| Mon 21 Feb 2005, 9:28 | | Proposed Demerger |
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Lonrho Africa Plc - Proposed Demerger of Lonrho Africa Trade & Finance Limited
Lonrho Africa Plc
(Incorporated and registered in England and Wales)
(Registration number 2805337)
(Share code: LAF; ISIN number: GB0002568813)
(`Lonrho Africa` or `the Company`)
PROPOSED DEMERGER OF LONRHO AFRICA TRADE & FINANCE LIMITED
Further to the announcement made on 13 September 2004, Lonrho Africa is today
pleased to announce details of the proposed demerger of its wholly owned
subsidiary Lonrho Africa Trade & Finance Limited (`LATF`).
The Board is today posting a circular, together with forms of proxy, to Lonrho
Africa Shareholders which details the proposals relating to the Demerger and
seeks shareholders` approval for the Demerger at a Court Meeting and an
Extraordinary General Meeting which have been convened for 16 March 2005.
Under the terms of the Demerger, further details of which are set out below, a
new holding company, Castle Acquisitions Plc, has been formed for LATF, which is
to be demerged from the Lonrho Africa Group by way of a scheme of arrangement.
It is intended that an application will be made for Castle Shares to be admitted
to trading on AIM. It is expected that the Demerger will become effective on 21
April 2005 and that Castle Shares will be admitted to trading on AIM from 3 May
2005.
Summary of the Proposals
The Demerger of LATF and the establishment of a new corporate structure entails
a number of steps.
In summary, the first of these is the creation of a new holding company, Castle
Acquisitions. Thereafter, the entire issued share capital of LATF will be
transferred by Lonrho Africa by means of a Court approved Scheme of Arrangement
to Castle Acquisitions in consideration of the allotment of new Castle Shares to
Qualifying Shareholders. The result will be that Castle Acquisitions will be
the parent company of LATF and the Lonrho Africa Group will no longer include
LATF within its group. No changes will occur to any shareholdings in Lonrho
Africa as a consequence of the Scheme. The shareholding structure of Castle
Acquisitions will be different to the shareholding structure of Lonrho Africa,
such differences being due to the fact that fractional entitlements will not be
allotted to holders of Lonrho Africa Shares and shares will not be allotted to
Overseas Shareholders pursuant to the Proposals. However, over 90 per cent of
the issued Castle Shares will be held by the same persons who hold over 90 per
cent of the Lonrho Africa Shares at the Record Date.
The share capital of Lonrho Africa will be reduced pursuant to a Court approved
reduction of capital. This will allow the transfer of the entire issued share
capital of LATF to Castle Acquisitions and increase reserves available for
future distribution to shareholders of Lonrho Africa.
The share capital of LATF has also been reduced pursuant to a Court approved
reduction of capital in order to facilitate the Demerger and Admission.
BACKGROUND TO AND REASONS FOR THE PROPOSALS
The Lonrho Africa Group, through LATF, operates one defined benefit pension
scheme in the United Kingdom, the John Holt Pension Scheme (`UK Scheme`), the
assets of which are held separately from those of the Lonrho Africa Group under
a trust. The Law Debenture Trust Corporation plc is the sole independent trustee
of the UK Scheme. There are a variety of small overseas pension schemes which
are at different stages of being wound up. The Lonrho Africa Group does not
have any material post retirement benefits other than these pension schemes.
The last triennial full actuarial valuation of the UK Scheme was carried out at
30 September 2002. In order to comply with FRS17 this has been updated to 30
September 2004 in the consolidated statutory accounts of the Lonrho Africa
Group. This update showed that the market value at 30 September 2004 of the UK
Scheme`s assets was some GBP44.2m and the actuarial liabilities were GBP16.7m,
resulting in a surplus under FRS17 of GBP27.5m. Under FRS17 this surplus is not
currently recognised, in whole or in part, in the LATF balance sheet.
