| Wed 8 Feb 2006, 10:18 | | PSG Group/PSL/Arch Equity/Channel Life - Channel L |
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PSG ACH PGFP
PSG ACH PGFP
PSG Group/PSL/Arch Equity/Channel Life - Channel Life disposal and related party
transaction
PSG GROUP LIMITED
Registration number 1970/008484/06)
JSE share code: PSG ISIN: ZAE000013017
("PSG Group")
PSG Financial Services Limited
Registration number 1919/000478/06
JSE share code: PGFP ISIN code: ZAE000060166
("PSL")
ARCH EQUITY LIMITED
Registration number 2004/004019/06
JSE share code: ACH ISIN: ZAE000061073
("Arch Equity")
CHANNEL LIFE LIMITED
Registration number: 1969/012487/06
("Channel Life")
CHANNEL LIFE DISPOSAL BECOMES UNCONDITIONAL AND SMALL RELATED PARTY TRANSACTION
1. INTRODUCTION
1.1 Shareholders are referred to the joint announcement published on the
Securities Exchange News Service ("SENS") of the JSE Limited ("JSE")
on 11 August 2005 and in the press on 12 August 2005 regarding the
disposal of a 50% interest in Channel Life Limited ("Channel Life") to
Sanlam Life Insurance Limited ("the Channel Life disposal").
1.2 The Channel Life disposal was subject to and conditional upon, inter
alia, regulatory approval as may have been required by the relevant
regulatory authorities. Shareholders are hereby advised that the last
remaining suspensive condition was fulfilled on 7 February 2006 and
that the Channel Life disposal is no longer subject to any unfulfilled
conditions. The proceeds relating to the Channel Life disposal will be
received on 9 February 2006.
1.3 The aforementioned announcement included details of a related party
transaction between PSL and Arch Equity ("the Channel Holdings
transaction") in terms of which PSL will acquire the 26% interest that
Arch Equity holds in Channel Life Holdings (Pty) Limited ("Channel
Holdings"). The Channel Holdings transaction was subject to PSG Group
obtaining written confirmation from an independent professional expert
confirming the fairness and reasonableness of said transaction to PSG
Group shareholders ("the fair and reasonable opinion") and subject to
the finalisation of an agreement between PSL and Arch Equity.
2. RELATED PARTY TRANSACTION
2.1 PSG Group, through its wholly-owned subsidiary PSL, holds
approximately 20% of Arch Equity"s ordinary issued share capital. Arch
Equity, in turn, holds approximately 23% of PSG Group"s issued share
capital. PSL and Arch Equity respectively hold 74% and 26% of the
issued shares in Channel Holdings.
2.2 In terms of Section 10.7 of the Listings Requirements of the JSE, the
Channel Holdings transaction is regarded as a small related party
transaction for PSG Group. Accordingly, PSG Group has appointed
PricewaterhouseCoopers Corporate Finance (Pty) Ltd ("PWC") as the
independent professional expert in accordance with paragraph 10.7(b)
of the Listing Requirements of the JSE and has provided the JSE with
written confirmation from PWC that the terms of the Channel Holdings
transaction are fair and reasonable to PSG Group shareholders. The
fair and reasonable opinion will lie open for inspection at the
registered office of PSG Group for a period of 28 days from the date
of publication of this announcement.
3. DETAILS OF CHANNEL LIFE HOLDINGS AND CHANNEL LIFE
Channel Holdings" only asset is a shareholding in Channel Life. Channel
Life is a niche life insurance company that provides life assurance
products as well as investment products to both retail and institutional
clients. At 28 February 2005 it had a net asset value of R123,7 million and
generated headline earnings of R39,0 million for the financial year then
ended.
4. RATIONALE FOR THE ACQUISITION
It is PSG Group"s desire to continue to exert meaningful influence and
participate in the expected growth in profitability of Channel Life
following the Channel Life disposal. Had it not acquired the 26% interest
in Channel Holdings from Arch Equity, PSG Group"s interest in Channel Life
would have been reduced to 23% compared with the 35% that it now holds.
5. PARTICULARS OF THE ACQUISITION
5.1 Subject matter of the acquisition
1040 ordinary shares in Channel Holdings, representing 26% of the
issued share capital, as well as a loan account of R14,9 million.
5.2 Acquisition consideration
The purchase consideration of R26,6 million will be paid by PSL to
Arch Equity in cash within 24 hours after PSG Group has received the
proceeds in respect of the Channel Life disposal.
5.3 Effective date
The effective date of the Channel Holdings transaction is 1 August
2005.
5.4 Suspensive Conditions
Following the approval by the Competition Commission and other
regulatory approvals of the Channel Life disposal, the Channel
Holdings transaction is no longer subject to any unfulfilled
conditions.
6. FINANCIAL EFFECTS
The pro forma financial effects of the Channel Holdings transaction are
presented for illustrative purposes only and because of their nature may
not give a fair reflection of PSG Group"s financial position nor of the
effect on future earnings after the transaction.
Set out below are the unaudited pro forma financial effects of the
transaction, based on the unaudited consolidated financial results of PSG
Group for the six months ended 31 August 2005. The directors are
responsible for these pro forma financial effects.
Unaudited Pro forma Change
Before the After the (%)
transaction Transaction
(cents) (cents)
Earnings per share 84,1 84,4 0,4
Headline earnings per share 101,1 101,4 0,3
Net asset value per share 412 412 Nil
Net tangible asset value per 328 312 (4,9)
share
Notes to financial effects
1. The earnings and headline earnings per share figures in the "Pro forma
After the transaction" column have been calculated:
- on the basis that the transaction was effected on 1 March 2005;
and
- the consideration paid would have earned interest at an after tax
interest rate of 6%.
2. The net asset value and net tangible asset value per share figures in
the "Pro forma After the transaction" column have been calculated on
the basis that the transaction was effected on 31 August 2005.
Stellenbosch
8 February 2006
PSG Capital
Sponsor to PSG Group and designated advisor to Arch Equity
Date: 08/02/2006 10:18:39 AM Produced by the JSE SENS Department
