| Fri 3 Nov 2006, 16:38 | | Tiwheel - Proposed Unbundling |
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TIW
TIW
Tiwheel - Proposed Unbundling
TIGER WHEELS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1970/011662/06)
Share code: TIW ISIN: ZAE000007407
("Tiwheel" or "the group")
PROPOSED UNBUNDLING AND SEPARATE LISTING OF TIGER AUTOMOTIVE LIMITED ("TAL"),
REPURCHASE AND CANCELLATION OF 2 298 496 TIWHEEL SHARES HELD BY WHOLLY-OWNED
SUBSIDIARY AND NOTICE OF A GENERAL MEETING OF SHAREHOLDERS OF TIWHEEL
1. Introduction
On 11 July 2006 the board of directors of Tiwheel ("the board"), announced its
intention to unbundle the group"s entire shareholding in its South African
retail business, Tiger Wheel & Tyre (Proprietary) Limited ("TWT") and its
wholesale tyre businesses in the United Kingdom and South Africa to Tiwheel
ordinary shareholders ("Tiwheel shareholders"), and to list these as a separate
entity, namely Tiger Automotive Limited ("TAL") on the JSE Limited ("JSE")
before the end of 2006, subject to regulatory and shareholder approvals ("the
unbundling").
The board has resolved, subject to the fulfilment of the conditions precedent
detailed in 5.3 below ("the conditions precedent"), to distribute 59 601 505 TAL
ordinary shares ("the TAL distribution shares") to Tiwheel shareholders and for
application to be made for the separate listing of the TAL distribution shares
on the JSE. In order to facilitate the unbundling the board has resolved to
repurchase and cancel 2 298 496 Tiwheel shares currently held by TWT ("the
treasury shares"), to amend the current Tiwheel share incentive scheme and to
adopt a new share incentive scheme for TAL.
The TAL distribution shares will, subject to the fulfilment of the conditions
precedent, be distributed to Tiwheel shareholders in the ratio of one TAL
distribution share for every Tiwheel ordinary share ("Tiwheel share") held by a
Tiwheel shareholder recorded in the register of Tiwheel shareholders ("the
register") on Friday, 15 December 2006 ("the record date").
2. Background to the unbundling
Tiwheel was founded when, then motor racing driver and now executive chairman,
Eddie Keizan acquired a controlling shareholding in a small wheel production and
retail business in downtown Johannesburg. Tiwheel became a market leader in its
field in South Africa and helped pioneer and develop the country"s alloy wheel
industry to one with world class status.
By 1987, when it was listed on the JSE, Tiwheel had evolved into a vertically
integrated, predominantly after-market-focused business consisting of wheel
manufacture, on the one hand, and the wholesaling and retailing of wheels and
tyres, on the other.
In 1998, Tiwheel - by then internationally recognised - acquired a 74 per cent
shareholding in German-based aluminium wheel manufacturer ATS
Beteiligungsgesellschaft mbH ("ATS" or"ATS group"), a predominantly original
equipment ("OE") wheel producer and supplier. Subsequent to the ATS acquisition,
which introduced Tiwheel to the heart of the wheel production arena in Europe,
Tiwheel"s wholly-owned wheel plant in Babelegi (north of Pretoria) - developed
in 1999 as both an OE and after-market wheel producer - was integrated into the
ATS group manufacturing operations.
Changing market conditions, such as increasingly stringent production processes
and quality standards demanded by international automotive manufacturers, made
it difficult for OE and after-market wheels to be technologically and, at the
same time, cost-efficiently, manufactured under the same roof. This led to the
five manufacturing plants in the ATS group - in South Africa, Germany, Poland,
and two in the USA - being predominantly dedicated to meeting the OE wheel
requirements of some 25 primarily premium-class auto manufacturers worldwide.
These include, Mercedes, BMW, Chrysler, Audi, Ford, Mazda, Nissan, Jaguar,
Volvo, Porsche, Peugeot, General Motors, Opel, and Volkswagen. Tiwheel"s SA, UK
and international after-market retail and wholesale operations and the ATS
wholesale operations now source most of their aftermarket wheel requirements
from more cost-competitive licensed producers in countries in Asia and
elsewhere.
