| Mon 6 Nov 2006, 12:28 | | Yorkcor - Acquisition; BEE transaction; Offer to S |
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YRK
YRK
Yorkcor - Acquisition; BEE transaction; Offer to Shareholders & withdrawal of
cautionary
The York Timber Organisation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1916/004890/06)
Share code: YRK & ISIN: ZAE000008108
("Yorkcor" or "the company")
Aquisition of control of Yorkcor by Blackstar Investors Plc ("Blackstar")
Introduction of BEE Shareholders
Offer to all Yorkcor Shareholders
..Withdrawal of Cautionary announcement
INTRODUCTION
Further to the cautionary announcement dated 26 September 2006, Yorkcor"s board
of directors (the "board") is pleased to announce that agreement (the
"transaction agreement") has been reached between companies controlled by the
Tucker family and their associates (the "Tucker companies"), Yorkcor and
Blackstar in terms of which, subject to fulfilment of certain conditions
precedent set out below:
Blackstar and the company will jointly make an offer (the "joint offer") to
acquire 100% of the company"s issued share capital for a cash consideration of
R9,80 per offer share, on the basis that the company will be the purchaser in
respect of the first 26% of the company"s entire issued share capital and
Blackstar will be the purchaser in respect of the balance tendered;
the Tucker companies irrevocably undertake to accept the joint offer in respect
of all the offer shares held by them, constituting 84,75% of the company"s
entire issued share capital;
in substitution for the 26% ordinary issued share capital repurchased by the
company in terms of the joint offer, it is intended that a new class of non-
redeemable convertible cumulative preference shares in the capital of the
company ("preference shares") carrying full voting rights and convertible into
ordinary shares on a one-for-one basis after 31/2 years will be created and
issued to special purpose vehicles ("SPVs") still to be incorporated and to be
owned by trusts established for the benefit of:
- the employees of Yorkcor and its subsidiaries (the "Yorkcor group") 94% of
whom are "black people" within the meaning of the draft codes of good practice
(the "draft codes") issued by the Department of Trade and Industry;
and
- certain historically disadvantaged Mpumalanga communities and strategic black
economic empowerment partners; and
it is intended that Blackstar will fund the BEE component of the transaction by
subscribing for cumulative redeemable preference shares in the capital of the
SPVs
(collectively, "the transactions").
BACKGROUND TO AND RATIONALE FOR THE TRANSACTIONS
Blackstar is a public company listed on the Alternative Investment Market (which
is operated by the London Stock Exchange) and has raised GBP80 million for
investment primarily in South African BEE transactions. Blackstar Managers
advises Blackstar"s South African funds.
Blackstar Managers identified a unique opportunity presented by the sale of the
Tucker family"s interest to play a significant role in the timber industry in
South Africa, both as an investor and as the facilitator of black empowerment
within Yorkcor.
Blackstar has associated itself with Yorkcor, Yorkcor management and the BEE
parties detailed below to acquire the Tucker family interests and reconstitute
the Yorkcor board.
BLACK ECONOMIC EMPOWERMENT
One of Yorkcor"s principal strategic objectives is the implementation of a broad
based BEE structure that will result in approximately 26% of the company"s
equity and voting rights being beneficially held by black people.
Moreover, the company recognises the need to address the lack of participation
by black women and broad-based structures in BEE consortia and has structured
the BEE component of the transaction with these considerations foremost in mind.
Yorkcor continues to improve its status in respect of empowerment at board and
management level, employment equity, skills development, preferential
procurement and enterprise development.
In terms of the BEE component of the transactions, it is intended that the
preference shares giving the holders an aggregate 26% interest in the company
will be issued to the following SPVs:
10% will be issued to an SPV the entire issued ordinary share capital of which
will be owned by a trust (the "staff trust") to be established for the benefit
of the Yorkcor group"s current employees (of all races), which the board
believes is consonant with the company"s policy of "equal opportunity for all
employees". The salient features of the staff trust are intended to be:
- that preferential participation will be given to black people and women;
- that in determining the extent of an employee"s participation, regard will be
had to his or her length of service with the Yorkcor group; and
- 10% of the participation in the staff trust will be reserved for black people
in managerial positions for the purpose of attracting and retaining first-class
talent.
