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STEINHOFF INTERNATIONAL HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 98/03951/06)
("STEINHOFF")
CORNICK GROUP LIMITED
(FORMERLY ASSOCIATED FURNITURE COMPANIES LIMITED)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 64/02648/06)
("CORNICK")
JOINT ANNOUNCEMENT REGARDING:
- THE MERGER OF CORNICK'S OPERATING SUBSIDIARIES AND STEINHOFF AFRICA HOLDINGS
(PROPRIETARY) LIMITED ("STEINHOFF AFRICA"); AND
- A RENOUNCEABLE RIGHTS OFFER BY STEINHOFF,
AND
FURTHER CAUTIONARY ANNOUNCEMENT TO CORNICK SHAREHOLDERS.
INTRODUCTION
FURTHER TO THE JOINT CAUTIONARY ANNOUNCEMENT DATED 28 APRIL 1999, THE BUSINESS
BANK AND BRAIT MERCHANT BANK LIMITED ARE AUTHORISED TO ANNOUNCE THAT AGREEMENT
HAS BEEN REACHED BETWEEN STEINHOFF, STEINHOFF AFRICA AND CORNICK IN TERMS OF
WHICH:
- STEINHOFF AFRICA HAS ACQUIRED, WITH EFFECT FROM 1 APRIL 1999, CORNICK'S
ENTIRE BUSINESS OPERATIONS INCLUDING ALL ITS SHARES IN, AND SHAREHOLDER'S LOAN
CLAIMS AGAINST, CORNICK'S OPERATING AND OTHER SUBSIDIARIES ("THE MERGER"). THE
CONSIDERATION ACCRUING TO CORNICK PURSUANT TO THE MERGER IS TO BE SATISFIED BY
THE ALLOTMENT TO CORNICK OF RIGHTS TO 42 578 276 STEINHOFF SHARES ("THE
CONSIDERATION SHARES"), CREDITED AS FULLY PAID AT AN ISSUE PRICE OF 425 CENTS
PER SHARE. THE FINAL CONSIDERATION WILL BE DETERMINED ON THE ELECTION OF THE
SHAREHOLDERS OF CORNICK EITHER TO ACCEPT ONE STEINHOFF SHARE FOR EACH CORNICK
SHARE HELD ("THE SHARE ALTERNATIVE") OR A CASH CONSIDERATION OF 382,5 CENTS PER
CORNICK SHARE HELD ("THE CASH ALTERNATIVE"); AND
- STEINHOFF WILL UNDERTAKE A RENOUNCEABLE RIGHTS OFFER OF 67 325 750 NEW
ORDINARY SHARES ON THE BASIS OF 10 NEW ORDINARY SHARES FOR EVERY 100 SHARES
HELD AT AN ISSUE PRICE OF 425 CENTS PER SHARE TO RAISE AN AMOUNT OF R286 134
438, BEFORE EXPENSES ("THE STEINHOFF RIGHTS OFFER"). SHOULD THE MERGER BECOME
UNCONDITIONAL, STEINHOFF INTENDS TO UTILISE THE PROCEEDS OF THE RIGHTS OFFER TO
REDEEM ALL INTEREST-BEARING DEBT ASSUMED IN TERMS OF THE MERGER AND THE RECENT
SCHEME OF ARRANGEMENT PURSUANT TO WHICH MEGACOR HOLDINGS LIMITED WAS
CONSTITUTED A WHOLLY OWNED SUBSIDIARY OF STEINHOFF AFRICA ("THE MEGACOR
SCHEME").
