| Tue 28 Dec 2004, 9:05 | | Acquisition Of Interests Held By Caesars South Afr |
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Peermont Global - Acquisition Of Interests Held By Caesars South Africa
Incorporated
PEERMONT GLOBAL LIMITED
Incorporated in the Republic of South Africa
Registration number: 1995/004449/06
Share Code: PTG
ISIN: ZAE000058053
(`Peermont Global`)
ACQUISITION OF INTERESTS HELD BY CAESARS SOUTH AFRICA INCORPORATED
1. Introduction
Peermont Global is pleased to announce that it has entered into agreements
which, subject to the fulfillment of the conditions precedent referred to in
paragraph 3 below, will result in the acquisition of:
* the 25% interest that Caesars South Africa Incorporated (`CSA`) holds in GRER
Holdings (Proprietary) Limited (`GRERH`) by way of a share repurchase by GRERH
(`the GRERH share repurchase`).
GRERH holds 100% of Global Resorts (East Rand) (Proprietary) Limited (`GRER`),
which operates the Caesars Gauteng Hotel Casino and Convention Resort
(`Caesars Gauteng`) located in East Rand region of Central Gauteng; and
* the 50% interest CSA holds in Caesars Global Resorts Management
(Proprietary) Limited (`CGRM`) by Peermont Global (`the CGRM acquisition`). CGRM
is a management company which provides certain services to Caesars Gauteng,
(collectively `the transaction`).
Prior to the transaction, Peermont Global has:
* an effective economic interest in GRERH of 62.22% until 31 December
2016 (after which date its effective economic interest will decline to
50%) and a voting interest of 25%; and
* economic and voting interests in CGRM of 50%.
The transaction will increase Peermont Global`s:
* effective economic interest in GRERH to 82.96% until 31 December 2016 (after
which date its effective economic interest will decline to 66.66%) and its
voting interest to 50%; and
* economic and voting interests in CGRM to 100%.
Peermont Global`s black economic empowerment partner, Marang (East Rand) Gaming
Investments (Proprietary) Limited (`MER`), will as a result of the transaction
hold all the shares in GRERH not held by Peermont Global.
2. Rationale
Caesars Entertainment, Inc., which owns the entire issued capital of CSA, has
provided an opportunity for Peermont Global and MER to acquire CSA`s interest in
GRERH and for Peermont Global to acquire CSA`s interest in CGRM.
The transaction enables Peermont Global to increase its economic interest in its
major asset being Caesars Gauteng. The transaction also facilitates the creation
of a simplified group structure. The mechanism allows MER to increase its
proportional interest in GRERH, thereby enhancing the black economic empowerment
credentials of GRERH and Peermont Global.
Given that GRERH can support the funding required for the GRERH share
repurchase, this was considered the most efficient mechanism to effect this
component of the transaction without diluting existing shareholders` interests.
The strong predictability and proven track record of GRER`s free cash flows
strongly support this funding mechanism and its long term financial benefits.
The CGRM acquisition, in conjunction with the termination of certain trademark
and trade name licence agreements, will enable Peermont Global to earn
additional management fee income as, once CGRM becomes a wholly-owned subsidiary
of Peermont Global, Peermont Global will procure the cession and assignment of
the management contract from CGRM to Peermont Global.
3. Detailed terms
3.1. The aggregate consideration to be paid to CSA is denominated in US Dollars.
The consideration to be paid to CSA will be covered forward into Rands and the
approximate Rand equivalents (net of all hedging costs) are shown below in
brackets, based on an anticipated exchange rate of R6.00:1US$. Hedging costs
will be for the account of GRERH and Peermont Global.
The total consideration payable to CSA prior to adjustment in terms of paragraph
3.2 below will be as follows:
** US$116 million (R696 million) for the GRERH share repurchase;
* US$28 million (R168 million) for the CGRM acquisition; and
* US$1 million (R6 million) for the termination of the certain trademark and
trade name licensing agreements.
Peermont Global has received commitments to fund the total consideration from
Rand Merchant Bank and Nedbank Limited.
3.2 The total consideration will be increased by R102 740 per day from and
including 1 January 2005, up to and including two business days after all
conditions precedent to the transaction have been fulfilled or waived (`the
closing date`).
3.3. A major portion of Peermont Global`s interest and all of MER`s interest in
GRERH is held through Main Street 209 (Proprietary) Limited (`Main Street`).
Peermont Global and MER have agreed on a mechanism whereby Main Street`s voting
rights in GRERH will be 50% of the total voting rights in GRERH. This will
ensure that Peermont Global and MER each control 50% of the voting rights in
GRERH.
3.4 Upon implementation of the transaction, Peermont Global and GRERH will no
longer be entitled to use the name Caesars and all associated names and
trademarks. Caesars Gauteng will be renamed within 60 days of the closing date.
