| Wed 21 Dec 2005, 12:26 | | Peermont Global - Acquisition of a controlling int |
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Peermont Global - Acquisition of a controlling interest in the Tusk Group
Peermont Global Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/0004449/06)
Share code: PTG & ISIN: ZAE000058053
("Peermont Global" or "the Company")
ACQUISITION BY PEERMONT GLOBAL OF A CONTROLLING INTEREST IN THE TUSK CASINO
RESORTS AND HOTELS GROUP
1. INTRODUCTION
The Peermont Global board of directors ("the Peermont Global board") is pleased
to announce that Peermont Global has concluded agreements, subject to the
fulfilment of the conditions precedent set out in paragraph 5.2 below, to
acquire a controlling equity interest in the Tusk Casino Resorts and Hotels
Group ("the Tusk Group") ("the Tusk transaction") from:
- Moribo Investments (Proprietary) Limited and Alliance Investment Holdings
(Proprietary) Limited, two wholly-owned entities of Thebe Investment
Corporation (Proprietary) Limited ("Thebe") and the Lesedi Trust,
collectively hereafter referred to as Thebe;
- JS Franklin, TE Mokoena, IP Mossop and Tusk JIT Holdings (Proprietary)
Limited ("Tusk JIT") ("Tusk management"); and
- Stepney Investments (Proprietary) Limited, Bhambatha Investments
(Proprietary) Limited ("Bhambatha") and the other direct shareholders of
Emanzini Leisure Resorts (Proprietary) Limited ("Emanzini") ("the Emanzini
shareholders"),
(collectively referred to as "the Tusk shareholders").
The Tusk Group owns and manages casinos and hotels comprising:
- Tusk Mmabatho Casino Resort ("Tusk Mmabatho") in Mafikeng, North West
Province;
- Tusk Rio Casino ("Tusk Rio") in Klerksdorp, North West Province;
- Tusk Taung Hotel ("Tusk Taung") in Taung, North West Province;
- Tusk Venda Casino Hotel ("Tusk Venda") in Thohoyandou, Limpopo Province;
and
- Tusk Umfolozi Casino ("Tusk Umfolozi") in Empangeni, KwaZulu-Natal
Province.
Peermont Global will pay a minimum and maximum total purchase consideration, in
cash, of R440.30 million and R582.98 million respectively, as determined in
accordance with the purchase consideration formula detailed in paragraph 5.1
below. The purchase consideration will be financed by Peermont Global"s own cash
resources and the use of borrowings and preference share funding facilities
offered by funding institutions to Peermont Global.
2. AN OVERVIEW OF THE TUSK GROUP OPERATIONS
The primary assets in the Tusk Group are Tusk Rio, which commenced operations on
1 October 2004 and has been generating impressive performance levels since
opening and Tusk Umfolozi, which is located in a rapidly growing region of
KwaZulu-Natal. Tusk Mmabatho is the longest running gaming and hotel facility
within the Tusk Group with a hotel, gaming and other entertainment facilities.
Set out below is an overview of the gaming and hotel operations of the Tusk
Group:
Slots Tables Rooms
Tusk Rio 254 11 0
Tusk Umfolozi 300 10 0
Tusk Mmabatho 155 8 150
Tusk Taung 0 0 39
Tusk Venda 129 6 82
Total 838 35 271
Revenue1 EBITDA(1,3) EBIT(1,4)
Unaudited Unaudited Unaudited
6 months 6 months 6 months
ended 30 ended 30 ended 30
September September September
2005 2005 2005
Rm Rm Rm
Tusk Rio 49.0 19.7 17.2
Tusk Umfolozi 36.6 10.8 7.8
Tusk Mmabatho 31.5 7.9 6.5
Tusk Taung 1.8 (2.3) (2.4)
Tusk Venda 18.5 5.0 4.3
Management contracts2 - 7.9 6.9
Total 137.4 49.0 40.3
Notes:
1. The financial information presented above has been extracted,
without adjustment, from the unaudited management accounts of the Tusk
Group for the six months ended 30 September 2005.