A full 87 percent of the revenue of ATS group is generated outside South Africa
while, in direct contrast, 80 per cent of the revenue of its after-market
trading activities emanate from within South Africa.
3. Rationale for the unbundling
The rationale for the unbundling and separate listing of TAL, as also stated in
the pre-listing statement of TAL, which is published and posted to Tiwheel
shareholders today, includes the following:
- The after-market retail and wholesale operations ("the TAL operations") of
the group have now grown and matured to a size that warrants its own listing on
the JSE;
- Tiwheel"s 74 per cent-owned German-based ATS wheel manufacturing operations
(including the South African Babelegi factory)("the ATS operations") are
predominantly dedicated to the manufacture of original equipment for business,
while the TAL operations are concentrated on the after-market and source their
products mainly from outside of the group. The historical, and once carefully
nurtured, vertical integration and inter-dependence of the ATS operations and
the TAL operations is therefore no longer relevant or necessary;
- The TAL operations and the ATS operations have been managed as two separate
entities - each with their own chief executive - for some time;
- The highly technical and technology-charged ATS operations and the
intensely consumer marketing-orientated TAL operations are vastly different in
nature, and therefore demand specifically tailored management and workforce
skills and expertise. The businesses have very different capital requirements
and each needs directors with vastly different strategic inputs;
- The proposed unbundling will provide existing and potential shareholders in
the group with a separate listed investment in an international automotive
component manufacturing business, with Rand-hedge attributes, on the one hand,
and another in a clearly defined, predominantly South African, consumer-driven
business, on the other hand; and
- The board is of the opinion that to list the two entities separately will
unlock shareholder value and allow greater investor flexibility, primarily for
the benefit of shareholders who have supported the company over the years, in
both good and tough times.
A key benefit of the unbundling is that, with the TAL operations uncoupled from
it, Tiwheel"s clean-cut structure will enable the company to go forward and
participate without complexity in whatever rationalisation opportunities may
take place in a global automotive wheel industry that is ripe for consolidation.
4. Future Prospects Of The Tiwheel Group
The unbundled and separately JSE-listed Tiwheel and TAL have strong prospects
based on both organic and acquisition-driven growth, with sufficient balance
sheet strength and management depth to realise opportunities that arise.
Accordingly the Tiwheel board is confident that the two separate and focused
listed companies will continue to maintain Tiwheel"s past record of consistent
enhancement of shareholder value.
5. Salient terms of the unbundling, repurchase and cancellation and amendment
of the share incentive scheme
The Tiwheel board has resolved to unbundle all of the shares held by Tiwheel in
TAL to Tiwheel shareholders recorded in the register of Tiwheel shareholders on
the record date. The unbundling will involve the distribution in specie to
Tiwheel shareholders of 59,601,505 shares in TAL in the ratio of one TAL share
for every Tiwheel share held on the record date. The distribution will be
undertaken in terms of section 90 of the Companies Act and in accordance with
section 46 of the Income Tax Act by Tiwheel from share premium. In order to
facilitate the unbundling the directors propose that the 2 298 496 treasury
shares, currently held by TWT, be repurchased and cancelled, that the Tiwheel
share incentive scheme ("the Tiwheel share scheme") be amended and that a new
share incentive scheme be adopted by TAL ("the TAL share scheme").
The Tiwheel share scheme was designed to focus management performance on
creating shareholder value. As a result of the provisions of the Tiwheel share
scheme, the unbundling will have a substantial negative impact on its
participants. The Tiwheel board is of the view that the unbundling is in the
best interests of shareholders, but that it would not be equitable for
management to be penalised for creating shareholder value. Accordingly, the
directors have proposed certain amendments to the terms and conditions of the
Tiwheel share scheme which are intended, where possible, to ensure that its
participants are placed in substantially the position they would have been in
but for the unbundling. These amendments are set out in detail in the circular
referred to in 10 below .
