| Thu 13 Oct 2005, 14:05 | | Glenrand M.I.B Limited - Increasing Glenrand M.I.B |
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Glenrand M.I.B Limited - Increasing Glenrand M.I.B black shareholder base
GLENRAND M.I.B LIMITED
(a Licensed Financial Services Provider)
(Incorporated in the Republic of South Africa)
(Registration number 1997/008001/06)
Share code: GMB & ISIN: ZAE000018529
("Glenrand" or "the Company")
INCREASING GLENRAND M.I.B BLACK SHAREHOLDER BASE
1. Introduction
Further to the cautionary announcement dated Tuesday, 26 July 2005, Glenrand is
pleased to announce that as part of its ongoing commitment to the transformation
of its business, it has concluded agreements with Ayavuna Women"s Investments
(Proprietary) Limited ("Ayavuna"), Kunene Bros. Holdings (Proprietary) Limited
("KBH") and the Matemeku Consortium which comprises of Matemeku Investments
(Proprietary) Limited ("Matemeku") and Clidet No. 390 (Proprietary) Limited
("Clidet No. 390"), (collectively referred to as the Black Business Partners
("BBPs")), to introduce these BBPs as Black Economic Empowerment ("BEE")
shareholders in Glenrand (the "transaction").
The BBPs will each acquire a 5,9% shareholding in Glenrand, pursuant to the
implementation of the transaction, acquisition (as defined below) and repurchase
(as defined below), by way of Glenrand issuing new ordinary shares, which will
rank pari passu in all respects with the existing issued ordinary shares of
Glenrand.
Further, Glenrand has concluded agreements with the trustees of the Glenmib
Employee Empowerment Trust ("the Glenmib Trust") to acquire the outstanding
49.9% of the issued share capital of Glenrand M.I.B Makgulong (Proprietary)
Limited ("Makgulong") that it does not currently own for R20 000 000 (the
"acquisition").
In addition, Risk Funding Services (Proprietary) Limited ("RFS"), a 100% owned
subsidiary of Glenrand, and the Glenmib Trust, will on a pro rata basis acquire
7,5% and 4,0% respectively, of the issued ordinary shares before the issue of
new ordinary shares from all Glenrand shareholders other than from Kunene
Finance Company Limited ("KFC"), The Glenmib Employee Scheme and the Glenmib
Trust (the "excluded shareholders") (collectively referred to as the
"repurchase"). The repurchase is to be implemented through a scheme of
arrangement in terms of Section 311 of the Companies Act, 1973 (Act 61 of 1973),
as amended (the "Act"), (the "scheme"). The purpose of the acquisition and
repurchase is to enable Glenrand to facilitate the increase of its black
shareholder base through a broad-based black employee share scheme ("broad-based
employee share scheme").
2. Direct black shareholding as a result of the transaction, acquisition and the
repurchase
The table below sets out the black ownership of Glenrand pursuant to the
implementation of the transaction, acquisition and the repurchase.
Shareholding
Post-issue of
new ordinary
Number Transaction shares and
of shares value repurchase
(m) (R"m) (%)
Ayavuna 16,0 34,5 5,9
KBH 16,0 34,5 5,9
Matemeku 16,0 34,5 5,9
Glenmib Trust 11,6(1) 22,0 4,3
KFC (existing) 14,8 - 5,4
Total BEE shareholding 74,4 125,5 27,4
Note:
1. Includes 1,9 million existing ordinary shares held by the Glenmib Trust.
3. Rationale
Glenrand believes that BEE is a key requirement for the promotion of sustainable
economic growth and social development in South Africa. Besides its core
business objectives, Glenrand is committed to transformation in South Africa,
both at a shareholder level and throughout its business and is a proponent of
the goals and targets set out in the Financial Sector Charter ("FSC").
4. BBPs
4.1 Ayavuna
Ayavuna is a broad-based, women-controlled empowerment company whose objective
is to acquire quality assets for the benefit of black professional women, as
well as women"s organisations in health, education and skills transfer. The
company consists of a group of highly qualified shareholders, who bring skills
and experience spanning a wide array of disciplines including marketing, human
resources development and transformation as well as experience in the financial
services sector. Led by Hixonia Nyasulu, who was recently rated by the Financial
Mail as one of the most influential women in business in South Africa and by
Empowerdex as the most influential female director on the JSE Limited ("JSE"),
the company is positioning itself as a lead value-adding participant in women"s
empowerment.
4.2 KBH
KBH is an investment management company, 100% of which is owned and controlled
by the Kunene family. KFC, the investment holding company of the Kunene family,
is controlled by KBH and currently owns a 6,1% shareholding in Glenrand. This
existing shareholding, coupled with the shareholding resulting from the
transaction, will increase Glenrand"s black shareholder base to 27,4%, pursuant
to the implementation of the transaction and repurchase. Dr Dudu Kunene, the
designated representative of the Kunene family, is currently an executive
director on the Glenrand Board.
