| Mon 18 Dec 2006, 18:03 | | CSL |
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CSL
CSL - Consol - Firm intention to make an offer to acquire
CONSOL LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1946/021828/06
Share code : CSL
ISIN : ZAE000063251
("Consol")
FIRM INTENTION TO MAKE AN OFFER TO ACQUIRE THE ENTIRE ISSUED SHARE
CAPITAL OF CONSOL AND RESOLUTION NOT TO PROCEED WITH THE ETHOS OFFER
1. INTRODUCTION
Shareholders are referred to the announcements published by Consol
on 4 December 2006 and 8 December 2006 regarding the firm intention
to make an offer received from a consortium led by Ethos Private
Equity Fund V ("the Ethos offer"). Shareholders are further advised
that subsequent to these announcements the board of directors of
Consol ("the board") has received a firm intention to make an offer
("the new offer" or "the proposed acquisition") to acquire the
entire issued share capital of Consol, from Newshelf 809
(Proprietary) Limited ("Newshelf 809"), an entity affiliated with
Brait South Africa Limited ("Brait"), for a consideration of R19.50
per Consol share ("the offer consideration"), and thereby to
acquire control and ownership of the underlying assets and business
of Consol.
The board has resolved not to proceed with the convening of the
scheme meeting in respect of the Ethos offer as the new offer
contains more attractive terms and, in addition, has a material
level of support from shareholders as referred to in paragraph 3
below.
Shareholders are further advised that Brait has been involved in the
process since the first cautionary announcement on 20 July 2006 and
has concluded a comprehensive due diligence into the affairs of
Consol.
The new offer is to be implemented, subject to the conditions set
out in paragraph 5 below, by way of a scheme of arrangement in terms
of section 311 of the Companies Act 61 of 1973, as amended ("the
Act"), to be proposed by Newshelf 809 between Consol and all of its
shareholders ("the scheme").
If the High Court does not convene the meeting of Consol
shareholders to consider the scheme ("the scheme meeting"), or the
scheme meeting having been convened, the scheme does not become
operative for any reason other than the failure to obtain all the
necessary regulatory approvals, Newshelf 809 will make a general
offer to Consol shareholders at a price not less than the offer
consideration, which general offer will include the re-investment
option referred to in paragraph 2 below. The conditions to which the
general offer will be subject, which will include Newshelf 809
receiving acceptances in respect of no less than 90% (or such lower
percentage as Newshelf 809 may notify Consol shareholders) of the
issued shares in Consol, will be set out in the circular to be
posted to shareholders referred to in paragraph 10 below ("the
circular").
2. TERMS OF THE NEW OFFER
In terms of the new offer, Consol shareholders will be offered
either the offer consideration in cash or, if eligible as described
below, an opportunity to retain an investment in Consol by electing
to receive the offer consideration by way of a combination of cash,
shares in Newshelf 809 and claims against Newshelf 809 in respect of
their Consol shares("the re-investment option").
Only Consol shareholders who acquired beneficial ownership of Consol
shares prior to close of trade (17:00) on 18 December 2006 ("the
qualifying date") and who remain beneficial shareholders on the
consideration record date ("eligible Consol shareholders") will have
the opportunity to elect the re-investment option.
Each Consol shareholder's entitlement to receive the whole of the
offer consideration in cash or to elect the re-investment option in
terms of the new offer will be in accordance with the instructions
contained in the circular. Eligible Consol shareholders who fail to
elect the re-investment option in accordance with the terms of the
instructions contained in the circular will be deemed not to have
elected the re-investment option in respect of their Consol shares
and will thus receive their offer consideration in cash.
If the scheme becomes operative, Consol shareholders eligible to
participate in the scheme ("scheme participants") will be entitled
to receive the offer consideration as follows:
- R19.50 per Consol share payable to each scheme participant in
cash; or
- if a scheme participant is an eligible Consol shareholder and
validly elects the re-investment option, for every 1 000 Consol
shares held by the eligible scheme participant on the
qualifying date and the consideration record date (subject to
rounding), that scheme participant will receive:
- R15 274.55 in cash; plus
- 613 Newshelf 809 ordinary shares, issued at an aggregate price
of R582.35, credited as fully paid; plus
- class A loan claims against Newshelf 809 (and/or its holding
company or wholly-owned subsidiary) in an amount of
R3 643.10("the loan claims").
