| Mon 19 Jun 2006, 8:00 | | RAH - Offer Is Neither Fair Nor Reasonable - Respo |
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RAH
RAH
RAH - Offer Is Neither Fair Nor Reasonable - Response To The Offer By Sun
International Limited Posted Today
Real Africa Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/003919/06)
SHARE CODE: RAH ISIN: ZAE000008702
("RAH")
OFFER IS NEITHER FAIR NOR REASONABLE - RESPONSE TO THE OFFER BY SUN
INTERNATIONAL LIMITED POSTED TODAY
RAH RECOMMENDS SHAREHOLDERS DO NOT ACCEPT THE OFFER
- The Offer Undervalues Your Shares
- Independent external opinion - "Offer neither fair nor reasonable"
- Minimum RAH value of 640 cents per share
- Minimum value excludes any value in SunWest shares which are the
subject matter of current litigation against Sun International
- Acceptance Now Restricts Ability To Trade - No Offer Closing Date
- Uncertain time frame for receipt of offer consideration
- No need to decide until closing date announced - Offer price acts as
an underpin
- Retention of RAH Shares Offers More Upside for RAH Shareholders
- Focused on select, high growth gaming assets - arguably the best
portfolio of casino investments in South Africa
- Expansion in progress at three of the four casinos - RAH shareholders
denied participation
- Good RAH track record in actively realising value - since 2003,
R1 241 million returned to shareholders through cash and unbundled
investments
- Planned cash distribution of R280 million (equal to 77 cents per
share)
- Disposal of indirect investment in Oceana Group Limited imminent -
entire proceeds earmarked for further distribution
- Dividend policy to pay semi-annual dividends equal to net cash
revenues after operational and capital requirements
Danie Vlok, director of RAH said:
"The board, after taking into account the opinion of the independent sub-
committee and external financial advisers, recommends that shareholders do not
accept the offer from Sun International. The offer was unsolicited and aims to
acquire your company below its fair value. The independent valuation excludes
any value which may be attributed to the current litigation between RAH and Sun
International."
"RAH is on track with its strategy of being a focused investment company in
select and high growth gaming assets. These assets are some of the best gaming
assets in the country with plenty of growth and development potential. By
allowing Sun International"s offer to proceed shareholders are denied the
exposure to the growth potential which they currently enjoy."
19 June 2006
Enquiries:
RAH 011 463 0010
Danie Vlok, Director
College Hill 011 447 3030
Nicholas Williams 083 607 0761
Johannes van Niekerk 082 921 9110
RAH RECOMMENDS SHAREHOLDERS NOT TO ACCEPT THE OFFER
Sun International Limited ("Sun International"), through its wholly owned
subsidiary Sun International South Africa Limited ("SISA"), has made an
unsolicited conditional offer to acquire all of the issued ordinary shares in
the capital of RAH that it does not already own, at 590 cents per RAH share
(`the Offer"). The Offer opened on Friday, 2 June 2006. The closing date of the
Offer will be announced by Sun International which announcement will be made at
least 14 days prior to the closing date, provided that the Offer will remain
open for at least 21 days.
The board has, in order to consider the Offer, constituted an independent sub-
committee including two external co-opted members and has taken independent
external financial advice on the terms of the Offer.
Today RAH has posted its response circular to shareholders saying that, in the
opinion of the directors and taking account of the opinion of the independent
sub-committee and the independent external financial adviser, the Offer is
neither fair nor reasonable.
The recommended course of action for all shareholders is not to accept the
Offer. Shareholders who nonetheless wish to accept the Offer, should wait until
Sun International announces the Offer closing date so that they are not
precluded from dealing in their shares during a protracted Offer period.
Shareholders that are clients of investment managers or brokers that may or have
conditionally accepted the Offer on their behalf, should carefully consider the
merits of the Offer in the light of the board"s views and recommendation and
instruct their investment manager or broker not to accept the Offer.
The Offer undervalues RAH
If Sun International succeeds in its objective, RAH shareholders will be denied
participation in select, excellent growth gaming assets and the expansion
currently in progress at GrandWest, Carnival City and Sibaya casinos. RAH
shareholders are not offered a comparable participation in Sun International and
are therefore denied any participation in the future growth and development of
these assets.
