| Mon 6 Feb 2006, 9:01 | | L.A. Group Limited - Announcement |
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LAN LAR
LAR
L.A. Group Limited - Announcement
L.A. GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1936/008786/06)
Share Code: LAR & ISIN: ZAE000028676
Share Code: LAN & ISIN: ZAE000028684
("L.A. Group" or "the company")
ANNOUNCEMENT IN RESPECT OF THE FIRM INTENTION BY CLIFTON DUNES INVESTMENTS 327
(PROPRIETARY) LIMITED ("NEWCO") TO MAKE AN OFFER TO CERTAIN L.A. GROUP
SHAREHOLDERS AND FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements dated 11 August 2005, 23 September 2005,
31 October 2005 and 13 December 2005, L.A. Group shareholders are advised that
Newco has submitted to the board of directors of L.A. Group ("the L.A. Group
Board") a notice of its firm intention to make an offer in terms of which Newco
will acquire all the shares in the issued share capital of L.A. Group ("L.A.
Group Shares"), other than those already held by Robben Island Management
(Proprietary) Limited ("Robben Island"), Greyhouse Trust, Rimaz Investments
(Proprietary) Limited, AF Peer Family Trust, Miss Alia Peer, Miss Nazlia Peer,
Mr Mohamed Peer, Mr Riyadh Peer and Mrs Fazlyn Peer (collectively, "the Peer
Family Shareholders") and any subsidiaries of L.A. Group ("the Offer"). The
current controlling shareholder of L.A. Group is Robben Island, which is owned
directly or indirectly by the Peer family. AK Peer, a member of the Peer family,
is the executive chairman of L.A. Group. The Offer is subject to the conditions
precedent set out in 7 below. The salient details of the Offer are set out in
this announcement.
The consideration payable in terms of the Offer will be 800 cents in cash for
each L.A. Group ordinary share and "N" ordinary share. On this basis, the total
consideration payable by Newco for the L.A. Group Shares amounts to
approximately R198 million. In addition, Newco intends to reach agreement with
the holders of L.A. Group ordinary share options and "N" ordinary share options
("options") so as to settle the outstanding options by means of cancelling the
options. Using a settlement price of 800 cents per option, this is estimated to
cost Newco in total R11 million.
The Offer to be proposed by Newco will be implemented by way of a scheme of
arrangement in terms of section 311 of the Companies Act No. 61 of 1973, as
amended ("the Companies Act") ("the Scheme"), between L.A. Group and all of its
shareholders other than Robben Island, the Peer Family Shareholders and any
subsidiaries of L.A. Group ("Scheme Members").
Should the Scheme be implemented, Newco will acquire all the L.A. Group Shares,
other than those already held by Robben Island, the Peer Family Shareholders and
any subsidiaries of L.A. Group held in the issued share capital of L.A. Group
("Scheme Shares").
As separate, but related transactions, the Peer Family Shareholders will sell
all their L.A. Group Shares to Robben Island at 800 cents a share, and Newco
will then acquire from Robben Island all the L.A. Group ordinary shares and "N"
ordinary shares owned by Robben Island in exchange for the issue of Newco
ordinary shares to Robben Island, thereby resulting in Newco becoming a wholly-
owned subsidiary of Robben Island.
Therefore, there will be no change in the controlling shareholder of L.A. Group.
As a result of the above, Newco will hold 100% of L.A. Group"s issued share
capital and will own and control L.A. Group and the listing of the L.A. Group
Shares on the JSE Limited ("the JSE") will be terminated.
2. THE CASH CONSIDERATION
Each L.A. Group shareholder, other than Robben Island, the Peer Family
Shareholders and any subsidiaries of L.A. Group, recorded in the share register
of L.A. Group on the consideration record date of the Scheme ("Scheme
Participants"), will have the opportunity to receive a cash consideration of 800
cents per Scheme Share from Newco ("the Cash Consideration") or to elect a
reinvestment alternative to subscribe for unlisted cumulative redeemable
preference shares ("Newco Scheme Preference Shares") to be issued by Newco ("the
Reinvestment Alternative").
2. The Cash Consideration represents a premium to the L.A. Group ordinary share
price of:
* 17.6% to the closing share price of 680 cents per L.A. Group ordinary share on
the date preceding Thursday, 11 August 2005, the date of the first cautionary
announcement; and
* 44.0% to the 30-day volume weighted average L.A. Group ordinary share price of
555.5 cents up to and including the date preceding Thursday, 11 August 2005, the
date of the first cautionary announcement.
