| Thu 2 Nov 2006, 12:59 | | CET/Dynamic Joint announcement |
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DYM CAE
DYM CAE
CET/ Dynamic - Joint announcement
Cape Empowerment Trust Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/014606/06)
("CET")
Share Code: CAE
ISIN: ZAE000016952
Dynamic Cables RSA Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/001807/06)
("Dynamic")
Share Code: DYM
ISIN: ZAE000028270
Joint announcement regarding -
- the repositioning of Dynamic as a vehicle to hold interests in grand
parade investments limited ("GPI")
- the disposal of CET"S interests in GPI to Dynamic
- the disposal of Dynamic"s operating subsidiaries to CET
- Dynamic cautionary announcement
1. INTRODUCTION
1.1 Dynamic is a broad-based majority black owned, controlled and
managed black economic empowerment ("BEE") company whose operating
companies are active in the telecommunications, electrical and
engineering sectors. CET holds a shareholding of 52.7% in Dynamic.
1.2 CET is a broad-based majority black owned, controlled and managed
BEE investment company with investments in Dynamic, property
(African Alliance), security services (Alexandra Security) and
gaming (GPI).
1.3 CET and Dynamic are pleased to announce that they have concluded a
series of agreements in terms whereof -
1.3.1 Dynamic will be repositioned to hold investments in the
gaming industry only, and in particular in GPI;
1.3.2 CET will dispose of all its interests in GPI to Dynamic,
and CET will increase its shareholding in Dynamic ("the
GPI Transaction"); and
1.3.3 Dynamic will dispose of all of its operating subsidiaries
to a wholly-owned subsidiary of CET ("the Dynamic
Transaction"),
("the Transactions").
1.4 Dynamic intends to become the single largest shareholder in GPI. The
transactions referred to in this announcement represent the first
concrete steps to realise this objective.
2. REPOSITIONING OF DYNAMIC AND GPI TRANSACTION
2.1 Background
2.1.1 GPI is a Western-Cape based broad-based BEE company. GPI
holds -
2.1.1.1 a shareholding of 19.3% in Sunwest International
(Proprietary) Limited ("Sunwest"), which owns the
Grandwest Casino in the Cape Metropole as well as the
Table Bay Hotel in the V&A Waterfront;
2.1.1.2 a 25% interest in Thuo Gaming, operating as
GrandSlots; and
2.1.1.3 a 38% interest in the Worcester Casino, a new gaming
complex currently being developed near Worcester in
the Breede River Valley.
2.1.2 GPI is the BEE partner to Sun International South Africa
Limited in Sunwest and in the Worcester Casino.
2.1.3 Sunwest in particular is an exceptional asset, as
Grandwest is one of the most successful casinos in South
Africa.
2.1.4 CET has long considered GPI to an undervalued company and
has over the last 18 months accumulated the following
direct and indirect interests in GPI -
2.1.4.1 an effective 3.04% shareholding in GPI, via a 27.72%
shareholding in Sancino Projects Limited ("Sancino"),
which holds a 11% shareholding in GPI;
2.1.4.2 an effective 1.12% shareholding in GPI, via a 54.4%
shareholding in BLRT Investments Limited ("BLRT"),
which holds a 2.06% shareholding in GPI;
2.1.4.3 an effective 1.08% shareholding in GPI, via an
investment agreement with Western Cape Womens
Investment Forum Limited ("WECWIF"), which holds a
2.7% shareholding in GPI;
2.1.4.4 an effective 1.25% shareholding in GPI, via a holding
of 1 000 000 units in the GPI SPV Trust, which
represents an interest in 1 000 000 ordinary shares
in the capital of GPI ("GPI Shares"); and
2.1.4.5 a 0.2% direct shareholding in GPI in the form of 157
884 GPI Shares,
("the CET GPI Interests").
2.1.5 The CET GPI Interests represent an effective interest in
GPI of 6.69%.
2.1.6 In terms of the recently announced broad-based BEE
transaction announced by GPI, Sancino, BLRT and WECWIF are
able to acquire 1 257 142, 309 143 and 236 286 units,
respectively, in the GPI SPV Trust, at a price of R4.00
per unit. Each unit represents an interest in one GPI
share. Assuming that Sancino, BLRT and WECWIF follow their
rights under the GPI broad-based BEE transaction, the CET
GPI Interests will represent an effective interest in GPI
of 7.43%.
2.1.7 CET is continuously presented with opportunities to
acquire additional GPI Shares. In the event of CET
acquiring any such additional GPI Shares in the future,
these shares will be offered to Dynamic.
