| Thu 17 Mar 2005, 12:14 | | Proposed Introduction Of Additional Black |
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Aspen Pharmacare Holdings Limited - Proposed Introduction Of Additional Black
Share Ownership In Aspen
ASPEN PHARMACARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/002935/06)
Share code: APN ISIN: ZAE000023586
(`Aspen`)
THE PROPOSED INTRODUCTION OF ADDITIONAL BLACK SHARE OWNERSHIP IN ASPEN
1. INTRODUCTION
1.1 Further to the cautionary announcement dated 15 February 2005, Aspen is
pleased to announce that, subject to the fulfilment of certain conditions
precedent, which include the approval of Aspen shareholders, it has concluded
agreements whereby it proposes to facilitate the acquisition by a broad-based
grouping of Black Economic Empowerment (`BEE`) entities of shareholdings in
Aspen as follows:
1.1.1 the acquisition by Imithi Investments (Proprietary) Limited
(`Imithi`), the shareholders of which are set out in paragraph 2.5, of
13 400 000 new Aspen ordinary shares and 17 600 000 new variable rate,
voting, convertible, redeemable, cumulative Aspen preference shares
(`the Aspen preference shares`); and
1.1.2 the acquisition by the Industrial Development Corporation of South
Africa Limited (`the IDC`) of 6 100 000 new Aspen ordinary shares. The
IDC will grant Imithi a call option over these shares (`the Imithi/IDC
call option`).
The transactions in paragraphs 1.1.1 and 1.1.2 are hereinafter referred to as
`the Imithi transaction`.
1.2 Subsequent to the Imithi transaction Aspen and/or a wholly-owned subsidiary
of Aspen, Pharmacare Limited (`Pharmacare`), will propose a scheme of
arrangement (`the scheme of arrangement`) in terms of section 311 of the
Companies Act, 1973 (Act 61 of 1973) (`Companies Act`) between Aspen and its
ordinary shareholders (other than Pharmacare, Imithi, the IDC, Ceppwawu
Pharmaceuticals Investments (Proprietary) Limited (`Ceppwawu 1`) and Ceppwawu
Pharmaceuticals Investments 2 (Proprietary) Limited (`Ceppwawu 2`)
(collectively, `the excluded parties`)) to acquire, in terms of section 85 or
89 of the Companies Act, on a pro rata basis, 6.5% of the Aspen ordinary
shares held by those ordinary shareholders who will be participating in the
scheme of arrangement (`the scheme members`).
Imithi and Ceppwawu 1 and 2 are hereinafter referred to as `Aspen`s BEE
entities`.
1.3 After -
* implementation of the Imithi transaction;
* the scheme of arrangement;
* exercise of the Imithi/IDC call option; and
* conversion of the Aspen preference shares,
Aspen`s BEE entities (together with the 26 666 667 Aspen ordinary shares
currently held directly by Ceppwawu 1 and 2) will hold approximately 17.9% of
the then Aspen equity, and will enjoy the same percentage of the voting rights,
assuming no intervening changes in the Aspen equity.
Pending the exercise of the Imithi/IDC call option and the conversion of the
Aspen preference shares, Aspen`s BEE entities (together with the 26 666 667
Aspen ordinary shares currently held directly by Ceppwawu 1 and 2) will hold
approximately 11.9% of the then Aspen equity and 16.2% of the voting rights
attaching to the Aspen ordinary shares and Aspen preference shares, assuming no
intervening changes in the Aspen equity.
3. THE IMITHI TRANSACTION
2.1 Rationale
Aspen shareholders are referred to the circular to Aspen shareholders dated
5 July 2004 (`the Aspen/Peu circular`) wherein Aspen specifically stated
that, subject to the approval of Aspen shareholders, some or all of the 21
300 000 Aspen ordinary shares (`the Peu shares`) repurchased from Peu Health
(Proprietary) Limited (`Peu Health`) in terms of a specific share repurchase
(`the Peu share buy-back`) would be used to facilitate the introduction of
further BEE into Aspen.
