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Shareholder reorganisation, specific repurchase of shares and resultant directorate changes
Alexander Forbes Group Holdings Limited
Incorporated in the Republic of South Africa
(Registration Number: 2006/025226/06)
JSE Share Code: AFH and ISIN: ZAE000191516
(Alexander Forbes or the Company or Group)
SHAREHOLDER REORGANISATION, SPECIFIC REPURCHASE OF SHARES AND RESULTANT
DIRECTORATE CHANGES
DETAILED TERMS ANNOUNCEMENT REGARDING THREE INDEPENDENT TRANSACTIONS:
A. THE ACQUISITION OF 193,000,000 SHARES FROM MERCER AFRICA LIMITED (MERCER) BY
AFRICAN RAINBOW CAPITAL FINANCIAL SERVICES HOLDINGS PROPRIETARY LIMITED
(ARC), AT A PRICE OF 525 CENTS PER SHARE (ARC ACQUISITION) FOR A TOTAL
CONSIDERATION OF R1,013,250,000.
B. THE PROPOSED SPECIFIC REPURCHASE OF 200,800,000 ALEXANDER FORBES SHARES
HELD BY MERCER, AT A PRICE OF 515 CENTS PER SHARE (SPECIFIC REPURCHASE) FOR A
TOTAL REPURCHASE CONSIDERATION OF R1,034,120,000.
C. IMPLEMENTATION OF THE PROPOSED EXCHANGE OF SHARES HELD BY ARC IN
ALEXANDER FORBES LIMITED FOR SHARES IN ALEXANDER FORBES GROUP HOLDINGS
LIMITED (FLIP-UP) AND PROPOSED WAIVER OF ARC’S CONSEQUENTIAL OBLIGATION TO
MAKE A MANDATORY OFFER TO ALL ALEXANDER FORBES SHAREHOLDERS (MANDATORY
OFFER WAIVER).
COLLECTIVELY (SHAREHOLDER REORGANISATION)
1. INTRODUCTION AND RATIONALE
Mercer currently holds 442 801 129 ordinary shares (representing 34.4% of the total ordinary shares in
issue) in Alexander Forbes. Mercer routinely evaluates investments across the enterprise and has decided
to sell substantially all of its equity stake in Alexander Forbes (Mercer Sale), in an orderly and coordinated
manner. The Shareholder Reorganisation has therefore been structured to achieve the following key
objectives:
- To facilitate the acquisition by the Company of a large block of Alexander Forbes ordinary shares at a
meaningful discount, creating significant value for remaining shareholders.
- To reposition ARC as the key strategic anchor shareholder and, critically for Alexander Forbes, a black
empowerment partner.
- To ensure minimal disruption to the Alexander Forbes share price through the co-ordinated disposal of
the Mercer shares for the benefit of all stakeholders.
The Mercer Sale will be effected through the ARC Acquisition and the Specific Repurchase, which are
independent of each other and are not inter-conditional. In terms of this:
- Following implementation of the ARC Acquisition, ARC will hold 28.6% of the Company’s issued
share capital, subject to the requisite regulatory approvals.
- Following implementation of the Specific Repurchase, ARC will hold 33.9% and Mercer 4.5% of
the Company’s issued share capital.
- To facilitate the efficient implementation of the Shareholder Reorganisation, the Flip-Up will be
implemented by Alexander Forbes and ARC after the Mercer Sale. This has been done in terms of
the original Flip-Up agreement entered into between the Company, African Rainbow Capital
Proprietary Limited (later substituted by ARC) and Alexander Forbes Limited on 28 September
2016 (and as approved by shareholders at the general meeting held on 20 January 2017) which
permits the parties to determine the date of implementation of the Flip-Up. The parties have
determined that the Flip-Up will be implemented, subject to regulatory approvals and completion of
the applicable valuation procedure provided for under the Flip-Up agreement, on the earlier of the
Takeover Regulation Panel granting all final approvals or exemptions required for the waiver of any
obligation by ARC to make a mandatory offer to the Company’s shareholders (Waiver) or such
other date as agreed to in writing between the parties. All other terms and conditions of the Flip-
Up remain unaffected. The Waiver is independent of the ARC Acquisition and the Specific
Repurchase.
- In anticipation of the Flip-Up implementation, ARC will seek the required approval from the requisite
majority of independent Alexander Forbes shareholders for the waiver of any obligation by ARC to
extend a mandatory offer.
Alexander Forbes and Mercer have shared several strategic business initiatives over the past five years
providing significant opportunities to both companies and market-leading consulting and solutions to clients.
Notwithstanding the Shareholder Reorganisation, the strategic alliance, including all current commercial
agreements and associated service and product offerings, remain unaffected. Both companies remain fully
committed to maintaining a close relationship, to ensure that the enhanced value proposition for Alexander
Forbes’ clients is well preserved and strengthened. The Company and Mercer will continue to work
together, jointly innovating and delivering world class solutions to clients across Africa, including through
Arrive – the joint Pan-African benefits solution. Through Arrive, clients will continue to have access to
quality healthcare, and the opportunity to standardise benefits across multiple countries.