2.2 The Cash Consideration represents a premium to the L.A. Group "N" ordinary
share price of:
* 23.1% to the closing share price of 650 cents per L.A. Group "N" ordinary
share on the date preceding Thursday, 11 August 2005, the date of the first
cautionary announcement; and
* 34.0% to the 30-day volume weighted average L.A. Group "N" ordinary share
price of 596.8 cents up to and including the date preceding Thursday, 11 August
2005, the date of the first cautionary announcement.
As it is expected that the Scheme will be implemented before the end of April
2006, Scheme Participants will not participate in any further dividends, if so
declared by L.A. Group.
3. THE REINVESTMENT ALTERNATIVE
3.1 Newco Scheme Preference Shares
Simultaneously with the de-listing of the L.A. Group Shares, Newco will make an
offer to all Scheme Participants to reinvest all or part of the proceeds
receivable by them in the Newco Scheme Preference Shares. Newco will also
provide Scheme Participants the opportunity to subscribe for additional Newco
Scheme Preference Shares, however Newco will reserve the right, in its sole
discretion, to reject or accept such applications for additional Newco Scheme
Preference Shares. The detailed terms of the Newco Scheme Preference Shares will
be set out in a circular to be addressed to L.A. Group shareholders (see 12
below). The salient terms of the Newco Scheme Preference Shares to be issued by
Newco are as follows:
* subscriptions in terms of the Reinvestment Alternative can only be made for a
minimum subscription amount of R100 000;
* the Newco Scheme Preference Shares will be entitled to receive a dividend
every six months at a rate equivalent to 100% of the prevailing prime overdraft
rate as quoted by The Standard Bank of South Africa Limited ("Standard Bank")
from time to time (currently 10.5% nominal annual compounded monthly) on the
subscription amount; and
* the Newco Scheme Preference Shares are compulsorily redeemable commencing on
the fifth anniversary date after their issue, or subject to certain conditions
being achieved, redemption of a portion of such Newco Scheme Preference Shares
commencing on the third and/or fourth anniversary date of their issue will be
permitted.
Subscriptions in aggregate for the Newco Scheme Preference Shares are limited to
a maximum of R130 million and thus if applications in excess of R130 million are
received, Newco will allocate Newco Scheme Preference Shares on a pro-rata basis
to the applications received, subject however to Newco"s right to reject
applications for additional Newco Scheme Preference Shares as detailed above.
3.2 Bank Preference Shares
In addition, Newco will be raising a maximum of R120 million of funding from
Standard Bank in order to proceed with the de-listing process. This amount will
be raised through the issue by Newco of cumulative redeemable participating
preference shares to Standard Bank ("Bank Preference Shares"), the salient terms
of the Bank Preference Shares being as follows:
* the Bank Preference Shares will earn a dividend rate equivalent to 83% of the
prevailing prime overdraft rate as quoted by Standard Bank from time to time on
the subscription amount;
* the Bank Preference Shares will be compulsorily redeemable over a three year
period commencing on the third anniversary date after their issue;
* the Bank Preference Shares will rank in priority to the Newco Scheme
Preference Shares in respect of dividends and capital; and
* the holder of the Bank Preference Shares will in addition be issued, at
nominal value, a further class of preference share which will rank behind the
Bank Preference Shares and the Newco Scheme Preference Shares in respect of
dividends and capital. Such preference shares are compulsorily redeemable at a
redemption price determinable by a set formula on the fifth anniversary of the
date of their issue, but subject to certain conditions being achieved, may be
redeemed by Newco in tranches on the third, fourth and fifth anniversary of
their issue date.
To the extent that the subscriptions for the Newco Scheme Preference Shares
exceed R90 million, the funding procured by the issue of Bank Preference Shares
will be commensurately less, subject to a minimum issue of Bank Preference
Shares of R80 million.
4. RATIONALE FOR THE OFFER
Robben Island has been considering for some time various possibilities with
regard to its existing shareholding in the company. It is of the opinion that
the continued listing of the shares of the company on the JSE, and the
associated cost thereof, are no longer justifiable, given the relatively small
market capitalisation of the company and the fact that no benefits are
anticipated to arise by maintaining a listing on the JSE.
The L.A. Group shares have historically traded at a low liquidity and the
Scheme provides the Scheme Participants with the opportunity to realise value on
their full shareholding in L.A. Group.
Newco has therefore concluded that it would be appropriate to propose the
Scheme to the L.A. Group Board and immediately thereafter to seek a de-listing
of the company from the JSE.
5. INDEPENDENCE OF L.A. GROUP
In terms of the Securities Regulation Panel ("SRP") Code on Takeovers and
Mergers and the Rules of the SRP, Newco, in conjunction with Robben Island and
the Peer Family Shareholders, will be regarded as exercising control over L.A.
