| Wed 6 Dec 2006, 15:30 | | Liberty Life/Liberty Holdings - Acquisition by Lib |
|
LBH LGL
LBH LIBU
Liberty Life/Liberty Holdings - Acquisition by Liberty Life of the
remaining 62.6% of the shares in Stanlib
Limited
LIBERTY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1957/002788/06)
Share code: LGL
ISIN: ZAE000057360
Issuer code: LIBU
("Liberty Life" or "the Company")
LIBERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/002095/06)
Share code: LBH
ISIN: ZAE000004032
("Liberty Holdings")
QUANTUM LEAP INVESTMENTS 740 (PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/008281/07)
("Quantum Leap Investments")
ACQUISITION BY LIBERTY LIFE OF THE REMAINING 62.6% OF THE SHARES IN STANLIB
LIMITED
1. INTRODUCTION
Shareholders of Liberty Life and Liberty Holdings are referred to the
cautionary announcements released on SENS on Monday, 27 November 2006
and the interim results announcement of Liberty Life which was
released on SENS on Thursday, 10 August 2006 wherein the board of
directors of Liberty Life advised shareholders of its intention to
pursue the acquisition of the remaining 62.6% of the ordinary shares
in STANLIB Limited ("STANLIB"), currently owned by Standard Bank Group
Limited ("Standard Bank") (37.4%) and Quantum Leap Investments
(25.2%). Shareholders of Liberty Life and Liberty Holdings are now
informed that Liberty Life has agreed with both Standard Bank and
Quantum Leap Investments the terms of the acquisition of those shares
("the STANLIB acquisition"). The STANLIB acquisition will be effected
by way of inter-conditional agreements concluded between Liberty Life
and each of Standard Bank and Quantum Leap Investments.
2. THE STANLIB ACQUISITION
2.1 Rationale
A fundamental shift in the market has occurred since the creation
of STANLIB. The industry has experienced a pronounced shift from
on-balance sheet life products to off-balance sheet savings
products over the past few years. This has seen growth in
investment products and a resultant strong flow of funds to
collective investment managers.
In order for Liberty Life to grow and retain market share, it
must be in a position to provide new products, formulate a
sustainable asset acquisition strategy and align marketing,
distribution and sales activities accordingly.
The acquisition of STANLIB will enable Liberty Life to
effectively defend its asset base against competing investment
houses from an investment product perspective and will enable
Liberty Life and STANLIB to manage the rate and extent of asset
conversion to new generation products.
From a growth perspective, the acquisition of STANLIB by Liberty
Life will provide product and distribution opportunities, via a
comprehensive product range that will enable better matching of
client needs.
Management views the acquisition of STANLIB as an important step
to address structural inefficiencies within the group.
2.2 The purchase consideration
The purchase consideration payable to Standard Bank and Quantum
Leap Investments amounts to R1,564,809,114 of which -
* R935,190,887 will be paid to Standard Bank and will be
settled by Liberty Life issuing to Standard Bank 7,246,005
ordinary shares in the capital of Liberty Life as
consideration shares and the payment of a cash amount of
R384,494,507; and
* R629,618,227 will be paid to Quantum Leap Investments and
will be settled by Liberty Life issuing to Quantum Leap
Investments 2,486,577 ordinary shares in the capital of
Liberty Life as consideration shares and the payment of a
cash amount of R440,638,375.
The shares which will be issued for the purpose of this
transaction will be deemed to have a value of R76.00 per share.
Interest at a rate of prime less 4% will be payable on the cash
portion of the consideration from the effective date until the
implementation of the transaction.
Application will be made to the JSE Limited ("JSE") for the
listing of the consideration shares, to commence after
fulfillment of the conditions precedent referred to below.