UPON IMPLEMENTATION OF THE MERGER, WHICH IS ENVISAGED TO BE COMPLETED BY 25
JUNE 1999:
- THE CONSIDERATION SHARES IN TERMS OF THE SHARE ALTERNATIVE AND/OR CASH IN
TERMS OF THE CASH ALTERNATIVE WILL BE DISTRIBUTED TO CORNICK SHAREHOLDERS,
PENDING LIQUIDATION OR DE-REGISTRATION OF CORNICK OR THE IMPLEMENTATION OF AN
APPROVED UNBUNDLING SCHEME. IF THE LATTER MECHANISM IS IMPLEMENTED, CORNICK MAY
BE CONVERTED TO A CASH SHELL AND APPLICATION MADE TO THE JOHANNESBURG STOCK
EXCHANGE ("THE JSE") FOR THE TRANSFER OF ITS LISTING TO THE "CASH COMPANIES"
SECTOR OF THE JSE LISTS;
- THE CONTROLLING SHAREHOLDERS OF STEINHOFF WILL RENOUNCE, FOR NO
CONSIDERATION, 42 578 276 OF THEIR RIGHTS PURSUANT TO THE STEINHOFF RIGHTS
OFFER, IN FAVOUR OF CORNICK SHAREHOLDERS ON A ONE-FOR-ONE BASIS FOR
PARTICIPATION IN THE STEINHOFF RIGHTS OFFER AT A SUBSCRIPTION PRICE PER
STEINHOFF SHARE OF 425 CENTS. THE AFORESAID OFFER TO CORNICK SHAREHOLDERS WILL
COMPRISE A NON-RENOUNCEABLE OFFER AND, TO THE EXTENT NOT FOLLOWED BY CORNICK
SHAREHOLDERS, THE UNDERLYING STEINHOFF SHARES WILL BE TAKEN UP BY THE
UNDERWRITER OR ITS NOMINEE(S) AS REFERRED TO BELOW.
UPON FULFILMENT OF THE CONDITIONS PRECEDENT TO THE MERGER, CORNICK SHAREHOLDERS
WILL RECEIVE:
- ONE STEINHOFF SHARE FOR EACH CORNICK SHARE HELD PLUS A NON-RENOUNCEABLE RIGHT
TO SUBSCRIBE FOR AN ADDITIONAL STEINHOFF SHARE AT 425 CENTS PER SHARE; OR
- 382,5 CENTS PER CORNICK SHARE HELD, IN TERMS OF THE CASH ALTERNATIVE (IN
WHICH EVENT THE RIGHT TO SUBSCRIBE FOR AN ADDITIONAL STEINHOFF SHARE WILL NOT
APPLY).
CORPORATE STRUCTURE
THE OWNERSHIP STRUCTURE OF STEINHOFF AFTER THE MERGER WILL BE AS FOLLOWS:
* COMPRISING THE AGGREGATE HOLDING OF DIRECTORS AND MANAGEMENT OF STEINHOFF
THROUGH COMPANIES THEY CONTROL.
** BEING CORNICK SHAREHOLDERS' ULTIMATE HOLDING IN STEINHOFF ON THE ASSUMPTION
THAT NONE OF THEM WILL ACCEPT THE CASH ALTERNATIVE AND THAT THEY WILL FOLLOW
THEIR RIGHTS IN TERMS OF THE STEINHOFF RIGHTS OFFER .
# LISTED ON THE JSE WITH AN ESTIMATED MARKET CAPITALISATION OF R3 328 MILLION,
BASED ON THE STEINHOFF RIGHTS OFFER PRICE OF 425 CENTS PER SHARE.
RECORD DATE FOR THE STEINHOFF RIGHTS OFFER
THE RECORD DATE FOR STEINHOFF SHAREHOLDERS TO BE REGISTERED AS SUCH IN ORDER TO
PARTICIPATE IN THE STEINHOFF RIGHTS OFFER WILL BE THE CLOSE OF BUSINESS ON
FRIDAY, 28 MAY 1999.
