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MKL - Makalani Holdings Limited - Revised Proposed Offer
MAKALANI HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2005/000726/06
Share code: MKL
ISIN: ZAE000066700
("Makalani" or "the Company")
ANNOUNCEMENT RELATING TO A:
- REVISED PROPOSED OFFER BY MAKALANI TO LINKED UNITHOLDERS TO REPURCHASE
THEIR MAKALANI LINKED UNITS FOR A COMPOSITE PRICE OF R90.00 PER LINKED
UNIT (NET CASH CONSIDERATION OF R88.08 PER LINKED UNIT);
- PROPOSED DELISTING OF MAKALANI FROM THE JSE LIMITED; AND
- WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT.
1. Introduction
Makalani linked unitholders ("Unitholders") are referred to the firm
intention announcement released on SENS on 23 February 2010 (the "Initial
FIA") and the subsequent update announcements released on SENS on 10
March 2010 and 24 March 2010 respectively.
The Makalani board ("Board") remains of the view that the current listed
structure is no longer optimal for the Company and is proposing to
Unitholders, the delisting of Makalani from the JSE Limited.
Due to a number of positive developments in the intervening period
subsequent to the publication of the Initial FIA (more fully set out in
paragraph 3 below), the Board has resolved to revise the offer set out in
the Initial FIA by increasing the offer price ("Revised Offer") to
Unitholders to repurchase their Makalani linked units ("linked units"),
hereinafter referred to as the "Proposed Transaction" from R83.97 per
linked unit ("Initial Offer Price") to R90.00 per linked unit ("Revised
Offer Price") as set out in paragraph 2.1 below.
This is an increase of 7.2% (R128 million) on the Initial Offer Price,
thus valuing Makalani at over R1.9 billion. The Revised Offer Price
represents a 22.4% premium over the 30-day volume weighted average price
of a linked unit, calculated at 24 November 2009, being the day prior to
the release of the first cautionary announcement by Makalani on 25
November 2009 and a 20.0% premium over the closing price of a linked unit
on 24 November 2009.
Outside of the Revised Offer Price and consequential adjustments flowing
therefrom as set out below, the terms of the Revised Offer remain
otherwise the same as those published in the Initial FIA.
2. Revised terms of the Proposed Transaction
2.1 The Revised Offer Price is a composite amount of R90.00 per linked
unit. This will be reduced by the distribution by Makalani of R1.92
per linked unit that was announced in the interim results
announcement released on SENS on 22 February 2010. This
distribution was paid on 23 March 2010.
2.2 Accordingly, the net cash offer consideration payable on the
expected payment date of 31 May 2010 will be R88.08 ("Net Cash
Consideration"), which, taking into account the distribution of
R1.92 that was paid on 23 March 2010, results in an effective offer
consideration of R90.00.
2.3 If the payment date occurs after Monday 31 May 2010 (by reason of a
delay in the fulfilment or waiver, if applicable, of the conditions
precedent), the Net Cash Consideration will be increased by an
amount equivalent to 8% (eight percent) per annum (calculated daily
per linked unit from 1 June 2010 to the date of actual payment, both
dates inclusive).
2.4 The Revised Offer will be fully funded through the contemporaneous
subscription for new linked units ("Specific Issue") by Rand
Merchant Bank Investments and Advisory (Proprietary) Limited
("RMBIA") on a unit-for-unit basis, corresponding to the number of
acceptances received by the Company, under the Revised Offer. A term
of the Revised Offer (as was contained in the Initial FIA) is that
the Revised Offer will terminate if, at any time prior to the
business day immediately preceding the date upon which the last of
the conditions precedent is fulfilled or waived ("finalisation
date"):
2.4.1 Makalani shall have committed an act of insolvency or,
commits an act which would have constituted an act of
insolvency as defined in the Insolvency Act, 1936 if it
were a natural person, or if any of the circumstances
referred to in section 344 of the Companies Act apply to
Makalani; and/or
2.4.2 Makalani shall have been placed into final or provisional
liquidation.
3. Revised Offer Price
The Revised Offer takes into consideration the improvement in economic
and credit market conditions, improved prospects for certain portfolio
assets, as well as the additional time to implement the Revised Offer
since the release of the detailed cautionary on 14 December 2009.
These factors, as well as further advice from the independent expert
provided the board with the opportunity to increase the Initial Offer
Price to the Revised Offer Price of R90.00 per linked unit.
4. RMBIA support
Makalani has discussed the rationale and circumstances for increasing the
offer with RMBIA. RMBIA has agreed to "underwrite" the Proposed
Transaction at the Revised Offer Price on the basis of the circumstances,
as set out in paragraph 2. Accordingly, the Revised Offer will be fully
funded by RMBIA, in that RMBIA will contemporaneously subscribe by way of
a specific issue of linked units for cash for such number of new Makalani
linked units as is equal to the number of linked units in respect of
which the Revised Offer is accepted or deemed to have been accepted at
the Revised Offer Price.