Group. Newco, Robben Island and the Peer Family Shareholders will therefore not
be entitled to vote their L.A. Group Shares at the meeting of Scheme Members
("Scheme Meeting"). As at the date of this announcement, Newco, Robben Island
and the Peer Family Shareholders collectively own 15 621 524 L.A. Group ordinary
shares and 309 288 "N" ordinary shares, comprising approximately 62.2% and 2.0%
of L.A. Group"s issued ordinary and "N" ordinary share capital respectively,
excluding any shares held by any subsidiaries of L.A. Group.
6. OPINION AND RECOMMENDATIONS
The L.A. Group Board has appointed a sub-committee of independent non-executive
directors to consider the terms and conditions of the Offer and to make a
recommendation to the L.A. Group Board. The sub-committee appointed PKF (Jhb)
Inc. ("PKF"), as independent adviser to the sub-committee.
PKF has considered the Offer and is of the opinion that, as at 31 January 2006,
the terms and conditions of the Offer are fair and reasonable to Scheme Members
and has advised the independent sub-committee accordingly.
The independent sub-committee has considered the Offer, taking into account the
independent opinion of PKF, and is of the unanimous opinion that the Offer is
fair and reasonable to Scheme Members. The independent sub-committee advised
the L.A. Group Board accordingly. The L.A. Group Board has considered the terms
of the Offer and, taking into account the views of the independent sub-
committee, is of the opinion that the Offer is fair and reasonable to Scheme
Members and recommends that the Scheme Members accept the Offer and that Scheme
Members vote in favour of the resolutions required to give effect to the Scheme.
7. CONDITIONS PRECEDENT
The implementation of the Scheme is subject to fulfilment of the following
conditions precedent:
7.1 the JSE, the SRP and the South African Reserve Bank ("SARB") approving the
necessary documentation to be distributed to the shareholders of L.A Group;
7.2 the High Court of South Africa ("Court") ordering the convening of the
Scheme Meeting to approve the Scheme;
7.3 the approval of the Scheme by all regulatory authorities if, and to the
extent necessary, including the SARB, the SRP and the JSE;
7.4 the approval of the Scheme by a majority of L.A. Group shareholders, being
Scheme Members, 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;
7.5 the Court sanctioning the Scheme in terms of the Companies Act;
7.6 the lodging of a certified copy of the Order of Court sanctioning the Scheme
with, and registration by, the Registrar of Companies in terms of the
Companies Act;
7.7 Scheme Participants subscribing for Newco Scheme Preference Shares in an
amount not less than R90 million; and
7.8 the finalisation of the finance with Standard Bank and the related legal
documentation for the Newco Scheme Preference Shares and the Bank Preference
Shares; and the sale agreements between the Peer Family, Robben Island and
Newco.
8. RESERVATION OF RIGHTS
The Offer may be amended, varied or revised in such manner as Newco in its sole
discretion may determine, provided that no such amendment, variation or revision
shall be made unless the approval of the appropriate regulatory authorities, to
the extent required, has been obtained.
9. SHAREHOLDER SUPPORT
Letters expressing support to vote in favour of the Scheme have been received
from L.A. Group shareholders holding 5 486 352 L.A. Group ordinary shares and 6
039 672 L.A. Group "N" ordinary shares, collectively representing 57% of the
Scheme Shares.
Letters expressing support have also been received from L.A. Group shareholders
holding 5 486 352 L.A. Group ordinary shares and 6 039 672 L.A. Group "N"
ordinary shares to subscribe for Newco Scheme Preference Shares, in aggregate
totalling R90 million, representing 57% of the Scheme Shares.
L.A. Group shareholders are advised that one Scheme Meeting will be held at
which L.A. Group "N" ordinary shares count one hundredth of the vote of L.A.
Group ordinary shares.
10. CONFIRMATION OF SUFFICIENT CASH RESOURCES
Newco is in the process of finalising the finance with Standard Bank. Submission
has been made to the SRP regarding the confirmation that Newco has sufficient
cash resources to discharge its obligations in terms of the Offer, and
shareholders will be notified in due course, in a further announcement.
