96 4,20 41,89%
(cents)
NAV (cents) 645 651 0,93%
Number of
ordinary shares 103 022 105 322 2,23%
in issue `000
(net of treasury
shares)
Notes:
1. Based on the published consolidated reviewed results of HCI for the year
ended 31 March 2004.
2. Based on the assumption that the issue of shares for cash was effected on 1
April 2003 for income statement purposes and on 31 March 2004 for balance
sheet purposes and assuming that HCI receives the cash consideration of
R21,85 million.
3. Taking into account the after tax interest received on the issue of shares
for cash consideration at average call rates applicable during the period 1
April 2003 to 31 March 2004, assuming a corporate tax rate of 30%.
4. The effect of the issue of shares for cash on net tangible asset value has
not been included as the effect thereon is not materially different to the
effect on NAV.
2.5 Related party transaction
The specific issue of shares for cash is a related party transaction as defined
in section 10.1 (b) of the JSE Listings Requirements as Messrs Gavin OConnor and
Gavin Jones are directors of Mettle.
PWC has been appointed as an independent professional expert to consider the
terms and conditions of the specific issue of shares for cash. Their opinion
will be included in the circular to HCI shareholders (`the circular`), details
of which are given below.
2.6 Documentation
Subject to approval by the JSE, a circular containing full details of the
specific issue of shares for cash will be posted to HCI shareholders in due
course. The circular will also include a notice convening a general meeting for
HCI shareholders to consider and, if deemed appropriate, pass the resolutions
necessary to approve the specific issue of shares for cash.
Durban
26 August 2004
Sponsor Independent expert
Nedbank Capital PricewaterhouseCoopers
Corporate Finance
(Proprietary) Limited
Corporate and legal
advisors to HCI
-
HJS Advisory Services
(Proprietary) Limited
Date: 26/08/2004 05:27:23 PM Produced by the JSE SENS Department