RATIONALE
THE MERGER WILL CREATE A FULLY INTEGRATED SOUTH AFRICAN FURNITURE MANUFACTURER
CAPABLE OF DERIVING SUBSTANTIAL SYNERGISTIC BENEFITS WITH REGARD TO PURCHASING,
SHARED INFRASTRUCTURE, SYSTEMS, DISTRIBUTION AND MARKETING, WHICH WILL IMPACT
FAVOURABLY ON FUTURE EARNINGS PER SHARE. PARTICULAR AREAS IN WHICH THE
POTENTIAL BENEFITS OF THE MERGER ARE EVIDENT, INCLUDE:
- THE ACCESS THAT CORNICK'S BUSINESSES WILL HAVE TO STEINHOFF'S VAST EXPORT
DISTRIBUTION NETWORK AND MARKETS;
- RECIPROCAL UTILISATION OF IDLE PRODUCTION CAPACITY WHICH MAY ARISE FROM TIME
TO TIME;
- THE ENHANCED FOCUS OF THE COMBINED LOCAL OPERATIONS;
- COMPLEMENTARY MANAGEMENT SKILLS AND ENHANCED MANAGEMENT DEPTH ON BOTH SIDES;
AND
- ACCESS TO THE INTELLECTUAL PROPERTY OWNED BY CORNICK RELATING TO THE DESIGN,
PRODUCTION AND DISTRIBUTION OF FURNITURE.
STEINHOFF AFRICA, AS RECONSTITUTED AFTER THE MERGER, WILL HAVE 53 MANUFACTURING
FACILITIES SPREAD ACROSS SOUTH AFRICA, PRINCIPALLY AROUND JOHANNESBURG, DURBAN,
PRETORIA AND CAPE TOWN, EMPLOYING 12 500 PEOPLE AND WITH A DISTRIBUTION
INFRASTRUCTURE OF 11 WAREHOUSES AND A FLEET OF 500 VEHICLES.
THE ENLARGED STEINHOFF AFRICA WILL HAVE, INTER ALIA, THE FOLLOWING LEADING
BRANDS AT ITS DISPOSAL WHICH REPRESENT A COMPLEMENTARY SPREAD OF FURNITURE
PRODUCTS WITH A HIGH LEVEL OF MARKET ACCEPTANCE: ALPINE, BAKKER & STEYGER,
BASSET FURNITURE, CASSANDRA LOUNGE, EDBLO, GOMMAGOMMA, GRAFTON EVEREST, GRANT
ANDREWS OFFICE FURNITURE, HIGH POINT, MILANO LOUNGE, MOXWOOD, PAT CORNICK,
PEACH & HATTON INCLUDING GREAVES & THOMAS, PINEWOOD, SLUMBERLAND, SEALY,
THERAPEDIC, UNITA, VICTORIA LEWIS, VITAFOAM AND THE BRAND NAMES OF THE IQBAL
BAM GROUP. THE MEGACOR GROUP INCLUDES FURNITURE AND TIMBER RELATED PRODUCTS
DISTRIBUTED UNDER THE DOORWISE, HOUSE OF YORK, MEGA AND PRIME PINE BRAND NAMES.
AS A RESULT OF THE MERGER, THE NUMBER OF STEINHOFF SHARES IN THE HANDS OF THE
GENERAL PUBLIC (INCLUDING FINANCIAL INSTITUTIONS) WILL INCREASE TO 263 MILLION,
EQUIVALENT TO APPROXIMATELY 34% OF THE ENLARGED ISSUED SHARE CAPITAL. THIS
SHOULD ENHANCE THE LIQUIDITY/TRADEABILITY OF THE STEINHOFF SHARES.
THE CASH ALTERNATIVE
IN TERMS OF THE AGREEMENT RECORDING THE MERGER, CORNICK SHAREHOLDERS WILL BE
GIVEN THE RIGHT TO ELECT TO RECEIVE EITHER 382,5 CENTS IN CASH OR A STEINHOFF
SHARE FOR EACH CORNICK SHARE HELD. TO THE EXTENT THAT CORNICK SHAREHOLDERS
ELECT THE CASH ALTERNATIVE, THE ALLOTMENT OF THE RELATED PORTION OF THE
CONSIDERATION SHARES SHALL BECOME VOID AS ENVISAGED IN TERMS OF SECTION 93(4)
OF THE COMPANIES ACT, 1973 (ACT 61 OF 1973, AS AMENDED) ("THE COMPANIES ACT").