The composition of the offer consideration set out above in respect
of the re-investment option assumes that Newshelf 809 will have
availed itself of a senior subordinated payment-in-kind debt bridge
facility. Should Newshelf 809 not avail itself of this facility, the
composition of the consideration in respect of the re-investment
option will differ from that outlined above. Details will be set out
in the circular.
The Newshelf 809 ordinary shares and the loan claims will be subject
to the provisions of the articles of association of Newshelf 809,
the salient terms of which will be set out in the circular.
For legal and regulatory reasons, neither the opportunity to elect
the re-investment option nor the general offer will be offered to
Consol shareholders in certain jurisdictions.
Interest will be payable in cash on the offer consideration at the
prevailing 32-day deposit rate of First National Bank, a division of
FirstRand Bank Limited, for amounts exceeding R50 000 held on
deposit for less than one month (estimated at 6.60% per annum) with
effect from the earlier of the date of suspension of Consol's shares
on the JSE Limited ("JSE") and 16 March 2007, until the operative
date of the scheme, subject to a maximum interest payment of 17.15
cents per share.
The new offer is made on the basis that no dividends or similar
payments will be declared or paid to Consol shareholders between the
date of this announcement and the date of implementation of the
scheme. Should Consol declare any such dividends or make any such
payments, the offer consideration will be reduced by an amount equal
to the amount of such dividend or payment plus any STC payable in
respect thereof.
Following the completion of the scheme, Consol will be a wholly-
owned subsidiary of Newshelf 809 and the listing of the entire
issued share capital of Consol on the JSE will be terminated.
3. UNDERTAKINGS
Newshelf 809 has received conditional undertakings (the
"undertakings") to support the new offer from Investec Asset
Management (Proprietary) Limited ("Investec") (17.36%), the Public
Investment Corporation Limited ("PIC")(2.18%), Old Mutual Life
Assurance Company (South Africa)("OMLACSA") (4.53%) and Old Mutual
Asset Managers (South Africa) (Proprietary) Limited ("OMAM") (0.54%)
("the supporting shareholders"), who collectively represent
approximately 24.61% of Consol's issued ordinary share capital, in
terms of which the supporting shareholders have undertaken to vote
in favour of the scheme. Further, the PIC beneficially owns an
additional 11.56% of the Consol shares which are managed by third
party fund managers and has undertaken, to the extent it has the
legal right to do so, to vote these shares in support of the new
offer or not to permit these shares to be voted in a manner that is
contrary to the interests of the new offer. To the extent that the
PIC is not entitled to do so, shareholders are advised that the
managers of such funds shall have the right to vote those shares in
their discretion.
In addition, the supporting shareholders have agreed, in the
undertakings, to vote against any other competing offer ("competing
offer") received and proposed by the board in terms of a scheme of
arrangement, unless such competing offer is received on more
favourable terms and conditions. Such more favourable terms and
conditions would require, in aggregate, that the cash consideration
payable under the competing offer exceeds the cash consideration of
the new offer by margins of between 2% and 5%, that the competing
offer contains a re-investment option and that it be structured in a
manner that allows for 26% of the equity of Newshelf 809 to be
acquired by BEE shareholders. Copies of the undertakings will lie
open for inspection by Consol shareholders from Wednesday 19
December 2006 at the offices of Newshelf 809's financial advisors,
Citigroup Global Markets Limited, c/o Citigroup Corporate and
Investment Banking, at 145 West Street, Sandown, Sandton, attention
Steven van Weede, during ordinary working hours.
4. RATIONALE
Newshelf 809's rationale for proposing the scheme is to acquire ownership
and control over the business and the operating assets of the Consol
Group.
Consol has agreed to facilitate the scheme for the following reasons:
- the scheme represents an opportunity for Consol shareholders who
elect to dispose of their shareholding to receive the offer
consideration at a significant premium to the price at which Consol
shares have previously traded on the JSE, being a premium of:
- 62.5% to the closing price of R12.00 of the shares on
Wednesday, 19 July 2006, the last trading day before the
publication of the first cautionary announcement; and
- 49.9% to the volume weighted average trading price of the
shares during the 30 trading days up to and including
Wednesday, 19 July 2006, being R13.01; and
- the scheme will allow eligible scheme participants who elect the re-
investment option to re-invest in Consol.
