| Thu 2 Sep 2004, 17:22 | | Merger |
|
M Cubed - Merger of the M Cubed multi-management and Momentum international
multi-managers operations
M Cubed Holdings Limited
Registration number : 1998/014568/06
Share code : MCU ISIN : ZAE000033353
(` m Cubed`)
Momentum Group Limited
Registration number : 1904/002185/06
(`Momemtum`)
MERGER OF THE m CUBED MULTI-MANAGEMENT AND MOMENTUM INTERNATIONAL MULTI-MANAGERS
(`MIMM`) OPERATIONS
1. THE TRANSACTION
1.1 Shareholders of m Cubed are advised that m Cubed and Momentum (`the
parties`) have reached agreement in principle on 2 September 2004 in
terms of which the multi-management operations of both entities will
be merged into a new asset management holding company (`AM Holdco`).
1.2 m Cubed will house its asset management businesses, valued at R184
million, in AM Holdco and will be issued 184 AM Holdco shares. These
businesses consist of the m Cubed Asset Management operations, the
Escher Structured Products operations and the Asset Management
Outsourcing Services division.
1.3 AM Holdco will acquire the domestic multi-manager business of MIMM for
a purchase consideration of R40 million, the consideration to be
settled by the issue of 40 AM Holdco shares. Momentum and Anglo
American plc are the shareholders of MIMM. Momentum`s international
multi-management operations are not included in the transaction.
1.4 As a separate step, but indivisible to the transaction, MIMM will
increase its interest in AM Holdco to 50% by acquiring 72 additional
AM Holdco shares from m Cubed for a consideration of R72 million.
1.5 Either m Cubed or Momentum may acquire all the shares in
AM Holdco held by the other party after 12 months of the effective
date of the transaction, at a price to be agreed or determined.
1.6 AM Holdco will have its own corporate and business identity.
1.7 m Cubed and Momentum will have equal representation on the board of AM
Holdco. Charles Bothner, currently chairman of m Cubed, will be
appointed as chairman of the AM Holdco board. Frans Truter, CFO of
Momentum, will be appointed as deputy chairman of AM Holdco. Executive
directors will include Anne Cabot-Alletzhauser, Wayne McCurrie and
Morris Mthombeni. Further directors will be appointed to the AM Holdco
board in due course.
1.8 The major proportion of m Cubed, comprising the non-multi-manager
asset management businesses, m Cubed Wealth, Employee Benefits,
Automated Outsourcing Services and Treasury will remain 100% owned by
m Cubed.
2. RATIONALE
2.1 m Cubed currently has some R30 billion of funds under management in
its asset management operations. By merging these operations with
MIMM`s approximately R12 billion of funds, significant synergies and
economies of scale could be realised, thus improving profitability.
2.2 The parties recognise the importance of positioning AM Holdco as an
independent company and asset manager. AM Holdco will constitute its
own board, including non-executive appointees. It will operate
independently of any asset manager and asset management consultant,
improving its ability to optimise its service levels to its clients.
2.3 The merger of the two multi-manager businesses should create a
platform for a meaningful empowerment initiative. Accordingly, the
parties will endeavour to implement an empowerment transaction at AM
Holdco level.
2.4 The parties see significant growth opportunities for multi-management
as an asset management approach, especially for pension funds. The
transaction gives AM Holdco access to Momentum`s distribution
channels, and more specifically access to the retail market. AM
Holdco will have the benefit of a strategic shareholder of the calibre
of Momentum which also brings to the new operation proven expertise in
successfully combining businesses.
2.5 m Cubed will remain a 50% shareholder in AM Holdco, and will realise
R72 million in cash, increasing its cash resources to approximately
R200 million.
2.6 The remaining m Cubed businesses have a strong focus on wealth
management, insourced services and administration and specialised
investment products. It has developed a reputation as one of the
leaders in this market. AM Holdco will continue to service m Cubed`s
asset management clients.
3. STRUCTURE POST THE TRANSACTION
- Please refer to article as featured in the news paper: dated Friday 3
September 2004.
4. FINANCIAL EFFECTS ON m CUBED
4.1 The table below sets out the unaudited pro forma financial effects of
the transaction on the earnings and headline earnings and the net
asset value and tangible net asset value per m Cubed share, based on
the assumptions that:
4.1.1 for the purposes of the earnings and headline earnings per
share calculations:
- the results of m Cubed`s asset management operations
for the year ended 29 February 2004 were combined with
MIMM`s results for the year ended 30 June 2004; and
- the R72 million disposal consideration was received by
m Cubed on 1 March 2003, and that such consideration
was invested to earn an after-tax return of 5% during
the financial year ended 29 February 2004.
4.1.2 for the purposes of the net asset value and tangible net
asset value per share calculations, the transaction was
effected on 29 February 2004.
Audited (1) Proforma
Before After %
(cents) (cents) Change
Earnings per share (2) 2,4 2,0 (16)
Headline earning per share (2) 5,6 4,9 (12)
Net asset value per share (3) 50,9 59,6 17
Tangible net asset value per share (3) 27,2 37,1 36
Notes
1. Extracted from the audited consolidated financial statements of m Cubed
for the year ended 29 February 2004.
2. Based on a weighted average of 720,983 million shares in issue during the
financial year ended 29 February 2004.
3. Based on 720,983 million shares in issue at 29 February 2004.
4.2 The financial effects contained in the table in 4.1 above have been
prepared for the purposes of illustrating how the transaction would
have affected the relevant financial ratios of m Cubed for the
historic financial period indicated and are pro forma only.
Accordingly, such effects do not necessarily represent a true
reflection of the financial effects of the transaction on m Cubed`s
current and future earnings and net asset value.
5. CONDITIONS PRECEDENT
The transaction is subject to, inter alia, the following conditions
precedent:
- the parties entering into comprehensive formal agreements;
- m Cubed shareholders in general meeting passing the requisite
resolutions approving the transaction; and
- regulatory approvals, including the competition authorities,
JSE Securities Exchange South Africa (`JSE`) and the Financial
Services Board.
6. CIRCULAR TO m CUBED SHAREHOLDERS
A circular to m Cubed shareholders containing details of the transaction
and incorporating a notice of general meeting of shareholders will, subject
to approval by the JSE, be mailed to shareholders within 28 days of this
announcement or within such longer period as the JSE may allow in the
circumstances.
Sponsor and Advisor to m Cubed
PSG CAPITAL
Advisor to Momentum
Rand Merchant Bank Corporate Finance
Legal Advisor to m Cubed
Prinsloo, Tindle & Andropoulos Inc.
Legal Advisor to Momentum
Hofmeyr Herbstein & Gihwala Inc.
Reporting Accountants and Auditors to m Cubed
Fisher Hoffman PKF