CORNICK SHAREHOLDERS HOLDING AN AGGREGATE OF 29 332 088 CORNICK SHARES,
REPRESENTING 68,9% OF ITS PRESENT ISSUED EQUITY SHARES, HAVE INDICATED THAT
THEY WILL NOT ACCEPT THE CASH ALTERNATIVE. WRITTEN IRREVOCABLE UNDERTAKINGS IN
RESPECT OF 44,9% OF THE ISSUED EQUITY CAPITAL HAVE BEEN RECEIVED TO THIS EFFECT
STEINHOFF HAS PROVIDED THE SECURITIES REGULATION PANEL ON TAKEOVERS AND MERGERS
("THE SRP") WITH PROOF THAT IT WILL HAVE SUFFICIENT CASH RESOURCES AVAILABLE TO
SATISFY FULL ACCEPTANCE OF THE CASH ALTERNATIVE.
UNDERWRITING
THE STEINHOFF RIGHTS OFFER HAS BEEN FULLY UNDERWRITTEN BY INVESTEC GUINNESS
FLIGHT (PROPRIETARY) LIMITED IN CONJUNCTION WITH BOE MERCHANT BANK LIMITED.
FINANCIAL EFFECTS
ON STEINHOFF'S EARNINGS PER SHARE
BASED ON STEINHOFF'S INTERIM RESULTS FOR THE FOUR MONTHS ENDED 31 DECEMBER 1998
AND CORNICK'S INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1998, AND
ON THE ASSUMPTIONS THAT THE MERGER WAS EFFECTIVE AND THE MERGED ENTITY HAD THE
PROCEEDS OF THE STEINHOFF RIGHTS OFFER AT ITS DISPOSAL FOR A FULL TWELVE-MONTH
PERIOD, THE EFFECT ON STEINHOFF'S ANNUALISED HEADLINE EARNINGS PER SHARE WOULD
HAVE BEEN A DECREASE OF 1,4 CENTS FROM 36 CENTS TO 34,6 CENTS PER SHARE (IE A
3,9% DECREASE).
IT SHOULD BE NOTED THAT THE ABOVE EFFECT ON EARNINGS DOES NOT TAKE COGNISANCE
OF ANY SYNERGISTIC BENEFITS THAT MAY BE DERIVED FROM THE MERGER, THE EXTENT OF
WHICH DURING THE FIRST YEAR AFTER THE MERGER HAS BEEN IMPLEMENTED IS ESTIMATED
BY STEINHOFF AND CORNICK MANAGEMENT TO BE SUBSTANTIAL AND SHOULD ENHANCE
STEINHOFF'S EARNINGS PER SHARE IN THE FUTURE.
FINANCIAL EFFECTS
ON STEINHOFF'S EARNINGS PER SHARE
BASED ON STEINHOFF'S INTERIM RESULTS FOR THE FOUR MONTHS ENDED 31 DECEMBER 1998
AND CORNICK'S INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1998, AND
ON THE ASSUMPTIONS THAT THE MERGER WAS EFFECTIVE AND THE MERGED ENTITY HAD THE
PROCEEDS OF THE STEINHOFF RIGHTS OFFER AT ITS DISPOSAL FOR A FULL TWELVE-MONTH
PERIOD, THE EFFECT ON STEINHOFF'S ANNUALISED HEADLINE EARNINGS PER SHARE WOULD
HAVE BEEN A DECREASE OF 1,4 CENTS FROM 36 CENTS TO 34,6 CENTS PER SHARE (IE A
3,9% DECREASE).
IT SHOULD BE NOTED THAT THE ABOVE EFFECT ON EARNINGS DOES NOT TAKE COGNISANCE
OF ANY SYNERGISTIC BENEFITS THAT MAY BE DERIVED FROM THE MERGER, THE EXTENT OF
WHICH DURING THE FIRST YEAR AFTER THE MERGER HAS BEEN IMPLEMENTED IS ESTIMATED
BY STEINHOFF AND CORNICK MANAGEMENT TO BE SUBSTANTIAL AND SHOULD ENHANCE
STEINHOFF'S EARNINGS PER SHARE IN THE FUTURE.