5. FirstRand and Makalani Manco ("Manco") participation
Based on the Revised Offer Price, Makalani has agreed to pay Manco a
transaction fee of R18.8 million, excluding VAT, which only becomes
payable on the finalisation date. The transaction fee constitutes 1% of
the post transaction linked units. Manco has undertaken to utilise R13.5
million to subscribe for new Makalani linked units at a price of R88.08
per linked unit (equivalent to 153 740 linked units). The remaining R5.3
million will be payable in cash to Manco and will be utilised to fund any
tax payable by Manco pursuant to the receipt of the transaction fee.
6. Pro forma financial effects of the Proposed Transaction
The unaudited pro forma financial effects of the Proposed Transaction on
Unitholders, taking into account the Revised Offer and the Revised Offer
Price, are set out below. The pro forma financial effects are based on
the Makalani results for the six month period ended 31 December 2009. The
unaudited pro forma financial effects are the responsibility of the Board
and have been prepared for illustrative purposes only. Because of their
pro forma nature, they may not give a fair reflection of the Company`s
financial position after the Proposed Transaction.
The unaudited pro forma financial effects of the Proposed Transaction on
reinvesting Unitholders are set out below:
Unaudited Unaudited %
before the after the change
Proposed Proposed
Transaction Transaction
(1) (2)
Earnings per linked 386 379 (1.8)
unit ("EPLU")(cents)3
Headline EPLU (cents)3 386 379 (1.8)
Diluted EPLU (cents)3 386 379 (1.8)
Diluted headline EPLU 386 379 (1.8)
(cents) 3
NAV per linked unit 99.09 97.17 (1.9)
(Rand)4
Net tangible asset 99.09 97.17 (1.9)
value per linked unit
(Rand)4
Weighted average number 21 353 21 506 0.7
of linked units in
issue (`000) 5
Number of linked units 21 353 21 506 0.7
in issue (`000) 5
Notes:
1. Extracted from the unaudited interim results for Makalani for the 6
months ended 31 December 2009.
2. Represents the unaudited pro forma financial effects after the
implementation of the Proposed Transaction.
3. Earnings, diluted earnings and headline earnings per linked unit is
based on the following assumptions:
- the Proposed Transaction was effective 1 July 2009; and
- costs of the Proposed Transaction, estimated at R39.7 million,
are capitalised to equity and are settled as follows:
- R26.2 million in cash. Interest forgone on this cash
outflow is adjusted based on the average rate earned on
these funds during the period to 31 December 2009, being
7.27% pa; and
- R13.5 million through the issue of 153 740 linked units in
Makalani at R88.08 each.
- No tax consequence of the interest foregone on the cash outflow
has been included due to the assessed loss position of
Makalani.
4. Net asset and net tangible asset value per linked unit is based on
the following assumptions:
- The Proposed Transaction was effective 31 December 2009; and
- Costs of the Proposed Transaction, estimated at R39.7 million,
are capitalised to equity and are settled as follows:
- R26.2 million in cash; and
- R13.5 million through the issue of 153 740 linked units in
Makalani at R88.08 each.
5. All linked units repurchased in terms of the Makalani offer are
issued in terms of the specific issue. The linked units in issue are
adjusted by the Manco issue.
7. Unitholder support for the Proposed Transaction
Makalani has so far secured in-principle support for the Proposed
Transaction at the Revised Offer Price from 47.7% of voting Unitholders.
The major Unitholders, which have provided their irrevocable support
include, inter alias the Public Investment Corporation Limited, Visio
Capital Management and 36ONE Asset Management.
8. Conditions precedent
The Proposed Transaction is subject to the fulfilment, or if applicable,
waiver of the following conditions precedent by no later than 30 June
2010:
8.1 approval by Unitholders in general meeting of all special and
ordinary resolutions required to amend the articles of association
and implement the offer and the delisting;
8.2 the waiver by the Securities Regulation Panel ("SRP") and
independent Unitholders of the requirement for FirstRand to make an
offer to Unitholders in terms of Rule 8.7 of the Securities
Regulation Code on Takeovers and Mergers and the Rules of the SRP
("SRP Code");
8.3 by no later than the business day immediately preceding the
finalisation date, the NAV of Makalani has been agreed or determined
in accordance with the provisions of the subscription agreement
entered into between RMBIA and Makalani ("Subscription Agreement")
and such NAV is not less than R90.00 per linked unit (less
transaction costs); and
8.4 the registration by the Companies and Intellectual Properties
Registration Office of the relevant special resolutions.