A new share incentive scheme will be adopted by TAL on substantially the same
terms and conditions as the Tiwheel share scheme and a specific clause therein
will deal with the unbundling. The salient terms of the TAL share incentive
scheme are set out in the pre-listing statement of TAL referred to in 10 below.
5.1 Procedure for implementation of the repurchase and cancellation of the
treasury shares and the unbundling
A general meeting of Tiwheel shareholders will be held at Cnr Old Pretoria Road
and K101, Midrand, at 10h00 on Tuesday, 28 November 2006 to consider and, if
deemed fit, pass the resolutions required to implement the repurchase and
cancellation of the treasury shares, the amendment of the Tiwheel share scheme,
the adoption of the TAL share scheme and the unbundling of the TAL shares
through a dividend in specie.
5.2 Listing of TAL
Subject to the approval and implementation of the unbundling, the JSE has
granted approval for the listing of TAL in the "Speciality Retailers" sector of
the JSE list, under the abbreviated name "TAL", with effect from the
commencement of trade on Monday, 11 December 2006.
TAL"s pre-listing statement will be posted to Tiwheel shareholders on Monday, 6
November 2006. The TAL pre-listing statement contains, inter alia, the pro forma
historical financial information of TAL for the three years ended 30 June 2006.
5.3 Conditions precedent to the restructuring
The restructuring is subject to the fulfillment of the following conditions
precedent by no later than Wednesday, 29 November 2006 or such later date as the
Tiwheel board may, in its discretion, determine:
5.3.1 the approval by the requisite majority of Tiwheel shareholders, where
appropriate, of the resolutions necessary to:
- repurchase and cancel the treasury shares;
- amend the Tiwheel share incentive scheme;
- adopt the TAL share incentive scheme; and
- effect the unbundling by means of a specific in specie payment to
shareholders of Tiwheel;
5.3.2 the registration, where necessary, of such resolutions by the
Registrar.
6. Pro Forma Financial Effects
After the implementation of the restructuring described in this circular,
Tiwheel shareholders will be in substantially the same position as before with
regards to the aggregate earnings, NAV and TNAV per Tiwheel share, but with the
benefit of directly holding TAL shares.
The restructuring will have an impact on the company as the restructure reduces
its earnings per share. The illustrative pro forma financial effects set out
below have been prepared to assist Tiwheel shareholders to assess the impact of
the transactions on the EPS, HEPS and NAV and TNAV per Tiwheel share, in respect
of their Tiwheel shares only. The material assumptions are set out in the notes
following the table.
Due to the nature of the pro forma financial effects, they may not fairly
present Tiwheel"s financial position after the transactions, nor the effect on
Tiwheel"s future earnings. The pro forma financial effects are the
responsibility of the Tiwheel board and are provided for illustrative purposes
only.
Before the After the
restructuring restructuring Change
(cents) (cents) (%)
Earnings per share 125,3 22,4 (82,1%)
("EPS")
Headline earnings per 136,1 33,2 (75,6%)
share ("HEPS")
Net asset value per 1,639 1,381 (15,7%)
Tiwheel share ("NAV")
Tangible net asset 1,614 1,356 (16,0%)
value per Tiwheel share
(TNAV")
Notes:
1. The EPS and HEPS, as set out in the "Before the restructuring" column of
the table, have been extracted from the audited financial statements of Tiwheel
for the year ended 30 June 2006 and have been calculated based on a weighted
average of 60 439 003 Tiwheel shares in issue, which excludes the treasury
shares.
2. The EPS and HEPS, as set out in the "After the restructuring" column of the
table, have been calculated based on a weighted average of 60 439 003 Tiwheel
shares in issue, excluding the treasury shares, and assuming that the
transactions took effect on 1 July 2005.
3. The NAV and TNAV per Tiwheel share, as set out in the "Before the
restructuring" column of the table, have been extracted from the audited
financial statements of Tiwheel for the year ended 30 June 2006 and calculated
based on 59,601,505 Tiwheel shares in issue at 30 June 2006, which excludes the
treasury shares.
