|
Johnnic - Views of the Johnnic board and the independent external advisor on the
offer by HCI
Johnnic Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1889/000429/06)
(`Johnnic` or `the Company`)
ISIN Code: ZAE000024352
SHARE Code: JNC
VIEWS OF THE JOHNNIC BOARD AND THE INDEPENDENT EXTERNAL ADVISOR ON THE OFFER BY
HOSKEN CONSOLIDATED INVESTMENTS LIMITED (`HCI`)
The hostile and unsolicited offer by HCI to you, the Johnnic shareholder...
- Is lower than the current Johnnic share price
- Undervalues your shares
- Denies you participation in the potential upside
- Is not in your interest
- Is conditional and surrounded by uncertainty
- Has an unknown closing date
HCI...
- Is trying to acquire Johnnic for less than fair value
- Is seeking to remove Johnnic as a competitor and acquire its assets
- Could be required to dispose of its shareholding in Johnnic
- Shareholding in TIH is subject to a series of legal actions
- Is unclear as to its real intentions with regard to Johnnic assets
- Is offering you exposure to its diversified and unfocused portfolio of assets
Johnnic is...
- Focused on achieving its gaming strategy
- Well positioned to continue with its gaming strategy
- Committed to maximising shareholder value
- Committed to becoming a pure gaming player
1. INTRODUCTION
On 1 July 2005, HCI announced an unsolicited and hostile mandatory proposal to
acquire shares in Johnnic in return for a cash consideration of R9.75, which
consideration was subsequently revised to include a share alternative of one HCI
share for every 2.821 Johnnic shares held. A third revision of the terms was
made such that the cash consideration was increased to R10.70 per share and the
share alternative was increased to one HCI share for every 2.57 Johnnic shares
held (`the offer`). In accordance with its fiduciary duties and the Securities
Regulation Code on Take-overs and Mergers as governed and administered by the
Securities Regulation Panel (`the Code`), the directors of Johnnic (`the Johnnic
board`) has considered the offer and has taken independent financial advice in
order to assess the short and long term impact of such offer on the shareholders
of Johnnic (`Johnnic shareholders`). The purpose of this announcement is to
provide the views of the Johnnic board and the substance of the advice given to
the Johnnic board by its external independent advisors in relation to the offer.
2. VIEWS OF THE JOHNNIC BOARD ON THE OFFER
The Johnnic board has considered the terms of the offer and is of the view that
this offer undervalues Johnnic and is also below the current Johnnic share price
on the JSE Limited. The Johnnic board believes that the offer denies Johnnic
shareholders participation in the value that the Johnnic gaming strategy could
potentially unlock.
Johnnic is committed to the strategy of enhancement of shareholder value by
pursuing assets in the gaming sector.
In the process of executing such gaming strategy, Johnnic has found itself in
competition with HCI for the control of Tsogo Investment Holding Company
(Proprietary) Limited (`TIH`). HCI has embarked on an unsolicited and hostile
mandatory offer to the shareholders of Johnnic in order to acquire Johnnic`s
assets and remove Johnnic as a competitor. Johnnic has pursued actions to
protect and further its gaming interests with a view to maximising shareholder
value.
In pursuance of this strategy, Johnnic has concluded the acquisition of a 50%
shareholding in Fabcos Investment Holding Company Limited (`FIH`) (which in turn
holds 38% of TIH). Fabvest Investment Holdings Limited has however, without
stating the basis of such contention, disputed that Johnnic has fulfilled the
conditions precedent relating to 25% of this acquisition. Johnnic is enforcing
its rights by referring such matter to arbitration and based on Senior Counsel
advice, is reasonably confident that the results of the arbitration will be
favourable. Opportunities under consideration to further enhance the value of
Johnnic include discussions between Johnnic and Nafcoc Holding Company Limited
in regard to their respective gaming interests. Further preliminary discussions
relating to a consolidation of gaming interests through Johnnic are being
considered.
