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CULLINAN HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 01/01808/06)
("CULLINAN" OR "THE COMPANY")
THOMPSONS TOURS AND TRAVEL GROUP
ACQUISITION OF THE THOMPSONS TOURS AND TRAVEL GROUP BUSINESSES
INTRODUCTION
FURTHER TO THE CAUTIONARY ANNOUNCEMENT DATED 8 JUNE 1998, STANDARD CORPORATE
AND MERCHANT BANK IS AUTHORISED TO ANNOUNCE THAT CULLINAN HAS ACQUIRED, SUBJECT
TO THE FULFILMENT OF THE RESOLUTIVE CONDITION SET OUT IN PARAGRAPH 6 BELOW, AS
A GOING CONCERN THE BUSINESSES OF THE THOMPSONS TOURS AND TRAVEL GROUP ("THE
GROUP" OR "THE THOMPSONS TOURS AND TRAVEL GROUP") WITH EFFECT FROM 1 JUNE 1998
("THE ACQUISITION").
RATIONALE FOR THE ACQUISITION AND FUTURE PROSPECTS
AS STATED IN THE 1997 ANNUAL REPORT, CULLINAN WILL INVEST IN BUSINESSES THAT
ENJOY STRONG BRANDING, ARE OUTDOOR LIVING AND LEISURE ORIENTATED AND HAVE A
STRONG PRESENCE IN THEIR PARTICULAR MARKETS. THE THOMPSONS TOURS AND TRAVEL
GROUP MEETS THESE CRITERIA AND WILL FACILITATE CULLINAN'S EXPANSION INTO THE
TOURISM INDUSTRY. THE STRUCTURE OF CULLINAN SUBSEQUENT TO THE IMPLEMENTATION OF
THE ACQUISITION WILL BE AS FOLLOWS:
GROUP STRUCTURE APPEARS HERE
BACKGROUND TO THE THOMPSONS TOURS AND TRAVEL GROUP
THE THOMPSONS TOURS AND TRAVEL GROUP WAS ESTABLISHED IN 1978. IT IS A
DIVERSIFIED TOURISM AND TRAVEL GROUP WITH INTERESTS IN MOST SECTORS OF THE
TRAVEL INDUSTRY. IT EMPLOYS APPROXIMATELY 250 PEOPLE AND HAS OFFICES IN
JOHANNESBURG, DURBAN AND CAPE TOWN. IT TRADES THROUGH THE FOLLOWING DIVISIONS:
3.1 INBOUND TOURISM ("THOMPSONS SOUTH AFRICA")
THOMPSONS SOUTH AFRICA IS THE FASTEST GROWING DIVISION IN THE GROUP. IT IS AN
INBOUND TOUR OPERATOR THAT PROVIDES HIGH QUALITY TOURS AND PASSENGER HANDLING
SERVICES FOR A WIDE RANGE OF INTERNATIONAL CLIENTS VISITING SOUTHERN AFRICA. IT
HAS A SIGNIFICANT MARKET SHARE OF THE TOURIST BUSINESS FROM HOLLAND, SPAIN,
ITALY AND GERMANY. OVER 50% OF THE GROUP'S INCOME IS GENERATED BY THIS DIVISION
WHICH WILL RESULT IN A SUBSTANTIAL INCREASE IN THE EXPORT EARNINGS OF CULLINAN.
THE WEAKNESS OF THE CURRENCIES IN THE SOUTHERN AFRICAN REGION AUGMENTS THE
GROUP'S COMPETITIVE ADVANTAGE IN THE GLOBAL TOURIST INDUSTRY. FOR THE INBOUND
DIVISION, THIS HAS RESULTED IN INCREASED TRAFFIC, NOT ONLY TO SOUTH AFRICA, BUT
ALSO TO NAMIBIA, ZIMBABWE, KENYA, MAURITIUS AND THE SEYCHELLES. THE NATURAL
MOVEMENT AWAY FROM HARD TO SOFT CURRENCY DESTINATIONS IS CAUSING A SIMILAR
MOVEMENT IN THE OUTBOUND BUSINESS. INCREASING FOCUS ON THE SOUTHERN AFRICAN
REGION IS CONTRIBUTING TO THE GROUP'S DEVELOPMENT INTO A SIGNIFICANT PLAYER IN
THE TRAVEL AND TOURISM INDUSTRY IN AFRICA SOUTH OF THE EQUATOR.
3.2 OUTBOUND AND DOMESTIC TOURS ("THOMPSONS TOURS")
THOMPSONS TOURS IS A WHOLESALE TOUR OPERATOR THAT SELLS HOLIDAY AND OTHER
TRAVEL ARRANGEMENTS TO RESIDENTS OF SOUTHERN AFRICA. THE PACKAGES RANGE FROM
INEXPENSIVE LOCAL AND REGIONAL HOLIDAYS TO HIGH QUALITY LONG HAUL DESTINATIONS.
THESE DESTINATIONS INCLUDE EUROPE, THE AMERICAS, THE FAR EAST AND AUSTRALASIA.
