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IFS - Disposals by IFS of its remaining operating subsidiaries or their
businesses, related party details and withdrawal of cautionary
INDEPENDENT FINANCIAL SERVICES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1950/037061/06)
Share code: IND ISIN code: ZAE000025300
(`IFS` or `the company`)
ANNOUNCEMENT REGARDING THE DISPOSALS BY IFS OF ITS REMAINING OPERATING
SUBSIDIARIES OR THEIR BUSINESSES, RELATED PARTY DETAILS AND WITHDRAWAL OF
CAUTIONARY
1. Introduction
Shareholders are referred to previous announcements dated 18 August 2004,
5 October 2004 and 25 February 2005, and are advised that IFS has finalised
agreements to dispose of all its remaining operating subsidiaries or their
businesses (`the disposals`). The disposals by the IFS Group include:
- the previously announced sale of business by IFS Insurance Brokers
(Proprietary) Limited (`IFS Insurance Brokers`) as a going concern to
Multifund Financial and Insurance Services (Proprietary) Limited
(`Multifund Services`);
- the sale by 62 Juta Street Braamfontein (Proprietary) Limited (`62 Juta
Street`), a wholly-owned subsidiary of IFS, of:
* the properties situated at 155 Smit Street (`Smit Street properties`)
as a business entity to Jungle Holdings (Proprietary) Limited (`Jungle
Holdings`) as announced on 18 August 2004;
* the property, being the company`s head office building, situated at 62
Juta Street, Braamfontein, Johannesburg (`Juta Street property`) as a
business entity to Jungle Holdings;
* the Norwood property on public auction; and
- the disposal of the shares in and claims against Red Car Hire (Proprietary)
Limited (`Red Car Hire`) to Multifund Financial and Insurance
Administrators (Proprietary) Limited (`Multifund Administrators`).
IFS shareholders are referred to the consolidated unaudited interim results of
IFS at 31 December 2004, which are also published today.
2. The background and rationale for the disposals
IFS Insurance Brokers is a financial service provider whose business included
broking and services in respect of short-term insurance, long-term life
insurance, risk management and medical aid. 62 Juta Street is a property owning
company and one of its properties served as the premises of the IFS Insurance
Brokers business and the other properties were merely of an investment nature.
Red Car Hire provides IFS clients with the option to hire a vehicle should their
vehicle be subject to an insurance claim administered by IFS Insurance Brokers.
On 18 August 2004, it was announced that the Board of IFS had decided to realise
all the IFS Group assets and to distribute the net realisation proceeds to
shareholders. The disposals have been undertaken in pursuance of that objective.
Following the disposals, the company will have no remaining assets other than
cash and claims, save for 100 000 IFS shares held by O`Cor Insurance Brokers
(Proprietary) Limited, a wholly-owned subsidiary of the company, as treasury
shares. It is the intention of the directors to distribute to shareholders the
net proceeds from the disposals subject to the final computation of the
distributable amount. Further details in this regard will be contained in the
circular referred to in paragraph 8 below.
3. Terms and conditions of the disposals
3.1 IFS Insurance Brokers
In terms of an agreement dated 10 September 2004, the insurance
broking business of IFS Insurance Brokers was sold `voetstoots` to
Multifund Services as a going concern, including all rights and
obligations under the policies, the fixed assets and the agency
agreements of the business, but excluding any liabilities other than
prospective liabilities under the policies. The disposal was effective
1 October 2004. The determination of the purchase consideration is
formula-linked, having regard to premium and commission income and
underwriting profit actually earned during the 12 month period ending
30 September 2005. Based on the past performance of the business, the
quantum of the purchase consideration is expected to be a total amount
of R11 million. The purchase consideration was paid in cash as to R4
891 124 on 1 October 2004, and, as to the balance, subject to
adjustment based on performance, after the final determination of the
total purchase consideration following the first anniversary of the
effective date. Payment of such deferred balance is to be effected
during November 2005. The disposal agreement is subject to warranties
which are normal for a transaction of this nature, as well as the
fulfillment of the conditions detailed in paragraph 3.4 below, which
for this disposal are resolutive. Mr J W Simpson, the Chief Executive
Officer and controlling shareholder of IFS, has undertaken to vote in
favour of this disposal.
3.2 62 Juta Street
3.2.1 Smit Street properties
The properties situated at 155 Smit Street, which includes
all rights and obligations in terms of existing leases, and
all other assets necessary to carry on such letting
business, was sold `voetstoots` to Jungle Holdings as a
going concern for a total purchase consideration of R1 978
500 in terms of an agreement dated 12 August 2004. The
effective date of the disposal, being the date of transfer
of ownership of the Smit Street properties, was 11 November
2004. The disposal of these properties is not subject to any
unfulfilled conditions and the transaction, having been
concluded prior to the sale of the business of IFS Insurance
Brokers, is not subject to the approval requirements for
categorised transactions in terms of the Listings
Requirements of the JSE Securities Exchange South Africa
(`JSE`).
