| Tue 15 Feb 2005, 18:00 | | PROPOSED RATIONALISATION |
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WINHOLD / INMINS - PROPOSED RATIONALISATION
WINHOLD LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1945/019679/06)
Share code: WNH ISIN: ZAE000033916
(`Winhold`)
INMINS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/004321/06)
Share code: INM ISIN: ZAE000003588
(`Inmins`)
(collectively, `the Winhold Group`)
PROPOSED RATIONALISATION OF THE WINHOLD GROUP, INCORPORATING A PROPOSED SCHEME
OF ARRANGEMENT AND AN ODD LOT OFFER AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. PROPOSED RATIONALISATION
1.1 Introduction
The Winhold Group presently comprises two listed companies, with Winhold being
the holding company owning a 60% interest in Inmins and 100% in the formerly
listed Gundle Limited (`Gundle`). The boards of directors of Winhold and Inmins
propose to rationalise the Winhold Group in order to:
* accelerate growth of the Winhold Group;
* enhance shareholders` value for both sets of shareholders through improved
earnings/dividend payments and growth in value of the shares;
* simplify mergers and acquisitions;
* facilitate a single entry point for a substantial Black Economic Empowerment
(`BEE`) partner;
* increase the market capitalisation and liquidity of the shares in a single
listed entity, without any expected reduction in the future pro rata dividend
flow of the Inmins` shareholders;
* create the opportunity for Inmins to grow through acquisitions, as Inmins has
limited organic growth potential;
* remove the group pyramid structure which should reduce the price discount to
the value of Winhold`s underlying investment assets.
1.2 Rationale
It is expected that the growth of Inmins will level out should Inmins not be
able to grow by acquisition. Any meaningful acquisition will require the issue
of shares, but Winhold may not be able to take up its pro rata share of such
issue and is unwilling to accept a dilution of its holding in Inmins. However,
should shareholders exchange their holding in Inmins for a holding in Winhold,
all shareholders will benefit from the increased tradability and financial
leverage it would bring. Shareholders of Inmins will also be able to hedge their
investment risk more effectively within a diversified group, where exposure to
Gundle`s business will offset cyclicality within the mining industry, a key
market to Inmins. Over the past two years, Gundle`s new business model has
achieved remarkable growth in profitability and shows opportunity for expansion
and further growth in profitability. Presently, Winhold presents a low entry
point to Inmins shareholders to benefit from growth in Gundle, which is set to
accelerate over the medium term.
There is no need for two listed entities in the Winhold Group, and a single
listed entity will facilitate acceleration of its future growth through mergers/
acquisitions and consequent improvement in profitability.
The Winhold Group as a single entity can expect an improved share rating due to
the removal of the pyramid structure which will be beneficial to both current
sets of shareholders. Current indications are, that, with the expected continued
improvement in Gundle`s profitability, Inmins` shareholders are likely to
maintain their dividend income as Winhold plans to increase its dividend cover
to 2.7 times, in line with the historic cover of Inmins.
The illiquidity of Inmins shares and the current structure present obstacles to
facilitating a BEE transaction at holding company level. With its significant
exposure to the mining industry, this omission may lead to business attrition as
better positioned companies erode Inmins` market share.
For Winhold investors, the rationalisation will bring about a single listed
company with a diversified range of operating assets and an improved ability to
conduct script-based acquisitions. The removal of the pyramid structure will
improve earnings visibility and analysis of the business and facilitating entry
for a BEE investor.
The Winhold Group presently has some 3 800 shareholders, approximately 2 800 of
whom own less than 1 000 ordinary shares. It is therefore proposed that, after
the implementation of the scheme of arrangement referred to below, an odd lot
offer, subject to the approval of the JSE Securities Exchange South Africa (`the
JSE`) will be made to the holders of odd lots in Winhold in order to eliminate
the substantial costs associated with servicing a multiplicity of small
shareholders. The odd lot offer will also enable holders of odd lots to realise
their investments in a cost-effective manner which they are unable to do at
present, given the expense associated with trading in small parcels of shares.
Shareholders who elect to remain invested in Winhold will have the opportunity
of purchasing additional shares up to the proposed minimum ownership level.
1.3 Mechanics of the rationalisation
In terms of the rationalisation, Winhold will offer to acquire all the ordinary
shares in Inmins not already held by it, thereby constituting Inmins as a wholly
owned subsidiary.
The offer by Winhold to the shareholders of Inmins will be implemented by means
of a scheme of arrangement as more fully set out below.
2. THE SCHEME OF ARRANGEMENT
2.1 Introduction
Winhold will propose a scheme of arrangement in terms of section 311 of the
Companies Act, 1973 (Act 61 of 1973), as amended (`the scheme`), which on
implementation will result in:
* Inmins becoming a wholly-owned subsidiary of Winhold; and
* the listing of Inmins on the JSE being terminated.
