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PSG GROUP LIMITED
("PSG")
REGISTRATION NUMBER 70/08484/06
PSG FINANCIAL SERVICES LIMITED
("PSL")
REGISTRATION NUMBER 03/00478/06
PSG NOBLE CAPITAL LIMITED
("PSGN")
REGISTRATION NUMBER 98/09647/06
RESTRUCTURING OF PSG, PSL AND PSGN ("THE PSG GROUP")
1. INTRODUCTION
FURTHER TO THE CAUTIONARY ANNOUNCEMENT DATED 7 APRIL 1999, SHAREHOLDERS ARE
ADVISED THAT AGREEMENT HAS BEEN REACHED ON A RESTRUCTURING OF THE PSG GROUP, AN
ABRIDGED DIAGRAMMATIC REPRESENTATION OF WHICH IS AS FOLLOWS:
PSG* 71,4%
PSL*
- PSG ANCHOR LIFE LIMITED (100%)
- PSG CHANNEL GROUP LIMITED (86%)
- PSG INVESTMENT SERVICES LIMITED (95%)
- PSG SPECIALISED LENDING (PTY) LIMITED (100%)
81,1%
PSG INVESTMENT BANK HOLDINGS LIMITED
("PSGBH")
14,3%
PSGN*
30,9%
100%
PSG INVESTMENT BANK LIMITED
92,2%
HARVEST SECURITIES LIMITED*
("HARVEST")
*LISTED ON THE JSE
2. PROPOSED RESTRUCTURING OF THE PSG GROUP
2.1 SUBJECT TO THE CONDITIONS PRECEDENT REFERRED TO BELOW, IT IS PROPOSED THAT
("THE PROPOSALS"):
2.1.1 PSL WILL ACQUIRE FROM PSGN, WITH EFFECT FROM 1 MARCH 1999, ITS 14,3%
INTEREST IN PSGBH FOR A CONSIDERATION OF R150 202 500 PAYABLE IN CASH, WHICH
CONSIDERATION IS BASED ON A VALUE OF R1 050 000 000 ATTRIBUTABLE TO 100% OF
PSGBH. THE DISPOSAL, HAD IT BEEN EFFECTIVE AT 28 FEBRUARY 1999, WOULD HAVE
INCREASED PSGN'S NET ASSET VALUE AT 28 FEBRUARY 1999 (ADJUSTED FOR 1 080 000
PSGN SHARES ISSUED TO THE PSGN SHARE INCENTIVE TRUST) FROM R979 064 000,
EQUIVALENT TO 795,5 CENTS PER SHARE, TO R1 070 848 000, EQUIVALENT TO 870,0
CENTS PER SHARE;
2.1.2 PSGN WILL DISPOSE TO PSGBH, WITH EFFECT FROM 1 MARCH 1999, ITS NET ASSETS
(AFTER THE DISPOSAL IN 2.1.1 AND SAVE FOR CASH RESOURCES OF R1 230 800 REFERRED
TO IN 2.1.9) FOR A CONSIDERATION OF R1 203 319 200 ("THE DISPOSALS");
2.1.3 THE CONSIDERATION OF R1 203 319 200 PAYABLE IN 2.1.2 WILL BE SATISFIED
BY PSGBH:
- IN CASH AS TO THE AMOUNT REQUIRED BY PSGN TO DISTRIBUTE TO ITS SHAREHOLDERS
AT THEIR ELECTION UP TO 500 CENTS IN CASH PER PSGN SHARE ("THE CASH
ALTERNATIVE"); AND
- THE BALANCE BY THE ISSUE OF PSGBH SHARES IN THE RATIO OF 574,3581 PSGBH
SHARES FOR EVERY 100 PSGN SHARES IN RESPECT OF WHICH THE CASH ALTERNATIVE WAS
NOT ELECTED ("THE PSGBH SHARE ALTERNATIVE");
2.1.4 PSGN'S ENTITLEMENT TO PSGBH SHARES AND CASH IN ACCORDANCE WITH PSGN'S
SHAREHOLDERS' ELECTION OF THE CASH ALTERNATIVE AND/OR THE PSGBH SHARE
ALTERNATIVE IN TERMS OF 2.1.3 WILL BE DISTRIBUTED TO PSGN SHAREHOLDERS AS A
REDUCTION OF PSGN'S SHARE PREMIUM ACCOUNT ("THE PSGN DISTRIBUTION");
2.1.5 TO THE EXTENT TO WHICH PSGN SHAREHOLDERS ELECT THE CASH ALTERNATIVE, PSGN
SHAREHOLDERS AND OTHER PARTIES AS NOMINATED BY THE DIRECTORS WILL BE ENTITLED
TO SUBSCRIBE FOR THE PSGBH SHARES THAT WOULD HAVE BEEN ISSUED TO PSGN
SHAREHOLDERS FOR A CASH CONSIDERATION OF 170,22 CENTS PER SHARE, EQUIVALENT TO
THE VALUE OF R1 050 000 000 PLACED ON PSGBH IN TERMS OF 2.1.1 DIVIDED BY 616
835 294 PSGBH SHARES IN ISSUE BEFORE THE PROPOSALS. PSGN SHAREHOLDERS HOLDING
50 781 600 PSGN SHARES, EQUIVALENT TO 41,3% OF PSGN'S SHARE CAPITAL, HAVE
IRREVOCABLY UNDERTAKEN TO PSGN THAT THEY WILL NOT ELECT THE CASH ALTERNATIVE.