2. Total inter-group management fee income of R12.3 million is not
reflected in revenue as it is eliminated on consolidation.
3. EBITDA is defined as earnings before interest, taxation, depreciation
and amortisation.
4. EBIT is defined as earnings before interest and taxation.
3. RATIONALE FOR THE TUSK TRANSACTION
Peermont Global"s strategic objectives are to achieve significant growth in its
core focus of casino gaming, both domestically and internationally, and to
optimise hotel developments associated with gaming projects as well as to
capitalise on selected stand-alone hotel opportunities. The Tusk Group offers
Peermont Global an opportunity to acquire gaming assets that are in a growth
phase and at the same time diversify Peermont Global"s revenue stream and reduce
the extent of the Company"s dependence on the Gauteng gaming market.
Peermont Global has a proven track record in design, development and operation
of hotel, casino, resort and related facilities, through its development and
management of the Emperors Palace Hotel Casino and Convention Centre, the
Graceland Hotel Casino and Country Club, The Grand Palm Hotel Casino and
Convention Resort, the Mondior Summit Hotel, the Metcourt Lodge and the Mondazur
San Lameer Resort Estate Hotel. The Peermont Global board is of the opinion that
the Tusk Group will benefit from the combined gaming and hotel expertise of
Peermont Global and the Company will be able to extract synergies from the
expanded gaming and hotel group through the enhancement of facilities,
refinancing of debt within the Tusk Group, transfer of equipment and staff
between operations over time and standardisation of operating procedures.
The Tusk Rio and Tusk Umfolozi casinos currently have no hotels and will not
receive permanent casino licences until such time as their hotel and other
entertainment facilities are fully developed. Peermont Global intends to develop
these properties into multi-faceted resorts to enhance their appeal and maximise
revenues and profitability.
4. THE TUSK TRANSACTION STRUCTURE
To acquire the equity interest in the Tusk Group casino and hotel operations and
the 100% equity interest in the casino management companies from the Tusk
shareholders, Peermont Global has established a wholly-owned subsidiary, Main
Street 382 (Proprietary) Limited ("Peermont Tusk Holdco").
Peermont Global, through Peermont Tusk Holdco, will acquire:
- Thebe"s interest in the ordinary share capital ("sale shares") and claims
("sale claims") (the sale shares and the sale claims are collectively
hereafter referred to as "sale equity") in:
- Tusk Resorts Holdings (Proprietary) Limited ("TRH") (70% equity
interest);
- Tusk Casino and Hotel Management (Proprietary) Limited ("TCHM") (49%
equity interest);
- Tusk Resorts Holdings B (Proprietary) Limited ("TRH B") (90% equity
interest); and
- Tusk Casino and Hotel Management B (Proprietary) Limited ("TCHM B")
(60% equity interest);
- Tusk management"s sale equity in:
- Tusk Casino and Hotel Management Holdings (Proprietary) Limited
("TCHMH") (100% equity interest); and
- Tusk Casino and Hotel Management Holdings B (Proprietary) Limited
("TCHMH B") (100% equity interest);
- the Emanzini shareholders" sale equity in Emanzini (73.73% equity
interest).
After the implementation of the Tusk transaction, the Tusk Group"s remaining BEE
shareholders will be Gottam Investments (Proprietary) Limited and the staff
trust which collectively hold a 30% equity interest in the issued share capital
of Tusk Resorts (Proprietary) Limited ("Tusk Resorts").
It is Peermont Global"s intention to restructure the BEE shareholding at
Peermont Tusk Holdco level and, to the extent necessary, ensure that the BEE
shareholding in Peermont Tusk Holdco is at least 26% of the company"s issued
share capital. It is a condition of the Tusk Rio and Tusk Mmabatho casino
licences that the BEE shareholdings in these casinos are at a minimum of 26%.