5. CONDITIONS PRECEDENT TO THE SCHEME
The implementation of the scheme is subject, inter alia, to the
fulfilment of the following conditions precedent by no later than 13
April 2007 (or such later date, being not more than 90 days after
such date, as the new offer may be extended to):
5.1 all necessary regulatory and third party approvals and consents
in respect of the proposed acquisition being obtained, including but
not limited to approvals from the competition authorities, the South
African Reserve Bank, the JSE and the Securities Regulation Panel
("the SRP");
5.2 the High Court convening a meeting of Consol shareholders to
consider the scheme ("the scheme meeting");
5.3 the approval of the scheme by 75% of the votes exercisable by
the scheme members present and voting, in person or by proxy, at the
scheme meeting;
5.4 the securing of any third party consents which may be required
by Consol, arising from contractual obligations which become
applicable in the event of the proposed acquisition;
5.5 the sanctioning of the scheme by the High Court and a certified
copy of the order of Court sanctioning the scheme having been
registered by the Registrar in terms of the Act;
5.6 no material adverse change in the position of Consol coming to
the attention of Newshelf 809 before the date of sanctioning of the
scheme by the High Court, where material adverse change means the
occurrence of any event or act which either has, or is reasonably
likely to have, when measured on the day prior to the sanctioning of
the scheme by the High Court (individually or in aggregate), a
material adverse effect on the implementation of the scheme, which
has or have or may result in either (i) a reduction of 10% or more
of the earnings before interest, tax, depreciation and amortisation
of Consol when compared to the equivalent period during the previous
financial year of Consol or (ii) in a loss or liability to Consol
(or any member of the Consol group) exceeding 10% or more of the
market value of Consol, as implied by the new offer, provided that
any such act or event which is of a once-off, non-recurring nature
and which is not likely to materially impair the earnings of Consol
in subsequent financial years shall not constitute a material
adverse change; and
5.7 no underwriter exercising its rights to withdraw from the
underwriting agreement as a result of the happening of a material
adverse change.
Newshelf 809 shall have the right to waive the conditions in
referred in paragraphs 5.4 and 5.6 on written notice to Consol.
6. INFORMATION RELATING TO NEWSHELF 809
Newshelf 809 is a newly established private company which has been
incorporated solely for the purpose of acquiring control and
ownership of the underlying assets and business of Consol by
acquiring the entire issued share capital of Consol.
Newshelf 809 will be converted from a private to a public company to
enable eligible Consol shareholders to take advantage of the re-
investment option, but will remain unlisted.
Pursuant to the implementation of the scheme, the shareholders of
Newshelf 809 will be certain private equity investment funds under
the management of Brait (or its affiliates, fund investors or co-
investors) ("Brait funds"), executive management of Consol, those
eligible Consol shareholders who have validly elected the re-
investment option and, to the extent that eligible Consol
shareholders do not validly elect the re-investment option, the
underwriters to the new offer (being OMLACSA, HarbourVest
International Private Equity Partners V, HarbourVest Partners 2004
Direct Fund L.P. and Brait funds).
It is recorded that OMLACSA specifically excludes any third party
investment funds or entities under the management or advisory of
OMAM or entities forming part of the Old Mutual group of companies.
Shortly after the implementation of the scheme, it is contemplated
that a BEE entity ("BEE Co") will acquire 26% of the issued ordinary
share capital of Newshelf 809, in terms of a general offer to be
made by or on behalf of BEE Co to all Newshelf 809 shareholders.
In the event that and to the extent that, pursuant to such general
offer, BEE Co does not acquire the requisite 26% of Newshelf 809
ordinary share capital, all Newshelf 809 shareholders (other than
executive managers of Consol) will be obliged to dispose on a pro
rata basis such portion of their shares in and claims against
Newshelf 809 at cost plus an interest-related holding fee, as will
enable BEE Co to acquire an aggregate of 26% of the share capital
and claims against Newshelf 809.
A broad-based staff trust or incentive scheme will be established
for the benefit of employees of Consol to subscribe for or acquire
up to 2% of the ordinary shares in Newshelf 809, or economic
benefits equivalent thereto.
The relationship between and amongst Newshelf 809 shareholders, and
between Newshelf 809 shareholders and Newshelf 809, will be governed
by the articles of association of Newshelf 809.
7. OPINIONS AND RECOMMENDATIONS
The board has appointed Nedbank Capital to prepare a fair and
reasonable opinion on the new offer. Nedbank Capital has indicated
to the board that it has considered the new offer and is of the
opinion that it is fair and reasonable to Consol shareholders.
Nedbank Capital's written opinion will be contained in the circular.
Accordingly, the board recommends that Consol shareholders vote in
favour of the scheme and the directors of Consol undertake to vote
their own shares in favour of the scheme at the scheme meeting.
