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TRANS HEX GROUP LIMITED
(REGISTRATION NUMBER 63/07579/06)
("TRANS HEX")
BENGUELA CONCESSIONS LIMITED
(REGISTRATION NUMBER 88/03608/06
("BENCO")
PROPOSED SCHEME OF ARRANGEMENT BY TRANS HEX TO CONSTITUTE BENCO AS A
WHOLLY-OWNED SUBSIDIARY OF TRANS HEX
1. INTRODUCTION
FURTHER TO THE ANNOUNCEMENTS DATED 20 AUGUST 1999, 19 OCTOBER 1999 AND 1
DECEMBER 1999, THE BOARDS OF DIRECTORS OF BENCO AND TRANS HEX HAVE PLEASURE IN
ANNOUNCING THAT CERTAIN KEY CONDITIONS PRECEDENT TO THE MERGER OF BENCO AND
TRANS HEX HAVE BEEN FULFILLED, AND THAT TRANS HEX INTENDS TO PROPOSE A SCHEME
OF ARRANGEMENT IN TERMS OF SECTION 311 OF THE COMPANIES ACT, 1973
(ACT 61 OF 1973), AS AMENDED (THE "SCHEME"), BETWEEN BENCO AND ITS ORDINARY
SHAREHOLDERS ("SCHEME MEMBERS").
UPON THE SCHEME BECOMING OPERATIVE, ALL OF THE ORDINARY SHARES IN BENCO ("BENCO
SHARES") WILL BE HELD BY TRANS HEX. SUBJECT TO THE FULFILLMENT OF THE REMAINING
CONDITIONS PRECEDENT REFLECTED IN PARAGRAPH 7 BELOW, THE LISTING OF THE BENCO
SHARES ON THE JOHANNESBURG STOCK EXCHANGE ("JSE") WILL BE TERMINATED.
ROBERT FLEMING SOUTH AFRICA LIMITED HAS BEEN APPOINTED AS INDEPENDENT FINANCIAL
ADVISER TO THE BOARD OF DIRECTORS OF BENCO REGARDING THE TERMS AND
IMPLEMENTATION OF THE SCHEME AND IS OF THE OPINION THAT THE SCHEME IS FAIR AND
REASONABLE TO SCHEME MEMBERS. THE COMPETITION COMMISSION HAS APPROVED THE
MERGER OF BENCO AND TRANS HEX.
2. BACKGROUND INFORMATION ON TRANS HEX
TRANS HEX IS LISTED ON THE JSE AND THE NAMIBIAN STOCK EXCHANGE. THE CORE
BUSINESS OF TRANS HEX IS THE MINING AND MARKETING OF HIGH QUALITY DIAMONDS FROM
ALLUVIAL AND MARINE DEPOSITS IN THE NAMAQUALAND DISTRICT OF THE NORTHERN CAPE
PROVINCE OF SOUTH AFRICA. TRANS HEX HOLDS EXTENSIVE MINING RIGHTS OVER
PROSPECTIVE AREAS ADJACENT TO THE ORANGE RIVER AND HONDEKLIP BAY, AS WELL AS 11
MARINE MINING AND EXPLORATION CONCESSIONS ON THE WEST COAST. INTERNATIONAL
DIAMOND EXPLORATION ACTIVITIES IN NAMIBIA, BRAZIL AND ZIMBABWE ARE UNDERTAKEN
BY TRANS HEX INTERNATIONAL LIMITED, A SUBSIDIARY OF TRANS HEX, WHOSE SHARES ARE
TRADED ON THE TORONTO STOCK EXCHANGE. TOTAL DIAMOND PRODUCTION FOR THE 1999
FINANCIAL YEAR WAS 114 502 CARATS. DIAMOND MARKETING IS UNDERTAKEN BY TRANS HEX
THROUGH ITS OFFICES IN CAPE TOWN AND ANTWERP.
3. BACKGROUND INFORMATION ON BENCO
BENCO IS LISTED IN THE "MINING RESOURCES - MINING EXPLORATION" SECTOR OF THE
JSE. TOGETHER WITH ITS SUBSIDIARIES AND JOINT VENTURE PARTNERS, BENCO IS
FOCUSED ON MARINE DIAMOND EXPLORATION AND DEVELOPMENT OFF THE WEST COAST OF
SOUTHERN AFRICA. IN THAT AREA, BENCO HOLDS SEVEN CONCESSIONS TOTALING SOME 4
400 SQUARE KILOMETRES, AND IN ADDITION IT IS THE OPERATOR OF VARIOUS JOINT
VENTURES COVERING SOME 6 600 SQUARE KILOMETRES. IN NAMIBIAN WATERS, IT HOLDS A
CONTROLLING INTEREST OVER APPROXIMATELY 8 600 SQUARE KILOMETRES OF CONCESSIONS.