3.2.2 Juta Street property
In terms of the agreement dated 4 November 2004, the
company`s head office building, situated at 62 Juta Street,
which includes all rights and obligations in terms of
existing leases, and all other assets necessary to carry on
the business, was sold `voetstoots` to Jungle Holdings for a
total purchase consideration of R1 670 000. The effective
date of the disposal was 1 November 2004, although the
registration of transfer of the property took place on 11
February 2005. The disposal of the Juta Street property is
not subject to any unfulfilled conditions, and, accordingly,
shareholders` ratification for the transaction will be
sought in the general meeting referred to in paragraph 5
below. Mr J W Simpson, the controlling shareholder of IFS,
has undertaken to vote in favour of such ratification.
3.2.3 Norwood property
The Norwood property was sold by way of a public auction for
a total purchase consideration of R1 340 000. The effective
date of the disposal will be the date of registration of
transfer of ownership to the purchaser, Mr J W Simpson, who
is the Chief Executive Officer and controlling shareholder
of IFS and, as such, a related party in respect of this
transaction. The disposal of the Norwood property is subject
to the conditions stated in paragraph 3.4 below. Further
details in respect of the related party transaction are set
out in paragraph 6 below.
3.3 Red Car Hire
In terms of an agreement dated 4 March 2005, the shares in and claims
against Red Car Hire have been sold to Multifund Administrators. The
disposal will be effective from 28 February 2005 and is for a total
purchase consideration of R4 906 654. IFS has given the purchaser
warranties and indemnities which are normal for a transaction of this
nature. The disposal of the shares in and claims against Red Car Hire
is subject to the conditions detailed in paragraph 3.4 below.
3.4 Conditions
The disposals are subject to inter alia the following suspensive
conditions (in the case of IFS Insurance Brokers, these conditions are
resolutive):
- the approvals which may be required from the JSE and the
Securities Regulation Panel (`SRP`), as well as any other
applicable regulatory approvals;
- the approval or ratification, as the case may be, of the
disposals by IFS shareholders in general meeting.
3.5 Aggregation of transactions
The disposals are aggregated for purposes of transaction
categorisation in terms of the JSE Listings Requirements and
accordingly approval (and ratification, where applicable) by IFS
shareholders is required. To that end, a notice of general meeting of
IFS shareholders will be included in the circular referred to in
paragraph 8 below.
4. Pro forma financial effects of the disposals
Set out below are the unaudited pro forma financial effects of the disposals on
the audited results of the IFS Group for the year ended 30 June 2004. The pro
forma financial effects reflect the impact that the disposals might have had on
the earnings per share and the headline earnings per share had they been
effected on 1 July 2003, and the effect that the disposals might have had on the
net asset value per share and the net tangible asset value per share had they
been effected on 30 June 2004. The pro forma financial effects are provided for
illustrative purposes only and, because of their pro forma nature, may not
fairly present IFS`s financial position, changes in equity, results of
operations or cash flows.
After the After the After the
IFS Smit Juta
Before the Insurance Street Street
dis- Brokers Change properties Change property Change
posals1 disposal2 % disposal % disposal %
Earnings
per share
(cents)3 4,21 11,01 161,5 5,82 38,2 5,38 27,8
Headline
earnings
per share
(cents)3 10,10 10,17 0,7 10,39 2,9 10,17 0,7
Net asset
value
per share
(cents)4 41,90 49,04 17,0 43,22 3,2 43,00 2,6
Net tangible
asset value
per share
(cents)4 13,28 45,63 243,6 14,83 11,7 14,63 10,2
Weighted
average
number of
shares
(`000) 34 000 34 000 34 000 34 000
After the After the
Norwood Red Car After all
property Change Hire Change the dis- Change
disposal % disposal5 % posals6 %
Earnings
per share
(cents)3 5,14 22,1 13,71 225,7 14,72 249,6
Headline
earnings
per share
(cents)3 10,20 1,0 7,17 (29,0) 10,63 5,2
Net asset
value per
share
(cents)4 42,73 2,0 48,99 16,9 52,29 24,8
Net tangible
asset value
per share
(cents)4 14,25 7,3 25,40 91,3 49,51 273,0
Weighted
Average
number of
shares (`000) 34 000 34 000 34 000
Notes:
1 The `Before the disposals` column has been extracted from the audited
results of IFS for the year ended 30 June 2004.