11. PRO FORMA FINANCIAL EFFECTS ON L.A. GROUP SHAREHOLDERS
The unaudited pro forma financial effects on L.A. Group shareholders have been
prepared for illustrative purposes only, in order to provide information about
how the Scheme might have affected the historical financial information
presented by L.A. Group. Due to their nature, the unaudited pro forma financial
effects may not give a true reflection of L.A Group"s historical financial
position. The directors of the company are responsible for the preparation of
the unaudited pro forma financial effects. The table below sets out the
unaudited pro forma financial effects of the Scheme on L.A. Group ordinary and
"N" ordinary shareholders, based on the assumptions set out below:
11.1 Unaudited pro forma financial effects of the Cash Consideration
Before the After the Change
Scheme Scheme (%)
(cents) (cents)
Earnings per L.A. Group 39.4 18.6 -52.8
Share1
Headline earnings per L.A. 39.5 18.6 -52.9
Group Share1
Net asset value per L.A. 565.2 800.05 41.5
Group Share2
Net tangible asset value per 463.5 800.05 72.6
L.A. Group Share2
Market value per ordinary
share3
- preceding Thursday, 11 680.0 800.05 17.6
August 2005
- 30-day volume weighted 555.5 800.05 44.0
average price, preceding
Thursday, 11 August 2005
- Thursday, 2 February 2006 900.0 800.05 -11.1
Market value per "N" ordinary
share3
- preceding Thursday, 11 650.0 800.05 23.1
August 2005
- 30-day volume weighted 596.8 800.05 34.0
average price, preceding
Thursday, 11 August 2005
- Thursday, 2 February 2006 900.0 800.05 -11.1
Notes:
1. The amount in the "Before the Scheme" column is based on the unaudited
financial results of L.A. Group for the six months ended 31 August 2005. The
amount in the "After the Scheme" column represents the after-tax interest which
an L.A. Group shareholder with a marginal tax rate of 29% would have earned, had
the L.A. Group shareholder invested an amount equal to the Cash Consideration
for the six months ended 31 August 2005 at the average 32-day call interest rate
over that period, being 6.5%, compounded monthly in arrears.
2. The amount in the "Before the Scheme" column is based on the net asset value
and net tangible asset value as per the unaudited financial results of L.A.
Group at 31 August 2005. The amount in the "After the Scheme" column represents
the Cash Consideration.
3. The amount in the "Before the Scheme" column is based on the last trading
date prior to the publication of the first cautionary announcement on 11 August
2005, the 30-day volume weighted average share prices of the L.A. Group shares
prior to the publication of the first cautionary announcement on 11 August 2005
and the closing market price of L.A. Group shares on 2 February 2006, the last
trading date before the publication of this announcement. The amount in the
"After the Scheme" column represents the Cash Consideration.
4. No effect has been given to Capital Gains Tax that may be applicable to L.A.
Group ordinary and "N" ordinary shareholders.
5. Offer price.
11.2 Unaudited pro forma financial effects of the Reinvestment Alternative
Before the After the Change
Scheme Scheme (%)
(cents) (cents)
Earnings per L.A. Group Share 39.4 42.6 8.1
Headline earnings per L.A. 39.5 42.6 7.8
Group Share
Net asset value per L.A. 565.2 800.04 41.5
Group Share1
Net tangible asset value per 463.5 800.04 72.6
L.A. Group Share1
Dividend per Newco Scheme - 84.0 100.0
Preference Share2
Notes:
1. The amount in the "Before the Scheme" column is based on the net asset value
and net tangible asset value as per the unaudited financial results of L.A.
Group at 31 August 2005. The amount in the "After the Scheme" column represents
the Reinvestment Alternative.
2. The amount in the "After the Scheme" column is based on the Newco Scheme
Preference Share which will earn a dividend rate equivalent to 100% of the
prevailing Standard Bank prime overdraft rate (currently 10.5% nominal annual
compounded monthly) on the subscription amount.
3. No effect has been given to Capital Gains Tax that may be applicable to L.A.
Group ordinary and "N" ordinary shareholders.
4. Offer price.
12. FURTHER DOCUMENTATION
12.1 A circular containing details of all the matters referred to above will be
posted to L.A. Group shareholders in due course, once the necessary approvals
have been obtained from, inter alia, the SRP, the JSE and after the company has
received the necessary leave to convene the Scheme Meeting from the Court.
12.2 A further announcement containing full details of the relevant dates and
times as they relate to the Scheme and the appropriate confirmation that Newco
has sufficient cash resources to discharge its obligations in terms of the
Offer, will be published on the Securities Exchange News Service of the JSE in
due course. In this regard shareholders are advised to continue to exercise
caution when dealing in the company"s securities until a further announcement is
made.
Cape Town
3 February 2006
Investment Bank to Newco Attorneys to the Scheme
Standard Bank Bernard Vukic Potash and Gertz
Independent adviser to L.A. Auditors and reporting accountants to
Group L.A. Group
PKF Grant Thornton
Sponsor to L.A. Group
Sasfin Capital
Date: 06/02/2006 09:01:15 AM Produced by the JSE SENS Department