2.2 Conditions precedent
The approval and implementation of the scheme is subject to:
* the scheme being approved by a majority representing three-fourths of the
votes exercisable by Inmins` shareholders, other than Winhold (`scheme
members`), present and voting either in person or by proxy at a meeting of
scheme members;
* the scheme being sanctioned by the High Court of South Africa (Witwatersrand
Local Division) and the Order of Court being registered by the Registrar of
Companies.
2.3 Scheme consideration
In terms of the scheme, scheme members will receive 220 ordinary shares in
Winhold for every 100 scheme shares.
To achieve an equitable exchange ratio for both sets of shareholders, the ratio
was determined after carrying out an extensive financial valuation exercise and
after considering the weighted average market prices over an extended period.
Shareholders should bear in mind that an exchange ratio on a particular day can
be significantly influenced by trades of small volumes of shares. Speculation
due to cautionary announcements has also resulted in fluctuations in the share
prices.
2.4 Effects of the scheme
The financial effects of the scheme on the market values are based on the
90-day volume weighted closing prices of both shares at various dates, being:
26 July 2004: publication of first cautionary announcement regarding the
rationalisation
1 December 2004: publication of the Winhold consolidated audited results
(including Inmins) for the year ended 30 September 2004
11 February 2005: last practicable date prior to finalisation of this
announcement.
The financial effects of the scheme on net asset values and earnings
attributable to the holder of 100 Inmins shares are based on the audited group
results for the year ended 30 September 2004, assuming that the scheme had been
effective for the year ended on that date.
Before After
the scheme: the scheme: Change
100 Inmins 220 Winhold increase/
shares shares (decrease)
(Rand) (Rand) (%)
Market value - 26 July 2004 264,41 231,81 (12,33)
Market value - 1 December 2004 312,85 351,80 12,45
Market value - 11 February 2005 401,00 391,60 (2,34)
Net asset value 213,39 277,20 29,90
Tangible net asset value 213,39 243,84 14,27
Headline earnings 45,58 49,54 8,69
Earnings 46,36 50,70 9,36
2.5 Termination of listing on the JSE
Subject to the scheme becoming effective, it is anticipated that the listing of
Inmins on the JSE will be terminated with effect from the commencement of
trading on Monday 25 April 2005.
3. IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to vote in favour of the rationalisation, in both
Inmins and Winhold, have been obtained from material shareholders entitled to
vote at the scheme and general meetings. Further irrevocable undertakings from
other minority shareholders have also been received.
4. APPOINTMENT OF AN INDEPENDENT PROFESSIONAL EXPERT (`the IPE`)
The scheme constitutes an affected transaction in terms of the Securities
Regulation Code on Take-overs and Mergers and accordingly requires a fair and
reasonable statement from the IPE.
The boards of directors of Winhold and Inmins have appointed BDO Capital
(Proprietary) Limited as the IPE and this appointment has been approved by the
Securities Regulation Panel (`the SRP`) and the JSE.
The content of the fair and reasonable statement by the IPE will be contained
in the circular to shareholders required to propose and implement the scheme.
5. GENERAL AND DOCUMENTATION
In addition to the scheme meeting, it will be necessary to convene a general
meeting of the shareholders of Winhold in order to approve the proposal of the
scheme and to increase the authorised share capital of Winhold to enable
implementation of the scheme, if approved. The necessary resolutions for
implementation of the odd lot offer will also be proposed at the general
meeting.
Documentation in regard to the Winhold general meeting and the scheme is being
prepared and will, subject to the approvals of the JSE and the SRP, be
despatched to shareholders of the Winhold Group in due course.
6. SALIENT DATES and times
Announcements regarding the salient dates and times of the Winhold general
meeting and the scheme and the odd lot offer will be published in due course.
7. CAUTIONARY ANNOUNCEMENT
The cautionary announcements dating back to 26 July 2004 are hereby withdrawn.
By order of the boards
Germiston
15 February 2005
Corporate adviser
LANARK FINANCIAL SERVICES
Attorneys
Fluxmans Attorneys
Website: www.fluxmans.com
Fluxmans Inc. Registration No: 2000/024775/21
Sponsor
LPC Manhattan Sponsors (Pty) Ltd
(Registration number 1999/024792/07)
Auditors and reporting accountants
BDO Spencer Steward (JHB) Inc
Chartered Accountants and Auditors
Registered Accountants and Auditors
Independent Professional Expert
BDO Capital (Proprietary) Limited
(Registration number 1983/002903/07)
Date: 15/02/2005 05:35:12 PM
Produced by the JSE SENS Department
