| Tue 21 Nov 2006, 8:54 | | Peermont - Announcement Of A Firm Offer To Acquire |
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PTG
PTG
Peermont - Announcement Of A Firm Offer To Acquire The Entire Ordinary Issued
Share Capital Of Peermont And Withdrawal Of Cautionary Announcement
Peermont Global Limited
Registration number 1995/004449/06
Share code: PTG
ISIN code: ZAE000058053
("Peermont" or the "Company")
ANNOUNCEMENT OF A FIRM OFFER TO ACQUIRE THE ENTIRE ORDINARY ISSUED SHARE CAPITAL
OF PEERMONT GLOBAL LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcements published by Peermont on 18 July
2006, 28 August 2006, 6 October 2006 and 11 October 2006, shareholders are
advised that a consortium of investors, led by the Mineworkers Investment
Company, through MIC Leisure (Proprietary) Limited ("MIC"), and key members
of management (the "Consortium"), acting through Opalton Investments
(Proprietary) Limited ("NewCo"), in a transaction arranged by Brait South
Africa Limited, has submitted to the board of directors of Peermont (the
"Board") a firm intention to make an offer to acquire the entire issued
ordinary share capital of Peermont ("the offer" or "the proposed
acquisition") for a total cash consideration of 1 290 cents per Peermont
ordinary share, to be effected, subject to the conditions set out in
paragraph 7 below, by way of a scheme of arrangement ("the scheme") in
terms of section 311 of the Companies Act 61 of 1973, as amended ("the
Act"), to be proposed by NewCo, between Peermont and all of its ordinary
shareholders (excluding any ordinary shares in Peermont which are issued to
shareholders of Marang (East Rand) Gaming Investments (Proprietary) Limited
("Marang") pursuant to the transaction referred to in paragraph 7.3 below
("the Marang acquisition"), such excluded shares being "the excluded Marang
shares"). This announcement summarises the information provided in the firm
intention letter addressed by NewCo to Peermont"s Board and dated Friday,
17 November 2006.
2. The terms of the offer
The offer will, once the scheme becomes or is declared to be unconditional,
result in the payment to Peermont ordinary shareholders (excluding Marang
shareholders in respect of the excluded Marang shares) ("scheme members")
of a cash consideration of 1 290 cents per Peermont ordinary share ("the
purchase consideration"), which represents a 44.7% premium to the 30-day
volume weighted average price per Peermont ordinary share to Monday 17 July
2006, being the date before the first cautionary announcement in relation
to the proposed acquisition. For the avoidance of doubt, the offer does
not extend to or include the preference shares in Peermont held by Rand
Merchant Bank (a division of FirstRand Bank Limited).
The purchase consideration will be increased with reference to interest at
the publicly quoted basic prime overdraft rate of interest per annum of
FirstRand Bank Limited ("prime rate") plus 200 basis points calculated from
20 March 2007 ("the expected payment date"), to the actual payment date in
terms of the scheme ("the actual payment date"), should the actual payment
date be later than the expected payment date.
Following the implementation of the scheme, NewCo will acquire up to 21% of
the issued ordinary shares in Peermont Global Tusk Holdings (Proprietary)
Limited ("PGTH") from MIC. The Peermont group will then be re-organised by
NewCo, which re-organisation will involve the transfer of the business of
Peermont Global (East Rand) (Proprietary) Limited ("PGER") and the assets
of certain of the other subsidiaries of Peermont to NewCo and to certain
subsidiary companies of NewCo ("the Reorganisation").