IN ADDITION, BENCO HOLDS LAND-BASED PROSPECTING LICENSES IN SOUTH AFRICA OVER
SEVERAL FARMS NEAR SAXENDRIFT ON THE MIDDLE ORANGE RIVER.
BENCO HAS REPORTED NET OPERATING LOSSES IN EACH OF ITS PAST FIVE FINANCIAL
YEARS AND ONGOING EXPLORATION EXPENDITURE REQUIREMENTS, AS WELL AS DEBT
COMMITMENTS IN RESPECT OF A MORTGAGE HELD BY LAMBETH TRADING PTY LIMITED
("LAMBETH") OVER THE MINING VESSEL, MV MOONSTAR (THE "LAMBETH DEBT"), HAS PUT
STRAIN ON BENCO'S CASH RESOURCES.
AGREEMENT WAS REACHED WITH LAMBETH ON 11 NOVEMBER 1999 THAT THE LAMBETH DEBT
WILL BE SETTLED IN FULL BY THE ISSUE TO LAMBETH OF 3 416 451 ORDINARY SHARES IN
TRANS HEX AFTER THE COMPLETION OF THE SCHEME ("THE RECAPITALISATION AGREEMENT")
IN TERMS OF AN ISSUE OF SHARES PURSUANT TO THE TRANS HEX DIRECTORS' GENERAL
AUTHORITY TO ISSUE SHARES FOR CASH GRANTED IN GENERAL MEETING. SHOULD THE
SCHEME NOT BE COMPLETED, THE LAMBETH DEBT WILL BE REPAYABLE AS PER THE TERMS
APPLYING PRIOR TO THE RECAPITALISATION AGREEMENT.
4. RATIONALE FOR THE SCHEME
THE COMBINATION OF THE BUSINESSES OF TRANS HEX AND BENCO IS EXPECTED TO CONFER
NUMEROUS BENEFITS TO THE MERGED ENTITY, KEY ELEMENTS OF WHICH ARE THE FOLLOWING
* THE COMBINATION OF BOTH PARTIES' NAMIBIAN AND SOUTH AFRICAN MARINE
CONCESSIONS COUPLED WITH EXPANDED LAND-BASED DIAMOND ASSETS WILL PROVIDE
INCREASED OPPORTUNITIES FOR EXISTING DIAMOND RESOURCES TO BE EXPLOITED, AND
WILL STRENGTHEN THE STRATEGIC POSITION AND LESSEN THE RISK PROFILE OF THE
BUSINESSES;
* THE EXPANDED CAPITAL BASE OFFERED BY TRANS HEX WILL SUPPORT THE EXPLORATION
EXPENDITURE THAT IS REQUIRED FOR BENCO'S OFFSHORE AND LAND-BASED DIAMOND
DEPOSITS TO BE DEVELOPED;
* TRANS HEX WILL INVESTIGATE BENCO'S RELATIVELY UNEXPLORED LAND AND MARINE
CONCESSIONS AND ITS SHAREHOLDERS WILL SHARE IN THE EXCITING POTENTIAL OF THESE
PROPERTIES WITH BENCO'S SHAREHOLDERS;
* THE PROVEN TECHNICAL ABILITIES OF TRANS HEX WILL BE AVAILABLE TO THE MERGED
BUSINESSES;
* THE SCHEME WILL ALLOW BENCO SHAREHOLDERS TO PARTICIPATE, THROUGH TRANS HEX,
IN THE CONSOLIDATION OF THE SOUTH AFRICAN ALLUVIAL AND MARINE DIAMOND MINING
INDUSTRY WHICH IS CURRENTLY UNDERWAY AND WHICH INCLUDES THE PROPOSED
ACQUISITION OF PROSPECTIVE PROPERTIES ADJOINING THOSE OF BENCO ON THE MIDDLE
ORANGE RIVER; AND
* THE CRITICAL MASS ACHIEVED BY THE MERGER WILL ASSIST IN THE ENLARGED
COMPANY'S INTERNATIONAL EXPANSION, PROVIDING BOTH CURRENT AND NEW SHAREHOLDERS
THE OPPORTUNITY TO PARTICIPATE IN THE VALUE ENHANCEMENT CREATED BY THIS
STRATEGY.