Aspen is firmly committed to the promotion of BEE to achieve the
constitutional right to equality, increase broad-based and effective
participation of black people in the economy and achieve more equitable
income distribution. In addition, Aspen accepts that meaningful
participation by black people in the mainstream economy is essential to
sustaining South Africa`s successful economic and democratic structures. The
Imithi transaction has been designed to ensure that a meaningful portion of
Aspen`s equity is owned by black people and that black people have a
meaningful role in Aspen`s operations, management and development.
Imithi represents a combination of a number of different entities, which
have formed a number of special purpose vehicles (`SPVs`) with aligned focus
and interests. Imithi is truly broad-based, providing for the upliftment of
the previously disadvantaged, and achieves a relevant shareholder grouping
with the capability of adding value to Aspen on the factory floor, in
management, in the boardroom and in the wider healthcare industry.
2.2 Mechanics
In terms of the Imithi transaction and in line with Aspen`s stated intention in
the Aspen/Peu circular:
2.2.1 Imithi will acquire 13 400 000 new Aspen ordinary shares at R11.00 per
share which will be issued by Aspen by way of a specific issue of
shares for cash for a total consideration of R147.4 million;
2.2.2 Imithi will acquire 17 600 000 Aspen preference shares at R21.41, being
the volume weighted average price (`VWAP`) per share at which Aspen
ordinary shares traded on the JSE Securities Exchange South Africa
(`the JSE`) over the 30-day trading period preceding 16 March 2005
(`the 30-day VWAP`), which will be issued by Aspen by way of a specific
issue of shares for cash for a total consideration of R376.8 million.
Imithi will have the right to require redemption or conversion of the
Aspen preference shares into Aspen ordinary shares on a one-for-one
basis on the seventh anniversary after the issue of the Aspen
preference shares. The Aspen preference shares will vote pari passu
with the Aspen ordinary shares. The preference shareholders will be
entitled to receive an annual cumulative preference cash dividend at a
rate equal to the prime overdraft rate of interest as charged by First
National Bank Limited to its most favoured corporate customers in
respect of unsecured overdraft facilities from time to time (`the prime
rate`) multiplied by 1 minus the corporate tax rate for the relevant
dividend period; and
2.2.3 the IDC will acquire 6 100 000 new Aspen ordinary shares at R19.80 per
share which will be issued by Aspen by way of a specific issue of
shares for cash, for a total consideration of R120.8 million. The issue
price is equivalent to 92.5% of the 30-day VWAP, i.e. R21.41.
The acquisitions by Imithi referred to in paragraph 2.2.1 and paragraph 2.2.2
will be funded as to 2.5% of the transaction value, i.e. R13.1 million, by the
shareholders of Imithi and the balance, i.e. R511.1 million, by the subscription
by the IDC for preference shares in Imithi.
2.3 The Imithi/IDC call option
It is the intention of Imithi and the IDC that, subject to certain terms and
conditions, the Aspen ordinary shares held by the IDC will ultimately vest in
Imithi. To this end the IDC has granted Imithi a call option on the Aspen
ordinary shares held by the IDC. The price at which the Imithi/IDC call option
is granted is based upon a formula, which will result in the IDC achieving a
predetermined rate of return. The Imithi/IDC call option is exercisable by
Imithi over all or part of the Aspen ordinary shares held by the IDC between the
third and fourth anniversary of the date upon which the call option agreement,
entered into between the IDC and Imithi, becomes effective.
2.4 The shareholders` agreement
In terms of the shareholders` agreement entered into between Imithi, each of the
individual shareholders of Imithi and Aspen,
2.4.1 Imithi will not be entitled to dispose of, or encumber, its interest
in Aspen acquired in terms of paragraph 2.2.1 and paragraph 2.2.2
until the expiry of a seven-year period from the date of signature of
such agreement. After the expiration of the seven-year period, Imithi
may only dispose of, or encumber, sufficient Aspen ordinary shares to
refinance the outstanding debt whereafter any remaining Aspen ordinary
shares held by it shall be held for a minimum period of a further
three years. This results in an effective ten-year lock-in period;
2.4.2 Imithi has undertaken to use its best endeavours to maximise the
additional number of Aspen ordinary shares it may hold pursuant to the
exercise of the Imithi/IDC call option. A disposal or encumbrance of
such shares shall be subject to Aspen`s prior approval; and
2.4.3 Imithi will exercise the voting rights attached to all the Aspen
ordinary and preference shares which it will own on a proportionate
basis in accordance with the instructions of its shareholders.