The investments held by Afrisun Leisure Investments (Proprietary) Limited
("Afrisun") (RAH"s 66,3% held subsidiary) in GrandWest casino, Carnival City
casino, Sibaya casino and the BoardWalk casino, together with the investments
held in the National Management Company and the Gauteng Resort Manco (which
companies derive management fees from the four operating casino companies) are
arguably the best portfolio of casino investments available in South Africa, and
potentially the pick of Sun International"s portfolio of casino investments. If
Sun International succeeds in its bid, RAH shareholders will be denied
participation in this excellent portfolio.
The board has evaluated the Offer and concurs with the independent external
adviser"s value opinion. The independent external adviser"s minimum value is 640
cents per share. This value excludes any value to be derived from the litigation
referred to below. RAH is in the process of finalising its results for the year
ended 31 March 2006 and expects to release these results on SENS on or about
Friday, 23 June 2006. The annual financial results will contain, inter alia, a
net asset value statement that has been reviewed by RAH"s auditors.
Focused strategy of unlocking value
RAH has been actively unlocking and realising value for shareholders through the
disposal of non-gaming investments. The stated strategy of RAH is to position
itself as a focused listed investment holding company with investments in
select, high growth gaming assets. This process is well advanced with agreements
for the disposal of the indirect interest in Oceana being finalised. The
remaining significant non-gaming asset will then be the 45% shareholding in Life
Esidimeni, providing district hospital and health services on contract to
provincial governments in South Africa. At an appropriate time this asset will
be sold. As with other recent disposals, the proceeds will, to the extent that
these are not to be reinvested in RAH"s gaming and leisure interests, be
distributed to shareholders.
In following this strategy RAH has, since 2003, returned R1 241 million to
shareholders. RAH currently has cash of R280 million which should soon be
augmented by the cash proceeds on disposal of the indirect interest in Oceana.
The cash and near cash should therefore total approximately R620 million
(approximately 171 cents per RAH share).
With the process of disposing of non-gaming assets nearing completion, the board
has recently resolved that, subject to capital requirements, RAH will henceforth
declare and distribute semi-annual dividends equal to net cash revenues after
operational and capital requirements.
RAH intends to continue growing its gaming assets through further acquisitions.
Recently Afrisun has, subject to Gaming Board approval, acquired a 34,9%
interest in Zonwabise, which effectively increases RAH"s economic interest in
Emfuleni Resorts from 2,3% to 7,0%. During the financial year ended 31 March
2005 RAH increased its stake in Afrisun KZN by R38,5 million, in SunWest by
R29,0 million and followed the rights offer in Afrisun Leisure to the extent of
R29,4 million. During the financial year ended 31 March 2006, it invested a
further R57,3 million in SunWest.
Litigation could impact value
The minimum valuation of 640 cents per RAH share does not take into account any
value for the claim instituted against a subsidiary of Sun International inter
alia for the delivery of a maximum of 768 650 "N" ordinary shares in SunWest at
R75-00 per share together with all dividends declared thereon, since June 2003.
The details of the claim are summarised in the announcement released on SENS on
Wednesday, 17 May 2006.
Irrevocable undertakings considerations
Sun International has irrevocable undertakings to accept the Offer from Allan
Gray Limited ("Allan Gray") and Coronation Capital Limited, representing
approximately 50,9% of the RAH shares in issue, subject to the fulfillment or
waiver of the Offer conditions precedent. As regards the undertaking from Allan
Gray, on behalf of certain of its clients, this undertaking is subject to:
- its clients" mandates continuing; and
- the absence of a direct instruction to the contrary.
This does not preclude these shareholders from accepting a higher offer.