2.1.6 APPLICATION WILL BE MADE TO THE JOHANNESBURG STOCK EXCHANGE ("THE JSE")
FOR A LISTING OF PSGBH UNDER THE FINANCIAL - "FINANCIAL SERVICES"
SECTOR OF THE JSE LIST;
2.1.7 PSGBH WILL ESTABLISH A SHARE INCENTIVE SCHEME IN TERMS OF WHICH EMPLOYEES
WILL FROM TIME TO TIME BE GRANTED OPTIONS TO SUBSCRIBE FOR PSGBH SHARES. THE
EXISTING SHARE INCENTIVE SCHEME OF PSGN WILL BE CONVERTED INTO THE PSGBH SHARE
INCENTIVE SCHEME ON THE SAME TERMS AS ARE CURRENTLY APPLICABLE TO PARTICIPANTS
OF THE PSGN SHARE INCENTIVE TRUST. THE PSGBH SHARE INCENTIVE TRUST WILL
PURCHASE 28 000 000 PSGBH SHARES FROM PSL AT 170,22 CENTS PER SHARE. THE EFFECT
OF THE ABOVE WILL BE THAT ALL PSGBH EMPLOYEES WILL BE ENTITLED TO ACQUIRE
SHARES IN PSGBH;
2.1.8 IN TERMS OF RESTRAINT OF TRADE AGREEMENTS WITH SENIOR PSGBH EXECUTIVES,
PSGBH HAS ISSUED 16 600 000 SHARES FOR NO CONSIDERATION;
2.1.9 PSGN WITH NET ASSETS REPRESENTED BY CASH OF R1 230 800, EQUIVALENT TO 1
CENT PER SHARE, WILL BE RECONSTITUTED AS A CASH SHELL AND APPLICATION WILL BE
MADE TO THE JSE TO TRANSFER ITS LISTING TO THE "CASH COMPANY" SECTOR;
2.1.10 IN TERMS OF RELATED PROPOSALS, PSG WILL PROPOSE A SCHEME OF ARRANGEMENT
IN TERMS OF SECTION 311 OF THE COMPANIES ACT, 1973 (ACT 61 OF 1973), AS AMENDED
("THE ACT"), BETWEEN PSL AND ITS SHAREHOLDERS OTHER THAN PSG ("THE SCHEME") IN
TERMS OF WHICH:
- PSL SHAREHOLDERS WILL RECEIVE 23,3217 PSG SHARES FOR EVERY 100 PSL SHARES
HELD; AND
- PSL WILL BE CONSTITUTED A WHOLLY-OWNED SUBSIDIARY OF PSG AND ITS LISTING ON
THE JSE AND THE NAMIBIAN STOCK EXCHANGE WILL BE TERMINATED.
2.2 THE IMPLEMENTATION OF THE DISPOSALS IS CONDITIONAL UPON THE REQUISITE
REGULATORY APPROVALS AND THE APPROVAL OF PSGN SHAREHOLDERS IN GENERAL MEETING
IN TERMS OF SECTION 228 OF THE ACT. PSL AS A RELATED PARTY WILL NOT VOTE AT THE
PSGN GENERAL MEETING TO APPROVE THE DISPOSALS ("THE PSGN GENERAL MEETING").
2.3 THE IMPLEMENTATION OF THE PSGN DISTRIBUTION IS SUBJECT TO THE DISTRIBUTION
BEING APPROVED AS AN UNBUNDLING TRANSACTION IN TERMS OF SECTION 60 OF THE TAX
AMENDMENT ACT AND THE APPROVAL OF PSGN SHAREHOLDERS IN GENERAL MEETING AND TO
THE REGISTRATION OF THE NECESSARY SPECIAL RESOLUTIONS.
