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THETA - ANNOUNCEMENT

Release Date: 01/04/1999 15:24
Code(s): TMT
Wrap Text
THETA GROUP LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 05/21193/06)
("THETA")
ANNOUNCEMENT REGARDING

- THE PURCHASE OF THE MINORITY SHAREHOLDINGS IN UNITY FINANCIAL SERVICES LIMITED ("UNITY");
- THE TRANSFER OF 100% OF THE ISSUED SHARE CAPITAL OF ALTFIN, KING FINANCE AND UNITY TO AFRICAN BANK; - THE FUNDING OF AFRICAN BANK; AND
- THE INCREASE OF NEW AFRICA INVESTMENTS LIMITED'S ("NAIL") SHAREHOLDING IN THETA. INTRODUCTION
THETA HAS PREVIOUSLY COMMUNICATED TO SHAREHOLDERS ITS INTENTION TO INTEGRATE THE LENDING ACTIVITIES HOUSED IN ALTFIN, KING FINANCE AND UNITY INTO AFRICAN BANK. IT WAS NECESSARY TO ACQUIRE 100% OF EACH OF THESE INVESTMENTS BEFORE THIS OBJECTIVE COULD BE ACHIEVED. ON 21 JANUARY 1999, THETA ANNOUNCED THAT IT HAD ACQUIRED 100% OF ALTFIN AND KING FINANCE. IN THE 1998 FINANCIAL STATEMENTS MAILED TO SHAREHOLDERS ON 29 MARCH 1999 IT WAS REPORTED THAT THESE TWO OPERATIONS HAD BEEN INTEGRATED INTO AFRICAN BANK AND THAT DISCUSSIONS WITH UNITY MINORITY SHAREHOLDERS AND MANAGEMENT AIMED AT THETA ACQUIRING 100% OF UNITY WERE FAR ADVANCED.
AFRICAN MERCHANT BANK LIMITED IS AUTHORISED TO ANNOUNCE THAT THETA HAS COMPLETED THE NEGOTIATIONS REFERRED TO IN THE CAUTIONARY ANNOUNCEMENT DATED 24 MARCH 1999. THETA HAS ACQUIRED 100% OF UNITY ("THE ACQUISITION") AND HAS NEGOTIATED THE TRANSFER OF THE CREDIT FACILITIES AVAILABLE TO UNITY FROM BOE BANK LIMITED ("BOE BANK") TO AFRICAN BANK.
THE ACQUISITION OF MINORITY SHAREHOLDERS' INTERESTS IN UNITY THE TERMS OF THE ACQUISITION
THETA HAS ACQUIRED THE 48,7% OF THE ISSUED SHARE CAPITAL OF UNITY NOT
PREVIOUSLY HELD BY IT FROM BOE BANK (35%), UNITY'S OWNER MANAGERS (11,4%) AND SANLAM (2,3%). THE PURCHASE CONSIDERATION OF R1 155,9 MILLION WILL BE SETTLED BY THE ISSUE OF 55 099 684 NEW THETA SHARES.
THE EFFECTIVE DATE OF THE ACQUISITION IS 1 OCTOBER 1998.
UNITY, IN ITS PRESENT FORM, IS THE COMBINATION OF ITS ORIGINAL OPERATIONS AND THE TERM LOAN BUSINESS ACQUIRED FROM BOE BANK IN JULY 1998. AT THAT TIME, THE PROFITS FOR THE COMBINED UNITY OPERATIONS FOR THE YEAR TO 30 SEPTEMBER 1999 WERE WARRANTED TO BE AT LEAST R167 MILLION. THETA AND UNITY MANAGEMENT ARE CONFIDENT THAT THE CURRENT EARNINGS GROWTH IN UNITY IS ROBUST. THETA HAS THEREFORE ELECTED TO WAIVE THIS WARRANTY. RECOGNITION FOR THIS WAIVER HAS BEEN RECEIVED IN THE NEGOTIATION OF THE PRICE FOR THE UNITY SHARES. EFFECTS OF THE ACQUISITION ON THETA SHARE CAPITAL
THETA WILL ISSUE 55 099 684 NEW SHARES, THEREBY INCREASING THE NUMBER OF THETA SHARES IN ISSUE TO 550 113 987 SHARES. EARNINGS
THE PURCHASE BY UNITY OF THE TERM LOAN BUSINESS FROM BOE BANK IN JULY 1998 WAS BASED ON FORWARD EARNINGS OF R167 MILLION TO 30 SEPTEMBER 1999 AS HISTORICAL EARNINGS WERE SMALL AND REFLECTED AN EMBRYONIC BUSINESS. THIS LACK OF
HISTORICAL EARNINGS INFORMATION IN UNITY MAKES IT DIFFICULT TO PROVIDE MEANINGFUL INFORMATION ON THE EFFECT OF THE ACQUISITION ON THETA'S HISTORICAL EARNINGS. NET ASSET VALUE
THE ACQUISITION WILL REDUCE THETA'S NET ASSET VALUE AT 30 SEPTEMBER 1998 BY 12,2 CENTS TO 114,6 CENTS OR 9,6%, AFTER TAKING INTO ACCOUNT THE ISSUE OF 114 953 486 THETA SHARES SINCE THAT DATE FOR THE ACQUISITION OF AFRICAN BANK AND THE MINORITY INTERESTS IN ALTFIN, KING FINANCE AND UNITY. AFRICAN BANK
AFRICAN BANK HAS ACQUIRED 100% OF ALTFIN, KING FINANCE AND WILL ACQUIRE 100% OF UNITY.