The liabilities of the UK Scheme arise predominantly from the benefit
entitlements of deferred and pensioner members. The liabilities for pensioners
have in part been secured by the purchase of annuity policies. At 30 September
2004 the actuary to the UK Scheme estimated that the cash surplus was
approximately GBP20m.
The surplus in the UK Scheme will fluctuate over time allowing for the changes
in investment market conditions. The assets of the UK Scheme are invested in
corporate bonds, gilts and annuities to match the benefit entitlements for
members. The surplus in the UK Scheme is also affected by suspending future
employer contributions. However, because the number of active members of the UK
Scheme has fallen significantly in recent years, the current surplus will not be
reduced for some considerable time unless new employees are introduced into the
UK Scheme. The trustee of the UK Scheme, the Law Debenture Trust Corporation
plc, has considered with the Board of Lonrho Africa the manner in which this
surplus could best be utilised. The solution recommended by the Independent
Directors is for Castle to effect a reverse takeover as a means of introducing
new members to the UK Scheme thereby utilising the surplus, and in this regard
the Board of Lonrho Africa has for some time searched for suitable investment
opportunities.
In order to facilitate the unlocking of the potential shareholder value inherent
within the UK Scheme and make this potential asset more visible and attractive
to potential purchasers, it is proposed that a Demerger be implemented, thereby
creating a separate AIM quoted company with access, with the consent of the
trustee, to the pension surplus and with the freedom to pursue its own strategic
development without any exposure to the Lonrho Africa Group`s residual assets
and liabilities.
On Demerger, LATF will essentially have on its balance sheet a cash balance in
the order of GBP1.57m and will continue to operate the UK Scheme, thereby
affording the potential opportunity to access the pension surplus when
additional active employees are introduced to the UK Scheme. Lonrho Africa will
retain ownership of the Lonrho Africa Group`s residual assets and liabilities
and maintain its own separate AIM listing whilst it continues with its current
disposal programme.
DESCRIPTION OF THE PROPOSALS
Lonrho Africa will declare a dividend of an amount equal to the book value of
its shareholding in LATF (`Demerger Dividend`) which will be satisfied in specie
by the issue by Castle Acquisitions of Castle Shares, credited as fully paid, to
shareholders of Lonrho Africa on the bases set out below, in consideration of
the transfer of LATF to Castle Acquisitions. Castle Acquisitions will issue
Castle Shares to shareholders of Lonrho Africa on completion of the Demerger on
the basis of for every 1,000 Lonrho Africa Shares held one Castle Share
Fractional entitlements will not be allotted to Qualifying Shareholders nor will
Overseas Shareholders receive Castle Shares. Instead such fractional
entitlements and Castle Shares will be aggregated and allotted to GPG (UK)
Holdings plc, as underwriter, pursuant to the Underwriting Agreement. GPG are an
institutional investor who are interested in becoming a shareholder in Castle.
GPG will acquire Castle Shares at a price of GBP25 per Castle Share. The net
cash proceeds of the allotment will be paid to Overseas Shareholders who were
not allotted Castle Shares and to Qualifying Shareholders who were entitled to
fractional entitlements.
It is intended that an application will be made for the entire issued share
capital of Castle Acquisitions to be admitted to AIM following the Capital
Reduction and the Scheme becoming effective. However, Admission could be delayed
or never happen.
In the event that Admission does not occur, Castle Acquisitions will remain an
unlisted company with the inherent characteristics such companies have including
without limitation liquidity restrictions being applicable in the event of a
proposed sale or purchase of Castle Shares.
Castle does not intend to apply for a secondary listing on the JSE.
LONRHO AFRICA CAPITAL REDUCTION
The Court will at the same hearing to approve the Scheme be asked to consider
the Lonrho Africa Capital Reduction. Under the Lonrho Africa Capital Reduction
the capital of Lonrho Africa will be reduced by decreasing the nominal amount of
each Lonrho Africa Share from 20 pence to 1 penny. If the Lonrho Africa Capital
Reduction is approved by a special resolution of the Shareholders of Lonrho
Africa and is subsequently confirmed by the Court, this will create a new
reserve in the books of Lonrho Africa of approximately GBP3.6m which will be
available for future distributions to Shareholders of Lonrho Africa or otherwise
to facilitate any future transactions at the discretion of the directors of
Lonrho Africa.