ON STEINHOFF'S TANGIBLE NET ASSET VALUE
BASED ON THE UNAUDITED CONSOLIDATED BALANCE SHEETS OF CORNICK AND STEINHOFF AS
AT 30 SEPTEMBER 1998 AND 31 DECEMBER 1998 RESPECTIVELY, AND ON THE ASSUMPTION
THAT NO CORNICK SHAREHOLDER WILL ELECT THE CASH ALTERNATIVE, THE EFFECT OF THE
MERGER ON STEINHOFF'S TANGIBLE NET ASSET VALUE PER SHARE WOULD HAVE BEEN AN
INCREASE OF 41 CENTS FROM 189 CENTS TO 230 CENTS PER SHARE (IE AN INCREASE OF
21,7%).
ON CORNICK
SINCE CORNICK'S RESULTS FOR THE YEAR ENDED 31 MARCH 1999 HAVE NOT YET BEEN
PUBLISHED, THE EFFECT OF THE MERGER ON CORNICK WILL ONLY BE DISCLOSED IN THE
CIRCULAR REFERRED TO BELOW (WHICH IS ANTICIPATED TO BE ISSUED AFTER THE SAID
RESULTS HAVE BEEN PUBLISHED).
CONDITIONS PRECEDENT
THE MERGER AND THE ANCILLARY TRANSACTIONS, WHERE APPLICABLE, ARE SUBJECT TO THE
FULFILMENT OF THE FOLLOWING CONDITIONS PRECEDENT:
- THE APPROVAL OF THE DISPOSAL OF CORNICK'S OPERATING SUBSIDIARIES BY THE
SHAREHOLDERS OF CORNICK IN A GENERAL MEETING TO BE HELD ON OR ABOUT 25 JUNE
1999; AND
- THE APPROVALS INSOFAR AS MAY BE NECESSARY OF THE SRP AND THE JSE, THE
GRANTING OF A LISTING OF STEINHOFF'S RENOUNCEABLE (NIL-PAID) LETTERS OF
ALLOCATION AND THE NEW STEINHOFF SHARES TO BE ISSUED PURSUANT TO THE STEINHOFF
RIGHTS OFFER AND THE MERGER.
THE STEINHOFF RIGHTS OFFER IS FURTHERMORE CONDITIONAL UPON THE REGISTRATION OF
ALL DOCUMENTATION PERTAINING THERETO BY THE REGISTRAR OF COMPANIES.
SHAREHOLDERS HOLDING AN AGGREGATE OF 29 332 088 CORNICK SHARES, REPRESENTING
68,9% OF ITS PRESENT ISSUED EQUITY SHARES HAVE INDICATED THAT THEY WILL VOTE
ALL OF THEIR CORNICK SHARES IN FAVOUR OF THE RESOLUTIONS TO BE PROPOSED AT THE
GENERAL MEETING OF STEINHOFF SHAREHOLDERS REFERRED TO ABOVE. WRITTEN
IRREVOCABLE UNDERTAKINGS IN RESPECT OF 44,9% OF THE ISSUED EQUITY CAPITAL HAVE
BEEN RECEIVED TO THIS EFFECT.
IT SHOULD BE NOTED THAT THE STEINHOFF RIGHTS OFFER WILL NOT BE CONDITIONAL UPON
THE FULFILMENT OF THE CONDITIONS PRECEDENT RELATING TO THE MERGER. IN THE EVENT
OF THE MERGER NOT BECOMING UNCONDITIONAL, STEINHOFF WILL UTILISE THE NET
PROCEEDS OF THE STEINHOFF RIGHTS OFFER FOR ALTERNATIVE GROWTH OPPORTUNITIES
WHICH ARE CURRENTLY UNDER CONSIDERATION.