4.3 Matemeku
Matemeku is a 100% black controlled and owned company, with its executive
management beneficially owning 80% of the company. Its management and
shareholders comprise young professionals and entrepreneurs with diverse yet
sound and proven track records in management as well as various other leadership
roles. Matemeku"s vision is to build the company into a formidable BEE
participant in the following sectors: resources, tourism, property and financial
services. Matemeku is led by its Executive Chairman, Moss Mashishi.
The equity shareholding in Glenrand will be held by the Matemeku Consortium.
5. Mechanics of the transaction
The BBPs have each entered into detailed, binding agreements with Glenrand
setting out the terms of their participation in the transaction as well as
related performance criteria. In terms of the agreements entered into, the BBPs
will effectively subscribe for 48 071 397 new ordinary shares ("subscription
shares") at a price of R2.15 per ordinary share which represents:
* a discount of 5,3% to the 30-day volume weighted average traded price
calculated to the closing price per ordinary share on Tuesday, 11 October 2005;
and
* a discount of 8,5% to the closing price per ordinary share on Tuesday, 11
October 2005.
Glenrand will utilise an internally funded mechanism for the transaction in
terms of which Glenrand will issue subscription shares to the BBPs on a notional
funded basis. For as long as the notional funding is outstanding, the BBPs will
elect to receive capitalisation shares in lieu of cash dividends
("capitalisation shares"). The tenure of the transaction will be for a period of
10 years. On the termination date of the transaction, Glenrand will call back
(as defined below) as many capitalisation shares and subscription shares as are,
based on their then market value, equal in value to the outstanding notional
funding balance at the termination date ("the call-back") of the transaction.
The call-back can be implemented at any time during the duration of the
transaction at the election of each BBP, but only if the outstanding notional
funding can be settled and a minimum shareholding in Glenrand which is equal to
the subscription shares can be retained after making such election. The call-
back can further be implemented at the termination date of the transaction or if
an event of default occurs, as defined in the subscription agreements.
Glenrand will grant the BBPs an option which entitles the BBPs to subscribe, at
the then market value per ordinary share, for an equivalent number of ordinary
shares as acquired by Glenrand in implementing the call-back. Glenrand"s
obligation under this arrangement will be settled by an issue of new ordinary
shares against payment to the Company by the BBPs of the market value of such
ordinary shares.
6. Estimated economic costs of the transaction
The economic cost of the transaction represents the true cost to ordinary
shareholders and has been calculated to be the International Financial Reporting
Standards II ("IFRS") cost of the transaction adjusted for any savings on
secondary taxation on companies, resulting from the transaction.
Glenrand has estimated the economic cost of the transaction to be R24.6 million
which translates to 4,3% of the market capitalisation of Glenrand at the close
of business on Tuesday, 11 October 2005.
7. Performance agreements
In addition to entering into the transaction with each BBP, Glenrand has also
entered into performance agreements with each BBP in terms of which each BBP
will be expected to deliver services with a certain level of performance for the
benefit of Glenrand, for which the BBPs will receive a cash payment from
Glenrand.
8. Proposed appointments to the Glenrand Board
Once all conditions precedent to the transaction have been fulfilled, the
following individuals representing the BBPs will be invited to join the Glenrand
Board:
Ayavuna - Hixonia Nyasulu; and
Matemeku - Moss Mashishi.
Dr Dudu Kunene from KFC is an existing director of Glenrand and will represent
KBH on the Glenrand Board.
9. The Glenmib Trust
The Glenmib Trust was established to empower previously disadvantaged
individuals ("PDIs") who were employees of Glenrand at the time. This was done
through the trust granting options over ordinary shares held by the trust to
PDIs who were employees of Glenrand. However, the trust has over time become
insufficient to cater for the requirements of the FSC. The trustees of the trust
have therefore proposed that the trust deed be amended to enable more black
employees of Glenrand to receive options over ordinary shares.
It is anticipated that after the implementation of the transaction, acquisition
and repurchase, the Glenmib Trust will own 11 609 954 ordinary shares being 4,3%
of the issued ordinary share capital.
10. Acquisition and repurchase
In order to introduce a broad-based black employee share scheme for Glenrand,
the Company has concluded agreements with the trustees of the Glenmib Trust to
implement the acquisition. Makgulong is a business that has been developed by
the trust and Glenrand over a period of time and which operates as a short-term
insurance broker.
The acquisition is considered a related party transaction by the JSE, and the
Glenrand Board has in this respect appointed an independent sub-committee to the
Glenrand Board, to review the terms and conditions of the acquisition. The
independent sub-committee to the Glenrand Board has appointed EY Corporate
Finance ("EYCF") to advise them of the terms and conditions of the acquisition.