CONDITIONS TO THE SCHEME
The Scheme will become effective and binding if:
the Scheme is approved by a majority in number, representing not less than
threefourths in value, of the shareholders present and voting, either in person
or by proxy, at the Court Meeting;
a Special Resolution of Lonrho Africa to approve the matters necessary to
implement the Scheme is duly passed at the EGM;
the Scheme is sanctioned (with or without modification) and the reduction of
capital of Lonrho Africa provided for under the Scheme is confirmed by the
Court; and
an office copy of each of the orders of the Court sanctioning the Scheme and
confirming the reduction of capital of Lonrho Africa provided for under the
Scheme is delivered to the Registrar of Companies for registration and, in the
case of the order of the Court confirming the reduction of capital of Lonrho
Africa provided for under the Scheme, is registered by him.
The Directors will not take the necessary steps to enable the Scheme to be
sanctioned by the Court unless, at the relevant time, they consider that it
continues to be in Lonrho Africa`s best interests that the Scheme should become
effective.
Conditions to the Lonrho Africa Capital Reduction
The implementation of the Lonrho Africa Capital Reduction is subject to the
following conditions being satisfied:
the Scheme having become fully effective;
the Special Resolution which will be proposed at the EGM to approve, inter alia,
the Lonrho Africa Capital Reduction being passed;
the confirmation of the Lonrho Africa Capital Reduction by the Court; and
the registration by the Registrar of Companies of an office copy of the Court
order confirming the Lonrho Africa Capital Reduction.
The directors of Lonrho Africa will not take the necessary steps to enable the
Lonrho Africa Capital Reduction to be confirmed by the Court unless, at the
relevant time, they consider that it continues to be in Lonrho Africa`s best
interests that the Lonrho Africa Capital Reduction should become effective.
MODIFICATIONS TO THE SCHEME
The Scheme contains a provision for Lonrho Africa and Castle jointly to consent,
on behalf of all concerned, at the Court hearing to sanction the Scheme, to
modifications of, or additions to the Scheme or to any condition which the Court
may think fit to impose or approve. The Court would be unlikely to approve any
modifications or additions or to impose or approve any condition which might be
material to the interests of shareholders in Lonrho Africa unless the
shareholders in Lonrho Africa were informed of any such modification, addition
or condition. It will be a matter for the Court to decide, at its discretion,
whether or not further meetings of shareholders in Lonrho Africa should be held.
Similarly if a modification, addition or condition is put forward which, in the
opinion of the Independent Directors, is of such a nature or importance as to
require the consent of shareholders in Lonrho Africa at a further meeting, the
Independent Directors will not take the necessary steps to enable the Scheme to
become effective unless and until such consent is obtained.
RELATIONSHIP BETWEEN LONRHO AFRICA AND CASTLE FOLLOWING THE DEMERGER
Following the Demerger, Lonrho Africa and Castle will operate as independent
separately trading companies.
DIRECTORS OF CASTLE ACQUISITIONS
The Directors of Castle Acquisitions are:
Christopher H B Mills Non-executive Chairman
Richard J Wilkinson Non-executive Director
Michael S Wilson Non-executive Director
OVERSEAS SHAREHOLDERS
The implications of the Proposals for Overseas Shareholders may be affected by
the laws of the relevant jurisdictions. Overseas Shareholders should inform
themselves about and observe any applicable legal requirements. It is the
responsibility of each Overseas Shareholder to satisfy himself or herself as to
the full observance of the laws of the relevant jurisdiction in connection with
the Proposals, including the obtaining of any governmental exchange control or
other consents which may be required and/or the compliance with other necessary
formalities which are required to be observed and the payment of any issue,
transfer or other taxes due in such jurisdiction.
