| Fri 18 Nov 2005, 17:18 | | Johnnic - The Closing Date Of The Mandatory Offer |
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Johnnic - The Closing Date Of The Mandatory Offer By HCI
Johnnic Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1889/000429/06)
("Johnnic")
ISIN Code: ZAE000024352
SHARE Code: JNC
ANNOUNCEMENT OF THE CLOSING DATE OF THE MANDATORY OFFER BY HOSKEN CONSOLIDATED
INVESTMENTS LIMITED ("HCI")
INTRODUCTION
Shareholders of Johnnic ("shareholders") are referred to the announcement by HCI
published on SENS on 17 November 2005, which announcement contained, inter alia,
the closing date for the mandatory offer by Mercanto Investments (Proprietary)
Limited (a wholly-owned subsidiary of HCI) to acquire all the shares it does not
already own in the entire issued share capital of Johnnic ("the HCI offer").
Shareholders are further referred to the document which was posted to
shareholders on 15 August 2005 setting out the views of the Johnnic board of
directors ("the Johnnic board") and of the independent external advisor to the
Johnnic board regarding the HCI offer ("the Offer Response Document").
HCI OFFER UNDERVALUES JOHNNIC
The Johnnic board is of the firm view that the HCI offer of a cash consideration
of R10.70 per Johnnic share with a share alternative of one HCI share per 2.57
Johnnic shares held, significantly undervalues Johnnic. As indicated in the
Offer Response Document, the independent external advisor appointed to advise
the Johnnic board in respect of the HCI offer also indicated that the cash offer
of R10.70 per share was not fair and reasonable and that it was not in a
position to advise on whether HCI"s limited share offer would result in
additional value accruing to Johnnic shareholders.
Since the publication of the Offer Response Document, Johnnic has made
significant progress on its gaming strategy by announcing on 8 November 2005
that it had reached agreement with the shareholders of Nafcoc Investment Holding
Company Limited ("Nafcoc Vendors") in terms of which Johnnic will acquire the
entire issued share capital of Nafhold for a consideration of R675 million,
subject to the fulfilment of certain suspensive conditions ("the Nafhold
transaction").
The Johnnic board believes that the Nafhold transaction significantly enhances
value for shareholders and that its positive attributes include the following:
- it allows Johnnic to further pursue its gaming strategy, as more than 65%
of the company will comprise of gaming assets;
- it positions Johnnic as the best listed vehicle for those investors that
have a desire to gain exposure to Tsogo Sun Holdings (Proprietary) Limited
("Tsogo Sun"); and
- it increases Johnnic"s empowerment shareholding, with the Nafcoc vendors
having a shareholding of approximately 16.5% in Johnnic.
The announcement of the Nafhold transaction was well received by the market, as
evidenced by the share price of Johnnic which rose by 7% immediately following
the announcement. Since the announcement, the share price has risen by 12.5% to
R12.60 (being the closing share price of Johnnic on 17 November 2005), which is
a year long high.
The Johnnic board recommends that shareholders vote in favour of the Nafold
transaction, either by form of proxy to be lodged by 10.00 on Thursday, 8
December 2005 or by being present at the general meeting to be held at 10.00 on
Monday, 12 December 2005.
Further opportunities relating to the consolidation of gaming interests through
Johnnic are being considered. Johnnic"s existing interests in the gaming sector,
namely Suncoast Casino and Entertainment World ("Suncoast Casino") and Tsogo
Sun, are poised for continued solid growth in tandem with the ongoing expansion
of the leisure industry in South Africa.
Full details of the Nafhold transaction will be contained in a circular to
Johnnic"s shareholders to be posted on or about Friday, 25 November 2005.
APPROVAL OF THE GAMING AUTHORITIES
HCI has made application to the KwaZulu-Natal Gaming Board for the approval of,
inter alia, its acquisition of shares in Johnnic. Furthermore, depending on the
level of acceptances of the HCI offer, HCI may be required to obtain the
approval of certain Gaming Authorities for its acquisition of Johnnic shares in
terms of the HCI offer. If HCI does not succeed in obtaining any such
approvals, it will be required to sell some or all of its shares in Johnnic.
CONFLICT OF INTEREST
On 25 October 2005, a requisition of general meeting by HCI was received by
Johnnic. HCI is seeking to appoint four of its nominees to the Johnnic board.
This is the second time that HCI has issued a requisition of general meeting
seeking to have its nominees appointed to the Johnnic board, having been
unsuccessful in the general meeting of 30 June 2005.
The Johnnic board is of the view that for as long as HCI and Johnnic are in
competition for the control of Tsogo Investment Holding Company (Proprietary)
Limited ("TIH") (which controls Tsogo Sun), having representatives of HCI on the
Johnnic board would represent a conflict of interest and would be prejudicial to
the interests of shareholders. 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 and the Johnnic board does not believe that
this conflict can be managed effectively. As such, the Johnnic board urges
shareholders not to appoint HCI"s nominees to the Johnnic board until all
conflicts between Johnnic and HCI have been finally resolved. Shareholders need
to reject the HCI nominees by voting against such resolutions, either by form of
proxy to be lodged by 11.00 on Thursday, 8 December 2005 or by being present at
the general meeting to be held at 11.00 on Monday, 12 December 2005.
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.
REJECT THE HCI OFFER
The Johnnic board notes that despite the fact that it has openly stated that the
HCI offer significantly undervalues Johnnic and that Johnnic has subsequently
concluded a further value enhancing transaction, HCI has announced a closing
date for the offer without improving the terms thereof. The offer is also
significantly below the current Johnnic share price on the JSE Limited.
The Johnnic board therefore recommends that shareholders reject the HCI offer
and remain invested in a pure gaming stock. The Johnnic board still believes
that Johnnic is best positioned to realise value on its gaming strategy on a
stand alone basis.
Midrand
18 November 2005
Investment Bank
Standard Bank
Legal advisors
Webber Wentzel Bowens
Sponsor
Merrill Lynch South Africa (Proprietary) Limited
Date: 18/11/2005 05:18:04 PM Produced by the JSE SENS Department