EYCF will make their recommendation to the sub-committee to the Glenrand Board
who will in turn make their recommendation to the Glenrand Board.
The purchase consideration for the acquisition is R20 000 000 and is subject to
a satisfactory due diligence being concluded by Glenrand. The net asset value of
Makgulong as at 30 June 2005 is R16.2 million. The purchase consideration
together with the existing cash resources will be utilised by the Glenmib Trust
to repurchase, in conjunction with RFS, 27 953 181 Glenrand shares pro rata from
all Glenrand shareholders, other than from the excluded shareholders. The
Glenmib Trust and RFS will repurchase 9 691 630 ordinary shares representing
3,6% of the issued ordinary shares and 18 261 551 ordinary shares representing
6,7% of the issued ordinary shares, respectively, pursuant to the implementation
of the transaction, acquisition and repurchase.
The consideration payable per ordinary share in terms of the scheme ("scheme
share") will be a cash consideration of R2.27 per scheme share ("scheme
consideration"). The scheme consideration to be received by Glenrand
shareholders represents the 30-day volume weighted average trading price and a
discount of 3,4% to the closing price of R2.35 per ordinary share on the JSE on
Tuesday, 11 October 2005.
11. Unaudited pro forma financial effects of the transaction, acquisition and
repurchase
The unaudited pro forma financial effects of the transaction, acquisition and
repurchase on Glenrand for the financial year ended 30 June 2005 are set out in
the table below. The unaudited pro forma financial effects of the transaction,
acquisition and repurchase have been prepared for illustrative purposes only to
show what impact the transaction, acquisition and repurchase might have on the
financial position, changes in equity and results of operations of the Glenrand
consolidated results for the 12 months from 1 July 2004 for income statement
purposes and at 30 June 2005 for balance sheet purposes. These unaudited pro
forma financial effects have been presented in accordance with South African
Statements of Generally Accepted Accounting Practice. Due to their nature, the
unaudited pro forma financial effects may not give a fair reflection of
Glenrand"s financial position, changes in equity and results of operations after
the transaction, acquisition and repurchase on the Company. The directors of
Glenrand are responsible for the preparation of the unaudited pro forma
financial effects.
Before the
transaction, After the
acquisition transaction
and After the and
repurchase transaction Change acquisition
(cents) (cents) (%) (cents)
Basic earnings
per share ("basic
EPS") (1)(3) 4.3 2.6 (39.5) 4.9
Fully diluted basic
EPS (1)(3) 4.3 2.3 (46.5) 4.3
Headline earnings
per share
("HEPS") (1)(3) 11.9 10.2 (14.3) 12.5
Fully diluted
HEPS (1)(3) (5) 11.8 9.0(6) (23.7) 11.0
Net asset value
("NAV")
per share (2)(4) 66.9 66.1 (1.2) 68.4
Tangible NAV per
share (2)(4) 51.0 50.2 (1.6) 44.9
After the
transaction,
acquisition
and Cumulative
Change repurchase Change change
(%) (cents) (%) (%)
Basic earnings
per share
("basic EPS") (1)(3) 88.5 4.5 (8.2) 4.7
Fully diluted basic
EPS (1)(3) 87.0 3.9 (9.3) (9.3)
Headline earnings
per share ("HEPS") (1)(3) 22.5 12.7 1.6 6.7
Fully diluted
HEPS (1)(3) (5) 22.2 11.1 0.9 (5.9)
Net asset value ("NAV")
per share (2)(4) 3.5 54.6 (20.2) (18.4)
Tangible NAV per
share (2)(4) (10.6) 29.2 (35.0) (42.7)
Notes:
(1) The "Before the transaction, acquisition and repurchase" column reflects the
earnings and headline earnings per ordinary share for the year ended 30 June
2005 based on the published consolidated audited results. The "After the
transaction" column reflects the earnings and headline earnings adjusted for the
interest earned (after tax) on the consideration received on the new ordinary
shares issued and the costs incurred on the transaction, based on the assumption
that the transaction was implemented on 1 July 2004. "After the transaction and
acquisition" column reflects the earnings and headline earnings further adjusted
for the interest forgone (after tax) on the purchase consideration for the
acquisition and the enhanced earnings resulting from the acquisition, based on
the assumption that the transaction and acquisition was implemented on 1 July
2004. "After the transaction, acquisition and repurchase" column reflects the
earnings and headline earnings further adjusted for the interest forgone (after
tax) on the payment for the ordinary shares repurchased in term of the scheme,
based on the assumption that the transaction, acquisition and repurchase was
implemented on 1 July 2004.