5. TERMS OF THE SCHEME
SUBJECT TO FULFILLMENT OF THE CONDITIONS PRECEDENT REFLECTED IN PARAGRAPH 7
BELOW, IN TERMS OF THE SCHEME, SCHEME MEMBERS WILL RECEIVE A CONSIDERATION OF
4,791649 ORDINARY TRANS HEX SHARES ("SCHEME SHARES") FOR EVERY 100 BENCO SHARES
HELD ON THE RECORD DATE OF THE SCHEME (THE "RECORD DATE"). THE CONSIDERATION IS
BASED ON:
* 40 CENTS FOR EACH OF THE 107 504 931 ORDINARY SHARES IN BENCO IN ISSUE AT 20
AUGUST 1999; AND
* THE WEIGHTED AVERAGE SHARE PRICE FOR THE 30 CALENDAR DAYS ENDED 13 AUGUST
1999, BEING 834,7857 CENTS PER SHARE, FOR THE
64 381 608 ORDINARY SHARES IN TRANS HEX IN ISSUE AT 20 AUGUST 1999.
6. ODD LOT OFFER
SCHEME MEMBERS HOLDING LESS THAN 2 087 BENCO SHARES (EQUIVALENT TO 100 SCHEME
SHARES AT THE RECORD DATE), WILL IN TERMS OF THE SCHEME, BECOME ODD LOT HOLDERS
IN TRANS HEX ("ODD LOT SHAREHOLDERS").
IN ORDER TO OFFER ODD LOT SHAREHOLDERS AN OPPORTUNITY TO INCREASE THEIR
SHAREHOLDINGS TO 2 087 BENCO SHARES PRIOR TO THE IMPLEMENTATION OF THE SCHEME,
A RENEWAL OF BENCO'S GENERAL AUTHORITY TO ISSUE SHARES FOR CASH WILL BE SOUGHT
AT THE ANNUAL GENERAL MEETING OF BENCO WHICH IS EXPECTED TO TAKE PLACE ON THE
SAME DAY AS THE SCHEME MEETING. IN TERMS OF THE ODD LOT OFFER, BENCO
SHAREHOLDERS HOLDING LESS THAN 2 087 SHARES ON THE RECORD DATE WILL BE AFFORDED
THE OPPORTUNITY TO SUBSCRIBE FOR SUCH NUMBER OF NON-RENOUNCEABLE LETTERS OF
ALLOCATION TO BENCO ORDINARY SHARES ("BENCO LETTERS') AS WILL BRING THEIR TOTAL
BENCO SHAREHOLDING ENTITLEMENTS TO 2 087 BENCO SHARES, AT A PRICE OF 35 CENTS
PER BENCO LETTER ("THE ODD LOT OFFER"). THE ODD LOT OFFER WILL BE SUBJECT TO
AND DEPENDENT UPON THE IMPLEMENTATION OF THE SCHEME.
7. CONDITIONS PRECEDENT
THE SCHEME IS SUBJECT, INTER ALIA, TO THE FULFILLMENT OF THE FOLLOWING
CONDITIONS PRECEDENT:
* THE GRANTING OF THE REQUISITE APPROVALS BY THE JSE, THE SECURITIES REGULATION
PANEL ("SRP"), THE SOUTH AFRICAN RESERVE BANK AND ANY OTHER REGULATORY
AUTHORITIES WHICH HAVE JURISDICTION IN THIS REGARD;
* RATIFICATION BY THE MINISTER OF FINANCE OF THE ACQUISITION OF BENCO BY TRANS
HEX;
* THE HIGH COURT OF SOUTH AFRICA (THE "COURT") GRANTING AN ORDER CONVENING A
MEETING OF THE SCHEME MEMBERS TO CONSIDER AND VOTE ON THE SCHEME (THE "SCHEME
MEETING");
* THE APPROVAL OF THE SCHEME BY 75% OF THE SCHEME MEMBERS PRESENT IN PERSON OR
REPRESENTED BY PROXY AT THE SCHEME MEETING;
* THE SANCTIONING OF THE SCHEME BY THE COURT; AND
* THE REGISTRATION OF A CERTIFIED COPY OF THE ORDER OF COURT SANCTIONING THE
SCHEME BY THE REGISTRAR OF COMPANIES.