Based on the foregoing, it is estimated that 94% of the participatory interest
in the staff trust will benefit black people; and
16% will be issued to an SPV the entire issued ordinary share capital of which
will be owned by a trust (the "community trust") to be established for the
benefit of certain historically disadvantaged Mpumalanga communities and other
strategic BEE partners described more fully below. The salient features of the
community trust are intended to be:
- the strategic BEE partners are new BEE ownership entrants and will become 40%
beneficiaries of the community trust;
- the community trust will target various community groupings and the strategic
BEE partners will assist them in the purchasing of forestry businesses;
- Yorkcor will by means of a supply agreement facilitate the funding to purchase
any forestry business acquired and will assist with the management of these
businesses;
- the strategic BEE partners will provide advisory services to these community
groupings to establish businesses and become suppliers to Yorkcor thereby
enhancing the value to shareholders;
- the community groups will therefore improve Yorkcor BEE targets in respect of
preferential procurement and enterprise development.
The company has identified Silulu Investment Services (Pty) Ltd ("Silulu") as
the key strategic BEE partner of Yorkcor. Silulu brings with it substantial
experience and skill in the areas of enterprise development and transformation.
Silulu Investment Services is managed and controlled by Gay Mokoena, who is a
non-executive director of Yorkcor.
SALIENT TERMS OF THE PREFERENCE SHARES TO BE ISSUED TO THE SPVs
It is intended that the salient terms and conditions of the preference shares to
be issued by Yorkcor to the SPVs will be the following:
on a winding-up, the preference shares will rank prior to the ordinary shares
as regards dividends and return of capital;
the preference shares will be convertible on a one-for one basis into ordinary
shares at the option of the holder after 3 years and six months from the date of
issue;
the coupon payable on the preference shares will be the prime overdraft rate of
The Standard Bank of South Africa Limited less 1,25 percentage points;
save as aforesaid, they will rank pari passu with the ordinary shares and
accordingly carry full voting rights.
With regard to the issue of the preference shares to the SPVs, it is intended
that:
the aggregate number of preference shares to be issued will equate to 26% of
the combined issued ordinary and preference share capital in the company
immediately after implementation of the transaction (i.e. the ordinary shares
repurchased will be substituted one-for-one); and
the subscription price per preference share will be the same as the offer
consideration per offer share payable by the company in respect of its
repurchase of 26% of its entire issued share capital in terms of the joint offer
(i.e. R9,80 per preference share).
CONDITIONS PRECEDENT AND THE OFFER PROCESS
Posting of the joint offer document (and, accordingly, the making of the joint
offer) is subject to fulfilment of the following conditions precedent within 30
business days of the date of this announcement:
approval of the relevant documentation and the offer process by the JSE Limited
("JSE") and the Securities Regulation Panel ("SRP");
exchange control approval;
final agreement between Blackstar and the company on:
- the terms and conditions of the preference shares to be issued by Yorkcor to
the SPVs;
- the terms and conditions of the SPV preference shares to be issued by the SPVs
to Blackstar;
- the terms and conditions of the memorandum and articles of association of each
of the SPVs; and
- the terms and conditions of the deeds of the trusts that will hold the entire
ordinary issued share capital of the aforesaid SPVs, and such trust deeds being
lodged for registration by the Master of the High Court having jurisdiction in
terms of the Trust Property Control Act, 1988.
Moreover, the joint offer itself will be subject to fulfilment of the following
conditions precedent by not later than 10 February 2007:
that the indivisibly inter-related ordinary and special resolutions necessary
for the transaction to proceed are passed by the company"s shareholders in
general meeting (notice of which general meeting will be given in the joint
offer document); and
such approval as may be required in terms of the Competition Act, 1998.
The joint offer will open on the day on which the joint offer document is posted
and will close in accordance with JSE, SRP and STRATE requirements at least 14
days following an announcement that all the foregoing conditions have been
fulfilled and that the joint offer is accordingly unconditional in all respects.
The joint offer shall be unconditional as to acceptances.
Blackstar has provided confirmation to the satisfaction of the SRP that
sufficient resources are available to it to meet its commitments in terms of the
joint offer.
The Tucker companies have irrevocably undertaken to accept the joint offer in
respect of their shareholding, which constitutes 84,75% of the company"s entire
issued share capital. By reason thereof, if the offer is successfully concluded,
the company will repurchase 26% of its entire issued ordinary share capital from
the Tucker companies, and Blackstar will acquire from the Tucker companies a
controlling interest in the company of at least 58,75%.