PLEASE REFER TO PRESS VERSION OF THIS ANNOUNCEMENT FOR THE STRUCTURE OF PEERMONT
GLOBAL AFTER IMPLEMENTATION OF THE TUSK TRANSACTION BUT BEFORE ANY RESTRUCTURING
5. IMPORTANT TERMS AND CONDITIONS
5.1 Terms
The important terms of the Tusk transaction are as follows:
- For an effective 70% interest of the casino and hotel operations
of Tusk Resorts, a 100% equity interest in Emanzini and 100% of
the issued share capital of the casino management companies of
the Tusk Group, Peermont Global will pay a total purchase
consideration, in cash, of R511.5 million, subject to a maximum
15% adjustment (increase or decrease) on the payable cash
consideration, depending on actual audited EBITDA of the
respective companies for the year ending 31 March 2006 and actual
indebtedness and net working capital levels at 31 March 2006.
- Tusk Taung agterskot - Tusk Taung is in the process of being
disposed of by Tusk Resorts. Should Tusk Taung be sold by 31
March 2007, the purchase price attributable to Tusk Taung will be
adjusted in accordance with an agreed formula. The payment under
the Tusk Taung agterskot provision will be limited to a maximum
amount of R35.0 million and is included in the R511.5 million
purchase consideration mentioned above.
For the purposes of clarity, Peermont Global will pay a minimum and maximum
total purchase consideration depending on the financial performance of the
Tusk Group to 31 March 2006, in cash, of R440.30 million and R582.98
million respectively, in respect of the Tusk transaction.
5.2 Conditions precedent
5.2.1 General conditions precedent
The Tusk transaction is subject to the following general
suspensive conditions:
- to the extent necessary, the unconditional approval of
the South African competition authorities; and
- the unconditional approval by the North West Gambling
Board in respect of Tusk Resorts" assets namely Tusk
Rio and Tusk Mmabatho,
- the Limpopo Gaming Board in respect of Tusk Venda and
the KwaZulu-Natal Gambling Board in respect of
Emanzini"s ownership of Tusk Umfolozi.
5.2.2 Specific conditions precedent
The specific elements of the Tusk transaction are subject to
the following suspensive conditions:
- the termination, by 31 March 2006 of any agreement
relating to the acquisition of an interest in a casino
licence by Tusk Resorts;
- the approval of shareholders of Bhambatha of the Tusk
transaction in so far as it relates to their interest
in Emanzini;
- the sellers securing waivers of certain conditions
precedent from the relevant parties in respect of
certain agreements relating to the Tusk Group to ensure
the validity of these agreements; and
- the written consents of Thebe"s and Tusk management"s
funders for the two parties to conclude the Tusk
transaction.
It is anticipated that all the conditions precedent will be fulfilled by 31
May 2006.
6.PRO FORMA FINANCIAL EFFECTS OF THE TUSK TRANSACTION
The table below sets out the pro forma financial effects of the transaction on
shareholders of Peermont Global. Due to their nature, the unaudited pro forma
financial effects may not fairly present Peermont Global"s financial position,
changes in equity, results of operations or cash flows after the transaction.
The pro forma financial effects are the responsibility of the Peermont Global
board and are based on Peermont Global"s financial results for the six months
ended 30 June 2005. The low, medium and high price scenarios relate to the
purchase price paid by Peermont Global, being R440.30 million, R511.50 million
and R582.98 million respectively.
Low Medium High
Peermont Peermont % Peermont % Peermont %
Global Global change Global change Global change
before the after the after the after the
transactio transacti transacti transactio
n (1) on on n
Earnings 34.31 34.04 (0.79) 33.51 (2.33) 32.98 (3.88)
per
share
("EPS")
(cents)
(2)
Headline 34.34 34.07 (0.79) 33.54 (2.33) 33.00 (3.88)
earnings
per
share
("HEPS")
(cents)
(2)
Net 334.15 329.25 (1.47) 328.72 (1.62) 328.19 (1.78)
asset
value
("NAV")
per
share
(cents)(
3)
Tangible 127.46 50.06 (60.73 27.87 (78.14) 5.67 (95.55
NAV ) )
("TNAV")
(cents)
(3)
Assumptions:
1. The "Before the transaction" financial information has been extracted,
without adjustment, from the published, reviewed financial results of Peermont
Global for the six months ended 30 June 2005.
