| Tue 5 Oct 2004, 16:44 | | ACQUISITION BY JOHNNIC OF A 50% INTEREST IN FABCO |
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JOHNNIC HOLDINGS LIMITED - ACQUISITION BY JOHNNIC OF A 50% INTEREST IN FABCOS
INVESTMENT HOLDING COMPANY LIMITED (`FIH`) (`THE PROPOSED TRANSACTION`)
Johnnic Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1889/000429/06)
Share Code: JNC
ISIN: ZAE000024352
(`Johnnic`)
ACQUISITION BY JOHNNIC OF A 50% INTEREST IN FABCOS INVESTMENT HOLDING COMPANY
LIMITED (`FIH`) (`THE PROPOSED TRANSACTION`)
1. INTRODUCTION
The Standard Bank of South Africa Limited is authorised to announce that on 3
October 2004 Johnnic acquired a 50% interest in the ordinary issued share
capital of FIH from Fabvest Investment Holdings Limited (`Fabvest`) for a cash
consideration of R295 million, resulting in an effective 9.7% interest in Tsogo
Sun Holdings Limited (`Tsogo Sun`). The main shareholder in Fabvest is the
Fabcos Trust with a 91% shareholding. FIH is a holding company that owns a 38%
interest in Tsogo Investment Holding Company (Proprietary) Limited (`TIH`),
which in turn owns a 51% interest in Tsogo Sun. Tsogo Sun is a holding company
that has gaming and hotel interests, including Montecasino, Suncoast Casino and
Entertainment World (`Suncoast Casino`), Hemingway`s Casino, Emnotweni Casino,
the Ridge and approximately 82 hotels in the Southern Sun Hotels group.
2. RATIONALE FOR THE PROPOSED TRANSACTION
Johnnic took a decision a few years ago to get involved in the gaming industry.
To support its casino application in Gauteng, Johnnic acquired Gallagher Estates
Holdings Limited in the mid-1990`s, although the bid for such casino licence was
unsuccessful. Subsequently, through its holding in Durban Add-Ventures Limited
(`Durban Add-Ventures`) Johnnic applied for a casino licence in KwaZulu-Natal.
This licence was initially granted to Durban Add-Ventures and subsequently
withdrawn by the gambling board and awarded to Tsogo Sun. Following extended
litigation the parties settled on the basis that this project would be owned
jointly. Suncoast Casino has operated successfully since opening in November
2002.
The proposed transaction will enable Johnnic to make an initial investment in
Tsogo Sun and to increase its presence in the gaming and hotels industry. After
this investment is successfully concluded, Johnnic will continue to explore ways
to further increase its interests in the gaming and hotels industry.
3. TERMS OF THE PROPOSED TRANSACTION
The proposed transaction will be implemented in two equal tranches of shares in
FIH. The first and second tranches, each comprising of 2 ordinary shares of
R0.01 each, will together constitute 50% of the ordinary issued share capital
of FIH.
3.1 Acquisition of the first tranche
Fabvest has sold to Johnnic the first tranche for the purchase price of
R147,500,000 (one hundred and forty seven million five hundred thousand rands)
subject to the suspensive conditions in paragraph 4.1 below.
The purchase price of the first tranche will be paid against compliance by
Fabvest with its obligations relating to the implementation of the acquisition
of the first tranche.
3.2 Acquisition of the second tranche
Fabvest has sold the second tranche to Johnnic for the purchase price of
R147,500,000 (one hundred and forty seven million five hundred thousand rands)
subject to the suspensive conditions in paragraph 4.2 below. Payment of the
purchase price of the second tranche will be made against compliance by Fabvest
with its obligations relating to the implementation of the acquisition of the
second tranche.
Subsequent to the implementation of the proposed transaction, Johnnic will hold
a 50% interest in FIH which amounts to an effective 9.7% interest in Tsogo Sun.
Johnnic will further acquire 50% of the voting rights and board participation in
FIH.
Nedbank Limited (`Nedbank`) has advanced a loan to Fabvest which is secured by a
pledge of Fabvest shares in FIH. As such, the approval of Nedbank is one of the
suspensive conditions to the proposed transaction, as per paragraph 4.1 below.