The offer is made on the basis that:
*with the exception of the excluded Marang shares, the entire issued
ordinary share capital of Peermont will comprise 330 000 000 ordinary
shares of 0.01 cent each;
*Peermont shall pay a dividend of 10 cents per Peermont ordinary share
prior to the actual payment date ("the expected dividend");
*Peermont shall be entitled to declare and pay any dividends which may
become due and payable under the preference shares in issue by Peermont
("the preference dividends") and no adjustment to the purchase
consideration shall be made as a result of such amounts being declared
and/or paid;
*no dividend or similar payment or distribution to shareholders other than
the expected dividend and the preference dividends as contemplated above
will be declared between the date of this letter and the actual payment
date;
*NewCo will forthwith after the date hereof co-operate in good faith with
Peermont and use its reasonable commercial endeavours in order to:
*procure, to the extent that it is in its power to do so, the
fulfilment of all conditions referred to in the firm intent letter as
soon as reasonably possible after the date of the firm intent letter;
*finalise the scheme circular to be posted to the shareholders and any
ancillary documentation of Peermont; and
*implement the offer, should it become or be declared to be
unconditional;
*Peermont will forthwith after the date of this announcement co-operate in
good faith with NewCo and, to the extent consistent with the fiduciary
duties of its Board, use its reasonable endeavours to:
*take such steps as are reasonably required by it (and as requested in
writing from time to time) in order to enable fulfilment of the scheme
conditions set out in paragraphs 7.1 through 7.5 (both inclusive),
7.7, 7.8 and 7.13 but, in respect of any conditions relating to the
Reorganisation, without obligation to make any payment or incur any
cost or liability;
*subject to Peermont"s right to approve the scheme circular, finalise
the scheme circular to be posted to the shareholders and any ancillary
documentation relating to Peermont; and
*implement the offer, should it become or be declared to be
unconditional;
*NewCo and the Consortium indemnify and hold harmless Peermont and each and
all of its directors, officers and employees in respect of any cost,
liability or claim which arises howsoever from any act or omission taken by
them in good faith in connection with the offer and/or the proposed
acquisition (including in respect of the aforegoing undertakings) and waive
any claims which it may have against them in respect of such acts or
omissions;
*the scheme will be implemented, and the purchase consideration paid in
full in accordance with its terms, by no later than 15 business days after
the scheme is or is declared to be unconditional as contemplated by the
Listings Requirements of the JSE Limited ("JSE") ("the Listings
Requirements") or such earlier or later date as may be agreed between
Peermont and NewCo in writing.
Upon implementation of the scheme, an application will be made to the JSE
to terminate the listing of the entire issued share capital of Peermont on
the JSE.
3. Reimbursement of expenses and termination fee
In the event that NewCo takes all steps reasonably necessary to procure the
fulfilment of the conditions to the offer; and either (a) the offer fails
by virtue of any of the required regulatory or shareholder consents or
approvals not being obtained or (b) a competing, higher offer is made for
the entire issued ordinary and preference share capital of Peermont (or its
assets and liabilities) by an independent third party which is wholly
unconnected to NewCo, or its actual or prospective participants,
("Competing Offer"), and the payment date under such Competing Offer is on
or before Wednesday, 27 June 2007, or such later date as Peermont may agree
to in its discretion, the Consortium will be entitled to the reimbursement
of expenses up to R7.5 million (including value added tax ("VAT")). In
addition, Peermont shall pay the Consortium jointly, and not severally, a
fee equal to the greater of (i) 0,6% of the equity value of the entire
issued share capital of Peermont as implied by the Competing Offer
(including VAT) and (ii) R25 million (including VAT) if and only if a
Competing Offer is made and successfully implemented as contemplated above.
4. NewCo shareholding structure
On implementation of the proposed acquisition, NewCo will be owned and
controlled, through two intermediate holding companies, Linkton Investments
(Proprietary) Limited ("HoldCo2") and MRX 80 Investment Holdings
(Proprietary) Limited ("HoldCo1"), by a black economic empowerment ("BEE")
holding company, Maxshell 114 Investments (Proprietary) Limited ("BEE
HoldCo"). BEE Holdco will hold 75% of the shareholding in HoldCo1.
Management members ("ManCo") will collectively hold 17.5% of the
shareholding in HoldCo1. These management members include members of the
senior management of Peermont, led by Anthony Puttergill, as well as a
second tier of management. "Founding BEE individual partners", who include
some of the original Marang National Investors ("MNI") Promoters, will hold
7.5% of the shareholding in HoldCo1. HoldCo1 will hold 100% of the
ordinary shares in HoldCo2.
A consortium of BEE shareholders, led by MIC, will directly or indirectly
hold 67% of the shareholding in BEE HoldCo. Lenders and other investors
will hold 33% of the shareholding in BEE HoldCo. The lenders are not,
however, members of the Consortium.
5. Details of any existing holding of securities in the offeree company:
Members of Peermont management referenced in paragraph 4 above, or parties
related or affiliated to them, collectively own 5,957,092 ordinary shares
in Peermont.
The Consortium has obtained irrevocable undertakings from the following
holders of ordinary shares in Peermont (in the aggregate holding
approximately 73% of the existing issued ordinary share capital of
Peermont) to vote in favour of the scheme:
5.1 Genbel Securities Limited, holder of approximately 26%;
5.2 RMB Asset Management (Proprietary) Limited, holder of approximately
27%; and
5.3 Coronation Asset Management (Proprietary) Limited, holder of
approximately 20%.
The irrevocable undertakings provide that the obligations set out therein
may be terminated (on 10 days" written notice to NewCo) in the event of a
third party bona fide offer for the entire ordinary issued share capital of
the Company, the terms of which are more favourable than the offer;
provided that the Board is satisfied that the offeror will be in a position
to implement such offer.
