| Wed 21 Jun 2006, 14:30 | | IFS - Rights Offer and Acquisition |
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IND
IND
IFS - Rights Offer and Acquisition
INDEPENDENT FINANCIAL SERVICES LIMITED
(Registration No. 1950/037061/06)
Share Code: IND & ISIN Code: ZAE000025300
("IFS" or "the company")
RIGHTS OFFER AND ACQUISITION OF THE SHARES IN, AND SHAREHOLDERS" CLAIMS AGAINST,
ALLCARE ADMINISTRATORS (PROPRIETARY) LIMITED
INTRODUCTION
Further to the cautionary announcement dated 2 May 2006, shareholders are
advised that IFS:
- intends implementing a rights offer to its shareholders (the "rights
offer"); and
- has concluded an agreement ("the agreement") for the acquisition of all of
the shares in, and shareholders" claims against, Allcare Administrators
(Proprietary) Limited ("Allcare") on the terms set out below (the
"acquisition");
(collectively, the "transactions").
In addition to the transactions, IFS will (subject to the necessary
shareholders" and JSE Limited ("JSE") approval):
- increase its authorised share capital from 34 000 000 shares of 1 cent each
to 1 000 000 000 shares of 1 cent each ("the increase of IFS"s share
capital");
- change the name of the company from Independent Financial Services Limited
to Makadebona Holdings Limited; and
- amend the main object of the company to reflect its main business in
keeping with its future activity as a holding company.
RIGHTS OFFER
IFS is offering for subscription by way of a renounceable rights offer to IFS
shareholders ("shareholders") and/or their renouncees a total of 51 000 000 new
IFS shares ("rights shares") at a subscription price of 8.82 cents per rights
share, in the ratio of 1.5 rights shares for every share held by shareholders.
Shareholders shall be entitled to accept, renounce or sell their rights or allow
them to lapse, but will not be entitled to apply for additional shares in excess
of their entitlement.
The rights offer is intended to raise working capital to enable the company to
pursue strategic acquisitions and to introduce Sandile Zungu and Zungu
Investments Company (Proprietary) Limited ("Zungu Investments") as key strategic
empowerment shareholders and partners in the company in the manner contemplated
below.
The rights issue has been fully underwritten (at no cost to the company) by DNR
Capital, a division of DNR Corporate Advisors (Proprietary) Limited.
DNR Capital, which holds 78,69% of the entire issued share capital of IFS (and
as such will be entitled to 40 130 043 rights shares) has agreed to renounce its
rights in respect of 25 000 000 rights shares in favour of Zungu Investments. As
a result, Zungu Investments will, after the rights offer, own 25 000 000 shares
in the company, which will comprise approximately 29,4% of the issued share
capital of the company prior to the acquisition.
The rights offer is conditional on the increase of IFS" share capital.
THE ACQUISITION
The company, through its wholly owned subsidiary Fluxrab Investments No.135
(Proprietary) Limited ("purchaser"), has agreed to acquire 100% of the shares in
and shareholders" claims against (collectively "sellers" equity") Allcare with
effect from 1 July 2006 from M-Power Health (Proprietary) Limited ("M-Power"),
Howard Jonathan Phillips, David Kuper, Sonia Rachel Kuper, Morris Jack Kuper and
the trustees for the time being of the Harold Serebro Family Trust
(collectively, the "sellers").
The purchase consideration for the seller"s equity shall be a maximum of R206
million to be discharged as follows ("purchase consideration"):
- an initial payment to the sellers" of R152 million on the closing date (as
that term is defined in the agreement)("closing date") in cash;
- the issue to the sellers on the closing date of 16 000 000 IFS shares at an
issue price of R1,00 each; and
- a deferred payment (payable only to certain of the sellers), if the net
profit before tax of Allcare for the twelve month period ending on 31
December 2007 ("2007 PBT") as determined in terms of the agreement exceeds
R40 666 667, of:
- R3,00 for every R1,00 above R40 666 667 up to R50 million; and
- R2,00 for every R1,00 above R50 million, up to a maximum deferred payment
of R38 million, payable in cash on the third business day after the date
upon which the 2007 PBT has been finally determined in accordance with the
agreement.
ALLCARE
Allcare, which was established in 1969, is an accredited administrator of
medical aid schemes currently covering in excess of 220 000 lives through the
administration of seven medical schemes (four of which are restricted schemes
and three of which are open to the public). Having grown significantly over the
past decade, Allcare is well positioned to continue to grow its membership base
through a combination of acquisitive and organic growth.
