| Tue 31 May 2005, 18:10 | | Imr - Change Of Name, Related Party Transaction An |
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Imr - Change Of Name, Related Party Transaction And Acquisition,
Release Date: 31/05/2005 17:26:02 Code(s): IMR
IMR - Change Of Name, Related Party Transaction And Acquisition,
Strategic Update, Offer To Shareholders And Further Cautionary
IMR Investments Limited t/a Conduit Capital
(Incorporated in the Republic of South Africa)
Registration number 1998/017351/06
Share Code: IMR
ISIN: ZAE000044004
(`IMR` or `the Company`)
CHANGE OF NAME, RELATED PARTY TRANSACTION AND ACQUISITION, STRATEGIC
UPDATE, OFFER TO SHAREHOLDERS AND FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
During February and March 2005 it was announced that Messrs Wayne
Rosenberg (`Rosenberg`) and Stanley Shane (`Shane`) had sold 30 000 000
and 10 000 000 IMR shares respectively. The announcement of the sale by
Shane of 10 000 000 IMR shares (constituting approximately 30% of his
and his associates` aggregate holding) stated that the sale was in the
context of a broader transaction, the details of which were still being
finalised.
The shares sold by Rosenberg and Shane were bought in equal parts by
Messrs Paul Diamond (`Diamond`), Jason Druian (`Druian`) and their
associates.
The details of the broader transaction referred to in the previous
announcement have been finalised and are set out in this announcement.
This announcement also includes details of an offer to IMR shareholders
(`the Shareholders`).
CHANGE OF NAME
IMR intends changing its name to Conduit Capital Limited (`Conduit
Capital`) in order to more accurately reflect the new business and
strategy as set out below. Consequently, all references to Conduit
Capital in this announcement imply IMR trading as Conduit Capital.
NEW STRATEGY
The Company has resolved to embark on a new strategy that will see it
use its specialised expertise to act as a conduit between black
entrepreneurs and the capital and execution capability necessary to
source, evaluate and implement empowerment transactions in an
increasingly competitive empowerment environment. This new strategy will
see the Company partnering with emerging, aspirant and highly motivated
black economic empowerment participants.
THE ACQUISITION
In line with this new strategy and to ensure a commonality of interests,
the Company has concluded a transaction effective 1 March 2005 with
Druian and Diamond to acquire a number of their early stage investments,
investment opportunities and advisory mandates (collectively `the
Investco assets`).
To facilitate the acquisition, the Investco assets have been housed in a
newly incorporated company (`Investco`), the entire issued share capital
of which will be acquired by the Company.
There is a significant overlap between the Investco assets and a number
of investments and investment opportunities being pursued by the
Company. In this context, the acquisition ensures an alignment of
interests between the Company, Druian and Diamond, which the Company is
confident will result in the unlocking of significant value for
shareholders.
The Investco assets include:
- an investment in and an advisory mandate in respect of Black
Ginger 92 (Proprietary) Limited (`Black Ginger`), an empowerment company
which owns 27,5% of Constantia Insurance Company Limited (`CICL`). The
Company also has an indirect shareholding in Black Ginger, which forms
part of its broader interest in a niche black controlled insurance and
risk solutions financial services business;
- an interest in a co-advisory and co-investment relationship with
DIHOLD, the investment arm of the Democratic Nursing Organisation of
South Africa;
- shareholdings and investment opportunities in various black
controlled entities; and
- a number of other advisory mandates.
PURCHASE CONSIDERATION
Given the difficulty in valuing early stage investments and investment
opportunities, the purchase consideration payable in terms of the
acquisition has been structured on the following basis:
- the consideration will be discharged by the issue of Conduit
Capital shares (`the consideration shares`) at a price of 9 cents per
share, being the price at which IMR shares were trading when the
principal terms of the acquisition were agreed;
- the number of consideration shares to be issued will be dependant
upon the pre-tax returns from the Investco assets (`the Investco
returns`) over the three year period ending 1 March 2008 (`the
calculation period`);
- the consideration shares will be issued on an annual basis as soon
as practically possible after 1 March 2006, 2007 and 2008 (`the pay
dates`);
- on each pay date Conduit Capital will issue so many consideration
shares as is equivalent (at an issue price of 9 cents per share) to the
Investco returns for the previous twelve months;
- by way of example if the Investco returns for each twelve month
period were R720 000, Conduit Capital would issue 8 000 000
consideration shares at an aggregate issue price of R720 000 on each of
the pay dates;
- the number of consideration shares that can be issued in terms of
the acquisition is capped at 24 000 000 shares.
The parties recognise that, in some instances, the Investco assets will
deliver returns over a longer period than the calculation period while
some of the Investco returns will be once off. Accordingly, the purchase
consideration has been calculated on a conservative basis that equates
in effect to R1 for R1 of pre-tax value earned from the Investco assets
over the calculation period.
FINANCIAL EFFECTS OF THE ACQUISITION
The acquisition will have no effect on historical net asset value and
net tangible asset value per share or on the historical earnings or
headline earnings per share.
THE CONDUIT CAPITAL BOARD
Druian and Diamond have been appointed as executive directors of the
Company with effect from 24 May 2005. Mr Reggie Berkowitz and Ms Megan
Kruger have been appointed as independent non-executive directors, also
with effect from 24 May 2005.