2.5 Shareholders of Imithi
Details of the shareholders of Imithi are as follows:
2.5.1 Amalgum Investments 35 (Proprietary) Limited (`Amalgum`)
Amalgum, a wholly owned subsidiary of Ceppwawu Investments
(Proprietary) Limited, (`Ceppwawu Investments`) which in turn is a
wholly-owned subsidiary of the Ceppwawu Development Trust, will have a
50.4% shareholding in Imithi. Ceppwawu 1 and Ceppwawu 2, both of which
are wholly-owned subsidiaries of Ceppwawu Investments, currently hold
26 666 667 Aspen ordinary shares, equivalent to 7.5% of the Aspen
ordinary shares in issue, net of treasury shares after the
implementation of the Imithi transaction and the scheme of
arrangement. The Chemical, Energy, Paper, Printing, Wood and Allied
Workers Union (`Ceppwawu`) has approximately 70 000 union members and
represents Aspen`s unionised employees.
2.5.2 Little Swift Investments 214 (Proprietary) Limited, to be renamed
Masibulele Pharmaceuticals (Proprietary) Limited (`Masibulele`)
Masibulele will have a 16.5% shareholding in Imithi. Masibulele is an
SPV in which the shareholders are predominantly black women with
strong connections to the healthcare industry. A minority stake in
Masibulele is held by two senior executives of Aspen, from previously
disadvantaged groups.
2.5.3 Blue Nightingale Trading 169 (Proprietary) Limited (`Blue
Nightingale`)
Blue Nightingale will have a 16.5% shareholding in Imithi. Blue
Nightingale is an SPV comprising various professional and business
persons from previously disadvantaged groups and the Rockland Targeted
Development Investment Fund, which makes investments, inter alia, on
behalf of retirement funds affiliated to The Congress of South African
Trade Unions.
2.5.4 Business Ventures 670 (Proprietary) Limited (`Business Ventures`)
Business Ventures will have a 16.5% shareholding in Imithi. Business
Ventures is an SPV drawing together shareholders from previously
disadvantaged groups with leadership positions in healthcare circles,
with emerging business capabilities and a development trust founded by
The Congress of Traditional Leaders of South Africa.
2.5.5 IDC
The IDC will have a 0.1% shareholding in Imithi while it is a funder
of Imithi.
2.6 Conditions precedent
The Imithi transaction is subject to the fulfilment of, inter alia, the
following conditions precedent:
2.6.1 the granting of all the necessary regulatory approvals required for
the implementation of the Imithi transaction (including the approval
by the JSE);
2.6.2 the passing of the requisite resolutions relating to the Imithi
transaction by Aspen shareholders at the Aspen general meeting (`the
Aspen general meeting`);
2.6.3 the registration of the requisite special resolutions by the Registrar
of Companies;
2.6.4 the granting of the Order of Court that the scheme of arrangement be
sanctioned in terms of section 311 of the Companies Act; and
2.6.5 the registration of the Order of Court by the Registrar of Companies.
3. THE SCHEME OF ARRANGEMENT
3.1 Rationale
Subsequent to the Imithi transaction Aspen will have cash resources in
excess of its optimal gearing and current investment requirements. The board
of directors of Aspen (`the Aspen Board`) has considered various
alternatives available in order to optimise investment returns and to
distribute this excess cash and has taken cognisance of all its
stakeholders` various interests. If implemented the scheme of arrangement
will result in scheme members being treated equally and maintaining their
proportionate percentage shareholding in Aspen, relative to each other.