4. SUSPENSIVE CONDITIONS
4.1 First tranche
The acquisition of the first tranche is subject to the following suspensive
conditions:
* obtaining of a written approval from Nedbank of the sale of shares agreement,
which provides for the acquisition of the first and second tranches, and the
release of the first tranche from its pledge;
* obtaining of an irrevocable and unconditional written undertaking by Nedbank
to the satisfaction of Johnnic:
* to release from its pledge the second tranche to Johnnic on the effective
date of the second tranche;
* that Nedbank agrees to be bound by the provisions of the sharehold`rs`
agreement, dated 3 October 2004, concluded between Johnnic, Fabvest and FIH
(`the shareholders agreement`) in the event of the exercise by Nedbank of any of
its rights in terms of the pledge referred to above;
and
* to amend FIH`s memorandum of association in certain respects, if required by
Johnnic;
* Johnnic being admitted as a member of the Foundation for African Business and
Consumer Services; and
* Fabvest providing Johnnic with proof, to the satisfaction of Johnnic, that all
agreements relating to the restructuring of the Fabvest Group of companies,
including Nedbank`s interest in such companies, have been amended to the extent
necessary such that FIH is neither a party to, nor has any obligations in terms
of, any such agreements, which proof shall include but shall not be limited to
proof that all suretyships provided by FIH in respect of such restructuring have
been cancelled without penalty or prejudice to FIH.
The suspensive conditions to the sale of the first tranche must be fulfilled by
8 October 2004 or such other date as may be mutually agreed between Johnnic and
Fabvest.
4.2 Second tranche
The acquisition of the second tranche is subject to the following suspensive
conditions:
* to the extent necessary, the obtaining of an unconditional written approval of
the sale of the second tranche from the Competition Authorities in terms of the
Competition Act, No 89 of 1998 or, in the event of the grant of a conditional
approval, on such condition(s) being acceptable to both Johnnic and Fabvest;
* obtaining of an unconditional written approval of the sale of the second
tranche from the Mpumalanga, Eastern Cape, Kwa-Zulu Natal and Gauteng Gaming
Boards; and
* obtaining of any other necessary regulatory consents or approval in respect of
the sale of the second tranche.
The suspensive conditions to the sale of the second tranche must be fulfilled by
31 January 2005 or such later date as may be determined by Johnnic by written
notice to Fabvest which date shall not be later than 30 June 2005.
5. PROFORMA FINANCIAL EFFECTS OF THE TRANSACTION
The table below sets out the proforma financial effects of the proposed
transaction on shareholders of Johnnic (`shareholders`). The `before` column of
the proforma financial effects is based on Johnnic`s audited financial results
for the year ended 31 March 2004, excluding telecommunications but including
Suncoast Casino since its acquisition. The attributable earnings per share and
headline earnings per share in the `after` column are based on the assumption
that the proposed transaction was implemented on 1 April 2003 and the net asset
value per share is based on the assumption that the transaction was implemented
on 31 March 2004.
Before After % increase
Attributable earnings 287.0 435.1 51.6%
Headline earnings 123.0 143.9 17.0%
Attributable earnings per share 173.0 262.1 51.6%
Headline earnings per share 74.1 86.7 17.0%
Net asset value 2667.2 2667.2 0.0%
Net asset value per share 16.0 16.0 0.0%
Assumptions:
1. Johnnic`s proportionate share of 38% of TIH earnings would be equity
accounted as FIH holds a 38% equity investment in TIH.
2. TIH`s unaudited management accounts for the financial year ended 31 March
2004 were used.
3. The proposed transaction will be financed from Johnnic`s current cash
resources and cash obtained from proceeds of the disposal of certain of
Johnnic`s existing assets.
4. Interest of R8 million for the period from 1 April 2003 to 31 March 2004 has
been foregone.
5. No goodwill effect has been taken into account.
6. The new asset value of FIH`s investment in TIH is R65 million .
7 No Capital Gains Tax implications have been taken into account as there are
sufficient assessed losses to set off any gains.
8 The suspensive conditions relating to the acquisition of the first and second
tranches are fulfilled.
6. CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the proposed transaction does not relate to the
cautionary announcement published on Wednesday, 22 September 2004, informing
shareholders of the appointment of an Independent Committee of the Board of
Directors of Johnnic and the process of addressing of the Johnnic / Johnnic
Communications Limited pyramid structure on the JSE. Accordingly, shareholders
are advised to continue exercising caution when dealing in Johnnic`s securities
until a further announcement is made.
Midrand
5 October 2004
Investment Bank and Transactional Sponsor
Standard Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Legal adviser
Webber Wentzel Bowens
Sponsor
Merrill Lynch South Africa (Pty) Ltd
(Registration number 1995/001805/07)
Date: 05/10/2004 04:36:47 PM Produced by the JSE SENS Department
