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GENBEL SECURITIES LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1977/002124/06)
("GENSEC")
SANLAM LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1659/001562/06)
("SANLAM")
PROPOSED ACQUISITION BY SANLAM OF THE ENTIRE ISSUED SHARE CAPITAL OF GENSEC
1. INTRODUCTION
SHAREHOLDERS OF GENSEC AND SANLAM WERE ADVISED IN JOINT CAUTIONARY
ANNOUNCEMENTS DATED 17 AUGUST, 14 SEPTEMBER AND 30 OCTOBER 2000 THAT, SUBJECT
TO THE FINALISATION OF CERTAIN PRE-CONDITIONS (THE "PRE-CONDITIONS"), SANLAM
WAS CONSIDERING MAKING AN OFFER TO PURCHASE ALL OF THE SHARES IN GENSEC THAT
SANLAM AND ITS SUBSIDIARIES DID NOT ALREADY OWN FOR A CASH CONSIDERATION OF
R37,00 PER GENSEC SHARE (THE "OFFER"). SANLAM AND ITS SUBSIDIARIES CURRENTLY
HOLD 63% OF THE ENTIRE ISSUED SHARE CAPITAL OF GENSEC.
THE PRE-CONDITIONS, INCLUDING RECEIVING APPROVAL FROM THE MINISTER OF FINANCE,
HAVE NOW BEEN MET. SANLAM HAS ADVISED THE BOARD OF DIRECTORS OF GENSEC (THE
"GENSEC BOARD") THAT IT WILL NOW IMPLEMENT THE OFFER BY WAY OF A SCHEME OF
ARRANGEMENT IN TERMS OF SECTION 311 OF THE COMPANIES ACT, 1973 (ACT 61 OF
1973), AS AMENDED (THE "ACT"), BETWEEN GENSEC AND ITS SHAREHOLDERS OTHER THAN
SANLAM AND ITS SUBSIDIARIES (THE "SCHEME").
2. RATIONALE
SANLAM SOLD ITS ASSET MANAGEMENT BUSINESS TO GENSEC IN 1998 IN EXCHANGE FOR
SHARES IN GENSEC AND, AS A RESULT, BECAME GENSEC'S CONTROLLING SHAREHOLDER AND
LARGEST WHOLESALE ASSET MANAGEMENT AND INVESTMENT BANKING CLIENT. THE STRATEGIC
OBJECTIVES OF SANLAM HAVE EVOLVED SINCE ITS DEMUTUALISATION AND LISTING IN 1998
AS IT HAS EMBARKED ON A PROCESS OF TRANSFORMING ITSELF FROM A MUTUAL LIFE
INSURANCE COMPANY TO A BROAD-BASED AND MULTI-BRANDED SOUTH AFRICAN FINANCIAL
SERVICES GROUP.
GENSEC HAS EVOLVED FROM A PROPRIETARY TRADING BUSINESS INTO A CLIENT SERVICES
ORGANISATION OPERATING IN SEVERAL SPHERES OF THE FINANCIAL SERVICES ARENA.
GENSEC'S STATED OBJECTIVE IS TO BALANCE ITS VOLATILE EARNINGS BY DIVERSIFYING
INTO ACTIVITIES THAT WILL INCREASE RECURRING FEE-BASED INCOME.
THE DIVERSIFICATION ASPIRATIONS OF BOTH COMPANIES COULD LEAD TO A POTENTIAL
OVERLAP OF BUSINESS DEFINITION. UNDER A UNIFIED STRUCTURE, AREAS WHERE THE
PRODUCT CAPABILITIES OF GENSEC CAN BE USED TO FURTHER COMPLEMENT THE
DISTRIBUTION CAPABILITIES OF SANLAM WILL BE EXPLORED IN ORDER TO CREATE COMMON
OBJECTIVES, ENHANCE STRATEGIC DEVELOPMENT AND FACILITATE CROSS-SELLING BETWEEN
GENSEC AND SANLAM. IN ADDITION, A UNIFIED STRUCTURE WILL FACILITATE THE
EFFICIENT USE OF CAPITAL WITHIN THE SANLAM GROUP.
THE SCHEME, IF IMPLEMENTED, WILL FACILITATE THE ACHIEVEMENT OF SANLAM'S
STRATEGIC OBJECTIVES AND ALLOW SHAREHOLDERS OF GENSEC OTHER THAN SANLAM AND ITS
SUBSIDIARIES ("GENSEC SHAREHOLDERS") TO REALISE THEIR INVESTMENT FOR R37,00 IN
CASH PER GENSEC SHARE (THE "CASH CONSIDERATION"), WHICH REPRESENTS A PREMIUM OF
38% TO THE MARKET PRICE OF A GENSEC SHARE ON THE DAY PRIOR TO THE ANNOUNCEMENT
MADE ON 17 AUGUST 2000.
3. TERMS OF THE SCHEME
3.1 CONSIDERATION
SUBJECT TO THE FULFILMENT OF THE CONDITIONS PRECEDENT REFLECTED IN PARAGRAPH
3.2 BELOW, GENSEC SHAREHOLDERS WILL RECEIVE THE CASH CONSIDERATION FOR EACH
GENSEC SHARE HELD ON THE RECORD DATE, WHICH IS EXPECTED TO BE FRIDAY, 15
DECEMBER 2000.
CHASE HAS CONFIRMED TO THE SECURITIES REGULATION PANEL ("SRP") THAT SANLAM HAS
SUFFICIENT RESOURCES TO DISCHARGE ITS OBLIGATIONS IN TERMS OF THE SCHEME.
