| Thu 9 Dec 2004, 16:10 | | JCI/ Randgold/ OrlyFunt - Disposal of BEE |
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JCI/ Randgold/ OrlyFunt - Disposal of BEE
JCI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1894/000854/06)
Debenture code: JCDD ISIN: ZAE000039699
(`JCI` or `the Company`)
RANDGOLD & EXPLORATION COMPANY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1992/005642/06)
Share code: RNG ISIN: ZAE000008819
Nasdaq trading symbol: RANGY
(`Randgold`)
ORLYFUNT HOLDINGS (PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/014960/07)
(`OrlyFunt`)
THE PROPOSED DISPOSAL BY JCI AND RANDGOLD OF A PORTFOLIO OF BLACK ECONOMIC
EMPOWERMENT JOINT VENTURE INVESTMENTS AND MINERAL RIGHTS TO ORLYFUNT, A BLACK
OWNED INVESTMENT AND MANAGEMENT COMPANY (`THE TRANSACTIONS`) AND CAUTIONARY
ANNOUNCEMENT
1. Introduction
NewFound and Lyons Corporate Finance are authorised to announce that, subject
to the fulfilment of the conditions precedent referred to in paragraph 3.2
below, agreement has been reached in terms of which:
1.1 JCI will dispose of a portfolio of Black Economic Empowerment (`BEE`) joint
venture investments and various mineral rights to OrlyFunt for a consideration
of R1,4 billion (`the JCI assets`); and
1.2 Randgold will dispose of various mineral rights to OrlyFunt for a
consideration of R144,9 million (`the Randgold assets`).
Following implementation of the transactions, JCI and Randgold will, in
aggregate, own 40% of the ordinary issued share capital of OrlyFunt and the BEE
founding partners, together with a broad-base grouping of BEE shareholders
referred to in paragraph 2.3 below, will effectively own 60% of the issued
ordinary share capital of OrlyFunt.
2. Background and rationale
2.1 In recent years JCI has funded numerous start-up and early stage business
joint ventures in partnership with various BEE groupings aimed at providing an
attractive equity return to JCI and its shareholders and at the same time
affording BEE participants access to equity capital and thereby providing BEE
participants a direct and meaningful participation in the South African economy.
Approximately two-thirds of JCI`s current debt arose in funding such BEE joint
venture initiatives.
2.2 OrlyFunt is an investment holding and management company founded, owned and
managed by Mafika Mkwanazi, Sello Rasethaba, Andrew Mlangeni and Lunga Ncwana
(`the BEE founding partners`).
2.3 A broad-based grouping of BEE shareholders will be introduced into OrlyFunt
by the BEE founding partners to ensure that the benefits of the transactions and
the future benefits of equity participation within OrlyFunt are enjoyed by a
wide range of BEE shareholders.
2.4 The transactions will provide OrlyFunt with a balanced spread of
investments at various stages of their business development cycles in a number
of strategic sectors of the South African economy, including mining, information
technology, property, telecommunications and financial services. Upon
implementation of the transactions OrlyFunt`s investment portfolio will have a
value of approximately R1,6 billion which will be enhanced by the acquisition of
additional interests of other BEE groupings.
2.5 OrlyFunt`s investment and management philosophy is to accelerate the
business and strategic development of its investments in order to unlock their
value potential in an optimal timeframe. This will be achieved by leveraging
OrlyFunt`s existing and new BEE credentials through OrlyFunt providing pro-
active input in the management of the investments through a direct involvement
of OrlyFunt`s management team which, collectively, has over 50 years of
corporate management experience.
2.6 From JCI`s perspective, the transactions will consolidate in OrlyFunt the
majority of its BEE joint venture investments and create an independent capital
base that will partner with JCI in future empowerment initiatives. It is
intended that OrlyFunt, on its own or in conjunction with other BEE groupings,
will list on the JSE Securities Exchange South Africa (`JSE`) in due course,
resulting in subsequent substantial cash inflow to JCI, thereby reducing JCI`s
debt and de-gearing its balance sheet.
2.7 From Randgold`s perspective, the transactions will perpetuate participation
in the ultimate realisation of the value of its mineral rights, which require
conversion in terms of the Minerals and Petroleum Resource Development Act.
Following the implementation of the transactions, OrlyFunt will apply for the
conversion of such mineral rights.
3. Terms of the transactions
3.1 The terms of the transactions are as follows:
3.1.1 JCI, in a series of inter-conditional agreements will:
- dispose of a portfolio of BEE joint venture investments and various mineral
right interests to OrlyFunt for a consideration of R1,4 billion in exchange for
an entitlement to 80,4% of the issued ordinary share capital of OrlyFunt. In
addition, OrlyFunt will owe JCI R909,6 million on loan account, which loan
account will be secured by a pledge of the JCI assets, will be interest free and
will be repayable within three years from the future cash flows or proceeds of
the disposal of the JCI assets;
- dispose of its entitlement in respect of 44,2% of the issued ordinary share
capital of OrlyFunt for a consideration of R267,4 million to a company owned by
the BEE founding partners (`NewCo`) which will in turn dispose of 30% thereof to
a broad-base grouping of BEE shareholders as referred to in paragraph 2.3 above;
- receive a participating preference share in OrlyFunt which will entitle JCI
to 60% of any profits realised by OrlyFunt on the realisation of any of the non-
mineral right JCI assets; and
- receive a participating preference share in OrlyFunt which, will entitle
JCI to 80% of any profits realised by OrlyFunt on the realisation of any of the
JCI mineral right interests forming part of the JCI assets.
