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STANBIC/LIBHOLD/LIBERTY LIFE/LIBSIL/FIT - STANBIC OF 50% OF LBC

Release Date: 09/02/1999 16:20
Wrap Text
STANDARD BANK INVESTMENT CORPORATION LIMITED
(REGISTRATION NUMBER 69/17128/06)
("STANBIC")
LIBERTY HOLDINGS LIMITED
(REGISTRATION NUMBER 68/02095/06)
("LIBHOLD")
LIBERTY LIFE ASSOCIATION OF AFRICA LIMITED
(REGISTRATION NUMBER 57/02788/06)
("LIBERTY LIFE")
LIBLIFE STRATEGIC INVESTMENTS LIMITED
(REGISTRATION NUMBER 83/06300/06)
("LIBSIL")
FIRST INTERNATIONAL TRUST LIMITED
(REGISTRATION NUMBER 57/02956/06)
("FIT")

ANNOUNCEMENT REGARDING THE ACQUISITION BY STANBIC OF A FURTHER 50% SHAREHOLDING IN LIBLIFE CONTROLLING CORPORATION (PROPRIETARY) LIMITED 1. INTRODUCTION
SHAREHOLDERS ARE REFERRED TO THE CAUTIONARY ANNOUNCEMENTS PUBLISHED BY STANBIC AND LIBHOLD, LIBERTY LIFE, LIBSIL AND FIT (COLLECTIVELY REFERRED TO AS "THE LIBERTY LIFE GROUP") AS WELL AS LIBERTY INVESTORS LIMITED ("LIBVEST") ON 5 FEBRUARY 1999, AND ARE ADVISED THAT STANBIC AND LIBVEST HAVE ENTERED INTO AN AGREEMENT IN TERMS OF WHICH STANBIC WILL ACQUIRE LIBVEST'S 50% SHAREHOLDING IN, AND CLAIMS ON LOAN ACCOUNT AGAINST, LIBLIFE CONTROLLING CORPORATION
(PROPRIETARY) LIMITED ("LCC") FOR A PURCHASE CONSIDERATION OF R5 595 MILLION ("THE LCC ACQUISITION"). LCC, WHICH OWNS 54,8% OF THE EQUITY OF LIBHOLD, IS THE ULTIMATE HOLDING COMPANY OF THE LIBERTY LIFE GROUP. SUBSEQUENT TO IMPLEMENTATION OF THE LCC ACQUISITION, THEREFORE, LCC WILL BECOME A WHOLLY-OWNED SUBSIDIARY OF STANBIC. 2. RATIONALE 2.1 HISTORICAL CIRCUMSTANCES
IN THE CAUTIONARY ANNOUNCEMENT OF 5 FEBRUARY 1999, MR DONALD GORDON, THE FOUNDER OF THE LIBERTY LIFE GROUP, ANNOUNCED HIS INTENTION TO RETIRE AS CHAIRMAN OF THE LIBERTY LIFE GROUP DURING THE 1999 FINANCIAL YEAR. AS SHAREHOLDERS HAVE BEEN AWARE OVER MANY YEARS, IN 1983 MR GORDON SOUGHT TO INTRODUCE AN INSTITUTIONAL SHAREHOLDER WHICH WOULD BECOME THE ANCHOR OF THE LIBERTY LIFE GROUP AND PROVIDE IT WITH STABILITY AFTER HIS RETIREMENT. IN ACCORDANCE WITH THIS OBJECTIVE, A JOINT CONTROL AGREEMENT WAS ENTERED INTO WITH STANBIC IN 1983. NOW THAT MR GORDON HAS DECIDED TO RETIRE, THE CONTEMPLATION EMBODIED IN THE JOINT CONTROL AGREEMENT WITH STANBIC IS BEING REALISED AND THE INTENTIONS SET OUT THEREIN ARE BEING IMPLEMENTED. 2.2 FUTURE VISION
FOR SOME TIME NOW, STANBIC AND THE LIBERTY LIFE GROUP HAVE BEEN CONSIDERING WAYS TO TAKE ADVANTAGE OF THE CONSIDERABLE CURRENT AND POTENTIAL SYNERGIES WHICH EXIST BETWEEN THE TWO GROUPS. THE LCC ACQUISITION IS SEEN AS THE FIRST STEP IN UNLOCKING THESE SIGNIFICANT BENEFITS.