2. The EPS and HEPS per share calculations have been based on the assumptions
that the transaction was implemented on 1 January 2005 and that it was effective
for the six months ended 30 June 2005. The calculation was based on the weighted
average number of shares in issue for the six months ended 30 June 2005 being
330 000 000 shares.
3. The NAV and TNAV calculations have been based on the assumption that the
transaction was implemented on 30 June 2005. NAV per share is calculated as
shareholders" equity divided by the total number of Peermont Global shares in
issue at 30 June 2005 being 330 000 000 shares.
4. EPS have been adjusted to incorporate the attributable profit of the Tusk
Group for the six months ended 30 September 2005, the interest cost on Peermont
Global"s additional cash borrowings of R375 million, Peermont Global"s interest
rate of 7.78% (being the average after-tax rate of interest on borrowings for
the six-month period ended 30 June 2005) and the weighted average number of
Peermont Global shares in issue being 330 000 000 shares. The EPS and HEPS of
the Tusk Group, for the six-month period ended 30 September 2005, have been
calculated based on the pro forma consolidated unaudited financial results of
the Tusk Group for the six months ended 30 September 2005.
5. Current financing terms and conditions of the Tusk Group debt have been
assumed in the calculation of the HEPS and EPS and no adjustment has been made
to show the impact of the reduced borrowing cost on the Tusk Group debt after
the Tusk transaction.
6. HEPS and EPS calculations have assumed that the Taung agterskot payment is
made, which payment will only be made if the business is sold, whilst HEPS and
EPS have included the historical losses of Taung as at 30 September 2005.
7. NAV and TNAV have been adjusted to include the attributable portion of the
assets of the Tusk Group and the payment of the total consideration amounting to
R511.5 million in cash. The NAV and the TNAV of the Tusk Group have been
extracted from the pro forma consolidated unaudited financial results of the
Tusk Group, which were based on the unaudited results of the Tusk Group for the
six months ended 30 September 2005.
8. TNAV was calculated prior to attributing any additional fair value to
tangible assets such as land and buildings. The fair value of such assets is
still to be determined in accordance with IFRS.
It is Peermont Global"s intention to refinance the debt funding in the Tusk
Group on more favourable terms. The pro forma financial effects set out above do
not reflect the effect that this refinancing would have had on Peermont Global"s
financial performance for the six months ended 30 June 2005.
7.TRANSACTION CATEGORISATION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The transaction is classified as a Category 2 transaction in terms of the JSE
Limited"s ("the JSE") Listings Requirements ("Listings Requirements") on
classification of transactions. A circular to shareholders on the Tusk
transaction will be issued on or about 31 January 2006 but no shareholders"
approval in general meeting is required. Shareholders will be advised on SENS
and in the press when all the conditions precedent to the Tusk transaction have
been fulfilled.
The articles of association of the companies that will become subsidiaries of
Peermont Global as a result of the Tusk transaction will be amended within a
reasonable period of time to comply with the Listings Requirements once the Tusk
transaction has been implemented.
Shareholders are referred to the cautionary announcements dated 26 October 2005
and 7 December 2005 and are advised that caution is no longer required to be
exercised by shareholders when dealing in their Peermont Global securities.
Bryanston
21 December 2005
Investment bank and sponsor
Standard Bank
Attorneys to the Tusk transaction
Webber Wentzel Bowens
Corporate advisers to Thebe
Thebe Business Ownership Plans
Reporting accountants
KPMG
Legal advisers to the Emanzini shareholders
Edward Nathan Corporate Law Advisers
Legal advisers to Tusk management
Cliffe Dekker
Date: 21/12/2005 12:26:16 PM Produced by the JSE SENS Department