2.1.8 Sancino, BLRT and WECWIF hold certain other investments
unrelated to GPI.
2.2 Rationale
2.2.1 GPI has indicated that it intends to seek a listing of its
shares on the JSE Limited ("JSE"), but no timeframe for
such listing has yet been published.
2.2.2 CET believes that GPI Shares are generally undervalued.
CET is aware that several independent valuations of GPI
have recently been performed and that these valuations
place an intrinsic value on GPI Shares of between R9 and
R20. However, due to the fact that GPI shares are
currently unlisted, GPI Shares have never changed hands
above R10. CET has explored various mechanisms intended to
unlock the value in its GPI Interests, and believes that
the proposed Transactions will provide a mechanism for the
market to price GPI Shares more effectively.
2.2.3 CET and Dynamic have resolved that Dynamic shall, by way
of the Transactions, be restructured and repositioned such
that it is a JSE listed entity which invests only in the
gaming sector, and in particular in GPI.
2.2.4 It is believed that such restructuring and repositioning
will result in the following benefits -
2.2.4.1 an effective market determination of the value of the
CET GPI Interests, resulting in CET being able to
place a more accurate value on its GPI Interests;
2.2.4.2 the creation of a stable, long term GPI shareholder
with impeccable broad-based BEE credentials;
2.2.4.3 as GPI is currently unlisted, Dynamic will provide
the only listed point of entry into GPI;
2.2.4.4 as a listed entity with the ability to issue new
shares, Dynamic will be ideally positioned to
accumulate additional interests in GPI in line with
its stated objective of becoming the single largest
shareholder in GPI.
2.3 Salient terms of the GPI Transaction
2.3.1 Subject matter
2.3.1.1 CET will dispose of all of the CET GPI Interests to
Dynamic.
2.3.1.2 The disposal of the units in the GPI SPV Trust is
subject to certain approvals and waivers typical to
those encountered in broad-based BEE transactions
being obtained, and will not be proceeded with and
will be excluded from the GPI Transaction if these
are not obtained.
2.3.1.3 CET has provided warranties to the effect that it
owns the CET GPI Interests, that they are
unencumbered, and that they are not subject to pre-
emptive rights.
2.3.2 Purchase price and payment
2.3.2.1 The aggregate purchase price for all the CET GPI
Interests is an amount of R67 500 000 ("the Purchase
Price").
2.3.2.2 The Purchase Price for all of the CET GPI Interests
has been arrived at after placing value on one GPI
Share of R10.00. The non-GPI related investments of
Sancino, BLRT and WECWIF represent approximately 20%
of the transaction value.
2.3.2.3 The Purchase Price shall be paid on the effective
date of the GPI Transaction by way of the allotment
and issue to CET of 54 000 000 new ordinary par value
shares in the capital of Dynamic ("Dynamic Shares")
at a price of R1.25 per share.
2.3.2.4 Following the implementation of the GPI Transaction
CET shall hold 89 203 000 (74%) of the total number
of 120 800 000 Dynamic Shares in issue.
2.3.3 Effective Date
The effective date of the GPI Transaction is 1 January
2007.
2.3.4 Suspensive Conditions
The GPI Transaction is subject to the following suspensive
conditions -
2.3.4.1 the approval by the JSE and Securities Regulation
Panel ("SRP") of the conclusion and implementation of
the GPI Transaction by not later than 15 December
2006;
2.3.4.2 the approval by any other regulatory authority by not
later than 15 January 2007;
2.3.4.3 the approval by Dynamic shareholders in general
meeting of the necessary resolutions required for the
conclusion and implementation of the GPI Transaction
by not later than 15 January 2007;
2.3.4.4 the approval by CET shareholders in general meeting
of the necessary resolutions required for the
conclusion and implementation of the GPI Transaction
by not later than 15 January 2007; and
2.3.4.5 the Dynamic transaction becoming unconditional by not
later than 15 January 2007.
2.4 The Code
2.4.1 In terms of the Securities Regulation Code on Takeovers
and Mergers ("the Code"), the acquisition by Dynamic of
the shares in BLRT and the WECWIF interests in terms of
the GPI Transaction may constitute "affected
transactions", and Dynamic may be obliged to extend
mandatory offers to the other shareholders of BLRT and
WECWIF to acquire their shares on similar terms.
2.4.2 If and when such offer is to be made, Dynamic shall
publish a suitable announcement.
2.5 Change of name
At the meeting of Dynamic shareholders to be convened to consider
the GPI Transaction, Dynamic shareholders will also be requested to
approve a new name for Dynamic to reflect its new identity.