In any case, where Lonrho Africa and/or Castle is advised that the allotment and
issue of Castle Shares to a shareholder in Lonrho Africa with a registered
address in a jurisdiction outside the United Kingdom, Republic of Ireland or
South Africa or whom Lonrho Africa and/or Castle as the case may be, reasonably
believes to be a citizen, resident or national of a jurisdiction outside the
United Kingdom, Republic of Ireland or South Africa, would or may infringe the
laws of such jurisdiction, or would or may require Lonrho Africa and/or Castle
to comply with any governmental or other consent or any registration, filing or
other formality with which Lonrho Africa and/or Castle is unable to comply, or
compliance with which Lonrho Africa and/or Castle regards as unduly onerous,
then Lonrho Africa and/or Castle may determine either (i) that the holder`s
entitlement to Castle Shares shall be issued to a person appointed by Castle and
then sold at the price of GBP25 per Castle Share, with the net proceeds of sale
being remitted to the holder concerned; or (ii) that the holder`s entitlement to
Castle Shares pursuant to the Proposals shall be issued to such holder and then
sold on his behalf as soon as reasonably practical at the price of GBP25 per
Castle Share, with the net proceeds of sale being remitted to the holder
concerned.
In this regard, it will be assumed that the allotment and issue of Castle Shares
to any shareholders in Lonrho Africa with a registered address in South Africa
(or whom Lonrho Africa and/or Castle reasonably believe to be a resident of
South Africa or to be subject to the South African Exchange Control Regulations)
would infringe the South African Exchange Control Regulations unless such
shareholder(s) provide Castle with a letter from an authorised dealer in foreign
exchange, as such term is defined in the South African Exchange Control
Regulations, confirming that the allotment and issue of Castle Shares to the
shareholder(s) concerned will not constitute an infringement of the South
African Exchange Control Regulations. Any such letter should be addressed to
Castle Acquisitions PLC c/o Computershare Investor Services 2004 (Pty) Ltd, PO
Box 61763, Marshalltown 2107, South Africa, to be received by no later than the
Record Date.
Overseas Shareholders who do not receive Castle Shares will receive the
equivalent of 2.5p per Lonrho Africa Share held by them.
LONRHO AFRICA SHAREHOLDER MEETINGS
The Scheme requires the approval of shareholders in Lonrho Africa at the Court
Meeting and, for its implementation, at the Extraordinary General Meeting. The
Scheme also requires the sanction of the Court.
The directors of Lonrho Africa are authorised to implement the Lonrho Africa
Capital Reduction only if shareholders in Lonrho Africa pass the Special
Resolution which will be proposed at the EGM to approve the same.
Notices of the Court Meeting and the Extraordinary General Meeting are set out
on in the circular which will be posted to shareholders today.
COURT MEETING
The Court Meeting, which is held at the direction of the Court, has been
convened for 11.00 a.m. on 16 March 2005 to enable shareholders in Lonrho Africa
to consider the Scheme. At the Court Meeting, voting will be by poll and not by
a show of hands. A poll means that each shareholder in Lonrho Africa present
(or his or her proxy) who is entitled to be present and to vote has one vote for
every share which he or she holds or represents. The Scheme must be approved at
the Court Meeting by a majority in number representing not less than three
quarters in nominal value of Lonrho Africa Shares held by those present and
voting, in person or by proxy.
In order that the Court can be satisfied that the votes cast constitute a fair
representation of the views of shareholders in Lonrho Africa, it is important
that as many votes as possible are cast at the Court Meeting. Voting
information is set out in the circular being sent to shareholders today.
EXTRAORDINARY GENERAL MEETING
The Extraordinary General Meeting is being convened to ask shareholders in
Lonrho Africa to consider a resolution to give effect to the Proposals and
certain other matters.
The resolution provides for:
(a) approval of the Scheme; and
(b) approval of the Lonrho Africa Capital Reduction.
The majority required for the passing of the resolution is not less than three
quarters of the votes cast, as set out in the notice of Extraordinary General
Meeting in the circular which will be posted to shareholders today.