Allan Gray"s irrevocable undertaking to accept the Offer on behalf of its
clients that hold RAH shares may still be revoked by any such client that
believes that his RAH shares should not be sold in this manner. In light of the
board"s views and recommendation, and as Allan Gray"s acceptance of the Offer on
behalf of its clients preceded the publication of such views and recommendation,
clients should independently assess the merits of the Offer and should they not
wish to accept the Offer, immediately instruct Allan Gray accordingly. At the
same time in considering the Offer, RAH shareholders who find the significant
level of irrevocable acceptances procured by Sun International in advance
compelling, should bear in mind that Allan Gray together with its clients hold
41,9% of the issued share capital of Sun International with a current market
value of R3 951 million, and that the considerations of such clients and their
advisers may not necessarily coincide with those of a shareholder who holds only
RAH shares.
Recommended course of action - Do not accept the Offer
Shareholders should bear in mind that the Offer"s closing date has not been
communicated. While the Offer must remain open for a minimum period of 21 days,
it may remain open for a maximum of 60 days (which may be extended further
subject to compliance with the provisions of the Securities Regulation Code on
Take-overs and Mergers and the Rules of the SRP). There is therefore no
imperative now for a shareholder to accept the Offer especially given that the
Offer is conditional and may remain so until the Offer closing date is finally
decided upon by Sun International. In the event that the Offer consideration
were increased, all shareholders, including those that have accepted the Offer
would be entitled to the increased Offer consideration. By accepting the Offer
now shareholders would sterilise their shareholdings and be precluded from
trading their RAH shares and there would be an uncertain time frame within which
they would receive the Offer consideration. In all circumstances, Sun
International is required to give 14 days notice of the Offer closing, thereby
providing ample time to accept the Offer at a later stage should a shareholder
wish to do so. Furthermore, the Offer currently provides a cash underpin to the
RAH share price. The board remains of the view that shareholders should not
accept the Offer as it is neither fair nor reasonable.
In view of the above, caution is no longer required to be exercised by RAH
shareholders when dealing in their securities.
The directors of RAH, collectively and individually, accept responsibility for
the accuracy of the information given in relation to RAH and accordingly certify
that, to the best of their knowledge and belief such information is true and
correct and that, no facts have been omitted which would make any statement in
this announcement false or misleading, and that all reasonable inquiries to
ascertain such facts have been made and that this announcement contains all
information required by law and the SRP Code.
Johannesburg
19 June 2006
Financial adviser
NM Rothschild & Sons (South Africa) (Pty) Ltd
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal Adviser
Deneys Reitz
Independent external adviser to the board
The Standard Bank of South Africa Limited
Notes to editors:
RAH is an investment holding company and holds shareholdings in, inter alia, the
following companies:
- 66,3% of the ordinary shares of Afrisun (RAH holds an effective 89%
economic interest in Afrisun as RAH holds additional shares providing
an additional economic interest in Afrisun Leisure to RAH):
- 42,8% of Ocfish;
- 45% of Life Esidimeni (Proprietary) Limited; and
- 100% of Persetel Q Data Africa Holdings Limited, which holds treasury
shares and cash.
Afrisun holds minority interests in a number of Sun International"s subsidiaries
namely, Afrisun Gauteng (Proprietary) Limited (Carnival City casino), Afrisun
KZN (Proprietary) Limited (Sibaya casino), Emfuleni Resorts (Proprietary)
Limited (Boardwalk casino) and SunWest International (Proprietary) Limited
(GrandWest casino and Table Bay Hotel) as well as shareholdings in National
Casino Resort Manco (Proprietary) Limited and Gauteng Casino Resort Manco
(Proprietary) Limited.
Ocfish holds a 46,5% interest in Oceana, a company listed on the JSE, Oceana is
involved in the fishing and allied Services sector. It engages in the catching,
processing and procurement of marine species including pilchard, anchovy, redeye
herring, lobster, horse mackerel, squid, tuna, abalone, hake and other deep-sea
species. Products are sold through international and local marketing channels.
In addition, Oceana provides extensive cold storage and fruit handling
facilities.
Life Esidimeni (Proprietary) Limited is a public/private partnership that
provides district hospital and health services on contract to provincial
government in South Africa. It has approximately 8 300 beds in 20 facilities and
provides medical services to approximately 300 outpatients at community
hospitals and 7 000 inpatients daily.
Date: 19/06/2006 08:00:06 AM Produced by the JSE SENS Department
