| Fri 15 Sep 2006, 17:16 | | Metrofile Holdings - Rights Offer and Acquisition |
|
MFL
MFL
Metrofile Holdings - Rights Offer and Acquisition of Minority Interests
Metrofile Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MFL & ISIN: ZAE000061727
("Metrofile Holdings" or "the Company")
RIGHTS OFFER AND ACQUISITION OF MINORITY INTERESTS
INTRODUCTION
Shareholders are advised that, further to the announcement on Friday, 14
July 2006, Metrofile Holdings will:
- be recapitalised by means of a rights offer, in an aggregate amount of
R142 million by the issue of 188 897 403 Metrofile Holdings shares at
an issue price of 75 cents per share, in a ratio of 255 rights offer
shares for every 100 Metrofile Holdings shares held on the record date
of the rights offer("the rights offer"), which rights offer is to be
fully underwritten by Sabvest Financial Services (Proprietary) Limited
("SFS"), a wholly owned subsidiary of Sabvest Limited ("Sabvest");
- acquire the cumulative 35% interest held by the minority shareholders
in the issued share capital of Metrofile (Proprietary) Limited
("Metrofile")("the acquisition of the minority interests")in
consideration for the issue of a cumulative 35% interest in Metrofile
Holdings, following the rights offer and the buy-back mentioned below;
- buy-back and cancel the existing 7 million treasury shares held by MGX
Management Services (Proprietary) Limited ("MGX Management Services");
and
- place 10 million Metrofile Holdings shares under the control of the
directors to issue for cash under a general authority should this be
required for the settlement of other group liabilities and contingent
liabilities,
together "the capital reorganisation".
THE RIGHTS OFFER
Background
On 30 June 2006, Metrofile Holdings owed R89 million to external creditors
represented by interest-bearing loan notes which are convertible into
Metrofile Holdings shares if they are not repaid by 4 March 2009. These
loan notes will total R95 million with interest to early December 2006,
which is when it is anticipated they will be settled from the rights offer
proceeds. These loan notes are also secured by inter-company loan notes of
R291 million, which may be convertible to the benefit of external creditors
if the external loan notes are not paid by the due date. Metrofile Holdings
had R28.3 million of other third party liabilities which will total R29.5
million by December 2006. Further, the costs of the capital reorganisation
will be about R6.5 million. Accordingly, the cash required for actual
outlays is expected to be R131 million as at December 2006.
The directors of Metrofile Holdings have therefore resolved to propose that
Metrofile Holdings raises R142 million through a fully underwritten rights
offer to its shareholders. The proceeds raised from the rights offer will
be used to repay the abovementioned liabilities of R131 million in
Metrofile Holdings, and retain the balance to settle other remaining
liabilities and contingent liabilities that may become actual obligations.
THE ACQUISITION OF MINORITY INTERESTS
Background
Immediately after the rights offer is implemented, the directors propose
that Metrofile Holdings acquires the minority interests in Metrofile from
Mineworkers Investment Company (Proprietary) Limited ("MIC") (25%), Sabvest
(5%) and management (5%). Metrofile is the South African market leader in
the management of business records through its 16 storage centres and
locations throughout South Africa, and is the only material asset of
Metrofile Holdings.
The board of Metrofile Holdings ("the board")believes that the acquisition
of minority interests will:
- align the interests of Metrofile"s BEE partner, executive management
and directors at the same level with all its shareholders;
- establish the shareholding structure that was originally intended when
these parties were introduced to Metrofile Holdings and its
subsidiaries ("the group") as shareholders but was not possible at the
holding company level at the time due to the volume and complexity of
the liabilities and contingent liabilities at that level;
- enable Metrofile Holdings to access and better plan the cash flows of
its subsidiary, Metrofile, and deal with the assets of Metrofile in
accordance with future corporate strategy, without the need to obtain
the consent of the minority shareholders in the subsidiary, as it will
now be wholly owned;
- increase the market capitalisation of Metrofile Holdings which will be
attractive to new investors;
- strengthen the group to facilitate future corporate strategy; and
- provide future liquidity for MIC, Sabvest and executive management
after the expiry of their lock in periods.
The consideration payable for the acquisition will be settled through the
issue of Metrofile Holdings shares to the minorities pro rata in number so
that after the issue the Metrofile Holdings shares held by the existing
shareholders in Metrofile Holdings will still represent 65% of the value of
Metrofile and the shares held by the minorities will still represent 35% of
the value of Metrofile.
