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BRN BRT
BRT
Brimstone - Acquisition of a 10% shareholding in Oceana Group Limited
BRIMSTONE INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/010442/06)
JSE share code: BRT; ISIN: ZAE000015277
JSE share code: BRN; ISIN: ZAE000015285
("Brimstone" or "the Company")
Acquisition of a 10% shareholding in Oceana Group Limited ("Oceana")
1. Introduction
Brimstone has concluded binding Heads of Agreement ("the Heads of
Agreement") with Oceana dated 23 June 2006 to acquire a 10% shareholding in
the ordinary share capital of Oceana for a purchase consideration of R176.4
million (the "Acquisition"). The Heads of Agreement will apply until
definitive transaction agreements are concluded and the Acquisition will
become effective when the Principal Agreement described in 2.1 below
becomes unconditional. The Heads of Agreement will terminate if the
Principal Agreement does not become unconditional.
2. The Acquisition
2.1 Overview and nature of Oceana"s business
A Black Economic Empowerment consortium comprising Brimstone as the
strategic black partner and a black employee share trust to be created
by Oceana will, pursuant to the completion of the transactions
described below, collectively own 22.4% of Oceana"s issued ordinary
share capital. The Acquisition forms part of a series of indivisible
transactions contained in an agreement (the "Principal Agreement")
involving the disposal by Real Africa Holdings Limited ("RAH") and
other minority shareholders of their shares in Ocfish Holding Company
Limited ("Ocfish") to Tiger Brands Limited ("Tiger Brands"), the
subsequent unbundling of Ocfish"s interest in Oceana and the sale by
Tiger Brands of such Oceana shares to Brimstone and the black employee
share trust. Brimstone shareholders are referred to the announcements
issued today by Oceana and RAH for more details on the said
transactions.
Oceana is the holding company of subsidiaries engaged in the fishing
and allied services sector, with interests in catching, processing,
marketing and trading of a wide range of fish and fish products and
the provision of commercial cold storage services.
2.2. Terms of the Acquisition
Brimstone will purchase from Oceana the entire issued ordinary share
capital of a special purpose vehicle (the "SPV") established to house
the 10% shareholding in Oceana, subsequent to the SPV being funded (as
described in 2.3 below) to acquire 11 596 755 Oceana shares from Tiger
Brands (the "Acquisition Shares"). The purchase price payable by the
SPV for the Acquisition Shares is R15.21 per Oceana ordinary share (ex
the 2006 interim dividend), translating into a total purchase
consideration of R176.4 million.
2.3. Financing
It is intended that the SPV will be funded by a combination of a R20
million contribution from Brimstone, third party funding of R76.5
million and vendor financing for the balance of the purchase
consideration. Brimstone will procure that a third party funder will
subscribe for cumulative, non participating, redeemable preference
shares ("Third Party Preference Shares") for an aggregate subscription
price of not less than R76.5 million.
To the extent that the third party funding is not procured within 35
days from the date of signature of the Principal Agreement, Oceana
will be obliged to provide the shortfall of the funding required by
the SPV for the purpose of acquiring the Acquisition Shares on the
same terms as those envisaged for the Third Party Preference Shares.
3. Rationale
Brimstone has invested in the fishing industry for more than 10 years. The
Company was part of the initial empowerment consortium that acquired an
interest in Ocfish, the holding company of Oceana, in 1994. It also has a
21.52% shareholding in Sea Harvest Corporation Limited (a subsidiary of
Tiger Brands) which is a major fishing company focused primarily on the
white fish sector. Post the Acquisition, Brimstone will have significant
interests across all major sectors in the fishing industry in South Africa.
4. Financial effects of the Acquisition
The table below sets out the pro forma financial effects of the Acquisition
on the earnings ("EPS"), headline earnings ("HEPS"), net asset value
("NAV") and tangible NAV per Brimstone ordinary share. The pro forma
financial information has been prepared for illustrative purposes only and
because of its nature may not give a true picture of Brimstone"s financial
position and results of operations, nor the effect and impact of the
Acquisition going forward and is the responsibility of Brimstone"s
directors.
Per Brimstone ordinary share Before After the Percentage
(cents) Acquisition Acquisition change
(cents) (1) (cents) (2)
EPS 91.7 88.1 (3) (3.9)%
HEPS 91.1 87.5(3) (3.9)%
NAV and tangible NAV 216.4 216.9 (4) 0.2%
Number of shares for EPS and 168 002 168 002
HEPS purposes ("000)
Number of shares for NAV and
tangible NAV purposes ("000) 228 813 228 813
Notes:
1. Based on Brimstone"s published audited results for the year ended 31
December 2005.
2. Based on the assumption that the Acquisition was effected on 1 January
2005 for income statement purposes and 31 December 2005 for balance
sheet purposes.
3. After taking into account attributable Oceana investment income.
Further to this, an adjustment has been made to take into account
interest forgone on the portion funded from Brimstone"s cash resources
calculated at an average rate of 6.5% and interest incurred on the
third party and vendor financing at interest rates of 8.8% and 10.5%
respectively.
4. On the basis that no intangible assets are separately recognised, in
accordance with International Financial Reporting Standards.
5. Categorisation
The Acquisition is a Category 3 transaction in terms of the JSE Limited
Listings Requirements. Brimstone shareholders will be advised by way of an
announcement issued on the Securities Exchange News Service when the
Principal Agreement becomes unconditional in accordance with its terms.
Cape Town
26 June 2006
Investment bank and sponsor Corporate law adviser
Nedbank Capital Edward Nathan (Proprietary) Limited
Date: 26/06/2006 04:01:15 PM Produced by the JSE SENS Department
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