BOTH GROUP AND INDIVIDUAL TRAVEL ARE CATERED FOR. THIS DIVISION ALSO HANDLES
CONFERENCES, INCENTIVE TOURS AND SPECIALISED MOVEMENTS FOR SPORTS TEAMS,
SCHOOLS AND OTHER SPECIAL INTEREST GROUPS. THOMPSONS TOURS IS WELL KNOWN IN THE
TRAVEL TRADE AND IS A MARKET LEADER IN A NUMBER OF ITS PRODUCTS.
3.3 RETAIL TRAVEL ("THOMPSONS TRAVEL")
THOMPSONS TRAVEL PROVIDES RETAIL TRAVEL SERVICES FOR THE CORPORATE AND LEISURE
SECTORS. THE JOHANNESBURG RETAIL OFFICE IS REGARDED AS THE BIGGEST SINGLE
TRAVEL AGENCY IN SOUTH AFRICA, A POSITION IT HAS HELD FOR THE PAST THREE YEARS.
4. TERMS OF THE ACQUISITION
4.1 PURCHASE CONSIDERATION
THE PURCHASE CONSIDERATION FOR THE ACQUISITION WILL BE SETTLED (SUBJECT TO THE
PROFIT WARRANTY SET OUT IN PARAGRAPH 4.2 BELOW) BY THE ISSUE OF 100 MILLION
CULLINAN ORDINARY SHARES ("THE CONSIDERATION SHARES") AND THE PAYMENT OF R12,7
MILLION IN CASH TO THE VENDORS OF THE GROUP.
FROM 1 APRIL 2000 TO 30 MARCH 2001, CULLINAN HAS AGREED TO UNDERPIN THE VALUE
OF 50 MILLION OF THE CONSIDERATION SHARES AT 50 CENTS PER SHARE.
4.2 PROFIT WARRANTY
THE VENDORS HAVE WARRANTED TO CULLINAN THAT THE PRE-TAX PROFIT OF THE GROUP
SHALL NOT BE LESS THAN R6 MILLION FOR THE 12 MONTHS TO 31 MAY 1999 ("THE PROFIT
WARRANTY"). IF THE PROFIT WARRANTY IS NOT MET, THE PURCHASE PRICE PAYABLE IN
TERMS OF 4.1 WILL BE REDUCED IN TERMS OF AN AGREED FORMULA.
4.3 THE THOMPSONS TOURS AND TRAVEL GROUP MANAGEMENT
THERE WILL BE NO CHANGE IN THE MANAGEMENT OF THE GROUP. THE VENDORS OF THE
GROUP, WHO ARE ALL FULL TIME MANAGERS, WILL CONTINUE TO RUN THE BUSINESS AS
SIGNIFICANT SHAREHOLDERS IN CULLINAN. THEY NAVE SIGNED SUITABLE RESTRAINT OF
TRADE AGREEMENTS, AND HAVE RESTRICTIONS ON THE SALEABILITY OF THE CONSIDERATION
SHARES TO ENSURE CONTINUITY OF MANAGEMENT. MR ANTON THOMPSON, THE CURRENT
MANAGING DIRECTOR OF THE THOMPSON TOURS AND TRAVEL GROUP, WILL BE APPOINTED TO
THE CULLINAN BOARD OF DIRECTORS.
5. FINANCIAL EFFECTS
THE FINANCIAL EFFECTS ON THE EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
ATTRIBUTABLE TO CULLINAN SHARES BEFORE AND AFTER THE ACQUISITION, ARE AS
FOLLOWS:
SIX MONTHS ENDED 31 MARCH 1998
BEFORE(1) AFTER PERCENTAGE
(CENTS) (CENTS) CHANGE
EPS 1,38 1,61 (2) 16,7%
NAV 15,1 13,40 (3) -11,3%
NOTES
1. AS PER INTERIM REPORT FOR SIX MONTHS ENDED 31 MARCH 1998.
2. ASSUMING THE ACQUISITION WAS EFFECTIVE ON 1 OCTOBER 1997 AND THAT HALF THE
PROFIT WARRANTY WAS ACHIEVED.
3. ASSUMING THE ACQUISITION WAS EFFECTIVE ON 31 MARCH 1998.
6. RESOLUTIVE CONDITION
THE ACQUISITION IS CONDITIONAL UPON THE JOHANNESBURG STOCK EXCHANGE GRANTING
APPROVAL FOR THE LISTING OF THE CONSIDERATION SHARES.
7. CIRCULAR
A CIRCULAR CONTAINING FURTHER DETAILS OF THE ACQUISITION WILL BE POSTED TO
SHAREHOLDERS WITHIN 28 DAYS OF THIS ANNOUNCEMENT.
JOHANNESBURG
16 SEPTEMBER 1998
MERCHANT BANK
STANDARD CORPORATE AND MERCHANT BANK
(A DIVISION OF THE STANDARD BANK OF SOUTH AFRICA LIMITED)
(REGISTRATION NUMBER 62/00738/06)
ATTORNEYS
BOWMAN GILFILLAN HAYMAN GODFREY INC
REG NO. 78/01915/21
SPONSORING BROKER
STANDARD EQUITIES (PTY) LIMITED
(REGISTRATION NUMBER 72/08305/07)
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)