6. Sources of funding
The Consortium will provide the required equity component of the funding
for the proposed acquisition by subscribing for new ordinary shares and
preference shares in HoldCo1. The proceeds of these subscriptions will be
advanced to NewCo via HoldCo2. In addition, HoldCo1 and HoldCo2 will
secure funding in the form of local and/or foreign currency denominated
payment in kind ("PIK") notes (which will be on-lent to NewCo for purposes
of funding the Reorganisation) and NewCo will secure interest bearing
funding in the form of foreign currency denominated 1st Priority Senior
Secured Notes (interest-bearing corporate paper) each to be issued to
foreign institutions and lenders to fund the proposed acquisition. The
Consortium has appointed Citigroup Global Markets Limited ("Citigroup") as
its underwriter to arrange and place the debt component of the funding for
the proposed acquisition.
In order that NewCo may pay the purchase consideration in full and thereby
acquire all of the existing issued ordinary shares in Peermont, NewCo has
procured finance in the form of a senior bridging loan facility, pursuant
to the underwriting of the debt component of the proposed acquisition.
Upon implementation of the scheme, the relevant portion of the proceeds of
the aforementioned bridging loan will be paid to the scheme participants
pursuant to the implementation of the scheme, in full discharge of the
purchase consideration.
In terms of Rule 2.3.2 (b) and Rule 21.7 of the SRP Code, NewCo has
confirmed that a cash confirmation letter has been provided to the
Securities Regulation Panel ("SRP"). The aforesaid cash confirmation
will, unless agreed otherwise with Citigroup Global Markets (Proprietary)
Limited, expire to the extent that payment of the purchase consideration
has not been made by 15 May 2007. This may be extended by agreement between
NewCo and Citigroup.
7. Conditions precedent to the Scheme
The scheme will be subject to (and will become operative upon) the
fulfilment, or where applicable waiver, of the following conditions
precedent ("the scheme conditions"):
7.1 the scheme having been approved by a majority representing three-
fourths of the votes exercisable by the scheme members present and
voting, either in person or by proxy, at the scheme meeting before or
on 13 March 2007 or such other date on or prior to the longstop date
(as defined below) as Peermont may from time to time notify NewCo of
in writing;
7.2 the relevant Court having sanctioned the scheme before or on 27 April
2007 or such other date on or prior to 30 June 2007 as NewCo may from
time to time notify Peermont of in writing ("the longstop date");
7.3 the conclusion of an agreement, on terms reasonably satisfactory to
Peermont and NewCo, before or on 15 January 2007 (or such other date
as may be agreed in writing between NewCo and Peermont) pursuant to
which the Company acquires all of the issued ordinary shares in Marang
in exchange for the issue of up to 61 240 311 Peermont shares and/or a
consideration of R790 000 000, which purchase consideration will be
settled through the issue of up to 61 240 311 Peermont shares, or a
combination of the two, ("the Marang acquisition") after the record
date for the expected dividend contemplated in paragraph 2. The
Marang acquisition will be suspensively conditional, inter alia, on
(i) the scheme becoming unconditional and (ii) the approval of the
requisite majority of shareholders of Peermont. Should the scheme not
become unconditional or the Marang acquisition not be duly approved by
Peermont shareholders, the Marang acquisition will lapse and will not
be implemented. To the extent that it is implemented, the Marang
shareholders shall, for the avoidance of doubt and notwithstanding
that they may, pursuant to the Marang acquisition, be issued with
shares in Peermont prior to or upon the record date for participation
in the scheme, not be participants under the scheme;
7.4 the approval by the requisite majority of shareholders of Peermont of
the Marang acquisition and any issue by Peermont of shares pursuant
thereto;
7.5 a certified copy of the order of Court sanctioning the scheme having
been registered by the Registrar in terms of the Act before or on the
date 7 business days from the date on which the relevant Court
sanctions the scheme;
7.6 the South African exchange control authorities approving (a) the
funding required to implement the proposed acquisition and the
Reorganisation, including the implementation of the debt and equity
funding arrangements of NewCo, HoldCo1 and HoldCo2, and (b) the scheme
circular and payment of the scheme consideration by Peermont and/or
NewCo, both before or on (i) 15 April 2007 or (ii) such later date as
Peermont may notify NewCo of in writing, being a date not later than
27 April 2007, or (iii) such other date as may be agreed in writing
between NewCo and the Company;
7.7 receipt of regulatory approvals, to the extent required in law, in
relation to the proposed acquisition, the Reorganisation and both the
debt and equity funding thereof from the following regulators (in each
case either unconditionally or subject to conditions reasonably
acceptable to the persons on whom such conditions are imposed and, for
which purposes, a condition imposed on Peermont or any subsidiary will
be deemed to have been imposed on both NewCo and Peermont):
(i) the JSE Limited;
(ii) the SRP;
(iii) the competition authorities; and
(iV) the relevant gambling boards;
before or on (i) 15 April 2007 or (ii) such later date as Peermont may
notify NewCo of in writing, being a date not later than 27 April 2007,