2.4 THE ACQUISITION BY PSGBH OF PSGN'S NET ASSETS IN 2.1.2, THE ESTABLISHMENT
OF THE PSGBH SHARE INCENTIVE SCHEME IN 2.1.7 AND THE ISSUE OF PSGBH SHARES AS
RESTRAINTS IN 2.1.8 AS A SPECIFIC ISSUE OF SHARES FOR CASH ARE SUBJECT TO THE
APPROVAL OF THE RELEVANT SHAREHOLDERS IN GENERAL MEETING.
2.5 COMMITMENTS TO VOTE IN FAVOUR OF THE DISPOSALS AND THE PSGN DISTRIBUTION
HAVE BEEN RECEIVED FROM THE HOLDERS OF 56,2% OF PSGN'S SHAREHOLDERS ENTITLED TO
VOTE ON THE DISPOSALS AT THE PSGN GENERAL MEETING.
2.6 THE APPROVAL AND IMPLEMENTATION OF THE SCHEME IS SUBJECT TO VOTES BEING
CAST IN FAVOUR OF THE SCHEME REPRESENTING NOT LESS THAN THREE-FOURTHS OF THE
VOTES CAST AT A MEETING OF PSL SHAREHOLDERS OTHER THAN PSG CONVENED TO CONSIDER
THE SCHEME AND TO THE SCHEME BEING APPROVED BY THE HIGH COURT OF SOUTH AFRICA.
3. RESULTANT STRUCTURE
THE ABRIDGED CORPORATE STRUCTURE AFTER THE IMPLEMENTATION OF THE PROPOSALS WILL
BE AS FOLLOWS:
PSG*
58,8%**/70,0%***
- PSG ANCHOR LIFE LIMITED (100%)
- PSG INVESTMENT SERVICES LIMITED (95%)
- PSG CHANNEL GROUP LIMITED (86%)
- PSG SPECIALISED LENDING (PTY) LIMITED (100%)PSGBH*
PSGN*
(CASH SHELL)92,2%
HARVEST*
(TO BE RENAMED VELOCITY HOLDINGS LIMITED)
* LISTED ON THE JSE.
** ASSUMING THAT NO PSGN SHAREHOLDERS ELECT THE CASH ALTERNATIVE.
*** ASSUMING THAT ALL PSGN SHAREHOLDERS ACCEPT THE CASH ALTERNATIVE ADJUSTED
FOR THE IRREVOCABLE COMMITMENTS IN RESPECT OF THE CASH ALTERNATIVE IN TERMS OF
2.1.5.
4. RATIONALE FOR THE PROPOSALS AND SALIENT INFORMATION ON PSGBH
4.1 RATIONALE FOR THE PROPOSALS
THE PROPOSALS POSITION PSGBH AS A FULLY-FLEDGED INVESTMENT BANKING GROUP,
CAPITALISED FOR GROWTH AND AS A MEANINGFUL PLAYER IN THE FINANCIAL SERVICES
INDUSTRY. IN ADDITION, THE PROPOSALS:
4.1.1 STREAMLINE AND SIMPLIFY THE PSG GROUP STRUCTURE;
4.1.2 ELIMINATE CONFLICTS OF INTEREST IN THE PSG GROUP;
4.1.3 PROVIDE STRATEGIC AND GROWTH OPPORTUNITIES THAT WOULD NOT BE IMMEDIATELY
AVAILABLE TO PSGBH AND PSGN SEPARATELY; AND
4.1.4 SHOULD ENHANCE SHAREHOLDER VALUE REFLECTING THE HIGHER RATING GENERALLY
ACCORDED AN INVESTMENT BANKING GROUP OVER PSGN AS AN INVESTMENT TRUST, THE
MARKET PRICE OF WHICH HAS HISTORICALLY TRADED AT A DISCOUNT TO PSGN'S NET ASSET
VALUE.
4.2 DIRECTORS OF PSGBH
THE CHAIRMAN OF PSGBH WILL BE JANNIE MOUTON AND THE EXECUTIVE DIRECTORS WILL BE
ANDRE LA GRANGE, HUGH OOSTHUIZEN, BOTHA SCHABORT AND CHARLES TURNER. JANNIE
MOUTON WILL NOT RECEIVE ANY REMUNERATION FROM PSGBH NOR WILL HE PARTICIPATE IN
ANY OF THE INCENTIVE SCHEMES.