3.2 Mechanics
Aspen and/or Pharmacare shall propose a scheme of arrangement, between Aspen
and the scheme members to acquire 6.5% of their Aspen ordinary shares at the
30-day VWAP, on a pro rata basis, in terms of section 85 or section 89 of
the Companies Act at R21.41 per Aspen ordinary share. The total
consideration for the 20 269 560 Aspen ordinary shares (based on the current
number of Aspen shares in issue) to be acquired will be R434.0 million.
The Aspen ordinary shares to be acquired by Aspen and/or Pharmacare will be
cancelled or held as treasury shares, respectively.
3.3 Conditions precedent
The scheme of arrangement is conditional on, inter alia, the fulfilment of
the following conditions precedent:
3.3.1 the passing of the requisite resolutions by Aspen shareholders to
approve the Imithi transaction at the Aspen general meeting;
3.3.2 the passing of the special resolution approving the acquisition by
Aspen and/or Pharmacare of Aspen ordinary shares from Aspen
shareholders being duly passed by Aspen shareholders at the Aspen
general meeting;
3.3.3 the registration of the requisite special resolutions by the Registrar
of Companies;
3.3.4 the scheme of arrangement being approved by a majority representing
not less than three-fourths (75%) of the votes exercisable by scheme
members present and voting either in person or by proxy at the meeting
to be held to approve the scheme of arrangement (`the scheme
meeting`);
3.3.5 the High Court of South Africa (Witswatersrand Local Division)
sanctioning the scheme of arrangement in terms of the Companies Act
and the registration of such Order by the Registrar of Companies; and
3.3.6 any other regulatory approvals that may be required.
4. UTILISATION OF PROCEEDS
Aspen intends to utilise the R 376.8 million raised by the issue of the Aspen
preference shares in an optimal manner. Given current circumstances and funding
requirements this would entail an investment in premium rated preference shares.
R268.2 million raised from the issue of Aspen ordinary shares will be used
towards funding the scheme of arrangement. The balance of R165.8 million
(assuming no intervening changes in the number of Aspen ordinary shares in
issue) required to fund the scheme of arrangement will be obtained from Aspen`s
existing cash resources.
5. THE RESULTANT SHAREHOLDER STRUCTURE OF ASPEN
The shareholder structure of Aspen post implementation of the proposed BEE
transaction and the scheme of arrangement is set out below.
SEE PRESS FOR DETAILS
* Listed on the JSE
The percentages in the above structure are stated as a percentage of the total
Aspen equity in issue, net of treasury shares and subsequent to the Imithi
transaction and the scheme of arrangement and assuming full conversion of the
Aspen preference shares.
6. ACCOUNTING TREATMENT
The principle underlying the accounting treatment is compliance with South
African Statements of Generally Accepted Accounting Practice (`GAAP`), which is
based on International Financial Reporting Standards (`IFRS`). GAAP and/or IFRS
may require a transaction to be accounted for in a different manner to its legal
substance and form.
Any possible effects of IFRS 2 (Share-based Payments) on the Imithi transaction
have not been taken into account.
It is also assumed that the fair value of underlying debt and equity components
of the preference shares is equal to the issue price for the purposes of IAS 32
(Financial Instruments: Disclosure and Presentation) and IAS 39 (Financial
Instruments: Recognition and Measurement).
7. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects set out in the table below have been
prepared to assist Aspen shareholders to assess the impact of the Imithi
transaction and the scheme of arrangement on the earnings per share (`EPS`),
headline EPS (`HEPS`) and the net asset value (`NAV`) and the tangible NAV
(`NTAV`) per Aspen ordinary share. These unaudited pro forma financial effects
have been disclosed in terms of the Listings Requirements of the JSE and do not
constitute a representation of the future financial position or results of Aspen
on implementation of the Imithi transaction and the scheme of arrangement. The
unaudited pro forma financial effects have been prepared for illustrative
purposes only. The material assumptions are set out in the notes following the
table.