The monetary consideration will be the number of Metrofile Holdings shares
issued calculated as above at the average market price per share on the
five trading days prior to such issue. The market price will not affect the
number of Metrofile Holdings shares to be issued as it is the intention
that the existing shareholders and the minorities will have the same
effective percentage interests in Metrofile before and after the
transaction.
Effective date
The effective date of the acquisition of minority interests is expected to
be on or about 30 November 2006.
SETTLEMENT OF CONTINGENT LIABILITIES
The board estimates that there are contingent liabilities in the group of
about R10 million in respect of:
- a possible deficit in a group pension fund;
- warranties relating to the sale of previous businesses owned by the
group; and
- claims that may potentially be due to creditors.
The board has resolved to propose that 10 million Metrofile Holdings shares
be placed under the control of the directors to issue for cash to settle
these contingent liabilities should it be required.
ORGANISATION OF THE SHARE CAPITAL OF METROFILE HOLDINGS
Metrofile Holdings has insufficient authorised and unissued shares
available to implement the capital reorganisation. Accordingly, the
directors propose, subject to the requisite approval of shareholders being
obtained in general meeting, that:
- Metrofile Holdings increases its authorised share capital from R0.6
million to R3.1 million through the creation of 400 million ordinary
shares with a par value of 0.6416 cents each that will rank pari passu
in all respects with the ordinary shares already in issue; and
- 336 796 214 authorised but unissued ordinary shares, sufficient to
meet the requirements of the rights offer, the acquisition of the
minority interests and the settlement of the contingent liabilities,
be placed under the control of the directors who will allot and issue
such shares for cash and in exchange for minority interests, without
restriction on all or any such shares.
PRO FORMA FINANCIAL EFFECTS
The value of the net assets/(net liability) that are subject to the
transaction is (R265 million). The profits attributable to the net assets
are R18.5 million.
The pro forma financial information is the responsibility of the directors.
The pro forma financial effects set out below have been prepared to assist
shareholders to assess the impact of the capital reorganisation on the
earnings, headline earnings, adjusted headline earnings, net asset value
and tangible net asset value per Metrofile Holdings ordinary share. The
material assumptions are set out in the notes following the table. These
pro forma financial effects have been disclosed in terms of the Listings
Requirements of the JSE Limited ("JSE") for illustrative purposes only and
do not constitute a representation of the future financial position of
Metrofile Holdings on completion of the capital reorganisation. There will
be no financial effects from the share repurchase of the treasury shares.
Before the After the Change
capital rights offer
reorganisation only
(cents) (cents) (%)
Earnings per share 27.5(1) 12.7 (51.2)
Headline earnings per 24.1(1) 11.8 (53.9)
share
Earnings adjusted per 15.5(1) 9.5 (38.5)
share
Headline earnings 12.1 (1) 8.6 (28.7)
adjusted per share
Net liability per (412.8) (3) (55.5) 86.5
share
Tangible net liability (412.8) (3) (55.5) 86.5
per share
After Change After rights Change
minority offer and
acquisition minority
only acquisition
(cents) % Cents (%)
Earnings per 13.4 (51.3) 10.5(2) (61.8)
share
Headline 12.3 (49.1) 9.9(2) (58.8)
earnings per
share
Earnings 9.4 (39.0) 8.4(2) (45.3)
adjusted per
share
Headline 8.3 (31.1) 7.9(2) (34.8)
earnings
adjustedper
share
Net liability (85.3) 79.3 (13.0)(4) 96.9
per share
Tangible net (129.3) 68.7 (35.4)(4) 91.4
liability per
share
Notes:
1. The earnings and headline earnings per share in the "Before the
capital reorganisation" column of the table are based on the reviewed
income statement of Metrofile Holdings for the financial year ended 30
June 2006 and 67 200 389 Metrofile Holdings shares in issue (being the
weighted average number of shares in issue for the year ended 30 June
2006, net of the treasury shares).