4.3 THE FUTURE
4.3.1 THE PROPOSALS CREATE IN PSGBH:
4.3.1.1 A SPECIALIST AND PROPRIETARY INVESTMENT BANKING GROUP OFFERING A RANGE
OF VALUE-ADDED AND COMPLEMENTARY SERVICES THROUGH EXPERIENCED TEAMS AND ACCESS
TO A STRONGLY-CAPITALISED BALANCE SHEET; AND
4.3.1.2 A FOCUS ON KNOWLEDGE-BASED NICHE ACTIVITIES INVOLVING HIGH VALUE-ADDED
PROCESSES.
4.4 CORE AREAS OF EXPERTISE
THE CORE AREAS OF EXPERTISE OF THE ENLARGED PSGBH INCLUDE, INTER ALIA:
- ASSET BASED FINANCE - PRIVATE EQUITY
- ASSET MANAGEMENT - SCRIP LENDING
- BROKING SERVICES - SPECIALISED INSURANCE STRUCTURING
- CORPORATE FINANCE - STRUCTURED AND PROJECT FINANCE
- EQUITY INVESTMENT - TRADING IN FINANCIAL INSTRUMENTS
- HEDGE FUNDS - TREASURY
- MERGERS AND ACQUISITIONS - TREASURY OUTSOURCING
5. FINANCIAL EFFECTS OF THE PROPOSALS
THE FOLLOWING ILLUSTRATES THE EARNINGS AND NET ASSET VALUE ATTRIBUTABLE TO
SHAREHOLDERS OF PSGN AND PSL AND TO PSG AND PSGBH BEFORE AND AFTER THE
PROPOSALS, BASED ON:
- THE NET ASSET VALUE ("NAV") REFLECTED IN THE PRELIMINARY PROFIT ANNOUNCEMENTS
OF PSG, PSL AND PSGN ("THE COMPANIES") FOR THE YEAR ENDED 28 FEBRUARY 1999,
ADJUSTED IN RESPECT OF PSGN FOR 1 080 000 SHARES ISSUED TO THE PSGN SHARE
INCENTIVE TRUST SUBSEQUENT TO 28 FEBRUARY 1999;
- THE FORECAST EARNINGS OF THE COMPANIES AND OF THE ENLARGED PSGBH FOR THE YEAR
ENDING 28 FEBRUARY 2000 ("FORECAST EARNINGS");
- THE PRO FORMA CONSOLIDATED BALANCE SHEET OF PSGBH AT 28 FEBRUARY 1999 BASED
ON THE BALANCE SHEETS OF PSGBH AND PSGN ASSUMING THAT THE PROPOSALS HAD BEEN
EFFECTIVE ON THAT DATE;
- THE EFFECTS ON NAV AND EARNINGS OF THE ENLARGED PSGBH ARE SHOWN UNDER TWO
SCENARIOS, NAMELY THAT NO PSGN SHAREHOLDERS ELECT THE CASH ALTERNATIVE ("CASE
A") AND THAT ALL PSGN SHAREHOLDERS ELECT THE CASH ALTERNATIVE, TAKING INTO
ACCOUNT THE COMMITMENTS IN RESPECT OF THE CASH ALTERNATIVE REFERRED TO IN
PARAGRAPH 2.1.5 ("CASE B"); AND
- ASSUMING PSGN SHAREHOLDERS ELECTING THE MAXIMUM CASH ALTERNATIVE RE-INVESTED
SUCH IN AN INTEREST-BEARING ACCOUNT TO YIELD AN AFTER-TAX RETURN OF 10%.