Pro
Forma
Pro Forma `After`
`After` the
Actua the Imithi Imithi Cumula
l transactio Change transact tive
`Befo n % ion and change
re` the %
scheme
of
arrangem
ent
EPS (cents)
for the six
months ended 63.7 62.0 (2.7) 62.1 (2.5)
31 December
2004
HEPS (cents)
for the six
months ended 63.7 62.0 (2.7) 62.1 (2.5)
31 December
2004
NAV (cents)
as at 31 281.6 357.2 26.9 250.0 (11.2)
December
2004
NTAV (cents)
as at 31 58.2 146.0 150.9 26.1 (55.1)
December
2004
Number of
shares in
issue at 31 338.0 357.5 337.3
December
2004 (`m)
Weighted
average
number of
shares in
issue for 340.8 360.3 340.0
the six
months ended
31 December
2004 (`m)
Notes
1. All figures in the Actual `Before` column are based on the published interim
results for the six months ended 31 December 2004 (`the interim results`).
2. The unaudited Pro Forma `After` EPS and HEPS calculations are based on the
following assumptions:
2.1 the Imithi transaction and the acquisition by Aspen of 20 269 560 Aspen
ordinary shares in terms of the scheme of arrangement were implemented
on 1 July 2004;
2.2 the proceeds received from the issue of 17 600 000 Aspen preference
shares in terms of the Imithi transaction were invested in preference
shares with an annual after-tax yield of 64% of the prime rate for the
six months to 31 December 2004;
2.3 STC at 12.5% has been taken into account on all dividends payable and
receivable; and
2.4 the costs of the Imithi transaction and the scheme of arrangement have
been offset against the share premium.
3. The unaudited pro forma `After` NAV and NTAV calculations have been based on
the additional assumption that the Imithi transaction and the scheme of
arrangement were implemented on 31 December 2004.
4. The benefit of the reduced number of ordinary shares in issue as a result of
the Peu share buy-back was included in the interim results. Of the total
dilution in HEPS of 2.5%, 2.1% arises as a consequence of the 13 400 000
Aspen ordinary shares to be issued to Imithi in substitution of an equal
number of Peu shares (refer to paragraph 2.1).
8. OPINIONS AND RECOMMENDATIONS
The Aspen Board has designed the Imithi transaction to ensure that it is in line
with the BEE strategy of Aspen as set out in paragraph 2.1 and that it will be
positive for the future development of Aspen`s business. The Aspen Board
believes that the Imithi transaction and the scheme of arrangement will be in
the best interests of Aspen and all its stakeholders.
The Aspen Board, save for Mr Buthelezi, a trustee of The Ceppwawu Development
Trust and director of Ceppwawu Investments, who recused himself owing to
Amalgum`s involvement in the Imithi transaction, unanimously recommends that
shareholders vote in favour of the resolutions to be considered at the Aspen
general meeting and in favour of the scheme of arrangement at the scheme
meeting. In respect of their own holdings of Aspen ordinary shares, the members
of the Aspen Board intend to vote in favour of the resolutions to be presented
at the Aspen general meeting and in favour of the scheme of arrangement at the
scheme meeting.
9. NOMINATION OF DIRECTOR
Dr. Judy Dlamini has been nominated by Imithi to the Aspen board. Dr. Dlamini
led the Imithi team in negotiating the Imithi transaction. She is a qualified
medical doctor with corporate finance and business experience.
10. BLACK EMPLOYEES
The Aspen Board is considering various options for the effective implementation
of a workers` trust and a share scheme for senior black employees. An
announcement in this regard will be made as soon as details are available.
11. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Aspen shareholders are referred to the cautionary announcement dated 15 February
2005 and are advised that they are no longer required to exercise caution in
their dealings in Aspen ordinary shares.
12. FURTHER DETAILS
A circular setting out the full details of the Imithi transaction and the scheme
of arrangement, which circular will incorporate the notices of the Aspen general
meeting and the scheme meeting, will be posted to Aspen shareholders in due
course.
Woodmead
17 March 2005
Transaction advisor Sponsor to Aspen Legal advisor
to Aspen Investec Bank to Aspen
Investec Corporate Werksmans Inc.
Finance
Transaction advisor Legal advisor to Funder to
to Imithi Imithi Imithi
Andisa Capital Bowman Gifillan IDC
Attorneys