Headline earnings per share were 24,1 cents. Included in the headline
earnings of R16,2 million are non recurring dividends received of R2
million and tax reversals of R6,4 million. If these non recurring
amounts are excluded from headline earnings, headline earnings per
share would be 12,1 cents. Shareholders are referred to the financial
review section of the annual results announcement
2. Headline earnings have been adjusted with an interest charge that
will no longer be applicable if these liabilities have been settled at
the holding company level after the rights offer. There is no tax
effect for the adjustment as there was no income at the holding
company level against which to deduct the interest charge and no
deferred tax asset was raised. Headline earnings have been adjusted to
include the minority interest after the minority acquisition.
3. The earnings and headline earnings per share in the "after the rights
offer and minority acquisition" column of the table are based on 326
796 214 Metrofile Holdings shares in issue on the assumption that the
capital reorganisation is effective from 1 July 2005.
4. The net liability value per share and tangible net liability value per
share in the "Before the capital reorganisation" column of the table
are based on the reviewed balance sheet of Metrofile Holdings at 30
June 2006 and 67 200 389 Metrofile Holdings shares in issue(excluding
the treasury shares).
5. The net liability value per share and tangible net liability value per
share in the "after the rights offer and minority acquisition" column
of the table are based on the issue of 326 796 214 Metrofile Holdings
shares in terms of the rights offer and the acquisition of minority
interests in Metrofile on the assumption that the capital
reorganisation is effective 30 June 2006.
6. The acquisition of minority interests will be at the average trading
price on the five days after the shares trade ex rights. For financial
effect calculations purposes, the average trading price have been
assumed at 75 cents per share.
The pro forma financial effects have been reviewed by Metrofile
Holdings" auditors, Deloitte & Touche ("Deloitte").
INDEPENDENT EXPERT"S OPINION
SFS has underwritten the rights offer, pursuant to which SFS may become a
material shareholder in Metrofile Holdings. Sabvest is guarantor to SFS.
Chris Seabrooke is Chairman of Metrofile Holdings, Chief Executive Officer
of SFS and Sabvest and a material shareholder in Sabvest.
In addition, MIC is a material shareholder (as defined in the Listings
Requirements of the JSE) in a subsidiary company of Metrofile Holdings,
namely Metrofile.
The acquisition of the minority interests in Metrofile is therefore a
related-party transaction. Accordingly, a fair and reasonable opinion is
being prepared by Deloitte Corporate Finance in terms of paragraph 10.4 of
the JSE Listings Requirements, the outcome of which will be made public in
a further announcement to shareholders to be released on or about 27
October 2006.
DOCUMENTATION
A circular containing the details of the creation of the shares required to
implement the capital reorganisation and placing the shares pursuant to the
rights offer under the control of the directors will be posted to
shareholders on or about Friday, 15 September 2006.
A circular containing the details of the capital reorganisation will be
posted to shareholders at a later date to be advised.
NOTICE OF GENERAL MEETING
A general meeting of Metrofile Holdings shareholders will be held at 09h00
at the offices of attorneys Webber Wentzel Bowens, 10 Fricker Road, Illovo
Boulevard, Johannesburg on Monday, 9 October 2006 for the purposes of
considering and, if deemed fit, adopting the requisite resolutions to
create the requisite number of shares in respect of the capital
reorganisation, and to place the shares in respect of the rights offer
under the control of the directors.
A second general meeting will be convened at a later date to consider and,
if deemed fit, adopt the requisite resolutions to:
- approve the acquisition of the minority interests;
- place the shares created in respect of the acquisition of the minority
interests and the settlement of the contingent liabilities under the
control of the directors, and authorise the directors of the Company
to issue and allot the newly created shares;
- approve the terms of the underwriting of the rights offer; and
- approve the buy-back by Metrofile Holdings of the treasury shares from
MGX Management Services.
Shareholders will be advised of the details of this meeting at a later
date.
SALIENT DATES AND TIMES
2006
Last day to lodge forms of proxy Thursday, 5 October
General meeting of shareholders at Monday, 9 October
09:00
Announce results of general meeting on Monday, 9 October
SENS
Announce results of the general Tuesday, 10 October
meeting in the press
Note:
Unless otherwise indicated, all times are South African times.
Shareholders will be notified of the important dates and times in respect
of the rights offer in due course.
Johannesburg
15 September 2006
Investment bank and sponsor
Standard Bank
Attorneys
Webber Wentzel Bowens
Joint attorneys
Charl du Plessis Attorneys
Reporting accountants and auditors
Deloitte & Touche
Registered Auditors
Date: 15/09/2006 05:16:07 PM Produced by the JSE SENS Department
