| Mon 23 May 2005, 7:53 | | Increase of HCI"S interest in the Tsogo Group |
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HCI - Increase of HCI`S interest in the Tsogo Group and renewal of cautionary
Hosken Consolidated Investments Limited
(Registration number 1973/007111/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000003257 Share Code: HCI
(`HCI` or the `Company`)
INCREASE OF HCI`S INTEREST IN THE TSOGO GROUP AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
HCI shareholders are referred to the announcement dated 17 December 2004
wherein shareholders were advised that HCI had entered into an agreement
(`the Prior Transaction Agreement`) with the Trustees for the time being of
the Fabcos Investment Trust (`the Fabcos Trust`) for the acquisition by HCI
from a company (`Newco`), that is to become controlled by the Fabcos Trust
and all the other current shareholders of Fabvest Investment Holdings
Limited (`Fabvest`), of all the issued shares in the capital of Fabvest
(`the Fabvest Acquisition`) .
Shareholders are reminded that:
* Fabvest owns 75% of all the issued shares in the capital of Fabcos
Investment Holding Company Limited (`FIH`), which in turn owns 38% of
all the issued shares in Tsogo Investment Holding Company (Pty) Ltd
(`TIH`), the company that owns 51% of all the issued shares in the
capital of and effectively controls Tsogo Sun Holdings (Pty) Ltd (`Tsogo
Sun`).
* Fabvest has sold 25% of all the issued shares in the capital of FIH to
Johnnic Holdings Limited (`Johnnic`) subject to certain conditions
precedent that have not yet been fulfilled (`the Second Tranche Sale`).
Should such conditions be fulfilled then Fabvest`s shareholding in FIH
will reduce to 50%. Should such conditions not be fulfilled then
Fabvest`s shareholding in FIH will remain at 75%. The conditions are
required to be fulfilled by 30 June 2005 at which time Fabvest`s
shareholding in FIH will be clear.
* Tsogo Sun is actively involved in the hotel and gaming industries. It is
the foremost casino and hotel operator in South Africa.
* HCI currently has an interest of approximately 32% in TIH. By entering
into the Prior Transaction Agreement and in line with HCI`s strategy,
HCI will increase its interest in TIH by either 19% if the Second
Tranche Sale is implemented or 28,5% if the Second Tranche sale is not
implemented. This will give HCI a combined interest in TIH of either 51%
or 60,5%. HCI will thereby obtain an increased exposure to Tsogo Sun and
the industries in which it operates.
* The Fabvest Acquisition agreement is a Category 3 transaction in terms
of the JSE Securities Exchange (`JSE`) Listings Requirements.
2. Update & Variation of the Prior Transaction Agreement
The Prior Transaction Agreement contemplated the formation of Newco and a
number of structural transactional steps designed to facilitate
implementation of the Fabvest Acquisition. Newco has now been formed and a
new transaction agreement (`the New Transaction Agreement`), together with
a series of written related agreements, has recently been entered into
(`the Operative Agreements`) which are aimed at implementing the Fabvest
Acquisition. The New Transaction Agreement and the Operative Agreements
supersede the Prior Transaction Agreement.
The only material variation to the Fabvest Acquisition pursuant to the New
Transaction Agreement and Operative Agreements is that the consideration
payable by HCI for the acquisition of all the issued shares in Fabvest will
now be discharged by:
*HCI delivering to Newco 15 500 000 ordinary issued shares in its
capital (`the Consideration Shares`) if at the time that the Fabvest
Acquisition is implemented, Fabvest owns 50% of all the issued shares
in FIH; or
*HCI delivering to Newco the Consideration Shares and making payment to
Newco of a cash amount of R138 million if at the time that the Fabvest
Acquisition is implemented, Fabvest owns 75% of all the issued shares
in FIH.
It is contemplated that the Fabvest Acquisition is likely to require HCI
to make a comparable offer to Johnnic for its shares in FIH in terms of the
Securities Regulation Code on Takeovers and Mergers. HCI has engaged, and
is in ongoing discussions with, the Securities Regulation Panel in this
regard.
3. Fulfilment of conditions precedent regarding the Fabvest Acquisition
The condition precedent that the holder of security furnished by Fabvest
agrees to the release of such security has been fulfilled and is no
longer applicable.
The Competition Tribunal has provided its unconditional approval for the
Fabvest Acquisition and this condition has accordingly been fulfilled and
is no longer applicable.