or (iii) such other date as may be agreed in writing between NewCo and
the Company;
7.8 receipt of the following third party waivers and consents, excluding
7.9 any consent required from a member of the Consortium or its
affiliates, on terms reasonably acceptable to NewCo and, if applicable,
Peermont in relation to the proposed acquisition and the Reorganisation:
(i) waiver of any pre-emptive rights, options or similar rights held
by any third parties in respect of any of the shares in the
subsidiaries of Peermont;
(ii) any consent required under any material contract with a third
party to the change in control of Peermont, or any of its
subsidiaries;
(iii) any consent required for the transfer of any material
shares, assets or business or to the cession and assignment
of any material contract transferred in pursuance of the
Reorganisation;
(iv) any approval required in terms of any shareholders agreement in
relation to any subsidiary of Peermont; and
(v) such consents of any third-party institutional financier to, or
holder of preference shares issued by, any Peermont subsidiary,
as may be necessary;
before or on (i) 24 April 2007, (ii) such later date as Peermont may notify
NewCo of in writing, being a date not later than 27 April 2007, or (iii)
such other date as may be agreed in writing between NewCo and the Company;
provided that where any of the aforegoing third party waivers or consents
are made subject to terms and/or conditions, such terms and/or conditions
will be deemed to be reasonably acceptable to NewCo unless (A) such term or
condition alone or in aggregate with any other such term or condition has
or may result in a reduction of 10% or more of the EBITDA (where EBITDA is
defined as net income (or loss) for any given period, excluding all
interest expense, tax expense, depreciation and amortisation for that same
period, determined in accordance with IFRS) of the Peermont group for the
equivalent period during the prior financial year adjusted for the Tusk
transaction or (B) if not quantifiable in money, is otherwise material to
the proposed acquisition taken as a whole; and provided further that where
any such waiver or consent is not obtained this condition shall not fail
unless such waiver or condition is material to the proposed acquisition
taken as a whole;
7.9 on or before the last business day prior to the Court hearing to
sanction the scheme ("the scheme sanction date") there have not
occurred any (i) revocation, or amendment of the terms and/or
conditions, of any gaming licences issued in respect of the operations
of the Peermont group, (ii) change in the South African or Botswana
gambling legislation or licensing dispensation or (iii) other act or
event, which, upon the occurrence of any event described in clause
(i), (ii) or (iii), has, or is reasonably likely to have, when
measured on the day prior to the scheme sanction date (individually or
in aggregate), a material adverse effect on the implementation of the
proposed scheme (which for purposes of this condition precedent shall
mean any act or condition which individually or in the aggregate has
or may result in either (A) a reduction of 10% or more of the EBITDA
of the Peermont group for the equivalent period during the prior
financial year adjusted for the Tusk transaction or (B) in a loss or
liability to the Peermont group exceeding of 10% or more of the market
capitalisation of Peermont as implied by the offer);
7.10 on the last business day prior to the scheme sanction date the Itraxx
EUR cross-over index Series 6, or any equivalent or replacement
thereof, shall not exceed a level of 375 basis points. The Itraxx EUR
cross-over index Series 6 tracks the trading of the most liquid non-
financial names with at least EUR100 million of publicly traded debt
and rating below BBB-/Baa3 by Standard and Poors and Moody"s Investor
Services;
7.11 on the last business day prior to the scheme sanction date there has
not occurred and continue to occur any suspension or limitation of
trading in securities generally (for reasons other than information
technology or administrative disruptions) on the New York Stock
Exchange, the London Stock Exchange or the JSE Limited, or minimum
prices for issued securities listed on such exchanges shall not have
been generally established on any such exchanges for a period
exceeding 2 days and be continuing, the effect of which suspension or
limitation or minimum prices (individually or in aggregate) has, or is
reasonably likely to have, a material adverse effect on the
implementation of the proposed scheme, the Reorganisation and/or the
funding thereof;
7.12 prior to the scheme sanction date:
(i) there has not been declared any general banking moratorium by any
of the United Kingdom, the Republic of South Africa, the United
States Federal or New York State authorities;
(ii) a state of national emergency has not been declared by the United
Kingdom, the Republic of South Africa, or the United States; or
(iii) there has not been a declaration of war by the Republic of
South Africa, or a declaration of war against the Republic
of South Africa;
the effect of which (individually or in aggregate) has, or is reasonably
likely to have, a material adverse effect on the implementation of the
proposed scheme, the Reorganisation and/or the funding thereof; and
7.13 prior to the date on which the scheme is sanctioned, Peermont has not,
except in pursuance of a contract entered into earlier, undertaken any
of the actions referred to in rule 19 of the SRP Code, without the
prior written consent of the SRP and of NewCo, which consent shall not
unreasonably be withheld or delayed.
