| Wed 8 Dec 2004, 17:13 | | Financial effects of the proposed scheme |
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Liberty Life/ Capital Alliance - Financial effects of the proposed scheme of
arrangement and withdrawal of cautionary announcement
Liberty Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1957/002788/06)
Share code: LGL
ISIN: ZAE000057360
(`Liberty Life`)
Capital Alliance Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1952/000756/06)
Share code: CPT
ISIN: ZAE000011904
(`Capital Alliance`)
FINANCIAL EFFECTS OF THE PROPOSED SCHEME OF ARRANGEMENT BETWEEN CAPITAL ALLIANCE
AND ITS SHAREHOLDERS, OTHER THAN LIBERTY LIFE AND CAPITAL ALLIANCE SPECIAL
FINANCE (PROPRIETARY) LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
In the joint cautionary announcement released on 1 December 2004, shareholders
were advised that Liberty Life had submitted to the board of directors of
Capital Alliance a notice of its firm intention to make an offer to acquire all
the shares in the issued ordinary share capital of Capital Alliance, other than
those already held by Liberty Life and Capital Alliance Special Finance
(Proprietary) Limited (`Capital Alliance Special Finance`), a wholly-owned
subsidiary of Capital Alliance (`the offer`).
Liberty Life`s intention is to implement the offer by way of a scheme of
arrangement (`the scheme`) in terms of section 311 of the Companies Act No. 61
of 1973, as amended, to be proposed by Liberty Life between Capital Alliance and
all of its ordinary shareholders, other than Liberty Life and Capital Alliance
Special Finance.
This announcement sets out the pro forma financial effects of the scheme on
Liberty Life and Capital Alliance shareholders and the withdrawal of the
cautionary announcement relating to Liberty Life and Capital Alliance.
PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects have been prepared for illustrative purposes
only, in order to provide information about how the scheme may have affected the
historical financial information presented by Capital Alliance and Liberty Life,
if the scheme had been implemented on the dates indicated in the notes below.
Due to their nature, the pro forma financial effects may not give a true
reflection of the historical financial positions of Capital Alliance or Liberty
Life.
Pro forma financial effects on Liberty Life shareholders
The table below sets out the pro forma financial effects of the scheme on
Liberty Life shareholders, based on the assumptions set out below.
Before the After the Percentage
scheme(1) scheme (cents change
(cents per per share)
share)
Basic earnings(2, 4) 181.3 206.9 14.1%
Headline earnings(2, 4) 167.2 196.6 17.5%
Net asset value(3, 5) 3,235 3,234 0.0%
Net tangible asset value(3, 5)
3,145 2,700 -14.1%
Notes
The `Before the scheme` financial information has been extracted, without
adjustment, from the unaudited results of Liberty Life for the six months ended
30 June 2004.
The basic and headline earnings per share calculations have been based on the
assumption that the scheme was implemented on 1 January 2004 and that it was
effective for the six months ended 30 June 2004. Basic and headline earnings per
share have been calculated based on the weighted average number of Liberty Life
ordinary shares in issue over the six-month period ended 30 June 2004.
The net asset value and net tangible asset value per share calculations have
been based on the assumption that the scheme was implemented on 30 June 2004.
Net asset and net tangible asset values per share have been calculated based on
the total number of Liberty Life ordinary shares in issue as at 30 June 2004.
The `After the scheme` basic and headline earnings per share have been adjusted
for the:
- unaudited earnings and headline earnings of Capital Alliance for the six
months ended 30 September 2004, which have been extracted, without
adjustment, from the unaudited results of Capital Alliance for the six
months ended 30 September 2004;
- exclusion of the unrealised net gain on revaluation and disposal of
investments included in Capital Alliance`s income statement;
- decrease in investment income, assuming the R3.1 billion scheme
consideration is financed from Liberty Life shareholders` funds through
existing available cash and near cash, which would have earned an after-tax
return of 3.9% per annum;
- decrease in investment income on the final dividend paid to Capital
Alliance shareholders, which would have earned an after-tax return of 3.9%
per annum; and
- estimated transaction costs relating to the offer and the investment income
that would have been earned on such transaction costs at an after-tax
return of 3.9% per annum.
The `After the scheme` net asset value and net tangible asset value per share
have been adjusted to include:
- the net assets of Capital Alliance, based on the unaudited results of
Capital Alliance for the six months ended 30 September 2004, and the
payment of the R3.1 billion scheme consideration in cash;
- the goodwill of approximately R402 million and intangible asset (value of
in-force business) of approximately R678 million arising on the acquisition
of Capital Alliance;
- the final dividend to be paid to Capital Alliance shareholders of R1.00 per
Capital Alliance ordinary share;
- the additional Capital Alliance shares to be issued in respect of the
outstanding Capital Alliance employee share options; and
- the estimated transaction costs relating to the offer.
Pro forma financial effects on Capital Alliance shareholders
The table below sets out the pro forma financial effects of the scheme on
Capital Alliance shareholders, based on the assumptions set out below.
Before the After the Percentage
scheme (cents scheme (4) change
per share) (cents per
share)
Market value at 11 November 1,450 1,850 27.6%
2004(1)
30-day volume weighted 1,346 1,850 37.5%
average market value up to
11 November 2004(2)
Net asset value(3) 1,223 1,850 51.3%
Net tangible asset value(3) 1,144 1,850 61.8%
Notes
The `Before the scheme` column reflects the closing JSE Securities Exchange
South Africa (`JSE`) market value per Capital Alliance share on 11 November
2004, being the last trading day preceding the publication of the first Capital
Alliance cautionary announcement.
The `Before the scheme` column reflects the 30-day volume weighted average JSE
market value per Capital Alliance share calculated for the 30 days up to and
including 11 November 2004, being the last trading day preceding the publication
of the first Capital Alliance cautionary announcement.
The `Before the scheme` column reflects the unaudited net asset value and net
tangible asset value per share as extracted, without adjustment, from the
unaudited results of Capital Alliance for the six months ended 30 September
2004.
The `After the scheme` column shows the cash consideration to be received from
Liberty Life and the final dividend to be received from Capital Alliance.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Pursuant to this announcement, Liberty Life and Capital Alliance shareholders
are advised that caution is no longer required when dealing in their Liberty
Life and Capital Alliance shares.
Johannesburg
8 December 2004
Investment bank and transactional sponsor to Liberty Life
Standard Bank
Sponsor to Liberty Life
Merrill Lynch South Africa (Pty) Limited
Attorneys to Liberty Life
Werksmans Incorporated
(Registration number 1990/007215/21)
Auditors and reporting accountants to Liberty Life
PricewaterhouseCoopers Inc.
Investment bank to Capital Alliance
Investec Corporate Finance
Sponsor to Capital Alliance
Investec Bank Limited
Attorneys to Capital Alliance
Jowell Glyn & Marais Inc.
Auditors and reporting accountants to Capital Alliance
PricewaterhouseCoopers Inc.