3.1.2 Randgold will:
- dispose of its 74% interest in the share capital of Minrico Limited and its
55,1% interest in the share capital of Free State Development and Investment
Corporation and various other mineral right interests to OrlyFunt for a
consideration of R144,9 million, in exchange for an entitlement to 8,4% of the
issued ordinary share capital of OrlyFunt. In addition, OrlyFunt will owe
Randgold R94,1 million on loan account, which loan account will be secured by a
pledge of the Randgold assets, will be interest free and will be repayable
within three years from the realisation of value from the Randgold assets;
- dispose of its entitlement in respect of 4,6% of the issued ordinary share
capital of OrlyFunt to NewCo for a consideration of R27,8 million which will, in
turn, dispose of 30% thereof to a broad-base grouping of BEE shareholders as
referred to in paragraph 2.3 above; and
- receive a participating preference share in OrlyFunt, which will entitle
Randgold to 80% of any incremental value realised by OrlyFunt on the realisation
of any of the Randgold assets.
3.1.3 NewCo will receive a participating preference share in OrlyFunt, which
will entitle NewCo to 60% of any of the incremental value realised by OrlyFunt
on the realisation of the assets currently owned by OrlyFunt.
3.1.4 Post-implementation of the transactions, JCI and Randgold will own 40%
of the ordinary issued share capital of OrlyFunt and the BEE founding partners,
together with a broad-base grouping of BEE shareholders referred to in paragraph
2.3 above, through NewCo will own 60% of the issued ordinary share capital of
OrlyFunt.
3.2 The transactions are subject to the fulfilment of the following conditions
precedent by not later than 31 May 2005, or such later date as may be agreed by
the parties:
3.2.1 the approval of JCI shareholders in general meeting of the terms of the
transactions;
3.2.2 the necessary regulatory approvals being obtained, including the
approval of the JSE and the Securities Regulation Panel;
3.2.3 the unconditional approval of the Competition Authorities to the sale of
investments to OrlyFunt having an aggregate purchase consideration of not less
than R1 billion value; and
3.2.4 the conclusion of binding sale and purchase agreements between JCI (on
the one hand) and OrlyFunt (on the other hand) and between Randgold and OrlyFunt
recording the detailed terms of the transactions.
4. Financial effects of the transactions
4.1 On JCI
The financial effects of the transactions on JCI will be announced in due
course when the interim results of JCI for the six month period ended 30
September 2004 are published.
4.2 On Randgold
The transactions, had they been effective for the six month ended 30 June
2004, would not have had a significant effect on the net asset value, net
tangible asset value, earnings and headline earnings for Randgold as at and for
the six months then ended.
5. Cautionary announcement
JCI shareholders are advised to exercise caution when dealing in their JCI
shares until the financial effects of the transactions on JCI are announced on
the Securities Exchange News Service of the JSE and published in the press in
terms of paragraph 4.1 above.
6. Categorisation of the transactions and circular to JCI shareholders
6.1 The purchase consideration in respect of the JCI assets represents in
excess of 30% of JCI`s market capitalisation and accordingly the transactions
insofar as JCI is concerned are classified as a Category 1 transaction in terms
of the Listings Requirements of the JSE.
6.2 The purchase consideration in respect of the Randgold assets represents
19,1% of Randgold`s market capitalisation and accordingly the transactions
insofar as Randgold is concerned are classified as a Category 3 transaction in
terms of the Listings Requirements of the JSE.
Accordingly, a circular to JCI shareholders, incorporating details on the
transactions and a notice of general meeting of JCI shareholders, will subject
to the approval of the JSE, be posted to JCI shareholders on or before 31
January 2005. No circular is required to be posted to Randgold shareholders.
Johannesburg
9 December 2004
Corporate adviser to JCI and Randgold
NEWFOUND
Sponsor to JCI and Randgold
SASFIN CORPORATE FINANCE
A Division of Sasfin Bank Limited
Corporate adviser to OrlyFunt
LYONS
CORPORATE FINANCE
Attorneys to JCI and Randgold
TABACKS
Joint auditors to OrlyFunt
GOBODO
Chartered Accountants (SA)
Registered Accountants and Auditors
AND
J Murray Chamberlain
Attorneys to OrlyFunt
NALANE MANAKA
Date: 09/12/2004 04:00:24 PM
Produced by the JSE SENS Department