The Fabvest Acquisition remains subject to the following conditions
precedent:
* approval from the relevant Gaming Boards;
* approval from the JSE and the Securities Regulation Panel; and
* the passing of all necessary shareholders` resolutions.
to the extent required.
The Operative Agreements include irrevocable undertakings from
shareholders holding the requisite number of shares in the relevant
companies for the passing of the required resolutions.
These remaining conditions precedent are required to be fulfilled by 31
December 2006 and HCI has the right to extend this date if it deems
necessary.
LOAN AGREEMENT
1. Introduction
On 19 April 2005 Nedbank Limited (`Nedbank`) made a written offer to the
Fabcos Trust, Established Investments (Pty) Ltd (`EI`) and Fabvest (`the
Fabcos Group`) in which Nedbank offered to agree to accept payment of
certain amounts and then exit from its funding arrangements with the Fabcos
Group (`the Nedbank Offer`). EI is the entity through which the Fabcos Group
holds its interest in Premier Foods.
The Fabcos Group approached HCI with a view to HCI lending certain amounts
to the Fabcos Group to enable it to substantially discharge payment
obligations under the Nedbank Offer. HCI has agreed to cause its subsidiary,
HCI Treasury (Pty) Ltd (`HCIT`) to lend certain amounts for this purpose and
accordingly HCI has, together with HCIT and the Fabcos Trust, entered into a
loan agreement with Fabvest (`the Loan Agreement`).
2. Salient terms of Loan Agreement
Salient terms of the Loan Agreement are set out below:
An initial capital amount of R330 million is to be loaned and advanced. R15
million has already been advanced and the remaining balance is to be
advanced on 1 July 2005. This amount bears interest in an agreed fixed
amount of R73 million for the period up to 30 June 2006 and at prime
thereafter. Repayment of this amount is to be made on the later of 30 June
2006 or 40 business days after HCI has delivered the Consideration Shares
(as referred to above) to Newco. Repayment may be made either in cash or by
delivery to HCIT of HCI shares at a value of R26 per share or by a
combination of cash and HCI shares. If the Fabvest Acquisition is not
implemented (and accordingly the Consideration Shares are not delivered)
then repayment is to be made exclusively from the proceeds of the disposal
by Fabvest of its entire interest in FIH.
Should the whole repayment of the loan or part thereof be through the
delivery of HCI shares, all shares delivered will be repurchased by HCI
(or its nominee). This repurchase will be subject to shareholder
approval in terms of the Companies Act, 1973 (Act 61 of 1973) as
amended, and the JSE Listings Requirements. It is intended to obtain
HCI shareholder approval for this contingent specific share repurchase
prior to the repayment date.
A further capital amount of R138 million is to be loaned and advanced only
if the Second Tranche Sale is not implemented. This amount will not bear
interest and will be repayable on the same basis as the above initial
capital amount.
All amounts to be loaned are to be advanced directly to Nedbank which has
agreed to appropriate such amounts solely towards a discharge of the payment
obligations under the Nedbank Offer.
3. Assumption of Liability
The Operative Agreements are structured to separate Fabvest`s interests in
FIH (which is to remain housed in Fabvest) and in EI (which is to be
transferred to Newco). The Operative Agreements accordingly provide that in
consideration for the sale by Fabvest to Newco of Fabvest`s entire interest
in EI, Newco shall assume all Fabvest`s obligations owing under the Loan
Agreement.
4. Security
Both the Fabcos Trust and Newco have respectively furnished guarantees and
cessions and pledges to HCIT to secure repayment obligations owing under the
Loan Agreement.
5. Borrowing Facilities
HCIT is to make use of external borrowing facilities provided to it to make
the payments it is required to make under the Loan Agreement.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 11 April 2005
in which it was announced that HCI had entered into negotiations (not
related to the Fabvest Acquisition), which, if successfully concluded, may
have a material effect on the price of the Company`s shares.
Shareholders are advised that the Company is still involved in the
aforementioned negotiations and accordingly are advised to continue to
exercise caution when dealing in their HCI shares until a further
announcement is made.
Durban
23 May 2005
Sponsor
Nedbank Capital
Corporate Advisor
HJS Advisory Services (Pty) Ltd
Legal advisers to HCI
Sonnenberg, Hoffmann Galombik
Legal advisers to the Fabcos Group
Lowndes & Associates
Date: 23/05/2005 07:37:52 AM
Produced by the JSE SENS Department