No condition precedent shall be capable of being waived unless it is
lawful to do so and unless such waiver is in writing and signed by RMBIA
and Makalani (with the exception of 8.3 above, which may be waived by
RMBIA only).
The date by which the conditions precedent must be fulfilled or, if
applicable, waived, may not be extended beyond 30 June 2010 without the
written consent of RMBIA and Makalani. Should any of the conditions
precedent referred to in 8 above not have been timeously satisfied or
waived, the Revised Offer shall ipso facto lapse and be of no force or
effect.
9. Independent sub-committee and fairness opinion
The independent sub-committee, as described in the Initial FIA, of
independent non-executive directors of the Board ("the Sub-committee")
appointed Java Capital (Proprietary) Limited as the independent advisor
("Independent Expert") to Makalani to opine on the Revised Offer.
The Revised Offer Price has been assessed by the Independent Expert,
which has been appraised of the developments and additional factors
considered by the Board as set out in paragraph 3 above. As the revised
offer is within the Independent Expert`s fair value range, it has been
assessed to be fair and reasonable. The full opinion of the Independent
Expert and the basis for its conclusion will be included in the circular
to Unitholders to be posted on or about Friday 9 April 2010. The
recommendation of the Sub-committee after taking into consideration the
opinion of the Independent Expert will also be published in the circular.
10. Cash confirmation
FirstRand Limited has provided the SRP with appropriately revised written
confirmation, as contemplated in the Securities Regulation Code, that
RMBIA has sufficient funds available for the sole purpose of meeting its
obligations under the Subscription Agreement (as referred to in the
Initial FIA, which agreement has been appropriately amended), which in
turn ensures that Makalani has sufficient cash resources and/or
facilities available to meet the cash commitments to Unitholders in
relation to the Proposed Transaction incorporating the Revised Offer
Price.
11. Salient dates and times
The salient dates and times regarding the Proposed Transaction are set
out below.
2010
Revised Offer opens at 09:00 on Monday 12 April
Last day to lodge objections with the Friday 23 April
SRP with respect to waiving Rule 8.7
of the SRP Code on
Last day to lodge forms of proxy for Monday 3 May
the general meeting by 10:30 on
General meeting to be held at 10:30 Wednesday 5 May
on
Results of the general meeting Wednesday 5 May
released on SENS on
Results of the general meeting Thursday 6 May
published in the South African press
on
Finalisation date Thursday 13 May
Last date to trade in order to Friday 21 May
participate in the Revised Offer is
Makalani linked units suspended from Monday 24 May
trading on the JSE on
Record date for the Revised Offer on Friday 28 May
Revised Offer closes at 12:00 Friday 28 May
(midday) on
Results of Revised Offer released on Monday 31 May
SENS on
Dematerialised Unitholders will have Monday 31 May
their accounts credited with the Net
Cash Consideration on
Certificated Unitholders will have Monday 31 May
the Net Cash Consideration posted to
them on
Results of the offer published in the Tuesday 1 June
South African press on
Makalani linked units delisted from Tuesday 1 June
the JSE at commencement of trade on
Notes:
1. All times shown are South African local times.
2. The above dates and times are subject to change. Any material change
will be released on SENS and published in the South African press.
3. Makalani linked units may not be dematerialised after Friday 21 May
2010.
4. Dematerialised Unitholders are required to notify their duly
appointed CSDP/broker of their election to remain invested in
Makalani, in the manner and time stipulated in the custody agreement
governing the relationship between the Unitholder and his/her
CSDP/broker.
5. Tuesday 27 April 2010 is a public holiday in South Africa.
12. Circular
A detailed circular will be posted, by prepaid registered post, to all
beneficial Unitholders regarding the Proposed Transaction on or about 9
April 2010. A general meeting of Unitholders will be convened, in terms
of the Notice of General Meeting to be attached to the circular, on or
about Wednesday, 5 May 2010 to consider and, if deemed fit, pass the
resolutions required to implement the Proposed Transaction.
13. Withdrawal of cautionary
Unitholders are advised that, as a result of the publication of this
announcement, the cautionary announcement of 24 March 2010 is now
withdrawn and caution is no longer required to be exercised by
Unitholders when dealing in their linked units.
Illovo
6 April 2010
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal advisor
Edward Nathan Sonnenbergs Inc
Legal advisor to the funders
Cliffe Dekker Hofmeyr Inc
Independent sponsor
Deloitte and Touche Sponsor Services (Proprietary) Limited
Independent expert
Java Capital (Proprietary) Limited
Reporting Accountants
PWC
Date: 06/04/2010 08:38:01 Supplied by www.sharenet.co.za
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