SUBSEQUENT TO THE IMPLEMENTATION OF THE LCC ACQUISITION, STANBIC AND LIBERTY LIFE WILL CONTINUE TO CONDUCT THEIR DAY TO DAY OPERATIONS ON AN INDEPENDENT BASIS. THEY WILL, HOWEVER, IMMEDIATELY BEGIN TO EXPLORE PROFITABLE AREAS OF MUTUAL CO-OPERATION, SUCH AS BANCASSURANCE.
DISCUSSIONS HAVE BEEN HELD BETWEEN THE RESPECTIVE SENIOR MANAGEMENT TEAMS OF STANBIC AND LIBERTY LIFE WHICH REAFFIRMED THEIR CONSENSUS OF LAST YEAR THAT A MERGER BETWEEN THE TWO COMPANIES WOULD BE AN APPROPRIATE MECHANISM THROUGH WHICH TO MAXIMISE BENEFITS.
THE VISION OF A MERGED STANBIC/LIBERTY LIFE INCLUDES THE CREATION OF A LISTED HOLDING COMPANY WITH TWO WHOLLY-OWNED SUBSIDIARIES IN BANKING AND LIFE ASSURANCE.
DISCUSSIONS BETWEEN STANBIC, LIBHOLD AND LIBERTY LIFE AS TO THE TERMS OF THE PROPOSED MERGER WILL COMMENCE IN THE NEAR FUTURE. IF SUCCESSFUL, IT SHOULD BE POSSIBLE TO COMPLETE THE PROPOSED MERGER DURING THE COURSE OF 1999, SUBJECT TO THE REQUISITE APPROVALS OF THE BOARDS OF DIRECTORS OF THE VARIOUS COMPANIES AND, WHERE NECESSARY, SHAREHOLDER APPROVAL. 3. MATERIAL TERMS OF THE LCC ACQUISITION
THE MATERIAL TERMS OF THE LCC ACQUISITION ARE SET OUT BELOW:
3.1 THE LCC ACQUISITION WILL BE EFFECTIVE FROM 1 JANUARY 1999, BUT WILL BE IMPLEMENTED NO LATER THAN 30 JUNE 1999 ("THE COMPLETION DATE").
3.2 IMPLEMENTATION OF THE LCC ACQUISITION IS SUBJECT TO THE FULFILMENT OF, INTER ALIA, THE FOLLOWING CONDITION PRECEDENT, NAMELY THAT THE LCC ACQUISITION IS APPROVED IN GENERAL MEETING BY A SIMPLE MAJORITY OF LIBVEST SHAREHOLDERS (EXCLUDING LIBERTY LIFE, WHICH IS REGARDED AS A RELATED PARTY).
3.3 THE AGREEMENT BETWEEN STANBIC AND LIBVEST WAS SUBJECT TO THE FULFILMENT OF A NUMBER OF CONDITIONS PRECEDENT, ONE OF WHICH WAS THE APPROVAL OF THE JOHANNESBURG STOCK EXCHANGE ("JSE"). IN GRANTING SUCH APPROVAL THE JSE HAS REQUIRED THAT:
3.3.1 AN INDEPENDENT PROFESSIONAL ADVISER PROVIDES THE BOARD OF DIRECTORS OF LIBVEST WITH AN OPINION TO THE EFFECT THAT THE DISPOSAL BY LIBVEST OF ITS 50% SHAREHOLDING IN LCC IS FAIR AND REASONABLE INSOFAR AS LIBVEST SHAREHOLDERS ARE CONCERNED;
3.3.2 AN INDEPENDENT PROFESSIONAL ADVISER PROVIDES THE BOARD OF DIRECTORS OF STANBIC WITH AN OPINION TO THE EFFECT THAT THE LCC ACQUISITION IS FAIR AND REASONABLE INSOFAR AS STANBIC SHAREHOLDERS ARE CONCERNED; AND
3.3.3 MR DONALD GORDON AND MR ALAN ROMANIS (BEING DIRECTORS OF BOTH STANBIC AND LIBVEST) RECUSE THEMSELVES FROM VOTING AT ANY STANBIC BOARD MEETING HELD TO APPROVE THE LCC ACQUISITION. AS THIS BOARD MEETING WAS HELD ON 9 FEBRUARY 1999, SHAREHOLDERS ARE ADVISED THAT THIS REQUIREMENT HAS ALREADY BEEN MET. 3.4 THE PURCHASE CONSIDERATION OF R5 595 MILLION IS PAYABLE ON 30 JUNE 1999 AS FOLLOWS:
3.4.1 BY THE TRANSFER TO LIBVEST OF SHARES IN LIBERTY INTERNATIONAL HOLDINGS PLC ("LIH") AT R45,00 PER SHARE, HAVING AN ESTIMATED VALUE OF R850 MILLION. THESE SHARES REPRESENT LIBVEST'S ENTITLEMENT TO THOSE LIH SHARES WHICH LCC CAN EXPECT TO RECEIVE SUBSEQUENT TO THE PROPOSED RESTRUCTURING OF LIH. LIBVEST WILL BE ENTITLED TO PARTICIPATE IN LIH'S INTERIM DIVIDEND FOR 1999.