AN INTEGRAL PART OF THE ACQUISITION OF UNITY IS THE TRANSFER OF UNITY'S FUNDING FACILITY FROM BOE BANK TO AFRICAN BANK. THIS SOURCE OF FUNDS HAS BEEN REFORMULATED AS FOLLOWS:
- BOE LIMITED ("BOE") WILL SUBSCRIBE FOR SUBORDINATED DEBENTURES IN AFRICAN BANK TO THE VALUE OF R500 MILLION REPAYABLE ON 1 OCTOBER 2004;
- BOE BANK WILL PROVIDE AFRICAN BANK WITH A 5 YEAR FUNDING FACILITY OF R500 MILLION; AND
- BOE BANK WILL FUND UNITY'S CURRENT BOOK OF R1,6 BILLION IN AFRICAN BANK FOR ITS FULL TERM.
AFRICAN BANK'S EQUITY BASE WILL BE INCREASED BY THE ISSUE OF THE R500 MILLION SUBORDINATED DEBENTURES MENTIONED ABOVE, WHICH RANK AS SECONDARY CAPITAL. THESE FUNDS, TOGETHER WITH THE R500 MILLION FUNDING FACILITY, WILL BE IMMEDIATELY USED BY AFRICAN BANK TO FUND GROWTH IN ALL OF ITS OPERATIONS.
AFRICAN BANK'S FUNDING STRUCTURE AFTER THE ACQUISITION IS ILLUSTRATED BY THE PROFORMA CONSOLIDATED BALANCE SHEET AT 1 MARCH 1999. THIS INCLUDES THE BALANCE SHEETS OF ALTFIN, KING FINANCE AND UNITY AT THIS DATE, THE ISSUE OF AFRICAN BANK SHARES TO THETA TO ACQUIRE 100% OF ALTFIN, KING FINANCE AND UNITY AND THE ISSUE OF THE R500 MILLION SUBORDINATED DEBENTURES TO BOE.
PROFORMA CONSOLIDATED BALANCE SHEET OF AFRICAN BANK ON 1 MARCH 1999: SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' INTEREST (PRIMARY CAPITAL) 708 136 889
SUBORDINATED DEBENTURES (SECONDARY CAPITAL) 500 000 000
TOTAL CAPITAL 1 208 136 889 TERM FUNDING 1 769 735 060 DEPOSITS AND SAVINGS 443 664 000
CREDITORS AND ACCRUALS 356 278 675
3 777 814 624 ASSETS
FIXED ASSETS 25 852 726
INVESTMENTS 167 947 478
NET ADVANCES 2 653 315 925 OTHER ASSETS 94 141 947
CASH AND SHORT TERMS FUNDS 836 556 548
3 777 814 624 THETA SHAREHOLDERS NAIL'S SHAREHOLDING IN THETA
THETA WILL ISSUE 55 099 684 NEW SHARES IN TERMS OF THE ACQUISITION. NAIL, IN SEPARATE AGREEMENTS WITH BOE BANK AND UNITY MANAGEMENT WILL ACQUIRE 44 666 905 OF THESE NEW SHARES IN EXCHANGE FOR NEW NAIL 'N' ORDINARY SHARES AND CASH. THIS WILL INCREASE NAIL'S SHAREHOLDING IN THETA FROM 48,6% PRIOR TO THE ACQUISITION TO 51,9%. SEPARATE ANNOUNCEMENTS BY BOE AND NAIL, WHICH REFER TO THIS SHARE EXCHANGE, APPEAR IN THE PRESS TODAY. UNITY MANAGEMENT'S SHAREHOLDING
A KEY PHILOSOPHY UNDERLYING THE STRUCTURE OF THETA HAS BEEN THAT THE MANAGERS AT ALL LEVELS WITHIN THETA ARE SHAREHOLDERS. THESE SHAREHOLDINGS REPRESENT A SIGNIFICANT PORTION OF EACH MANAGER'S PERSONAL WEALTH. THE OWNER MANAGERS IN UNITY WILL ACQUIRE 14 507 100 NEW THETA SHARES IN EXCHANGE FOR THEIR UNITY SHARES. KEY UNITY MANAGERS HAVE AGREED TO RENOUNCE THEIR RIGHTS TO 7 049 546 THETA SHARES IN FAVOUR OF NAIL IN EXCHANGE FOR NEW NAIL 'N' ORDINARY SHARES. THE AGREEMENTS ARE STRUCTURED WITH RIGHTS TO ENSURE THAT THE UNITY OWNER MANAGERS RETAIN THE ECONOMIC INTEREST IN THE THETA SHARES EXCHANGED FOR NEW NAIL 'N' ORDINARY SHARES. CONDITIONS PRECEDENT
THE ACQUISITION AND ALL OTHER RELATED AGREEMENTS ARE, INTER ALIA, SUBJECT TO THE APPROVAL BY THE REGISTRAR OF BANKS, THE JOHANNESBURG STOCK EXCHANGE AND THE SECURITIES REGULATION PANEL. JOHANNESBURG 1 APRIL 1999 MERCHANT BANK TO THETA AND AFRICAN BANK AMB AFRICAN MERCHANT BANK LIMITED REGISTERED BANK (REGISTRATION NUMBER 96/16470/06) ATTORNEYS TO THETA MOSS-MORRIS INC. (REGISTRATION NUMBER 94/08751/21) JOINT SPONSORING BROKERS TO THETA DEUTSCHE MORGAN GRENFELL (PROPRIETARY)LIMITED (REGISTRATION NUMBER 73/06709/07) (MEMBER OF THE JOHANNESBURG STOCK EXCHANGE) ABN-AMRO SECURITIES (SOUTH AFRICA)(PTY)LTD. REGISTRATION NUMBER 95/01231/07 MEMBER OF THE JOHANNESBURG STOCK EXCHANGE

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