| Mon 21 Aug 2006, 9:01 | | Alexander Forbes - Sale of International Risk Serv |
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AFB
AFB
Alexander Forbes - Sale of International Risk Services and further
cautionary
Alexander Forbes Limited
(Incorporated in the Republic of South Africa)
(Registration number 1958/001974/06)
Sharecode: AFB
ISIN code: ZAE000018230
("Alexander Forbes" or the "Company")
Sale of International Risk Services
1. Introduction
Shareholders are referred to the cautionary announcements dated 7
June 2006 and 19 July 2006, in which shareholders were
advised that the Company had entered into discussions with
private investors which could result in the Company reducing
its shareholding in its International Risk Services
business. Shareholders are now advised that Alexander
Forbes International Limited (a wholly owned subsidiary of
the Company) has entered into an agreement to sell its
entire interest in its subsidiary, Alexander Forbes Risk
Services Holdings Limited ("AFRSH") to Lockton International
Holdings Limited ("the Purchaser"), for a total
consideration of approximately GBP86 million, before
adjusting for certain of the outstanding liabilities of
AFRSH ("the transaction").
The majority shareholder of the Purchaser is Lockton Companies Inc.
("Lockton") with a minority equity interest held by Trident
III, L.P., an investment fund managed by Stone Point Capital
LLC, of Greenwich, Connecticut, a private equity firm that
specialises in investments in the global insurance and
financial services industries. Lockton is one of the
largest insurance brokerage firms in the United States and
the tenth largest retail broker worldwide.
AFRSH is the holding company of a group that provides insurance and
reinsurance broking, risk and insurance programme management
and consulting, alternative risk finance, claims management
and insurance products and services in the United Kingdom,
Asia and Latin America.
The transaction is subject to approvals from the South African
Reserve Bank and the Financial Services Authority in the
United Kingdom as well as clearance being received from the
Pensions Regulator in the United Kingdom on the defined
benefit scheme pension arrangements.
The group remains committed to its Risk and Insurance Services
business in Africa and is confident that it will continue to
have the right solutions to meet clients" risk related needs
in all relevant territories. The International Financial
Services and Investment Solutions businesses remain core to
the group"s strategy.
2. Rationale for the transaction
The transaction concludes an extensive review undertaken by the
Company and its advisers of the strategic options for AFRSH.
Following receipt of a number of expressions of interest
during the course of this process, the Board of Alexander
Forbes has concluded that the transaction is in the best
interests of Alexander Forbes" shareholders.
3. Details of the Purchase Consideration
After adjusting for outstanding liabilities, including the AFRSH
defined benefit pension scheme deficit and the deferred
consideration still payable in respect of a number of
previous acquisitions concluded by AFRSH and its
subsidiaries, the net consideration payable in relation to
the transaction will be approximately GBP67.6 million. The
net consideration will be payable as follows:
* GBP64.5 million in cash on completion; and
* GBP3.1 million in loan notes to be issued by the Purchaser.
These loan notes will bear interest at 8% per annum and will
be redeemable on 31 March 2010 but will be subject to
certain set-off rights in respect of potential warranty
claims that the Purchaser may have.
It is expected that the cash proceeds from the transaction will be
used to repay existing interest-bearing debt both in the
United Kingdom and South Africa.
4. Pro-forma financial effects of the transaction
The table below sets out the illustrative financial effects of the
transaction on Alexander Forbes. The unaudited pro-forma
financial effects have been prepared for illustrative
purposes only. Due to the nature of the unaudited pro-forma
financial effects, they may not give a fair reflection of
the financial position and results of operations of
Alexander Forbes after completion of the transaction. The
unaudited pro-forma financial effects are the responsibility
of the Directors of Alexander Forbes.
Before Pro-forma % Change
Cents after the
per transaction
share)1 (cents
per share)
Earnings per
share (2) 3 27 >+100%
Headline
earnings per share (2) 4 4 -
Core earnings per share(2)
116 116 -
Net asset value 364 388 +7%
("NAV") per share (3)
Net tangible asset value (125) (102) +18%
("NTAV") per share (3)
Number/weighted
average number of
shares in issue 443 443 -
(excluding treasury shares)
(millions)
Number/weighted
average number of
shares in issue
(excluding treasury shares)
adjusted for
effects of accounting for 462 462 -
policyholder investments
as treasury shares
(millions)
Notes:
1. Based on the audited consolidated results of the Company for
the year ended 31 March 2006.
2. Earnings, Headline earnings and Core earnings per share effects
have been determined based on the following assumptions:
* The transaction was effective 1 April 2005;
* The cash proceeds of the transaction, net of transaction
costs, have been applied to settling interest-bearing debt
in the United Kingdom of approximately GBP20 million and the
balance, converted at a R/GBP exchange rate of 13.00,
representing approximately the current exchange rate, has
been applied to settling interest-bearing debt in South
Africa with the surplus being held on interest-bearing
deposit; and
* The profit on disposal of approximately GBP8 million (net of
transaction costs) converted at the assumed R/GBP exchange
rate of 13.00, is excluded from Headline and Core earnings
per share calculations.
3. NAV and NTAV per share effects have been determined on the
following assumptions:
* The transaction was effective 31 March 2006; and
* The profit on disposal of approximately GBP8 million (net of
transaction costs) has been converted at the assumed R/GBP
exchange rate of 13.00.
5. Further cautionary announcement
The cautionary announcements published on 7 June 2006 and updated
on 19 July 2006 also referred to discussions regarding a
potential transaction with private equity parties to acquire
the entire issued share capital of the Company. These
discussions are continuing and shareholders are advised to
continue to exercise caution when trading in the Company"s
securities until a further announcement is made.
Sandton
21 August 2006
Sponsor: J.P. Morgan Equities Limited
Date: 21/08/2006 09:01:12 AM Produced by the JSE SENS Department