2.1 The calculation of earnings per share and headline earnings per share in
the `After the IFS Insurance Brokers disposal` column takes into account
the effect of the deconsolidation of the IFS Insurance Brokers income
statement, the incorporation of after tax interest received of R227 461,
based on the proceeds of the extrapolated aggregate R11 million
consideration (of which approximately R6,1 million is deferred
consideration), and the average after tax cost of debt for the year ended
30 June 2004 calculated at 5,5% per annum.
2.2 The calculation of net asset value and net tangible asset value in the
`After the IFS Insurance Brokers disposal` column takes into account the
effect of the deconsolidation of assets of R4 191 628 assuming the assets
were disposed of as at 30 June 2004, goodwill written off amounting to R3
826 705 and net proceeds of the extrapolated aggregate R11 million
consideration.
3 The calculation of earnings per share and headline earnings per share in
the columns headed `After the Smit Street properties disposal`, `After the
Juta Street property disposal` and `After the Norwood property disposal`
takes into account the net loss of the rentals which would have been
received during the year of R6 522, R36 388 and R63 669 respectively,
aggregated profit on the sale of the properties after capital gains tax of
R1 105 532 and interest received of R262 516 based on the proceeds received
and the average after tax cost of debt of 5,5% per annum, assuming these
disposals were effective from 1 July 2003.
4 The calculation of net asset value and net tangible asset value in the
columns headed `After the Smit Street properties disposal`, `After the Juta
Street property disposal` and `After the Norwood property disposal` takes
into account the disposal of properties with an aggregate book value of R3
667 479, assuming that these properties were sold at 30 June 2004, for a
total consideration of R4 988 500.
5.1 The calculation of earnings per share and headline earnings per share in
the `After the Red Car Hire disposal` column takes into account the effect
of the deconsolidation of R1 299 446 of profits and interest received of
R226 398 based on the proceeds and an average after tax cost of debt of
5,5% per annum, assuming that the disposal was made as at 1 July 2003.
5.2 The calculation of net asset value and net tangible asset value in the
`After the Red Car Hire disposal` column takes into account the effect of
the deconsolidation of the R102 612 net asset value of Red Car Hire
assuming Red Car Hire was disposed of as at 30 June 2004, goodwill of R1
712 321 being eliminated and net proceeds of R4 906 654.
6 The `After all the disposals` column reflects the aggregated effect of the
disposals based on a weighted average number of shares in issue, and shares
in issue of 34 million during the 12 months ended 30 June 2004.
7 Various vehicles, items of furniture and other loose assets were sold
piecemeal after 30 June 2004 for gross proceeds amounting in total to R608
803. These small transactions have not been taken into consideration in the
calculation of the above financial effects.
8 These financial effects have been calculated based on the audited results
of IFS for the year ended 30 June 2004 and are not based on the interim
results for the six months ended 31 December 2004, as these interim results
already take into account certain of the disposals, and particularly the
disposal of the business of IFS Insurance Brokers, which was sold on the
basis of a resolutive condition as stated in paragraph 3.1 above.
9 These financial effects calculations also do not take into account the
special dividend of 14 cents per share announced on 25 February 2005 and
payable on 22 March 2005.
Salient dates and times
2005
Forms of proxy for the general meeting of IFS ordinary
shareholders to be lodged with the transfer secretaries
by no later than 10:30 on Friday, 20 May
General meeting of IFS ordinary shareholders to be held
at 10:30 on Tuesday, 24 May
Results of general meeting released on SENS on Tuesday, 24 May
Results of general meeting published in the press on Wednesday, 25 May
Notes:
These dates and times are subject to amendment and shareholders will be advised
of any amendment by notice on SENS.
6. Related party and purchaser details
Mr J W Simpson, being the Chief Executive Officer and controlling shareholder of
IFS, is the purchaser of the Norwood property from 62 Juta Street, a wholly-
owned subsidiary of IFS. Notwithstanding that he acquired that property on a
public auction, he is deemed to be a related party as defined in the Listings
Requirements of the JSE. Accordingly, the aforesaid Mr J W Simpson is precluded
from voting any of the shares directly or indirectly owned or controlled by him,
in respect of that particular disposal at the aforementioned general meeting.
However, he may be taken into account in determining a quorum for the purposes
of that general meeting.
7. Appropriate external advice
Cohen Hill Funk & Co, the independent advisers of the company, have provided the
directors of IFS with their external advice in respect of the disposals as
required in terms of the SRP Code on Takeovers and Mergers. Details of this
advice will be included in the circular, to IFS ordinary shareholders, referred
to in paragraph 8 below.
8. Documentation
A circular, which is subject to the approval of the JSE and SRP and which will
include a notice convening a general meeting of IFS ordinary shareholders, will
be posted to IFS ordinary shareholders on or about Thursday, 5 May 2005.
9. Withdrawal of cautionary
The cautionary announcement of 25 February 2005 is hereby withdrawn.
Johannesburg
18 March 2005
Sponsor
Merchant Sponsors (Proprietary) Limited
Attorneys
De Wet - Van der Watt (Sandton) Inc
Independent advisers, reporting accountants and auditors
Cohen Hill Funk & Co
Date: 18/03/2005 04:46:48 PM
Produced by the JSE SENS Department