On the same date, Messrs Armin Diem and Jason Schmulian have resigned as
non-executive directors of the Company. The Board wishes to thank them
for their long-standing commitment to the Company and wishes them well
in their future endeavours.
Following the appointments and resignations set out above, the
reconstituted Board comprises the following executive and non-executive
directors:
Executive Directors
The executive directors comprise Messrs Paul Diamond, Jason Druian,
Stanley Shane and Lourens Louw.
Mr Paul Diamond has significant investment experience and will source
new investment opportunities with specific emphasis on emerging black
businesses.
Mr Jason Druian, who brings with him a wealth of management experience,
has been appointed as Chief Executive Officer and will be responsible
for driving the new strategy and business direction of Conduit Capital.
Mr Lourens Louw, will continue to serve as the acting Financial Director
of the Company.
Mr Stanley Shane will continue to serve as an executive director of the
Company.
Non-Executive Directors
The non-executive directors comprise Messrs Reggie Berkowitz, Scott
Campbell and Ms Megan Kruger.
Mr Reggie Berkowitz was previously Group Legal Adviser of Investec Bank
Limited and serves on the boards of several listed companies. He will
play an important independent oversight role in ensuring that the Board
adheres to the highest levels of corporate governance.
Mr Scott Campbell, a long standing non-executive director, will remain
on the Board.
Ms Megan Kruger is an experienced business woman, corporate strategist
and entrepreneur. She will play an important role in the development of
Conduit Capital`s new strategy.
UPDATE ON EXISTING OPERATIONS AND INVESTMENTS
The Company has begun a process of streamlining its existing operations
and investments. This process includes disposing of under-performing
investments and, when possible, settling long running disputes.
In this regard, the Company has:
- fully written down its investment in Icon Retail Information
Systems (Proprietary) Limited; and
- settled its long standing dispute with Maurfin Investments Limited,
at no additional cost to the Company.
In addition, the Company has entered into advisory and investment
relationships with a number of empowerment entities comprising of high
profile individuals and groupings.
OFFER TO THE SHAREHOLDERS
Druian, Diamond and Shane (and parties associated with them):
- between them own approximately 72% of the Company`s issued share
capital in equal proportions;
- concluded a voting pool agreement on 30 May 2005 with the intention
of aligning their interests in the Company (`the voting pool
agreement`).
The voting pool agreement includes pre-emptive rights, a voting pool
arrangement and certain options designed to ensure that the parties
retain equal stakes in the Company, so that their interests remain
aligned.
The parties to the shareholders agreement are of the view that the
conclusion of the voting pool agreement constitutes them concert parties
and requires a mandatory offer to the Shareholders in terms of the
provisions of the Securities Regulation Panel (`SRP`) Code on Takeovers
and Mergers.
Accordingly, a mandatory offer will be made to the Shareholders by the
parties to the voting pool agreement (`the offerors`) to acquire all of
the shares in the Company that they do not already own at a price of 9
cents per share, being the highest price at which any of the offerors
has acquired shares in the Company during the last six months.
The offerors are of the view that the offer is not in the interest of
shareholders, as the acquisition and the new strategy and direction of
Conduit Capital will see significant value being unlocked to the benefit
of the Company`s shareholders.
The Board will appoint an independent advisor to advise shareholders on
whether the offer is fair and reasonable. The independent advice will be
contained in an offer circular to be sent to shareholders within 28 days
of the date of this announcement.
The SRP has been provided with independent confirmation that the
offerors have sufficient cash resources to discharge their obligations
under the offer.
RELATED PARTY TRANSACTION
Druian and Diamond are material shareholders in the Company and
accordingly the acquisition constitutes a related party transaction in
terms of the Listings Requirements of the JSE Securities Exchange South
Africa (`JSE`). In addition, due to the arrangement between Druian,
Diamond and Shane set out above, the parties are of the opinion that
Shane is a related party as well.
Accordingly, the acquisition is conditional upon the approval of a
majority of the Company`s shareholders (other than the related parties
and their associates) present in person or by proxy at a meeting called
to approve the resolutions necessary to implement the acquisition.
The Board will appoint an independent expert to advise on whether or not
the acquisition is fair and reasonable to the Company`s shareholders.
The independent advice will be contained in a circular to shareholders,
as referred to below.
FURTHER DOCUMENTATION
In addition to the offer circular referred to above, a circular will be
sent to shareholders, containing details of the acquisition and
including a notice of general meeting for the purpose of considering
and, if deemed fit, approving the resolutions necessary to implement the
acquisition and to change the name of IMR to Conduit Capital.
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the Company is involved in negotiations
which, if successfully concluded, may have a material effect on the
price at which the Company`s shares trade. Accordingly, shareholders are
advised to exercise caution when dealing in the Company`s shares until a
further announcement is made.
Melrose Arch
31 May 2005
Registered address:
1st Floor, 3 Melrose Square
Melrose Arch, 2076
PO Box 97, Melrose Arch, 2076
Telephone: (011) 684-1055/6/7
Facsimile: (011) 684-1058
Directors:
Executive directors: Jason D Druian (CEO), Paul Diamond, Lourens E Louw,
Stanley D Shane
Non-executive directors: Reginald S Berkowitz, Scott M Campbell, Megan
Kruger
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited
(Registration number: 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Sponsor:
Merchant Sponsors
Corporate and Legal Advisor:
Java Capital