From an investments perspective, the partnership with Mercer will continue to allow the Company’s clients
access to financial strategies that provide access to top global asset managers, including continuing to
enjoy a portfolio of integrated solutions with leading intellectual capital at a competitive price.
The Alexander Forbes Board is confident that the proposed Shareholder Reorganisation is in the best
interest of all shareholders and will enable and ensure the sustainability of the business to effectively deliver
on its value proposition and strategy.
2. SPECIFIC REPURCHASE
2.1. Terms
Subject to the approval of shareholders in a general meeting (General Meeting), and in terms of sections
48, 114 and 115 of the Companies Act, 71 of 2008 (Companies Act), the Companies Regulations, 2011
(Regulations) and the Listings Requirements of the JSE Limited (Listings Requirements), the Company
has agreed to repurchase and cancel 200,800,000 ordinary shares (Repurchase Shares) from Mercer, at
the earliest practical date (for the Specific Repurchase) expected to be on or about 2 April 2020, subject to
fulfilment or waiver, where applicable, of the conditions precedent set out in paragraph 2.2 below.
The Repurchase Shares represent 15.6% of the total issued share capital of Alexander Forbes and will be
repurchased for a total consideration of R1,034,120,000 (Specific Repurchase Consideration). The
Specific Repurchase Consideration equates to 515 cents per Alexander Forbes ordinary share, which price
represents a 4.28% discount to the 30-day volume weighted average price (VWAP) of the Alexander Forbes
ordinary shares of 538 as at 21 January 2020, being the day prior to the date on which the Specific
Repurchase Consideration was agreed to in writing between Alexander Forbes and Mercer.
2.2. Conditions precedent
The Specific Repurchase is subject to the fulfilment or waiver, where applicable, of the following conditions
precedent:
- All suspensive conditions for the sale of the Company’s short-term insurance business have been
fulfilled. In this regard, the cash flows from the disposal are expected on 31 January 2020. The Specific
Repurchase is conditional on the receipt of the proceeds of this sale.
- Alexander Forbes receiving a fair and reasonable report prepared by an independent expert, in respect
of the Specific Repurchase in terms of section 114(3) of the Companies Act, stating, inter alia, that the
Specific Repurchase is fair and reasonable to the shareholders of the Company.
- All required clearances being obtained, including approval of the Jersey Financial Services
Commission, the Prudential Authority, the JSE and the Takeover Regulation Panel (TRP).
- The passing of a special resolution of the shareholders (excluding Mercer and its associates) approving
the Specific Repurchase, as required by sections 48(8)(b), 114 and 115(2) of the Companies Act and
paragraph 5.69(b) of the Listings Requirements, and (ii) to the extent required, the approval of the
implementation of the special resolution for the Specific Repurchase by the court in the circumstances
and manner contemplated in terms of sections 115(3) to 115(6) of the Companies Act, and (iii) if
applicable, Alexander Forbes not treating such resolution as a nullity, as contemplated in section
115(5)(b) of the Companies Act.
- No more than 2% of the Company’s issued shares entitled to exercise voting rights, validly exercise
their appraisal rights in terms of section 164 of the Companies Act.
2.3. Impact on Alexander Forbes’ financial information
The Group’s cash balances are expected to decrease by R1,149,022,222 (including the dividend paid to
minorities at Alexander Forbes Limited) as a result of the Specific Repurchase and, on cancellation of the
Repurchase Shares, share capital and share premium will reduce by the same amount. Interest receivable
at rates of approximately 5.75% per annum (pre-tax) will be foregone on the cash resources used to acquire
the Repurchase Shares.
The reduced number of issued shares after cancellation of the Repurchase Shares will result in a lower
weighted average number of shares used to calculate earnings per share in future reporting periods.
Shareholders are referred to the Company’s announcement on 25 July 2019 relating to the short-term
insurance business disposal. As per the Company’s calculation of the final price, the expected sale
proceeds will amount to approximately R2,038,000,000 at 31 January 2020. The sale proceeds will be
received by Alexander Forbes Limited which is a 90% held subsidiary of the Company. The expected
proceeds available to the Company will therefore amount to R1,834,000,000, of which a portion will be
utilised for the Specific Repurchase.
Following implementation of the Specific Repurchase and cancellation of the Repurchase Shares,
Alexander Forbes will hold no additional shares in treasury. Treasury shares, on which the Company hold
no voting rights, as at 30 September 2019 were 65,508,049.
2.4. Cancellation and delisting
Following the fulfilment of the conditions precedent set out in paragraph 2.2 above, application will be made
to the JSE for the delisting of the Repurchase Shares, which shares will be cancelled as issued shares and
reinstated as authorised but unissued shares. The Repurchase Shares are expected to be cancelled and
delisted on or about 21 April 2020.
3. RESULTANT DIRECTORATE CHANGES
In accordance with the Amended and Restated Relationship Agreement entered into between the Company
and Mercer on 4 July 2014:
- Mr DJ (David) Anderson will be resigning as a director of the Company with effect from the day following
the completion of the ARC Acquisition; and
- Mr WS (Simon) O'Regan will be resigning as a director of the Company with effect from the day
following the fulfilment or waiver, where applicable, of the conditions precedent set out in paragraph
2.2 above.