The JSE has ruled that with regard to the resolutions creating the preference
shares and issuing them to the SPVs, the Tucker companies are required to
delegate the authority to vote on those resolutions to Blackstar in view of the
fact that Blackstar will be the future controlling shareholder. Blackstar has
irrevocably undertaken to vote those shares in favour of those resolutions.
Sasfin Capital, a division of Sasfin Bank Limited, has been appointed by the
board to advise it on the joint offer and the preference share issue. Sasfin"s
opinion will be contained in the joint offer document relating to the
transaction to be sent to Yorkcor shareholders in due course.
BLACKSTAR"S EXISTING HOLDINGS OF SECURITIES
As at the date of this announcement, neither Blackstar nor any person with whom
it is acting in concert holds any securities in Yorkcor, nor do any of the
foregoing have any option to purchase any securities in Yorkcor.
CONTINUED LISTING OF THE COMPANY
It is intended that Yorkcor will remain listed on the JSE and accordingly
Blackstar has agreed not to invoke the provisions of s440K of the Companies Act,
1973, should same be of application. Accordingly, there will be no compulsory or
forced acquisition of any minority shareholders" shares.
A listing is seen as the ideal vehicle to serve as a platform for growth.
Blackstar intends to place 10% to 15% of Yorkcor"s entire issued share capital
with other investors and/or institutions over a period of time, at an
appropriate price, in order to increase the free-float and to take its
investment below a 50% controlling position.
MARKET AND FINANCIAL INFORMATION
Information regarding the price at which Yorkcor shares traded on the JSE
immediately prior to the publication of Yorkcor"s first cautionary announcement
and the publication of this announcement, as well as a comparison of the offer
consideration to the published unaudited net asset value and tangible net asset
value per Yorkcor share as at 30 June 2006, Yorkcor"s financial half-year, are
set out in the table below. The financial information in this table is the
responsibility of the directors of Yorkcor.
Before the joint The joint offer Percentage
offer consideration difference
(cents per share) (cents per share)
Market price on
31 March 2006 1250 (1) 980 (21.6)
30-day volume-weighted
average price to
31 March 2006 1256 (2) 980 (21.9)
Market price on
3 November 2006 1297 (3) 980 (24.4)
30-day volume-weighted
average price up to
3 November 2006 1255 (4) 980 (21.9)
Net asset value 743 (5) 980 31.8
Net tangible asset value 743 (5) 980 31.8
Notes:
1. Closing price of shares on the JSE on 31 March 2006, being the last trading
day preceding the publication of Yorkcor"s first cautionary announcement in
respect of the joint offer.
2. Volume-weighted average price at which shares traded on the JSE for the 30
trading days up to and including 31 March 2006, being the last trading day
preceding the publication of Yorkcor"s first cautionary announcement in respect
of the joint offer.
3. Closing price of shares on the JSE on 3 November 2006, being the last
practicable trading day preceding the publication of this announcement.
4 Volume-weighted average price at which shares traded on the JSE for the 30
trading days up to and including 3 November 2006, being the last practicable
trading day preceding the publication of this announcement.
5. Net asset value and net tangible asset value per share attributable to
shareholders as at 30 June 2006.
The pro forma financial effects of the Yorkcor share repurchase and the
preference share issue, based on the published unaudited half year results of
Yorkcor for the six months ended 30 June 2006 are set out below. The pro forma
earnings figures illustrate the possible financial effects if the transactions
had been implemented on 1 January 2006, that is for a period of six months,
whereas the pro forma net asset value figures illustrate the possible financial
effects if the transactions were implemented on 30 June 2006. The pro forma
financial effects have been prepared for illustrative purposes only to provide
information on how the Yorkcor share repurchase and the preference share issue
may have impacted on the results and financial position of Yorkcor. Preparation
of the pro forma financial effects is the responsibility of the directors.
