| Mon 1 Aug 2005, 8:49 | | JDG/Connection - Proposed scheme of arrangement be |
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JDG/Connection - Proposed scheme of arrangement between connection and its
shareholders and withdrawal of cautionary
(Incorporated in the Republic of South Africa)
(Registration number 1981/009108/06)
(Share Code: JDG ISIN:ZAE000030771)
(`JDG`)
Connection Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/005390/06)
(Share Code: CCT ISIN:ZAE000042529)
(`Connection`)
PROPOSED SCHEME OF ARRANGEMENT BETWEEN CONNECTION AND ITS SHAREHOLDERS AND
WITHDRAWAL OF CAUTIONARY
1. Introduction
Further to the cautionary announcement issued by Connection dated 14 July
2005 (`Connection cautionary announcement`), JDG and Connection
shareholders are hereby advised that JDG has submitted to the board of
directors of Connection (`the Connection Board`) a notice of its firm
intention to acquire the entire issued ordinary share capital of Connection
(`the offer`). The offer is subject to the fulfillment of the conditions as
set out in paragraph 9 below.
JDG`s intention is to implement the offer by way of a scheme of arrangement
in terms of Section 311 of the Companies Act No 61, 1973, as amended (`the
Companies Act`) (`the scheme`) to be proposed by JDG between Connection and
all its ordinary shareholders (`Connection shareholders`) other than the
treasury shares held by Connection and/or any of its subsidiary companies
and the unallocated shares held in the Connection Group Holdings Share
Trust Scheme (`the Trust`) (`the scheme members`).
Should the scheme be implemented, JDG will acquire all of the scheme
members` ordinary shares (`scheme shares`). As a result, Connection will
become a wholly owned subsidiary of JDG and Connection`s listing on the JSE
Limited (`JSE`) will be terminated. Connection will continue to focus on
its market segment with its own brand identity, merchandise range and
market profile.
2. Rationale
The acquisition by JDG of Connection will provide JDG with access to a new
segment of the South African retail market.
3. The consideration
The consideration payable per scheme share will be R14.75, in cash in South
African Rand (`the scheme consideration`), which amounts to a total scheme
consideration of approximately R500 million. The scheme consideration
represents a premium to the closing price per Connection share on 13 July
2005, being the last trading day prior to the publication of the Connection
cautionary announcement.
Connection shareholders shall be entitled to participate in any dividend
declared by the Connection Board for its financial year ending 31 August
2005 in an amount not exceeding 35 cents per issued ordinary share of
Connection.
4. The substitute offer
In the event that the scheme does not become operative for any reason, a
substitute offer will be deemed to be made by JDG to the scheme members at
an amount equal to the scheme consideration (`the substitute offer`).
The substitute offer is conditional upon at least nine-tenths of scheme
members` acceptance thereof. Should at least nine-tenths of the scheme
members accept the substitute offer, JDG intends to invoke the provisions
of Section 440k of the Companies Act.
5. Indicative financial effects
5.1 Indicative financial effects of the scheme on JDG
These indicative financial effects are given for illustrative purposes only
and, because of their pro forma nature, may not give a fair reflection of
JDG`s financial results and position after the scheme.
Before the After the %
scheme (cents scheme (cents Change
per share) per share)
(1) (2) (3) (4)
Earnings 360 362 0.6%
Headline earnings 361 363 0.6%
Net Asset Value (`NAV`) 2 593 2 611 0.7%
Tangible Net Asset Value (`TNAV`) 2 504 2 499 (0.2%)
Notes:
1. Based on the published reviewed interim results of JDG and Connection for
the six months ended 28 February 2005.
2. Based on the assumption that the scheme was effected on 1 September 2004
for income statement purposes and 28 February 2005 for balance sheet purposes.
3. An adjustment has been made to take into account the after tax interest
that would have been earned on the scheme consideration at average deposit
rates applicable to JDG during the period 1 September 2004 to 28 February 2005.