3. DYNAMIC TRANSACTION
3.1 Background and Rationale
3.1.1 In the light of the fact that Dynamic will henceforth
focus exclusively on its gaming interests, it is
appropriate to dispose of its existing operations and
assets, all of which are housed in wholly-owned
subsidiaries ("the Dynamic Subsidiaries").
3.1.2 Dynamic and CET have agreed that Dynamic will dispose of
the Dynamic Subsidiaries to CET for a consideration equal
to the market value thereof.
3.1.3 The Dynamic Transaction is expected to benefit both CET
and the Dynamic Subsidiaries, as the Dynamic Subsidiaries,
as wholly-owned subsidiaries of CET, will have a
substantially improved BEE status, and CET will be able to
access the cash flows of the Dynamic Subsidiaries.
3.2 Salient terms of the Dynamic Transaction
3.2.1 Subject matter
3.2.1.1 Dynamic will dispose of all of its shares in the
capital of, and all of its claims on loan account
against, the Dynamic Subsidiaries to CET.
3.2.1.2 Dynamic has provided warranties to the effect that it
owns the Dynamic Subsidiaries, that they are
unencumbered, and that they are not subject to pre-
emptive rights.
3.2.2 Purchase price and payment
3.2.2.1 The aggregate purchase price for all the Dynamic
Subsidiaries is an amount of R50 000 000 ("the
Purchase Price").
3.2.2.2 The Purchase Price shall be paid within a period of 6
months following the effective date of the Dynamic
Transaction, at the election of CET -
3.2.2.2.1 in the event that CET has acquired additional
GPI Shares as contemplated in paragraph 2.1.7
above, by way of the transfer of such GPI Shares
at a price of R10 per GPI Share; or
3.2.2.2.2 by way of the delivery of Dynamic Shares at a
price of R1.25 per Dynamic Share; or
3.2.2.2.3 in cash,
or by way of a combination of the aforegoing.
3.2.2.3 To the extent that the Purchase Price is paid in
cash, it will attract interest at the Prime Rate less
2% from the effective date to the date of payment.
3.2.2.4 CET"s obligations to pay the Purchase Price will be
secured by way a cession and pledge of the shares in
and loan accounts against the Dynamic Subsidiaries.
3.2.3 Effective Date
The effective date of the Dynamic Transaction is 1 January
2007.
3.2.4 Suspensive Conditions
The Dynamic Transaction is subject to the following
suspensive conditions -
3.2.4.1 the approval by the JSE and SRP of the conclusion and
implementation of the Dynamic Transaction by not
later than 15 December 2006;
3.2.4.2 the approval by any other regulatory authority by not
later than 15 January 2007;
3.2.4.3 the approval by Dynamic Shareholders in general
meeting of the necessary resolutions required for the
conclusion and implementation of the Dynamic
Transaction by not later than 15 January 2007; and
3.2.4.4 the approval by CET Shareholders in general meeting
of the necessary resolutions required for the
conclusion and implementation of the Dynamic
Transaction by not later than 15 January 2007; and
3.2.4.5 the GPI transaction becoming unconditional by not
later than 15 January 2007.
3.3 The Code
3.3.1 In terms of the Code, the disposal by Dynamic of the
Dynamic Subsidiaries in terms of the Dynamic Transaction
constitutes an "affected transaction". In terms of Rule
29(d) of the Code CET shall not be entitled to vote on the
disposal of the Dynamic Subsidiaries.
3.3.2 Dynamic and CET shall comply with any resultant
obligations under the Code.
4. CATEGORISATION AND RELATED PARTY TRANSACTIONS
4.1 From a CET perspective the Transactions are, cumulatively,
categorised as a "category 1" transaction and requires shareholder
approval.
4.2 From a Dynamic perspective the Transactions are categorised as a
reverse take-over and requires shareholder approval.
4.3 Because Dynamic is a subsidiary of CET, the Transactions are, from a
Dynamic perspective, classified as "related party transactions".
4.4 Accordingly -
4.4.1 Dynamic is required to obtain an independent opinion as to
whether the terms and conditions of the Transactions are
fair and reasonable to Dynamic shareholders; and
4.4.2 CET shall not be entitled to be counted for purposes of
determining whether a quorum is present or to vote on the
proposed resolutions of Dynamic shareholders relating to
the Transactions.