Accepting the share alternative of the offer will result in Johnnic shareholders
being exposed to a portfolio of diversified and unfocused assets and not a pure
gaming stock that the Johnnic gaming strategy is intended to achieve. HCI shares
are tightly held with limited institutional support and are considered illiquid.
The fact that there is no closing date indicated at this stage creates
uncertainty in relation to the offer, therefore reinforcing the Johnnic board`s
view that Johnnic shareholders should take no action with regard to the offer.
The Johnnic board is of the view that Johnnic shareholders should reject the
offer.
3. VIEWS OF THE JOHNNIC BOARD ON HCI`S INTENTIONS REGARDING THE DIRECTORS AND
BUSINESS OF JOHNNIC
HCI has indicated that should it acquire more than 50% shareholding in Johnnic,
it shall seek to appoint the majority of the directors of the Johnnic board. The
Johnnic board is of the view that for as long as HCI and Johnnic are in
competitive positions relating to the TIH assets, this would represent a
conflict of interest. HCI has not indicated to the Johnnic board in a convincing
manner how such conflict of interest would be managed in the best interests of
Johnnic shareholders.
HCI`s intent regarding the continuation of the business of Johnnic is vague and
uncertain. In the absence of a specific statement of its intent regarding the
continuation of the business, the Johnnic board believes that the acquisition by
HCI of more than 50% of Johnnic is not in the best interests of Johnnic
shareholders.
4. OPINION OF THE INDEPENDENT EXTERNAL ADVISOR
4.1 Opinion of the Independent external advisor
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited (`PwC Corporate
Finance) was appointed by Johnnic to act as an independent external advisor in
respect of the offer.
PwC Corporate Finance has reported as follows:
`Based upon our analysis and subject to the foregoing and after taking into
account financial and non-financial considerations, we are of the opinion that
the terms and conditions in respect of HCI`s cash offer of R10.70 per share are
not fair and reasonable to the minority shareholders of the Company.`
and ...
`Our review of the share trading history of HCI`s ordinary shares on the JSE
Securities Exchange SA reflected that the HCI ordinary shares are illiquid.
Accordingly the prices at which HCI ordinary shares have traded may not in our
view present an appropriate basis from which we are able to draw a sound
indication of value.
As a result of the limitations in our procedures relating to the valuation of
HCI as referred to above and the limited information at our disposal we are not
in a position to advise Johnnic shareholders on a valuation range for HCI
ordinary shares and neither are we in a position to advise that HCI`s limited
share for share offer would result in additional value accruing to Johnnic
shareholders.`
4.2 Independent opinion explained
Per Johnnic Per
share Johnnic
share
Base value range per Johnnic share R 11.04 R 11.95
to
Successful outcome of arbitration in R 0.32 to R 0.72
regard to 25% of FIH
Quantifiable value range R 11.36 to R 12.67
- Non-quantifiable value:
- Successful implementation of gaming strategy
- Successful outcome of legal and regulatory actions
- No specified closing date for the offer
- Offer will remain open for 14 days following the closing date announcement
- HCI`s cash offer of R10.70 per Johnnic share is not fair and reasonable
- HCI`s shares are illiquid
- HCI share price may not reflect sound indication of value
- Not in a position to advise on HCI`s share offer
5. DIRECTORS` RESPONSIBILITY STATEMENT
The Directors of Johnnic, collectively and individually, accept full
responsibility for the accuracy of the information given and certify that, to
the best of their knowledge and belief, there are no facts that have been
omitted which would make any statement false or misleading and that all
reasonable enquiries to ascertain such facts have been made.
6. DOCUMENTATION
Johnnic has dispatched a response circular to its shareholders, which circular
spells out in more detail the views of the Johnnic board and the opinion of the
independent external advisor. Copies of the circular are also available at the
offices of Johnnic.
Midrand
16 August 2005
Investment Bank
Standard Bank
Legal advisors
Webber Wentzel Bowens
Sponsor
Merrill Lynch South Africa (Proprietary) Limited
Independent external advisor
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Date: 16/08/2005 03:05:06 PM
Produced by the JSE SENS Department
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