IN THE EVENT THAT STANBIC IS UNABLE TO EFFECT TRANSFER OF THESE OR EQUIVALENT SECURITIES, REPRESENTING LIBVEST'S CURRENT INDIRECT INTEREST IN LIH, BY 30 SEPTEMBER 1999, THEN STANBIC SHALL BE OBLIGED TO PAY THE AMOUNT OF R850 MILLION IN CASH;
3.4.2 BY THE ISSUE OF 85,7 MILLION STANBIC SHARES AT AN ISSUE PRICE OF R17,50 PER STANBIC SHARE, HAVING A VALUE OF R1 500 MILLION. THESE SHARES WILL ENTITLE LIBVEST TO PARTICIPATE IN STANBIC'S INTERIM DIVIDEND FOR 1999; AND
3.4.3 BY THE PAYMENT OF THE BALANCE OF APPROXIMATELY R3 245 MILLION IN CASH. STANBIC PROPOSES TO FUND NOT LESS THAN R1 500 MILLION OF THE R3 245 MILLION CASH OBLIGATION BY WAY OF A PLACING OF SHARES.
3.5 ON FULFILMENT OF THE CONDITION PRECEDENT CONTAINED IN PARAGRAPH 3.2 OF THIS ANNOUNCEMENT, OR AS SOON AS IS PRACTICAL THEREAFTER, SHARE CERTIFICATES IN RESPECT OF THE 50% SHAREHOLDING IN LCC, AS WELL AS IN RESPECT OF THE LIH AND STANBIC SHARES REFERRED TO IN PARAGRAPHS 3.4.1 AND 3.4.2 ABOVE, WILL BE PLACED IN AN ESCROW ACCOUNT AND RELEASED TO THE RESPECTIVE PARTIES ON THE COMPLETION DATE. 4. SECURITIES REGULATION PANEL
THE SECURITIES REGULATION PANEL ("SRP")HAS BEEN INFORMED OF THE TERMS OF THE LCC ACQUISITION, AND HAS RULED THAT THE LCC ACQUISITION CONSTITUTES AN "AFFECTED TRANSACTION" AS DEFINED IN THE SECURITIES REGULATION CODE ON TAKEOVERS AND MERGERS AND SECTION 440 OF THE COMPANIES ACT, NO 61 OF 1973, AS AMENDED. HOWEVER, HAVING REGARD TO THE SPECIAL HISTORICAL CIRCUMSTANCES APPLICABLE TO THE LCC ACQUISITION WHICH WERE CLEARLY DEFINED BETWEEN STANBIC AND LIBVEST IN 1983, AND THE FACT THAT THE LCC ACQUISITION SHOULD BE BENEFICIAL FOR THE COMPANIES IN THE LIBERTY LIFE GROUP AND THEIR SHAREHOLDERS, THE SRP HAS EXERCISED ITS DISCRETIONARY POWERS AND HAS RULED THAT NO OFFERS ARE REQUIRED TO BE MADE TO THE MINORITY SHAREHOLDERS OF LIBHOLD AND LIBERTY LIFE. 5. FINANCIAL EFFECTS
THE TABLE BELOW SETS OUT THE PRO FORMA EFFECTS OF THE LCC ACQUISITION ON THE EARNINGS PER STANBIC SHARE ("EPS") AND THE NET TANGIBLE ASSET VALUE PER STANBIC SHARE ("NTAV") BASED ON THE AUDITED FINANCIAL STATEMENTS OF STANBIC FOR THE YEAR ENDED 31 DECEMBER 1998 AND THE UNAUDITED FINANCIAL STATEMENTS OF LIBERTY LIFE FOR THE TWELVE MONTHS ENDED 30 JUNE 1998, AND BASED ON THE FOLLOWING: - FOR THE PURPOSE OF THE PRO FORMA EPS CALCULATION, IT HAS BEEN ASSUMED THAT THE LCC ACQUISITION WAS IMPLEMENTED AND THE PURCHASE CONSIDERATION SETTLED IN FULL ON 1 JANUARY 1998. THE CALCULATION HAS FOLLOWED STANBIC'S ACCOUNTING POLICY OF NOT TAKING INTO ACCOUNT ANY REVALUATION SURPLUSES RECOGNISED BY LIBERTY LIFE IN ITS INCOME STATEMENT;