(2) The "Before the transaction, acquisition and repurchase" column reflects the
NAV per ordinary share at 30 June 2005 based on the published consolidated
audited results. The "After the transaction" column reflects the NAV per
ordinary share after the consideration received from the new ordinary shares
issued and the enlarged number of ordinary shares in issue based on the
assumption that the transaction was implemented on 30 June 2005. The "After the
transaction and acquisition" column reflects the NAV per ordinary share after
the payment of the consideration for the acquisition based on the assumption
that it was implemented on 30 June 2005. The "After the transaction, acquisition
and repurchase" column reflects the NAV per ordinary share after the payment of
the consideration for the repurchase and an enlarged number of ordinary shares
based on the assumption that it was implemented on 30 June 2005.
(3) The weighted average number of shares in issue utilised in calculating the
EPS and HEPS in the "Before the transaction, acquisition and repurchase"
column was 241.8 million and in calculating the fully diluted EPS and fully
diluted HEPS was 242.7 million. The weighted average number of shares in issue
in calculating the EPS and HEPS in the "After the transaction" column was 241.8
million and in calculating the fully diluted EPS and fully diluted HEPS was
275.1 million. The weighted average number of shares in issue in calculating the
EPS and HEPS in the "After the transaction and acquisition" column was 241.8
million and in calculating the fully diluted EPS and fully diluted HEPS was
275.1 million. The weighted average number of shares in issue in calculating the
EPS and HEPS in the "After the transaction, acquisition and repurchase" column
was 223.6 million and in calculating the fully diluted EPS and fully diluted
HEPS was 256.9 million.
(4) In calculating NAV and Tangible NAV per share in the "Before the
transaction, acquisition and repurchase" column, the number of shares in issue
was 241.8 million. In determining the NAV and Tangible NAV per share in the
"After the transaction" column, the number of shares in issue was 241.8 million.
In calculating NAV and Tangible NAV per share in the "After the transaction and
acquisition" column, the number of shares in issue was 241.8 million and in the
"After the transactions, acquisition and repurchase" column the number of shares
in issue was 223.6 million.
(5) The number of ordinary shares utilised in the calculation of the fully
diluted HEPS is based on an assumption of the number of ordinary shares vesting
with the BBPs post the call-back.
(6) The reduction of 2.8 cents consists of 1.7 cents relating to reduced
earnings and 1.1 cents relating to an increased fully diluted number of shares
in issue.
(7) The adjustments above do not include any adjustments that will be required
once Glenrand adopts IFRS.
12. Conditions precedent to the transaction, acquisition and repurchase
The implementation of the transaction is subject to the fulfilment, inter alia,
of the following conditions precedent:
* approval of the transaction by the requisite majority of ordinary shareholders
in a general meeting;
* obtaining the necessary regulatory approvals required to implement the
transaction; and
* the fulfilment of other conditions precedent (which are capable of waiver at
Glenrand"s discretion).
The implementation of the acquisition and repurchase is subject to the
fulfilment, inter alia, of the following conditions precedent:
* the completion of a satisfactory due diligence on Makgulong by Glenrand;
* the approval of the scheme by scheme members representing not less than three
fourths of the votes exercisable by those scheme members present and voting
either in person or by proxy at the scheme meeting;
* the approval of the scheme by all regulatory authorities if and to the extent
necessary, including the South African Reserve Bank and the JSE;
* the High Court of South Africa sanctioning the scheme;
* a certified copy of the Order of Court sanctioning the scheme being registered
by the Registrar of Companies in terms of the Act; and
* the fulfilment of other conditions precedent (which are capable of waiver at
Glenrand"s discretion).
The effective date of the aquisition is the date on which the transaction and
repurchase become unconditional.
13. Opinions and recommendations
13.1 Glenrand Board recommendation
The Glenrand Board recommend that Glenrand shareholders and scheme members vote
in favour of the transaction and repurchase, respectively. The independent sub-
committee to the Glenrand Board has been tasked with reviewing the terms and
conditions of the acquisition and will make its recommendations to the Glenrand
Board in due course. The members of the Glenrand Board have undertaken to vote
in favour of the resolutions to be proposed for the transaction at the general
meeting and to vote in favour of the repurchase.
13.2 Timetable and documentation
Ordinary shareholders will be advised in due course as to the important dates
and times relevant to the transaction, acquisition and repurchase. A circular
setting out the full details of the transaction, acquisition and repurchase will
be posted to ordinary shareholders in due course.
14. Withdrawal of cautionary announcement
Glenrand shareholders are referred to the announcement released on SENS on
Friday, 7 October 2005 and are hereby advised that as the terms of the Glenrand
transaction, acquisition and repurchase have been announced, caution is no
longer required when dealing in their Glenrand shares.
Randburg
13 October 2005
Investment bank, transaction advisor and sponsor
Independent reporting accountants and auditors
Legal advisor
Independent advisor
Date: 13/10/2005 02:05:16 PM Produced by the JSE SENS Department