2.3 Conditions precedent
The STANLIB acquisition is conditional on the fulfillment of a
number of conditions on or before 31 March 2007, including, inter
alia, that -
* the Liberty Life shareholders pass ordinary resolutions
authorising the implementation of the STANLIB acquisition;
* all regulatory approvals (including approvals, if required,
from the Registrar of Banks and the Financial Services Board
and in terms of the Competition Act, No. 89 of 1998) which
are necessary for the implementation of the STANLIB
acquisition shall have been obtained;
* Liberty Life having declared its ordinary dividend to its
ordinary shareholders in respect of the period ending 31
December 2006 and that dividend having accrued to those
shareholders (Standard Bank and Quantum Leap Investments are
not entitled to any ordinary dividend declared by Liberty
Life for the period ended 31 December 2006 in respect of the
consideration shares);
* the JSE shall have approved the listing of the consideration
shares; and
* STANLIB shall have declared, to its shareholders as at 31
December 2006 and in respect of the year ending on that
date, the dividend required to be paid by the existing
shareholders agreement governing the relationship between
the existing shareholders of STANLIB.
2.4 Effective date
The STANLIB acquisition will be effective on 1 January 2007.
2.5 Related party transaction
In terms of the Listings Requirements of the JSE the transaction,
in terms of which Liberty Life will acquire a 37.4% stake in
STANLIB from Standard Bank, is classified as a related party
transaction, as Standard Bank is an associate of Liberty
Holdings, a majority shareholder of Liberty Life, the sole
investment of which is its interest in Liberty Life.
Consequently, Liberty Holdings and any associate of Liberty
Holdings which holds or controls the votes of Liberty Life shares
may be taken into account in determining the quorum at the
general meeting, but their votes will not be taken into account
in determining the results of the voting on the ordinary
resolutions required to be passed at the general meeting to
approve the STANLIB acquisition.
3. OPINIONS AND RECOMMENDATIONS
Liberty Life has retained Deutsche Securities (SA) (Proprietary)
Limited ("Deutsche Securities") to act as an independent expert to
provide a fair and reasonable opinion on the STANLIB acquisition. On
Wednesday, 6 December 2006, Deutsche Securities delivered to the
Liberty Life board of directors an opinion to the effect that, as of
the date of the opinion and based upon and subject to the factors and
assumptions detailed in its letter, the terms and conditions of the
STANLIB acquisition are fair and reasonable to the holders of ordinary
shares in Liberty Life.
The board of directors of Liberty Life is of the opinion that the
STANLIB acquisition is for the benefit of Liberty Life and its
shareholders.
The directors intend to vote in favour of the resolutions to approve
the STANLIB acquisition in respect of the ordinary shares held
directly or indirectly by them and recommend that all shareholders do
likewise.
4. INFORMATION ON STANLIB
STANLIB is an investment management, linked investment and collective
investment scheme business. STANLIB was formed in 2002 through the
merger of Liberty Asset Management, Liberty Collective Investments,
Standard Bank Unit Trusts and Standard Corporate and Merchant Bank
Asset Management.
As at 30 June 2006 STANLIB managed over R296 billion of assets, making
it the third largest manager of South African investments.
5. FINANCIAL INFORMATION
The unaudited pro forma financial effects set out below has been
prepared for illustrative purposes only in order to assist
shareholders to assess the impact of the STANLIB acquisition on the
earnings per share, headline earnings per share, net asset value per
share, tangible net asset value per share and embedded value per share
and is the responsibility of the directors of the Company. The
material assumptions used in the preparation of the financial effects
are set out in the notes following the table. Due to the nature of
the unaudited pro forma financial effects, they may not fairly present
the financial position of the Company after the STANLIB acquisition,
nor the effect on the Company"s future earnings.