5.1 ON PSGN SHAREHOLDERS
5.1.1 ELECTING THE PSGBH SHARE ALTERNATIVE (CASE A)
BEFORE AFTER
100 100 574,3581
PSGN PSGN PSGBH
SHARES SHARES SHARES TOTAL CHANGE
R R R R R %
NAV 795,47 1,00 626,85 627,85 (167,62) (21,1)
FORECAST EARNINGS 87,20 0,10 89,03 89,13 1,93 2,2
5.1.2 ELECTING THE CASH ALTERNATIVE (CASE B)
BEFORE AFTER
100 100 R500 280,6206
PSGN PSGN IN PSGBH
SHARES SHARES CASH SHARES TOTAL CHANGE
R R R R R R %
NAV 795,47 1,00 500,00 273,52 774,52 (20,95) (2,6)
FORECAST EARNINGS 87,20 0,10 50,00 42,68 92,78 5,58 6,4
5.2 ON PSL SHAREHOLDERS
AFTER AFTER
PROPOSALS PROPOSALS
BEFORE BEFORE SCHEME AFTER SCHEME
100 100 23,3217
PSL PSL PSG
SHARES SHARES CHANGE SHARES CHANGE
R R R % R R %
NAV:
- CASE A 155,55 178,22 22,67 14,6 178,27 0,05 -
- CASE B 155,55 162,36 6,81 4,4 162,41 0,05 -
FORECAST EARNINGS:
- CASE A 30,00 29,34 (0,66) (2,2) 29,34 - -
- CASE B 30,00 28,95 (1,05) (3,5) 28,95 - -
5.3 ON PSG
AFTER AFTER
PROPOSALS PROPOSALS
BEFORE BEFORE SCHEME AFTER SCHEME
100 100 100
PSG PSG PSG
SHARES SHARES CHANGE SHARES CHANGE
R R R % R R %
NAV:
- CASE A 668,82 766,02 97,20 14,50 764,39 (1,63) (0,2)
- CASE B 668,82 698,05 29,23 4,4 696,41 (1,64) (0,2)
FORECAST EARNINGS:
- CASE A 128,64 125,81 (2,83) (2,2) 125,81 - -
- CASE B 128,64 124,11 (4,53) (3,5) 124,11 - -
5.4 ON PSGBH
BEFORE AFTER
CASE A CASE B
NUMBER OF SHARES IN ISSUE ('000) 616 835 1 323 755 1 111 388
SHAREHOLDERS' FUNDS (R'000) 385 941 1 444 789 1 083 297
NET ASSET VALUE PER SHARE (CENTS) 62,6 109,1 97,5
FORECAST EARNINGS (CENTS PER SHARE) 16,2 15,5 15,2
6. OPINIONS AND RECOMMENDATION
6.1 THE DIRECTORS OF PSG, PSL AND PSGN HAVE CONSIDERED THE PROPOSALS AND ARE OF
THE UNANIMOUS OPINION THAT THEY ARE FAIR AND REASONABLE TO THEIR RESPECTIVE
COMPANIES.
6.2 PRICEWATERHOUSECOOPERS CORPORATE FINANCE (PTY) LTD HAS CONSIDERED THE TERMS
AND CONDITIONS OF THE DISPOSALS AND HAS EXPRESSED THE OPINION THAT THEY ARE
FAIR AND REASONABLE TO PSGN SHAREHOLDERS.
7. GENERAL
CIRCULARS TO SHAREHOLDERS OF THE COMPANIES, INCORPORATING NOTICES OF GENERAL
MEETINGS AND THE PROPOSED PRE-LISTING STATEMENT OF PSGBH ARE IN THE COURSE OF
PREPARATION AND WILL BE DESPATCHED TO SHAREHOLDERS IN DUE COURSE.
AN ANNOUNCEMENT OF THE SALIENT DATES OF THE SCHEME AND RELATED MATTERS WILL BE
PUBLISHED IN DUE COURSE.
STELLENBOSCH
4 MAY 1999
INVESTMENT BANK
PSG INVESTMENT BANK LIMITED
CORPORATE FINANCE
REPORTING ACCOUNTANTS AND ADVISOR TO PSGN MINORITIES
PRICEWATERHOUSECOOPERS
ATTORNEYS TO PSG GROUP
HOFMEYR HERBSTEIN
GIHWALA CLUVER & WALKER INC
ATTORNEYS TO PSGN
FLUXMAN RABINOWITZ - RAPHAELY WEINER
SPONSORING BROKERS TO ALL PSG GROUP COMPANIES IN SOUTH AFRICA
PSG SECURITIES LIMITED
(REGISTRATION NUMBER 96/00509/06)
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
WARBURG DILLON READ
WARBURG DILLON READ SECURITIES (SOUTH AFRICA) (PTY) LTD
(REGISTRATION NUMBER 95/11140/07)
A SUBSIDIARY OF UBS AG
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)
SPONSORING BROKERS TO PSL IN NAMIBIA
BRIAN VAN RENSBURG
(TRADING AS ABN AMBRO SECURITIES NAMIBIA)
(MEMBER OF THE NAMIBIAN
STOCK EXCHANGE)
SANDY KENNEDY
TEL: +27 11 726 6325 EXT 202
FAX: +27 11 482-1818
E-MAIL: SANDY@GRAPHICOR.CO.ZA
WEB: WWW.GRAPHICOR.CO.ZA
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