| Mon 21 Feb 2005, 18:00 | | Firm intention by SAAB SA to make an offer to min |
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Grintek/SAAB SA - Firm intention by SAAB SA to make an offer to Grintek minority
shareholders
Grintek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1955/000013/06)
Share code: GNK ISIN: ZAE000003067
(`Grintek`)
SAAB South Africa (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/015031/07)
(`SAAB SA`)
Firm intention by SAAB SA to make an offer to Grintek minority shareholders
1. Introduction
Further to the detailed cautionary announcement dated 9 November 2004, and the
renewal of cautionary announcements dated 20 December 2004 and 2 February 2005,
shareholders of Grintek are advised that SAAB AB, through its wholly owned
subsidiary, SAAB SA, has submitted a firm intention letter to the board of
directors of Grintek to make an offer (`the offer`) to acquire the entire issued
share capital of Grintek, other than the shares it already owns and those shares
held by Kunene Finance Company (Proprietary) Limited (`KFC`) and Kunene
Technology Investments (Proprietary) Limited (`KTI`) (collectively referred to
hereinafter as `Kunene`) for a cash consideration of 190 cents per Grintek share
(`the proposed transaction`).
The proposed transaction will be implemented by way of a scheme of arrangement
(`the scheme`) in terms of section 311 of the Companies Act 1973 (Act 61 of
1973), as amended (`the Act`), to be proposed by SAAB SA between Grintek and its
shareholders, other than Kunene (the `scheme members`).
SAAB AB and its subsidiaries (`SAAB`) are currently the registered holder of
14.3% of Grintek`s ordinary share capital and wish to acquire the remaining 56%
of shares in issue, other than those held by Kunene. SAAB is also a 49%
shareholder in Grintron (Proprietary) Limited, a Grintek subsidiary housing some
of Grintek`s defence electronics business. In addition, as detailed in 5 below,
SAAB has entered into a forward sale agreement with KTI over 19 764 706 Grintek
shares, representing approximately 6.7% of Grintek`s current issued share
capital.
It is the intention that Kunene remains involved as a shareholder of Grintek
following sanction of the scheme.
2. Rationale for the proposed transaction
The rationale for the proposed transaction includes inter alia:
- SAAB wishes to extend its geographical presence to the African
continent and in particular southern Africa;
- the defence and aviation arenas require significant capital
expenditure as well as extensive research and development expenditure;
- as a controlling shareholder of Grintek, SAAB will be able to forge a
closer working relationship with Grintek, facilitate the transfer of
technical expertise, undertake joint development and marketing
initiatives, provide Grintek with greater access to world markets and
an opportunity to leverage off of SAAB`s international infrastructure;
and
- Kunene`s continued participation in Grintek as a shareholder.
The implementation of the proposed transaction will provide the scheme members
with a certain and attractive cash opportunity to exit their investment in
Grintek.
The cash consideration to be received by scheme members represents a premium of:
- 52 cents or 38% to the closing price of 138 cents per Grintek share on
the JSE Securities Exchange South Africa (`JSE`), on 8 November 2004,
the last trading date before the publication of the detailed
cautionary announcement;
- 60 cents or 46% to the 30-day volume weighted average trading price of
130 cents per Grintek share for the period up to and including 8
November 2004; and
- 30 cents or 19% to the issue price of 160 cents for the 22 813 005
Grintek treasury shares subscribed for by SAAB on 15 January 2004.
The scheme therefore offers scheme members an opportunity to realise the value
of their Grintek shareholdings at a substantial premium.
3. Pro forma financial effects
The table below sets out the illustrative pro forma financial effects of the
scheme on Grintek shareholders assuming that the scheme had been concluded for
income statement purposes from 1 July 2003 and for balance sheet purposes at 30
June 2004. The pro forma financial effects have been prepared using the latest
available financial information, for illustrative purposes only to provide
information about how the scheme might have affected the financial information
presented and, because of their nature, may not give a true reflection of the
financial effects of the scheme:
Before the After the % change
scheme scheme
(cents per (cents per
share) share)
Market value per share and
cash received 1 138 190 38
30-day volume weighted
average market value per
share and cash received 2 130 190 46
Earnings per share 3 16.9 11,4 (33)
Headline earnings per share
3 18,8 11,4 (39)
Dividend per share 4 4.5 11,4 153
Net asset value per share
and cash received 5 149 190 28
Net tangible asset value per
share and cash received 5 120 190 58
Notes:
1. The `Before the scheme` column reflects the closing JSE market value per
Grintek share on 8 November 2004, being the day immediately preceding
publication of the detailed cautionary announcement. The `After the
scheme` column shows the consideration to be received per Grintek share.
2. The `Before the scheme` column reflects the 30-day volume weighted average
JSE market value per Grintek share calculated for the 30 days up to and
including 8 November 2004, being the day preceding the publication of the
detailed cautionary announcement. The `After the scheme` column shows the
consideration to be received per Grintek share.
3. The `Before the scheme` column reflects the audited earnings and headline
earnings per share for the year ended 30 June 2004. The `After the scheme`
column shows the after tax interest income that a Grintek shareholder would
have earned had the consideration to be received per Grintek share been
invested at an after-tax 12 month fixed deposit compounded interest rate of
6% per annum on 1 July 2003 for a period of 12 months.