The associated costs of rebranding are not considered material to Peermont
Global.
3.5. The current service contract with MER will be amended to become a
management and service agreement and the current charge of 0,5% of gaming
revenue will be increased to 0,6111% of gaming revenue. This charge will
increase to 0,77% of gaming revenue from 31 December 2016.
The impact of this change on Peermont Global will not be material.
4. Resultant structure
The Peermont Global group structure post implementation of the transaction is
illustrated in a memogram format available in the press.
5. Conditions precedent
The transaction is subject to the following conditions precedent:
5.1. the written approval of the Gauteng Gambling Board by 30 April
2005;
5.2. the written approval of the South African competition authorities
by 30 April 2005;
5.3. the approval of the terms of the transaction by the shareholders
of Peermont Global in general meeting; and
5.4. such other regulatory approvals as may be required.
6. Undertakings by Peermont Global shareholders
Undertakings to vote in favour of the transaction have been received from
shareholders of Peermont Global in respect of a total of 238 646 038 shares
currently held by them, representing 72,3% of the issued share capital of
Peermont Global. In addition, these shareholders manage 30 278 054 Peermont
Global shares representing 9,2% of the issued share capital of Peermont Global
on behalf of their clients, where these clients have retained discretion as to
the voting of such shares. These shareholders have undertaken to advise their
clients to vote in favour of the transaction.
7. Pro forma financial effects
The table below sets out the unaudited pro forma financial effects of the
transaction on shareholders, based on the reviewed interim financial statements
of Peermont Global for the six months ended 30 June 2004. The unaudited pro
forma financial effects are presented for illustrative purposes only to provide
information on how the transaction would have impacted on a shareholder. As a
result, the unaudited pro forma financial effects may not give a fair reflection
of Peermont Global`s financial position after completion of the transaction, nor
the effect on its future earnings. The unaudited pro forma financial effects are
the responsibility of the Board.
Before the 1 After the Percentage
transaction transaction change
(cents) (cents) (%)
Basic earnings per share 20,8 14,3(2) (30,9)
Headline earnings per share 22,9 19,2(3) (16,5)
NAV per share 235,3 98,5(4) (58,1)
Tangible NAV per share 199,7 10,2(5) (-94,9)
The pro forma financial effects have been prepared based on the assumption that
the transaction was implemented on 1 January 2004.
Notes:
1. The figures reflected in the `Before` column are the figures as reflected in
the reviewed interim financial statements of Peermont
Global for the six months ended 30 June 2004.
2. Includes Peermont Global`s increased share of the earnings of GRERH and CGRM
net of funding costs of associated funding raised.
3. Headline earnings per share (`HEPS`) after the transaction, adjusted for the
amortisation of goodwill associated with the transaction plus once off assumed
costs. Once off assumed costs have the effect of reducing HEPS by 2.9 cents per
share. Should these costs be ignored, HEPS would be 22.1 cents per share
4. The reduction in NAV per share is primarily as a result of the buyback and
cancellation of GRERH shares
4. Tangible NAV per share has been calculated after adjusting for estimated
goodwill in respect of the transaction.
5. The exchange rate assumed in calculating the above financial effects is R6.00
to the US dollar.
The financial effects above do not take into account the right awarded to GRER
to operate an additional 140 slots and 17 tables at Caesars Gauteng. The
benefits of these additional gaming rights will only impact the results of
Peermont Global after 30 June 2004.
8. Salient dates
2005
Last day to trade in order to vote at the
shareholders meeting, on Wednesday, 2 March
Record date to vote at the shareholders
meeting at 17:00, on Wednesday, 9 March
Last day for receipt of proxies for the
shareholders meeting by 10:00, on Wednesday, 9 March
Shareholders meeting to be held at 10:00, on Thursday, 10 March
1. These dates and times are subject to change. Any such change will be
published on SENS and in the press. Any reference to time is a reference to
South African time.
2. Shareholders should note that, as Peermont Global is settling through
STRATE, settlement for trade takes place 5 (five) business days after such
trade. Therefore, shareholders who acquire Peermont Global shares after 2 March
2005 will not be eligible to vote at the shareholders meeting.
3. No dematerialisation or rematerialisation of Peermont Global shares may
take place between 2 March 2005 and 10 March 2005.
9. Documentation
A circular providing further information on the transaction and containing,
inter alia, a notice of a general meeting of shareholders and a form of proxy,
will be posted to Peermont Global shareholders on or about 16 February 2005.
Bryanston
28 December 2004
Merchant bank
Rand Merchant Bank Corporate Finance
(A division of FirstRand Bank Limited)
Sponsor
Standard Bank
Attorneys
Webber Wentzel Bowens
Reporting accountants
KPMG Inc.
Date: 28/12/2004 08:15:09 AM
Produced by the JSE SENS Department