The scheme conditions in paragraphs 7.3 and 7.6 through 7.13 (both
inclusive) may be waived in whole or in part in writing by NewCo; provided
that any condition referred to in 7.6 and 7.7 shall not be capable of
waiver by NewCo to the extent that the regulatory approval referred to
therein is required to be obtained by Peermont.
In respect of each scheme condition (other than the conditions set out in
paragraphs 7.1, 7.2 and 7.5), NewCo shall be obliged, on or before the last
date for fulfilment thereof to address and deliver by hand to Peermont
(with copy to its attorneys of record for the scheme) a letter in which
NewCo either unconditionally declares the scheme condition to be fulfilled
or waived or contends that such scheme condition has failed (in whole or in
part). Each scheme condition or part thereof in paragraphs 7.3 through
7.13 (both inclusive) which is capable of being waived by NewCo will, as a
matter of contract, be deemed to have been fulfilled, and read as pro non
scripto, to the extent that either (a) NewCo declares such scheme condition
to have been fulfilled or waived (in whole or to the extent of any waiver
in part) or (b), in respect of the conditions set out in paragraph 7.3,
subparagraphs 7.7 (i) and (ii) and paragraphs 7.8 through 7.13 (but
specifically excluding any other condition) NewCo fails on or before the
last date for fulfilment of the relevant scheme condition to contend, by
way of the aforesaid letter, that such scheme condition has failed. For
the avoidance of doubt, the mere delivery of such a letter by NewCo shall
not imply that the relevant scheme condition or conditions identified
therein have failed, such failure being a matter of fact and not a matter
within the discretion of NewCo.
8. Opinions and recommendation
An independent committee ("Committee") of the board has been formed to
ensure appropriate governance throughout this process. At the request of
the Committee, PricewaterhouseCoopers Corporate Finance (Pty) Limited
("PWC") has performed a preliminary valuation. Given the circumstances and
market conditions prevailing at the date of this announcement:
*the Committee has considered the terms and conditions of the offer and,
subject to the final opinion of PWC, is at the time hereof of the opinion
that these terms and conditions are fair and reasonable to existing
Peermont ordinary shareholders; and
*the Committee intends to support the scheme and to recommend that scheme
members vote in favour of the scheme.
9. Further details
A circular containing full details of the Offer (including all the terms
and conditions of the Scheme) will be posted to shareholders on or about
Friday 19 January 2007, following the convening of the Scheme meeting by
the Court.
10. Withdrawal of cautionary announcement
Peermont shareholders are advised that the cautionary announcements
referred to in paragraph 1 above are hereby withdrawn.
Bryanston
21 November 2006
Financial advisor to Peermont
JPMorgan
Transaction sponsor to Peermont
JPMorgan Equities Limited
Legal advisor to Peermont
Webber Wentzel Bowens
Independent expert
PricewaterhouseCoopers Corporate Finance (Pty) Limited.
Transaction arranger and debt advisor to the Consortium
Brait South Africa Limited (Specialised Debt Finance)
Financial advisor to the Consortium
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal advisors to the Consortium
MJ King Inc.
Corporate Law Advisory Practice of KPMG Services (Proprietary) Limited
Tax advisor to the Consortium
KPMG Services (Proprietary) Limited
Underwriter and sole bookrunner
Citigroup Global Markets Limited
Competition advisors to the Consortium
KPMG Services (Proprietary) Limited
NewCo will be hosting a newswire call at 11.00 (SA time). South African toll
free number: 0800 200 648. Alternative number: +27 11 535 3600. Please ask to
join the NewCo call
NewCo will be hosting a media briefing at 15.00 (SA time) in committee 4 room,
at the Sandton Convention Centre, 4th floor, Maude Street, Sandton,
Johannesburg. Press representatives can dial into this conference using the
following numbers. South African toll free number: 0800 200 648. Alternative
number: +27 11 535 3600. Please ask to join the NewCo briefing.
Date: 21/11/2006 08:54:52 AM Produced by the JSE SENS Department
