| Mon 18 Jul 2005, 16:26 | | Peregrine - Acquisition By Citadel |
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Peregrine - Acquisition By Citadel
Peregrine Holdings Limited
(Registration number 1994/006026/06)
(`Peregrine` or `the company`)
JSE code: PGR ISIN code: ZAE000015152
ANNOUNCEMENT REGARDING THE ACQUISITION BY CITADEL INVESTMENT SERVICES LIMITED OF
AN ADDITIONAL 54% OF THE ENTIRE ISSUED SHARE CAPITAL OF DELOITTE PRIVATE CLIENTS
(PROPRIETARY) LIMITED
1. Introduction
Java Capital (Proprietary) Limited is authorised to announce that Citadel
Investment Services Limited, registration number 1996/006847/06 (`Citadel`) (a
wholly owned and a major subsidiary of Peregrine), which is the owner of 36% of
the issued share capital of Deloitte Private Clients (Proprietary) Limited,
registration number 1998/016676/07 (`DPC`), has entered into an agreement with
Deloitte & Touche Private Investments (Proprietary) Limited, registration number
1998/016656/07 (`the seller`), to acquire 54% of the issued share capital of DPC
for the purchase consideration described in 4 below (`the acquisition`).
2. Nature of business of DPC
DPC was incorporated during 1998 and has been the joint venture vehicle through
which Citadel and the Deloitte partnership have offered investment advisory and
private wealth management services to third parties including parties introduced
by Deloitte.
3. Rationale for the transaction
3.1. The Sarbanes Oxley legislation has had far reaching implications for the
accounting profession internationally. By far the most significant of these
implications is the issue of independence, resulting in the seller, a subsidiary
of Deloitte in South Africa, being obliged to sell its equity stake in DPC.
3.2. The forced exit has given Citadel an opportunity to increase its
shareholding in DPC to 90% with the remaining 10% being held by a share trust.
Terms and details of the transaction
4.1. The effective date of the acquisition is 1 June 2005.
4.2. The purchase consideration payable for the acquisition is a minimum of
R52.3 million and a maximum of R87.3million (`the purchase consideration`) and
is based on certain warranties relating to performance fees and other primary
business drivers being met over the period of two (and, in certain
circumstances, three) years from the effective date (`the warranties`).
4.3. For a period of at least two years from the effective date -
- DPC will be entitled to continue to use its existing name whereafter DPC shall
be obliged to change its name to a name which has no reference to the words
`Deloitte` and/or `Touche` or any combination or abbreviation thereof;
- the seller will be entitled to appoint a minimum of two directors to the board
of DPC, one of whom will be appointed as chairman of the DPC audit committee and
the other will be appointed as a member of the DPC investment and risk
committee.
4.4. The purchase consideration will be discharged, in cash, as follows :
- R50 million, on 1 August 2005;
- 47.5% of the distributable reserves of DPC as at the effective date, together
with interest thereon at the call rate, over a period not exceeding two years
from 1 August 2005; and
- the balance, based on the achievement of the warranties, is to be paid between
31 July 2007 and 31 July 2008.
5. Financial effects
The table below sets out the pro forma effects of the acquisition on the
headline earnings per Peregrine share (`HEPS`), earnings per Peregrine share
(`EPS`), the net asset value per Peregrine share (`NAV`) and the net tangible
asset value per Peregrine share (`NTAV`), based on the following assumptions :
- the `Before` column is based on the audited annual results of the Peregrine
Group for the year ended 31 March 2005;
the `After` columns reflects two scenarios:
- Scenario 1 assumes that none of the warranties are met,
Scenario 2 assumes that all the warranties are met;
- the effective date of the acquisition was 1 April 2004;
- the value of the distributable reserves of DPC being acquired as at the
effective date was R2.3 million;
- an interest rate of 7.25% was applied where applicable;
- for Income Statement purposes, under Scenario 2, the warranties accrued
evenly over the two year period;
- for Balance Sheet purposes, under Scenario 2, all the warranties were met
by 31 March 2005;
payment of the minimum purchase price of R52.3 million was made on 1 April 2004
and, under Scenario 2, the additional sum of R35m, due on the fulfilment of all
the warranties, was made on 31 March 2005
Before After - % After - %
Scenario 1 (no change Scenario 2 (all change
warranties warranties met)
met)
HEPS (cents) 48,2 46.1 -4% 53,1 10%
EPS (cents) 49,1 47,0 -4% 54,0 10%
NAV (cents) 264,5 262,4 -1% 278,9 5%
NTAV (cents) 166,5 138,3 -17% 136,5 -18%
6. Conditions precedent
The transaction is not subject to any conditions.
Sandton
18 July 2005
Sponsor
Java Capital (Proprietary) Limited
Date: 18/07/2005 04:01:08 P
Produced by the JSE SENS Department