8. FINANCIAL EFFECTS OF THE SCHEME
ON A TRANS HEX SHAREHOLDER:
PRIOR TO THE SCHEME AFTER THE SCHEME INCREASE/(DECREASE)
CENTS PER SHARE CENTS PER SHARE CENTS PER SHARE
NET ASSET VALUE 424 474 50
NORMAL EARNINGS 62 20 (42)
HEADLINE EARNINGS 96 64 (32)
ON A BENCO SHAREHOLDER:
PRIOR TO THE SCHEME AFTER THE SCHEME INCREASE/(DECREASE)
CENTS PER SHARE CENTS PER SHARE CENTS PER SHARE
NET ASSET VALUE 24 23 (1)
NORMAL (LOSS)/EARNINGS (26) 1 27
HEADLINE (LOSS)/EARNINGS (13) 3 16
NOTES:
THE PRO FORMA FINANCIAL EFFECTS OF THE SCHEME ON THE EARNINGS PER SHARE AND NET
ASSET VALUE PER SHARE ARE SET OUT IN THE TABLE AND ARE BASED ON THE FOLLOWING
ASSUMPTIONS, NAMELY:
1. THAT THE SCHEME HAS BEEN IN FORCE FOR A FULL 12 MONTH PERIOD.
2. FINANCIAL INFORMATION IS STATED FOR BENCO FOR THE YEAR ENDED 31 MAY 1999 AND
FOR TRANS HEX FOR THE YEAR ENDED 31 MARCH 1999.
3. BENCO'S ACCOUNTING POLICIES HAVE BEEN ADJUSTED TO CONFORM TO TRANS HEX'S
ACCOUNTING POLICIES, RESULTING IN BENCO'S MINING RIGHTS BEING VALUED AT R12 569
000.
4. ALL ODD LOT SHAREHOLDERS HAVING EXERCISED THEIR RIGHT TO INCREASE THEIR
SHAREHOLDING ENTITLEMENTS TO 2 087 BENCO SHARES, AND THE PROCEEDS HAVING BEEN
INVESTED IN AN INTEREST BEARING BANK ACCOUNT AT 11% PER ANNUM.
9. ALTERNATIVE TO THE SCHEME
IN THE EVENT OF THE SCHEME NOT BEING IMPLEMENTED, TRANS HEX IS ENTITLED TO
SUBSCRIBE FOR SUCH NUMBER OF BENCO SHARES AS WILL CONFER ON TRANS HEX OWNERSHIP
OF 50% PLUS ONE SHARE OF BENCO'S ISSUED SHARE CAPITAL AT 40 CENTS PER BENCO
SHARE, SUBJECT TO APPROVAL BY THE REQUISITE MAJORITY OF BENCO SHAREHOLDERS IN
GENERAL MEETING.
10. DOCUMENTATION
SUBJECT TO RATIFICATION OF THE ACQUISITION OF BENCO BY TRANS HEX BY THE
MINISTER OF FINANCE AND OF THE COURT GRANTING AN ORDER CONVENING THE SCHEME
MEETING, DOCUMENTATION CONTAINING DETAILS OF THE SCHEME AND THE ODD LOT OFFER,
WHICH IS SUBJECT TO THE APPROVALS OF THE JSE AND THE SRP, AND NOTICES CONVENING
THE SCHEME MEETING WILL BE MAILED TO BENCO SHAREHOLDERS.
A FURTHER ANNOUNCEMENT GIVING SALIENT DATES AND TIMES OF THE SCHEME WILL BE
PUBLISHED ON OR ABOUT THE SAME DATE.
CAPE TOWN
1 FEBRUARY 2000
FINANCIAL ADVISER TO BENCO
FLEMINGS
ROBERT FLEMING SOUTH AFRICA LIMITED
REGISTRATION NUMBER 95/11812/06
ATTORNEYS TO BENCO
CLIFFE DEKKER FULLER MOORE INC
(REGISTRATION NUMBER 98/18173/21)
FINANCIAL ADVISER TO TRANS HEX
DEUTSCHE BANK SECURITIES (SA) (PTY) LIMITED
(REGISTRATION NUMBER 95/11798/07)
ATTORNEYS TO TRANS HEX
BRINK COHEN LE ROUX & ROODT INC ATTORNEYS
(REGISTRATION NUMBER 93/04501/21)
JOINT SPONSORING BROKERS TO BENCO
FLEMING MARTIN SECURITIES LTD
REGISTRATION NUMBER 95/11815/06
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
INCENTIVE
LOWENTHAL (PTY) LTD
A MEMBER OF THE JOHANNESBURG STOCK EXCHANGE