Six months ended 30 June Before the After the Change
2006 STANLIB STANLIB (%)
acquisition(1) acquisition(2
)
Earnings per share ("EPS") 557.2 557.1 (0.0)
(cents)
BEE normalised headline 384.9 390.5 1.5
earnings per share
("BEEHEPS") (cents)
Headline earnings per share 407.2 412.6 1.3
("HEPS") (cents)
Net asset value ("NAV") per 37.47 34.09 (9.0)
share (Rand)
Tangible net asset value 31.80 25.32 (20.4)
("TNAV") per share (Rand)
Embedded value ("EV") per 76.55 77.34 1.0
share (Rand)
BEE normalised embedded 73.62 74.44 1.1
value ("BEEEV") per share
(Rand)
Notes
1. The information as set out in the "Before the STANLIB
acquisition" column has been extracted from the published
financial results of Liberty Life for the six months ended 30
June 2006. EPS and HEPS have been calculated on a weighted
average of 252.0 million shares in issue. BEEHEPS has been
calculated on a weighted average of 277.8 million shares in
issue. NAV per share, TNAV per share and EV per share have been
calculated on 252.8 million shares in issue at 30 June 2006.
BEEEV per share has been calculated on 278.6 million shares in
issue at 30 June 2006.
2. The information as set out in the "After the STANLIB acquisition"
column assumes the following adjustments:
* for the purpose of calculating EPS, BEEHEPS and HEPS the
assumed effective date of the transaction is 1 January 2006.
For the purpose of calculating NAV per share, TNAV per
share, EV per share and BEEEV per share the assumed
effective date of the transaction is 30 June 2006;
* the issue of a total of 9.7 million shares to Standard Bank
and Quantum Leap Investments for a total value of R740
million;
* the cash payment of R825 million to Standard Bank and
Quantum Leap Investments;
* the accounting of the acquisition as a common control
transaction using the US GAAP framework, includes the
following:
* the consolidation of 100% of the earnings and NAV of STANLIB
as reported for STANLIB for the six-month period ended 30
June 2006, as opposed to the previous equity accounting of
37.4% of the earnings and NAV of STANLIB; and
* the accounting of the full write off of intangible assets,
being the difference between the STANLIB reported NAV and
the total acquisition value, directly against shareholder
reserves;
* transaction costs of R10 million associated with the STANLIB
acquisition, which will be written off directly against
Liberty Life"s shareholders reserves; and
* for the purpose of calculating EPS, HEPS and BEEHEPS,
foregone interest at an after tax rate of 7.7% of cash
outflow associated with the cash payment for shares and
transaction costs.
3. The financial effects have been prepared using accounting
policies that comply with International Financial Reporting
Standards (IFRS). IFRS allows the use of US GAAP for the
accounting of common control transactions as no specific IFRS
framework governs such transactions. The accounting policies are
consistent with those applied in the previous financial year.
6. DOCUMENTATION
A circular incorporating a notice of general meeting relating to the
STANLIB acquisition will be posted to shareholders of Liberty Life in
due course.
Johannesburg
6 December 2006
Liberty Group will host a conference call for analysts and investors at
17.00 SA time, 15.00 UK time and 10h00 US time (EST) on the 6th December
2006. The call will include a brief introduction and overview of the
Stanlib transaction and an opportunity for questions. Analysts and
investors who wish to participate in the conference call should dial the
following numbers:
SA participants:
Toll 011 535 3600
Toll-free 0800 200 648
UK participants:
Toll-free 0800 917 7042
US
Toll-free 1 800 860 2442
Toll 1 412 858 4600
If you are not able to make the live conference call, you will have access
to a one week playback number as follows:
Code: 2641#
SA participants: 011 305 2030
UK participants: 0808 234 6771
US participants: 1 412 317 0088
Sponsor
Merrill Lynch South Africa (Pty) Ltd
Attorneys
Werksmans Inc
Independent expert
Deutsche Securities (SA) (Proprietary) Limited
Reporting accountants
PricewaterhouseCoopers Advisory Services (Proprietary) Limited
Investment bank to Quantum Leap Investments
Standard Bank
Joint legal advisers to Quantum Leap Investments
Routledge Modise Moss Morris
Derek Rabin Associates
Date: 06/12/2006 03:30:11 PM Produced by the JSE SENS Department