4. An adjustment has been made to the number of JDG shares in issue to take
into account the treatment of the unvested options granted by the Trust.
5.2 Indicative financial effects on the scheme members
These indicative financial effects are given for illustrative purposes only
and, because of their pro forma nature, may not give a fair reflection of a
Connection shareholder`s financial position after the scheme.
Before the After the
scheme (cents scheme (cents % Chang
per share) per share)
Market value 1 150.0(1) 1 475.0 28.3
Earnings 52.6(2) 34.0(4) (35.4)
Headline earnings 52.4(2) 34.0(4) (35.1)
NAV 166.6(2) 1 475.0 785.4
TNAV 38.4(3) 1 475.0 3 741.1
Notes:
1. The closing price per Connection share on 13 July 2005, being the last
trading day prior to publication of the Connection cautionary announcemen
2. Extracted from the published reviewed interim results for the six months
ended 28 February 2005.
3. Calculated based on the published reviewed interim results for the six
months ended 28 February 2005.
4. Pro forma earnings and headline earnings per share assuming that the scheme
consideration had been invested at average deposit rates applicable during the
period 1 September 2004 to 28 February 2005 and earned an effective after-tax
interest rate of 4.6% per annum.
6. Cash confirmation
The Securities Regulation Panel (`SRP`) has been furnished with independent
written confirmation that JDG has sufficient cash resources to satisfy the
scheme consideration.
7. Opinions and recommendations
The Connection Board has appointed Investec Bank Limited (`Investec`) as
the independent advisor to advise on whether the terms and conditions of
the scheme or, failing implementation thereof, the substitute offer are
fair and reasonable to Connection shareholders.
Investec`s opinion and the recommendation of the Connection Board will be
communicated to the Connection shareholders in due course.
8. Shareholder support
At this stage Connection shareholders holding approximately 58% of the
entire issued ordinary share capital of Connection other than the treasury
shares held by Connection and/ or any of its subsidiary companies have
indicated their firm intention to support the scheme.
9. Conditions precedent
The scheme is subject to, inter alia, the fulfillment or waiver (where
possible) of the following conditions precedent:
9.1 the conclusion between JDG and Connection of an implementation agreement
incorporating the terms and conditions set out in this announcement and suc
other terms as are reasonably acceptable to JDG and Connection in order to
effect to the scheme;
9.2 the scheme being approved by a majority representing not less than three-
fourths of the votes exercisable by the scheme members present and voting,
either in person or by proxy, at the scheme meeting;
9.3 the scheme being sanctioned by the High Court of South Africa
(Witwatersrand Local Division);
9.4 a certified copy of the Order of Court sanctioning the scheme being
registered by the Registrar of Companies in terms of the Companies Act;
9.5 the unconditional approval of the JSE, SRP, the South African Reserve Bank,
the competition authorities and any other regulatory authorities to the extent
required; and
9.6 the conclusion of satisfactory arrangements for the substitution of the
unvested options pursuant to the Trust, with options in JDG on the same vesting
basis.
10. Salient dates and documentation
A circular containing full details of the offer will be posted to
Connection shareholders in due course.
Further announcements, including the salient dates pertaining to the
transaction, will be published on the Securities Exchange News Service and
in the press in due course.
11. Withdrawal of cautionary announcement
Further to the Connection cautionary announcement and this announcement,
shareholders are advised that caution is no longer required to be exercised
by Connection shareholders when dealing in their Connection securities.
Johannesburg
1 August 2005
Financial advisor and transaction sponsor to JDG
Absa Corporate & Merchant Bank
Attorneys to JDG
Feinsteins Attorneys
Merchant bank and sponsor to Connection
Rand Merchant Bank ( A Division of FirstRand Bank Limited)
Attorneys to Connection
Paul Botha & Associates (Pty) Limited
Independent advisor to Connection
Investec Corporate Finance
Sponsor to JDG
PSG Capital
Date: 01/08/2005 08:34:56 AM
Produced by the JSE SENS Department