4. The `Before the scheme` column reflects the dividend distributed per share
for the year ended 30 June 2004. The `After the scheme` column shows the
after tax interest income that a Grintek shareholder would have earned had
the consideration to be received per Grintek share been invested at an
after-tax 12-month fixed deposit compounded interest rate of 6% per annum
on 1 July 2003 for a period of 12 months.
5. The `Before the scheme` column reflects the audited net asset value and net
tangible asset value per share at 30 June 2004. The `After the scheme`
column shows the consideration to be received per Grintek share.
6. The possible application of Capital Gains Tax has not been taken into
account in the calculations above.
4. Conditions precedent to the proposed transaction and the scheme
4.1 The proposed transaction is subject to the fulfilment of the following
conditions precedent by 1 May 2005:
- the Grintek board of directors (`the board`) obtaining a favourable
opinion in relation to the terms and conditions of the scheme from the
independent advisor;(which opinion has been furnished, refer to
paragraph 7 for details)
- the completion of a due-diligence investigation by SAAB SA to its
satisfaction, of the business and affairs of Grintek and its
subsidiaries; and
- SAAB SA receiving the necessary confirmation and satisfaction that all
licences and necessary approvals for Grintek to continue to conduct
its businesses effectively in the normal, ordinary and regular course
following the sanction and implementation of the scheme, are granted
or in place, as the case may be.
4.2 The scheme is subject to the fulfilment of the following conditions
precedent by 1 July 2005:
- the approval of the offer by all regulatory authorities if and to the
extent necessary, including inter alia, the Securities Regulation
Panel (`the SRP`), the JSE, the Competition Commission and the South
African Reserve Bank;
- the approval of the scheme by a majority representing not less than
three fourths of the votes exercisable by scheme members present and
voting either in person or by proxy at a meeting of scheme members;
- the High Court of South Africa (Transvaal Provincial Division)
sanctioning the scheme in terms of the Act; and
- a certified copy of the Order of Court sanctioning the scheme being
registered by the Registrar of Companies in terms of the Act.
SAAB SA reserves the right to waive any of the above conditions to the extent
that they can lawfully be waived, and to implement the offer by other
appropriate means should any of the conditions precedent not be met.
5. Special arrangements
Grintek has been advised that the following special arrangements have been
entered into:
5.1 A forward sale agreement over 19 764 706 Grintek shares was entered
into between SAAB and KTI on 10 December 2003, which defers delivery
of these Grintek shares until the fifth anniversary of the effective
date of the forward sale agreement.
5.2 During December 2004 SAAB and Kunene entered into a relationship
agreement in terms of which:
5.2.1 SAAB has granted Kunene a put option over all of Kunene`s
remaining Grintek shares, which Kunene shall be entitled to
exercise in approximately five years time, at an exercise price
per Grintek share which is equal to the higher of:
- a fixed firm price of 170 cents per Grintek share, compounded
annually to the date of exercise of the put, using an interest
rate derived from the sum of the average annual yield to maturity
of the RSA 153 Government Bond and a fixed premium of 2% per
annum, which currently equates to an effective rate of
approximately 9,6% per annum (based on a current yield to
maturity on the RSA 153 Government Bond of 7,6%); and
- a performance related formula based on the average of the audited
headline earnings per share for the last four (six monthly)
reporting periods prior to the exercise date, multiplied by two
and thereafter multiplying the resultant figure by the indicative
price earnings ratio based on the offer price of 190 cents per
share.
5.2.2 Kunene has in turn granted SAAB a call option over all Grintek
shares held by Kunene, which SAAB is also entitled to exercise in
approximately five years` time. In the event of SAAB exercising
its call option, the purchase price which will become payable for
the Grintek shares held by Kunene is the same as the purchase
price which would have been payable had Kunene exercised its
aforementioned put option.
Save as aforesaid, no arrangements, undertakings or agreements have been
concluded by SAAB SA, or any party acting in concert with SAAB SA or any other
shareholders, in relation to the Grintek shares which are the subject of the
offer.
6. SRP confirmation
The SRP has been given appropriate confirmation (in accordance with its
requirements) that SAAB SA will have sufficient cash resources available to
meet its obligations in terms of the offer.
7. Opinions and recommendations
The Grintek board has appointed an independent sub-committee to review the terms
and conditions of the proposed transaction. The independent sub-committee and
the board have considered and support the proposed transaction. The independent
sub-committee has appointed Investec Bank Limited (`Investec`) as an independent
third party to furnish an opinion in relation to the terms and conditions of the
offer. The full extract of this opinion will be contained in the scheme circular
referred to in paragraph 8. Investec is of the opinion that the offer is fair
and reasonable, provided the scheme is implemented in accordance with the time-
frame envisaged in 8 below.
8. Further announcement and documentation
It is currently anticipated that on or about 8 April 2005:
8.1 the salient dates and times of the scheme will be made to Grintek
shareholders; and
8.2 a scheme circular containing the final terms of the proposed
transaction will be posted to the shareholders of Grintek.
The scheme is anticipated to be completed by on or about 25 April 2005.
Centurion
22 February 2005
Investment bank and corporate advisor to SAAB SA
Nedbank Capital, a division of Nedbank Limited
Corporate law advisors to SAAB SA
Edward Nathan (Pty) Ltd
Independent advisor and sponsor to Grintek
Investec Bank Limited
Date: 21/02/2005 05:51:07 PM
Produced by the JSE SENS Department