5. UNAUDITED PRO FORMA FINANCIAL EFFECTS
On CET
The table below illustrates the unaudited pro forma financial effects of
the Transactions, based on the published reviewed interim results of CET
for the six months ended 30 June 2006. The preparation of the unaudited
pro forma financial effects is the responsibility of the directors of the
company. The unaudited pro forma financial effects have been prepared for
illustrative purposes only to provide information on how the Transactions
may have impacted on CET"s results and financial position. Due to the
nature of the unaudited pro forma financial effects, they may not give a
fair reflection of the company"s financial position.
Before(1) After(2) % Change
Eearnings
per share (cents) 12.5 13.1 4.6
Headline
earnings per share (cents) 12.5 13.1 4.6
Net asset value
per share 71.0 87.4 18.8
Tangible net asset value
per share 54.1 70.5 23.3
Number and weighted number
of shares in issue (`000) 175 767 175 767
Notes:
1 The figures in the "before" column are extracted from the published
reviewed interim results of CET for the six months ended 30 June
2006.
2 The "after" column assumes that the Transactions were concluded and
implemented on 1 January 2006 for earnings purposes and on 30 June
2006 for net asset value purposes, with the following underlying
assumptions:
i CET settled the purchase consideration of the Dynamic
Transaction in cash;
ii The after-tax earnings include earnings attributable to the
Dynamic Subsidiaries of R5 892 000 and an effective 73.8% of
the after-tax earnings attributable to the CET GPI Interests of
R10 445 000 for the period;
iii The purchase consideration will be fully funded by borrowings
at an after-tax cost of borrowings for CET of 8.4% per annum;
and
iv As the group retains control of the net assets of the Dynamic
Subsidiaries, no adjustments have been made to the goodwill
raised on initial consolidation of Dynamic.
On Dynamic
The table below illustrates the unaudited pro forma financial effects of
the Transactions, based on the published reviewed interim results of
Dynamic for the six months ended 30 June 2006. The preparation of the
unaudited pro forma financial effects is the responsibility of the
directors of the company. The unaudited pro forma financial effects have
been prepared for illustrative purposes only to provide information on
how the Transactions may have impacted on Dynamic"s results, financial
position and changes in equity. Due to the nature of the unaudited pro
forma financial effects, they may not give a fair reflection of the
company"s financial position and changes in equity.
Before After % Change
Earnings
per share (cents) 8.8 9.7 9.8
Headline
earnings per share (cents) 8.8 9.7 9.8
Net asset value
per share 46.3 98.3 112.3
Tangible net asset value
per share 32.5 98.3 202.4
Number and weighted number of
shares in issue
(`000) 66 800 120 800
Notes:
1 The figures in the "before "column are extracted from the published
reviewed interim results of Dynamic for the six months ended 30 June
2006.
2 The figures in the "after" column assume that the Transactions were
implemented on 1 January 2006 for earnings purposes and on 30 June
2006 for net asset purposes, with the following underlying
assumptions:
i Dynamic received R50 000 000 in cash in consideration for the
shares in and loans against the Dynamic Subsidiaries;
ii Dynamic settled the purchase consideration of the GPI
transaction by the issue of 54 000 000 ordinary shares at
R1,25;
iii The after tax earnings include earnings attributable to the CET
GPI Interests of R10 445 000 and exclude after tax earnings
attributable to the Dynamic Subsidiaries of R5 892 000 for the
period; and
iv The net after tax return on cash holdings was 4.9% per annum.
6. CIRCULARS
Circulars to CET and Dynamic shareholders, containing all requisite
information pertaining to the Transactions, and convening meetings of
shareholders of CET and Dynamic respectively, are being prepared. As the
Transactions, from a Dynamic perspective are categorised as a reverse
take-over, the circular to Dynamic shareholders will contain the revised
listing particulars of Dynamic ("revised listing particulars") and must
in terms of the JSE Listings Requirements be provided to shareholders
within 28 days of this announcement, failing which the listing of Dynamic
may be suspended. Dynamic shareholders are advised that the continued
listing of Dynamic is subject to JSE approval of the transaction circular
and the revised listing particulars.
7. DYNAMIC CAUTIONARY ANNOUNCEMENT
Dynamic is involved in further discussions and negotiations which, if
successfully concluded, may have an impact on the price at which the
company"s shares trade on the JSE. Dynamic shareholders are advised to
exercise caution in dealing with their Dynamic shares until such time as
a further announcement has been published in this regard.
Cape Town
2 November 2006
Corporate advisor and sponsor
Sasfin Capital
(A Division of Sasfin Bank Limited)
Legal Advisor
Hofmeyr Herbstein & Gihwala Inc
Date: 02/11/2006 12:00:13 PM Produced by the JSE SENS Department