Because of their nature, the pro forma financial effects may not fairly present
Yorkcor"s financial position after the Yorkcor share repurchase and the
preference share issue or the effect on future earnings:
Before After Percentage
change
Earnings and headline earnings per
share (cents) 83.9 97.8 12
Diluted earnings per share (cents)
and diluted headline earnings per
share (cents) 83.9 83.9 -
Net asset value per share and
tangible
net asset value per share 743.3 1 004.4 35
Diluted net asset value per share
and
diluted tangible net asset value
per share 743.3 743.3 -
Number of shares in issue 11 040 497 8 169 968
Number of shares in issue assuming
full dilution 11 040 497 11 040 497
Notes:
1. The figures in the "Before" column are extracted from the published unaudited
interim results of the company for the six months ended 30 June 2006;
2. The figures in the "After" column assume the repurchase in terms of the joint
offer was implemented, and the preference shares were issued and the cash
received on 30 June 2006 for asset value purposes;
3. The earnings per share and headline earnings per share in the "After" column
are based on the assumption that the preference shares were issued and the share
repurchases in terms of the joint offer were implemented on 1 January 2006. The
average prime interest rate used in calculating the financial effects was 11.5%;
4. Diluted figures are given assuming conversion of the preference shares on 1
January 2006;
5. The "Percentage change" column reflects the change between the before and
after situations.
RECONSTITUTION OF THE YORKCOR BOARD
After all the conditions precedent have been fulfilled and the joint offer
implemented, Blackstar Managers, on behalf of Blackstar, intends to work with
existing management to reconstitute the Yorkcor board. The objective of these
changes would be to give Yorkcor the appropriate BEE credentials and to give
Blackstar and other institutional shareholders the appropriate independent non-
executive representation.
FUTURE STRATEGY OF YORKCOR FOLLOWING THE TRANSACTIONS
The South African forestry industry has gone from an historic sawlogs surplus to
a growing deficit in recent years, primarily because of the limited stock of
trees and the robust local demand for wood products. As a result, prices at all
levels of the value chain - from forests lands to finished lumber - have doubled
over the past 5 years. Prices are expected to continue to increase until
constrained.
Yorkcor is one of the few timber companies to own its own forests, sawmills,
manufacturing plants, warehouse and sales and trading operations, making for a
highly efficient and cost effective operation. Yorkcor"s log mills convert round
softwood logs into a wide range of sawn lumber products such as structural
timber, scaffolding, furniture components, wood laminates, kitchen cupboard
parts, brush and broom handles as well as wood chips for pulp and paper. Yorkcor
markets sawn lumber to the construction, furniture, packaging and other
industries, as well as to timber merchants generally, partly through a network
of independent timber agents.
Yorkcor markets and sells the finished product for its own account and on behalf
of others. Yorkcor currently has small operations in the downstream wood
industry in basic furniture component manufacturing and will look to grow this
higher margin business.
Yorkcor is strategically well placed to benefit (and is benefiting) from the
infrastructure and development boom currently underway. Prices are expected to
increase if regional demand for lumber increases as a result of economic growth
in South Africa and neighbouring markets. The growth in this sector is expected
to continue for the next 4 to 5 years due to state infrastructure spend and the
lead up to the 2010 World Cup.
Blackstar has taken the view that Yorkcor"s existing management team can grow
the business in the medium and longer term. This includes organic growth through
re-investment, growth through potential acquisitions of other industry players
as well as growth through extending the value chain both up-stream, through
acquisition of forests, and down-stream, through acquisition/starting-up timber
value-add businesses. Yorkcor intends to increase its sales in the increasingly
attractive South African market and continue to grow its foreign trade.
Blackstar is investing on the basis that management intentions are in line with
its own strategic thinking.
DOCUMENTATION AND FURTHER ANNOUNCEMENT
A further announcement will be made in due course giving the salient dates
pertaining to the transactions and the joint offer.
Subject to JSE and SRP requirements, a circular will be posted to shareholders
containing details of the joint offer, the acceptance process, and the
preference share issue, as well as incorporating a notice of general meeting of
shareholders to pass the necessary resolutions to implement the transactions.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
In the light of the above information shareholders are no longer required to
exercise caution when dealing in their Yorkcor shares.
Pretoria
6 November 2006
Sponsor and independent adviser
Sasfin Capital
Legal adviser to Yorkcor
Edward Nathan Sonnenbergs
Adviser to Blackstar
Blackstar Managers South Africa
Legal adviser to Blackstar
Webber Wentzel Bowens
Date: 06/11/2006 12:28:38 PM Produced by the JSE SENS Department