8. MARKET AND FINANCIAL INFORMATION
Information regarding the price at which Consol shares traded
immediately prior to the publication of Consol's first cautionary
announcement and this announcement of Newshelf 809's firm intention
to make an offer, in relation to the purchase consideration, as well
as a comparison of the purchase consideration to the net asset value
and tangible net asset value per Consol share at 30 June 2006,
Consol's financial year end, is set out in the table below.
Before the The Premium
scheme purchase (%)
(cents) considerat
ion
(cents)
Market price on 19 July 2006 1 200(1) 1 950 62.5
30-day volume-weighted average price 1 301(2) 49.9
to 19 July 2006 1 950
Market price on 1 December 2006 1 741(3) 1 950 12.0
30-day volume-weighted average price 1 630(4) 19.6
to 1 December 2006 1 950
Market price on 15 December 2006 1 870(5) 1 950 4.3
30-day volume-weighted average price 1 742(6) 11.9
to 15 December 2006 1 950
Net asset value per share 488(7) 1 950 299.6
Tangible net asset value per share 472(7) 1 950 313.1
Notes:
1. Closing price of Consol shares on the JSE on 19 July 2006, being the
last trading day prior to publication of the first cautionary
announcement in respect of the new offer.
2. Volume-weighted average price at which Consol shares traded on the
JSE for the 30 trading days up to and including 19 July 2006, being
the last trading day prior to publication of the first cautionary
announcement in respect of the new offer.
3 Closing price of Consol shares on the JSE on 1 December 2006, being
the last trading day prior to publication of the Ethos offer.
4. Volume-weighted average price at which Consol shares traded on the
JSE for the 30 trading days up to and including 1 December 2006,
being the last trading day prior to publication of the Ethos offer.
5. Closing price of Consol shares on the JSE on 15 December 2006, being
the last trading day prior to the publication of this announcement
of Newshelf 809's firm intention to make an offer.
6. Volume-weighted average price at which Consol shares traded on the
JSE for the 30 trading days up to and including 15 December 2006,
being the last trading day prior to the publication of this
announcement of Newshelf 809's firm intention to make an offer.
7. Audited net asset value and tangible net asset value per share
attributable to Consol shareholders at 30 June 2006.
8. The information reflected in the table above does not take into
account any dividend and interest entitlements.
9. CONFIRMATION OF FUNDS
Newshelf 809's financial advisers have provided the necessary cash
confirmation to the SRP, as required by Rule 2.2(b) and Rule 21.7 of
the Securities Regulation Code on Takeovers and Mergers.
10. DOCUMENTATION
The circular providing further information on the new offer and
containing, inter alia, a notice of scheme meeting, forms of proxy
and a form of election and surrender will be posted to Consol
shareholders after the High Court has convened the scheme meeting.
11. IMPORTANT DATES AND TIMES
Consol shareholders will be advised of important dates and times of
the scheme in due course
Investment bank and sponsor to Consol
Standard Bank
Corporate law advisers to Consol
Taback & Associates (Pty) Limited
Independent adviser to Consol
Nedbank Capital
Lead Private Equity Sponsor and Lead Transaction Arranger
Brait South Africa Limited
Transaction debt arranger
Brait South Africa Limited (Specialised Debt Finance)
Attorneys to Newshelf 809 and Brait
Read Hope Phillips Thomas & Cadman Incorporated
Financial advisers to Newshelf 809
Citigroup Global Markets Limited
Brait South Africa Limited
Joint debt providers to Newshelf 809
Citibank, N.A.
J.P. Morgan PLC
Tax advisers and corporate law advisers to Newshelf 809
KPMG Services (Proprietary) Limited
Transaction co-underwriters
Brait IV Investments, LP
Brait Private Equity GP IV (Pty) Limited
Old Mutual Life Assurance Company (South Africa) Limited
HarbourVest International Private Equity Partners V
HarbourVest Partners 2004 Direct Fund L.P.
Wadeville
18 December 2006
Enquiries
Consol:
Mike Arnold, Group Managing Director
Tel: +27 11 874 2228
Cell: +27 83 270 9483
Karuna Nayager, Group Financial Director
Tel: +27 11 874 2272
Cell: +27 83 500 9808
Investor and Media Relations:
College Hill
Johannes van Niekerk
Tel: +27 11 447 3030
Cell: +27 82 921 9110
Date: 18/12/2006 17:53:01 Produced by the JSE SENS Department.