4. The NAV and TNAV per Tiwheel share, as set out in the "After the
restructuring" column of the table, have been calculated based on 59 601 505
Tiwheel shares in issue at 30 June 2006, excluding the treasury shares, and
assuming that the transaction took effect on 1 July 2005.
5. The cancellation of the treasury shares has no effect on the unaudited pro
forma financial information.
7. Directors" Opinions And Recommendations
The board is of the opinion that the terms and conditions of the unbundling and
repurchase will be to the benefit of Tiwheel shareholders and recommend that
Tiwheel shareholders vote in favour of all the resolutions necessary to
implement the restructuring at the general meeting of Tiwheel shareholders
referred to in 8 below.
The directors intend to vote in favour of all the resolutions necessary to
implement the unbundling and repurchase in respect of all the Tiwheel shares
held by them.
8. General Meeting
A general meeting of Tiwheel shareholders will be held at Cnr Old Pretoria Road
and K101, Midrand, at 10h00 on Tuesday, 28 November 2006, to consider and, if
deemed fit, pass, with or without modifications the resolutions required, inter
alia, to:
- repurchase and cancel the treasury shares;
- amend the Tiwheel share scheme to cater for the unbundling;
- adopt the TAL share scheme; and
- effect the unbundling.
9. Salient Dates And Times
2006
Last day for lodging of forms of
proxy for the general meeting by
10h00 on Friday, 24 November
General meeting to be held at
Midrand at 10h00 on Tuesday, 28 November
Results of the general meeting
announced on SENS on Tuesday, 28 November
Results of the general meeting
published in the press on Wednesday, 29 November
Last day to trade in Tiwheel
shares on the JSE in order to
participate in the unbundling on Friday, 08 December
Tiwheel shares trade "ex" the
entitlement to the TAL
distribution shares from
commencement of business on Monday, 11 December
Listing of TAL under the ISIN ZAE
000087482 and JSE code TAL from
the commencement of trade on Monday, 11 December
Announcement of ratio of
apportionment of base cost for CGT
purposes on Monday, 11 December
Record date to participate in the
unbundling on Friday, 15 December
TAL share certificates will be
posted to certificated
shareholders, by registered post,
at the risk of the certificated
shareholders concerned, and
dematerialised shareholders will
have their safe custody accounts
at their CSDP or stockbroker
updated on Monday, 18 December
Notes:
1. The abovementioned times and dates are South African times and dates and
are subject to change. Any such change will be announced on SENS and published
in the press.
2. Tiwheel shares may not be dematerialised or rematerialised from Monday, 11
December 2006 to Friday, 15 December 2006, both days inclusive.
10. Circular To Tiwheel Shareholders
A circular, including the notice convening a general meeting, containing full
details of the unbundling, will be posted to Tiwheel shareholders on Monday, 6
November 2006 together with the pre-listing statement of TAL. Copies of the
circular and pre-listing statement may be obtained during normal business hours
from Monday, 6 November 2006 to Tuesday, 28 November 2006 from:
- First National Bank of Southern Africa Limited, 4 First Place, Bank City,
Cnr Pritchard & Simmonds Streets, Johannesburg;
- Computershare Investor Services 2004 (Proprietary) Limited, ground Floor,
70 Marshall Street, Johannesburg;
- Sasfin Capital, Sasfin Place 13-15 Scott Street, Waverley;
- Fluxmans Inc, 11 Biermann Avenue, Rosebank;
- Tiwheel head office, Cnr Old Pretoria Road and K101, Midrand; and
- TAL head office, Cnr Old Pretoria Road and K101, Midrand.
Midrand
3 November 2006
SPONSOR AND CORPORATE ADVISOR
SASFIN CAPITAL
A division of Sasfin Bank Limited
LEGAL ADVISOR
FLUXMANS Incorporated
AUDITORS AND REPORTING ACCOUNTANTS
PKF(JHB)Incorporated
Date: 03/11/2006 04:38:23 PM Produced by the JSE SENS Department