GENERAL MEETING OF STEINHOFF
ALTHOUGH THE MERGER, IN RELATION TO STEINHOFF, REPRESENTS A CATEGORY 3
TRANSACTION AS DEFINED BY THE LISTING REQUIREMENTS OF THE JSE (WHICH DOES NOT
REQUIRE STEINHOFF SHAREHOLDERS' APPROVAL), STEINHOFF WILL CONVENE A GENERAL
MEETING ON 25 JUNE 1999 TO SEEK SHAREHOLDERS' APPROVAL FOR:
- A GENERAL AUTHORITY TO ISSUE SHARES FOR CASH, THE PROCEEDS OF WHICH MAY BE
UTILISED TO FURTHER ENHANCE STEINHOFF'S ACQUISITIVE GROWTH PROSPECTS, BOTH
LOCALLY AND ABROAD; AND
- A CAPITAL REDUCTION IN TERMS OF WHICH ALL OF STEINHOFF'S INTANGIBLE ASSETS,
WHICH, AFTER THE MEGACOR SCHEME, AMOUNT TO
R107 956 605, WILL BE WRITTEN OFF AGAINST THE SHARE PREMIUM ACCOUNT IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 83 OR 84 OF THE COMPANIES ACT.
DOCUMENTATION AND FURTHER ANNOUNCEMENTS
CIRCULARS TO THE SHAREHOLDERS OF STEINHOFF AND CORNICK, INCORPORATING THE
NOTICES OF GENERAL MEETING AND FULL DETAILS OF THE MERGER, THE STEINHOFF RIGHTS
OFFER AND THE RIGHTS OF AND ALTERNATIVES AVAILABLE TO CORNICK SHAREHOLDERS, ARE
IN THE PROCESS OF BEING PREPARED AND WILL, SUBJECT TO THE APPROVAL OF THE JSE
AND THE SRP, BE MAILED TO SHAREHOLDERS WITHIN 28 DAYS FROM THE DATE HEREOF.
THE SALIENT DATES OF THE STEINHOFF RIGHTS OFFER AND THE DATES RELEVANT TO
CORNICK SHAREHOLDERS WILL BE PUBLISHED IN DUE COURSE.
FURTHER CAUTIONARY ANNOUNCEMENT
SINCE THE FINANCIAL EFFECTS ON CORNICK ARE NOT SHOWN IN THIS ANNOUNCEMENT (DUE
TO THE FACT THAT CORNICK'S RESULTS FOR THE YEAR ENDED 31 MARCH 1999 HAVE NOT
YET BEEN ANNOUNCED), CORNICK SHAREHOLDERS ARE ADVISED TO CONTINUE EXERCISING
CAUTION IN DEALING IN THEIR CORNICK SHARES UNTIL A FURTHER ANNOUNCEMENT IS
PUBLISHED.
EPPINGDUST JOHANNESBURG
14 MAY 1999 14 MAY 1999
MERCHANT BANK TO STEINHOFF
THE BUSINESS BANK
A NEW FORCE IN MERCHANT BANKING
MERCHANT BANK TO CORNICK
BRAIT MERCHANT BANK LIMITED
(REGISTRATION NUMBER 60/03893/06)
ATTORNEYS TO STEINHOFF
DAYSON ATTORNEYS
CORPORATE ADVISOR TO CORNICK
BRAIT ADVISORS
SPONSORING BROKER TO CORNICK
INVESTEC SECURITIES LIMITED
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)
(REGISTRATION NUMBER 72/08905/06)
SPONSORING BROKERS TO STEINHOFF
BOE SECURITIES (PTY) LIMITED
(REGISTRATION NUMBER 96/15589/07)
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
STANDARD EQUITIES (PTY) LIMITED
(REGISTRATION NUMBER 72/08305/07)
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)
PSG SECURITIES LIMITED
(REGISTRATION NUMBER 96/00509/06)
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
UNDERWRITER
INVESTEC GUINNESS FLIGHT
GLOBAL ASSET MANAGEMENT