- FOR THE PURPOSE OF THE PRO FORMA NTAV AND NTAV ADJUSTED CALCULATIONS, IT HAS BEEN ASSUMED THAT THE LCC ACQUISITION WAS IMPLEMENTED, AND THE PURCHASE CONSIDERATION SETTLED IN FULL, ON 31 DECEMBER 1998;
- FOR THE PURPOSE OF THE PRO FORMA NTAV ADJUSTED CALCULATION,
THE INTEREST IN LCC HAS BEEN VALUED AT AN IMPLIED MARKET VALUE BASED ON THE LIBERTY LIFE SHARE PRICE AS AT THE CLOSE OF BUSINESS ON 8 FEBRUARY 1999. THE INTEREST IN LCC HAS NOT BEEN CONSOLIDATED;
- FOR THE PURPOSE OF THE PRO FORMA EPS AND NTAV CALCULATIONS, IT HAS BEEN ASSUMED THAT THE R3 245 MILLION CASH HAS BEEN SOURCED AS FOLLOWS:
- R1 500 MILLION BY THE PLACING OF STANBIC SHARES AT R20,50 PER SHARE, BEING THE CLOSING PRICE OF A STANBIC SHARE ON THE JSE ON MONDAY, 8 FEBRUARY 1999, BEING THE LAST PRACTICABLE DATE PRIOR TO PUBLICATION OF THIS ANNOUNCEMENT; AND - R1 745 MILLION OF BORROWINGS AT AN AFTER TAX RATE OF 12%.
BEFORE AFTER % CHANGE
EPS 170,7 151,6 (11,18)
NTAV 1 044,2 897,7 (14,03)
NTAV ADJUSTED 1 269,0 1 263,5 (0,43)
DESPITE THE ASSUMPTION MADE IN CALCULATING THE EFFECTS ON EPS, IT SHOULD BE NOTED THAT IN FACT THE LCC ACQUISITION WILL BE IMPLEMENTED WITH EFFECT FROM 1 JANUARY 1999, WHILST PAYMENT WILL ONLY BE MADE ON 30 JUNE 1999. ACCORDINGLY, IT IS ANTICIPATED THAT THE IMPLEMENTATION OF THE LCC ACQUISITION WILL HAVE A MINIMAL IMPACT ON EPS FOR 1999. 6. DOCUMENTATION
SUBJECT TO THE APPROVAL OF THE JSE, A CIRCULAR CONTAINING DETAILS OF THE LCC ACQUISITION AND INCORPORATING, INTER ALIA, AN OPINION FROM AN INDEPENDENT PROFESSIONAL ADVISER TO THE EFFECT THAT THE TERMS OF THE LCC ACQUISITION ARE FAIR AND REASONABLE TO STANBIC SHAREHOLDERS, WILL BE POSTED TO STANBIC SHAREHOLDERS IN DUE COURSE. 7. FIT AND LIBSIL
SHAREHOLDERS OF FIT AND LIBSIL SHOULD TAKE NOTE THAT THE RESTRUCTURING OF THESE COMPANIES IS CONTINUING AS CONTEMPLATED IN THE PREVIOUS ANNOUNCEMENT TO SHAREHOLDERS DATED 30 NOVEMBER 1998. 9 FEBRUARY 1999 JOHANNESBURG MERCHANT BANK TO STANBIC STANDARD CORPORATE AND MERCHANT BANK ATTORNEYS EDWARD NATHAN & FRIEDLAND INC JOINT SPONSORING BROKER TO STANBIC STANDARD EQUITIES (PROPRIETARY) LIMITED
SPONSORING BROKER TO STANBIC AND THE LIBERTY LIFE GROUP MERRILL LYNCH SOUTH AFRICA (PROPRIETARY) LIMITED

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