The Board expresses its sincerest appreciation to Messrs Anderson and O’Regan for their dedication,
commitment and significant contribution to the Board and Company during their tenure and wish them well
for the future.
4. WAIVER OF MANDATORY OFFER
As part of the Flip-Up, ARC will seek the required approval from the requisite majority of independent
Alexander Forbes shareholders of the ordinary resolution required for the waiver of the benefit that could
be derived from a mandatory offer to Alexander Forbes shareholders, arising from or in any way connected
to the Flip-Up, in accordance with Regulation 86(4), consisting of a waiver pertaining to the issue of
securities (Waiver Resolution). ARC and its associates will be precluded from voting on the Waiver
Resolution.
The Waiver Resolution is required as ARC does not intend to take a controlling stake in Alexander Forbes
at present, nor do they believe proceeding with a mandatory offer would be in the Company’s or
stakeholders’ best interests.
Below is an indicative illustration of the potential impact of the Shareholder Reorganisation and passing of
the Waiver Resolution on ARC’s shareholding in Alexander Forbes post the implementation of the Flip-Up:
Total number of Number of
Company shares shares held by Percentage
in issue ARC shareholding
Current 1,287,858,154 175,807,216 13.7%
Impact of ARC Acquisition - 193,000,000 15.0%
Position after ARC Acquisition 1,287,858,154 368,807,216 28.6%
Impact of Specific Repurchase (200,800,000) - 0.0%
Position after Specific Repurchase 1,087,058,154 368,807,216 33.9%
Impact of ARC Flip Up1 137,029,014 137,029,014 0.0%
1,224,087,168 505,836,230 41.3%
1. Note: the number of Flip Up shares shown in the table is calculated as at December 2019 and is illustative.
The actual number of Flip Up shares will be calculated in line with the Flip Up formula.
Following adoption of the Waiver Resolution and if the TRP so rules (TRP Waiver Ruling), Alexander
Forbes will release an announcement on the stock exchange news service of the TRP Waiver Ruling (the
TRP Waiver Announcement), informing Alexander Forbes shareholders that they may request the
Takeover Special Committee to review the TRP Waiver Ruling within 5 business days of issue of the TRP
Waiver Announcement.
5. CIRCULAR AND GENERAL MEETING
A circular containing full details of the Shareholder Reorganisation and incorporating a notice convening a
General Meeting of shareholders in order to consider and, if deemed fit, to pass, with or without modification,
the resolutions necessary to give effect to the Specific Repurchase and any other shareholder approvals
which may be necessary for the Shareholder Reorganisation (Circular), including the Waiver Resolution,
is expected to be distributed to shareholders on or about 4 March 2020.
The General Meeting of shareholders is expected to be held on or about 31 March 2020 in the Auditorium,
Ground Floor, Alexander Forbes, 115 West Street, Sandton, 2196.
6. OPINIONS AND RECOMMENDATIONS
Mercer is a material shareholder and related party to Alexander Forbes. In terms of the JSE Listings
Requirements, the Specific Repurchase constitutes a specific repurchase from a related party, which
requires the approval of Alexander Forbes shareholders, other than Mercer and its associates, by way of a
special resolution proposed at the General Meeting. The Specific Repurchase Consideration represents a
4.28% discount to the 30-day VWAP of 538 as at 21 January 2020 and, accordingly, no fairness opinion
on the terms of the Specific Repurchase is required in terms of the JSE Listings Requirements.
As required in terms of the Companies Act and Regulations, an independent board of Alexander Forbes
directors (Independent Board) has been constituted for the purpose of evaluating the terms of the Specific
Repurchase. The Independent Board comprises all of the independent non-executive directors of the
Company.
As the Specific Repurchase will result in Alexander Forbes acquiring in excess of 5% of the Alexander
Forbes ordinary shares in issue, the Specific Repurchase is, in terms of section 48(8)(b) of the Companies
Act, subject to the provisions of sections 114 and 115 of the Companies Act and Regulation 90 of the
Regulations. As such, the Specific Repurchase requires, inter alia, the preparation of a report by an
independent expert on the terms of the Specific Repurchase.
In addition, the Mandatory Offer Waiver requires a fair and reasonable opinion from an independent expert
in terms of Regulation 86(7).
The Independent Board has appointed Ernst & Young Advisory Services Proprietary Limited (Independent
Expert) to provide an independent fair and reasonable opinion on the terms of the Specific Repurchase
and Mandatory Offer Waiver and to make appropriate recommendations to the Independent Board. The
Independent Expert’s opinion and the views of the Independent Board will be detailed in the Circular.
7. RESPONSIBILITY STATEMENT
The Independent Board accepts responsibility for the information contained in this announcement and
confirms that, to the best of its knowledge and belief, the information is true and does not omit anything
likely to affect the importance of the information.
Carina Wessels
Executive: Governance, Legal and Compliance (Company Secretary)
22 January 2020
Sandton
Financial adviser and Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Legal adviser: Bowmans
Date: 22-01-2020 05:50:00
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