Allcare, the recipient of the PMR Diamond Arrow award as the best medical aid
administrator for the past five years:
- employs in excess of 300 staff with a head office in Sandton and branch
offices throughout the country; and
- operates a sophisticated information technology system, enabling timeous
and accurate reporting to the trustees of the various schemes under its
administration. This in turn enables the trustees to make objective
decisions in a dynamic environment.
Allcare has implemented clear and comprehensive black economic empowerment
strategy in all areas including ownership, management and employment equity.
This strategy will be maintained after the acquisition.
Stakeholders in Allcare, which include schemes under Allcare`s administration,
trustees of all schemes, corporate clients and individual members, should note
that the day to day operational management team of Allcare remains in place
after the acquisition which ensures, inter alia, the continuity and stability of
Allcare"s service excellence and Allcare"s organisational structure. In
addition, Allcare shall continue to operate under the same name and corporate
identity.
RATIONALE FOR THE ACQUISITION
The acquisition is the first transaction in the context of IFS" stated objective
of becoming a diversified empowered holding company, investing in various
sectors of the economy through acquisitive activity in the short to medium term.
Through the purchaser, whose name will be changed to Makadebona Healthcare (Pty)
Ltd, IFS and existing Allcare management will focus on developing and growing
the Allcare business, via a combination of organic and acquisitive growth. In
this regard a listed vehicle provides enhanced credibility and access to capital
and debt markets largely unavailable to private companies.
Certain of the beneficial shareholders of Allcare will receive a portion of
their consideration in IFS shares, which together with the introduction of Zungu
Investments as a shareholder in the company as indicated above, will result in
the maintenance of the status of IFS as an empowered company with the percentage
shareholding held by black persons above 26%.
CONDITIONS PRECEDENT TO THE ACQUISITION
The acquisition is subject to the following conditions precedent being fulfilled
by the following respective dates:
- the requisite shareholder approval being obtained by M-Power in terms of
section 228 of the Companies Act to approve its sale of its shares in and
claims against Allcare, by 19 June 2006;
- the purchaser delivering to the sellers irrevocable undertakings from
shareholders of the company with sufficient votes to approve the
acquisition and, if applicable, the increase of IFS"s share capital, to
procure that the company calls and hold the necessary general meeting and
to vote in favour of the resolutions to be proposed thereat, by 26 June
2006;
- written service contracts (incorporating restraint of trade undertakings)
being entered into between Allcare and certain of its key executives, by 30
June 2006;
- the completion of a due diligence investigation to the satisfaction of the
purchaser, by 10 July 2006;
- the receipt by the sellers, by 10 July 2006, of a letter of comfort
acceptable to the sellers, in which a financial institution acceptable to
them confirms that it is confident that the purchaser will be able to
discharge the purchase consideration;
- the approval of the acquisition, to the extent necessary, by the Registrar
of Medical Schemes, by 10 July 2006;
- the purchaser obtaining the finance required by it from such financial
institution as it may determine in order to enable it to make payment of
the aforesaid cash portion of the purchase consideration, by 10 July 2006;
- the requisite shareholder approvals being obtained at the general meeting
of shareholders of the company in respect of the acquisition and, if
applicable, the increase of IFS"s share capital, by 31 August 2006;
- the approval, to the extent necessary of the JSE and the Securities
Regulation Panel, by 31 August 2006; and
- the approval, to the extent necessary, in terms of the Competition Act
No.89 of 1998, by 30 September 2006, or, in the event that such approval is
given subject to certain conditions, then the sellers and the purchaser
confirming by such date that such conditions are acceptable to them.
FINANCIAL EFFECTS AND PROFIT FORECAST OF THE TRANSACTIONS
The pro forma financial effects of the transactions on the value of the net
assets, net tangible assets, historical earnings and headline earnings per share
of IFS are still in the process of being finalised and will be announced
(together with a profit forecast for IFS for the 12 months ended 30 June 2007)
as soon as they are complete. Shareholders are advised to continue exercising
caution when dealing in the company"s shares until such announcement is made.
CIRCULAR
A circular setting out full terms and conditions and salient dates and times of
the transactions together with a letter of allocation in respect of the rights
offer, will be posted to shareholders in due course.
Rosebank
20 June 2006
Sponsor
Java Capital (Proprietary) Limited
Legal advisor to the company and certain sellers
Fluxmans Attorneys
Legal advisor to certain sellers
MJ King Inc. Attorneys
Reporting accountants and auditors
PKF (Jhb) Inc
Date: 21/06/2006 02:30:18 PM Produced by the JSE SENS Department