Entitlement to attend and vote at the Court Meeting and the Extraordinary
General Meeting and the number of votes which may be cast at the Meetings will
be determined by reference to the register of members of Lonrho Africa at the
Voting Record Time.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
A timetable showing the proposed principal events relating to the Demerger is
set out below:
Latest time and date
for receipt 1.00 p.m. on Monday, 14 March 2005
of blue forms of proxy
for theCourt Meeting
Latest time and date
for receipt 1.15 p.m. on Monday, 14 March 2005
green forms of proxy
for the Extraordinary
General Meeting
Voting Record Time 8.00 p.m. on Monday, 14 March 2005
Court Meeting 1.00 p.m. on Wednesday, 16 March 2005
Extraordinary General
Meeting 1.15 p.m. on Wednesday, 16 March 2005
Last day to trade on Wednesday, 13 April 2005
Shares trade ex the
entitlement on Thursday, 14 April 2005
to Castle Shares
Court hearing of the
petition to sanction the on Tuesday, 19 April 2005
Scheme and to confirm the
reduction of capital of
Lonrho Africa provided for
under the Scheme
Record date on Wednesday, 20 April 2005
Pay Date by 9 May 2005
Note: All times set out above are South African times. Shareholders in South
Africa are reminded that up to 2.00 a.m. on 27 March 2005, South African time is
two hours ahead of London time. After 2.00 a.m. on 27 March 2005, South African
time is one hour ahead of London time. All dates shown above are based on
current expectations and may be subject to change.
Both the Court Meeting and the Extraordinary General Meeting are to be held at
The Pearce Room, Britannia Adelphi Hotel, Ranelagh Place, Liverpool L3 5UL,
England.
Shareholders on the South African register may not dematerialise or
rematerialise their shares and no shares may be transferred between the UK and
South African registers between Thursday, 14 April 2005 and Wednesday, 20 April
2005.
DEFINITIONS
Defined terms used in this announcement have the same meaning as those defined
in the shareholder circular being posted to Lonrho Africa shareholders today.
Copies of the shareholder circular and related documents posted to Lonrho Africa
shareholders today will be available to the public free of charge from the
offices of Strand Partners Limited, 26 Mount Row, London W1K 3SQ during normal
business hours on any weekday, Saturdays, Sundays and public holidays excepted,
from the date of this announcement up to and including the Effective Date or the
date that the Scheme lapses or is withdrawn, whichever is the earlier.
If Shareholders have sold or otherwise transferred all their Ordinary Shares in
Lonrho Africa, they should send the Circular they receive together with the
accompanying forms of proxy as soon as possible to the purchaser or transferee
or to the stockbroker, bank or other agent through whom the sale or transfer was
effected for onward transmission to the purchaser or transferee.
Enquiries:
Lonrho Africa Plc Tel: +944 (020) 7409 3494
Christopher Mills
Strand Partners Limited Tel: +944 (020) 7409 3494
(Financial Adviser to Lonrho Africa)
Simon Raggett
Matthew Chandler
Cardew Group Tel: +944 (020) 7930 0777
Nadja Vetter
This announcement has been approved by Strand Partners solely for the purposes
of section 21 of the Financial Services and Markets Act 2000. Strand Partners,
which is authorised and regulated in the United Kingdom by the Financial
Services Authority, is acting exclusively for Lonrho Africa Plc and for no one
else in connection with the matters described in this announcement and will not
be responsible to anyone else for providing the protections afforded to
customers of Strand Partners or for advising any other person on the contents of
this announcement or any matter referred to herein.
This announcement has been prepared for information purposes only and is not to
be relied upon in substitution for the exercise of independent judgement. It is
not intended as investment advice and under no circumstances is it to be used or
considered as an offer to sell, or a solicitation of an offer to purchase, any
securities nor a recommendation to enter into any transaction; nor shall it or
any part of it form the basis of or be relied on in connection with any contract
or commitment whatsoever.
Sponsor
Java Capital (Pty) Limited
21 February 2005