3.2 CONDITIONS PRECEDENT
THE SCHEME IS SUBJECT TO THE FULFILMENT OF THE FOLLOWING CONDITIONS PRECEDENT:
3.2.1 THE APPROVAL OF THE SCHEME BY NOT LESS THAN 75% OF THE VOTES EXERCISABLE
BY THE GENSEC SHAREHOLDERS PRESENT AND VOTING IN PERSON OR BY PROXY AT THE
MEETING CONVENED TO CONSIDER THE SCHEME (THE "SCHEME MEETING);
3.2.2 THE SANCTIONING OF THE SCHEME BY THE COURT; AND
3.2.3 A CERTIFIED COPY OF THE ORDER OF COURT SANCTIONING THE SCHEME BEING
REGISTERED BY THE REGISTRAR OF COMPANIES.
3.3 CONDITIONAL SUBSTITUTE OFFER
IN THE EVENT THAT THE SCHEME FAILS FOR ANY REASON, SANLAM WILL IMPLEMENT THE
OFFER BY WAY OF A GENERAL OFFER IN TERMS OF THE RULES OF THE SRP TO GENSEC
SHAREHOLDERS ON THE SAME TERMS AND CONDITIONS, MUTATIS MUTANDIS, AS THOSE
APPLICABLE UNDER THE SCHEME, SAVE FOR:
3.3.1 THOSE THAT RELATE SPECIFICALLY TO THE IMPLEMENTATION OF THE SCHEME; AND
3.3.2 ACCEPTANCES BEING RECEIVED IN RESPECT OF AT LEAST 90% OF THE GENSEC
SHARES HELD BY GENSEC SHAREHOLDERS, OR SUCH LESSER PERCENTAGE AS SANLAM MAY
DETERMINE (THE "CONDITIONAL SUBSTITUTE OFFER").
SUBJECT TO ACCEPTANCES BEING RECEIVED FROM NOT LESS THAN 90% OF THE GENSEC
SHAREHOLDERS AS AFORESAID, SANLAM WILL INVOKE THE PROVISIONS OF SECTION 440K OF
THE ACT TO COMPULSORILY ACQUIRE ALL THE REMAINING GENSEC SHARES.
4. FINANCIAL EFFECTS
THE TABLE BELOW ILLUSTRATES THE EFFECTS OF THE OFFER ON GENSEC SHAREHOLDERS:
PER GENSEC BEFORE AFTER
SHARE NOTES (CENTS) (CENTS) INCREASE
MARKET VALUE 1 2 690 3 700 38%
HEADLINE EARNINGS 2 242 285 18%
TANGIBLE NET ASSET VALUE 3 1 656 3 700 123%
NOTES:
1. THE MARKET VALUE REFLECTED IN THE "BEFORE" COLUMN IS THE CLOSING MARKET
PRICE OF A GENSEC SHARE ON 16 AUGUST 2000 (BEING THE DAY PRIOR TO THE FIRST
ANNOUNCEMENT). THE VALUE IN THE "AFTER" COLUMN REPRESENTS THE CASH
CONSIDERATION PAYABLE TO A GENSEC SHAREHOLDER ASSUMING THE OFFER IS
IMPLEMENTED.
2. THE AMOUNT IN THE "BEFORE" COLUMN IS BASED ON THE UNAUDITED HEADLINE
EARNINGS ATTRIBUTABLE TO GENSEC SHAREHOLDERS AND THE WEIGHTED AVERAGE NUMBER OF
GENSEC SHARES IN ISSUE (253 MILLION) FOR THE 12-MONTH PERIOD ENDED 30 JUNE
2000. THE AUDITED HEADLINE EARNINGS FOR THE 12-MONTH PERIOD ENDED 31 DECEMBER
1999 WAS 312 CENTS PER SHARE. THE AMOUNT IN THE "AFTER" COLUMN REFLECTS THE
AFTER-TAX INTEREST INCOME, AT AN AVERAGE TAX RATE OF 30%, THAT A GENSEC
SHAREHOLDER WOULD HAVE EARNED HAD THE CASH CONSIDERATION BEEN INVESTED AT AN
INTEREST RATE OF 11%, BASED ON THE AVERAGE RATE OF INTEREST EARNED ON
THREE-MONTH NEGOTIABLE CERTIFICATES OF DEPOSIT, FOR THE 12-MONTH PERIOD ENDED
30 JUNE 2000.
3. THE "BEFORE" COLUMN IS BASED ON THE UNAUDITED NET ASSET VALUE PER SHARE AS
DISCLOSED IN THE INTERIM RESULTS OF GENSEC AT 30 JUNE 2000. THE "AFTER" COLUMN
REPRESENTS THE CASH CONSIDERATION.
THE TABLE BELOW ILLUSTRATES THE EFFECTS OF THE OFFER ON SANLAM SHAREHOLDERS:
BEFORE AFTER
PER SANLAM SHARE NOTES (CENTS) (CENTS) INCREASE
HEADLINE EARNINGS 1 80,4 80,9 0,6%
NOTE:
1. THE AMOUNT IN THE "BEFORE" COLUMN IS THE UNAUDITED HEADLINE EARNINGS
ATTRIBUTABLE TO ORDINARY SHAREHOLDERS IN SANLAM AND THE WEIGHTED AVERAGE NUMBER
OF SANLAM SHARES IN ISSUE (2 652 MILLION) FOR THE 12-MONTH PERIOD ENDED 30 JUNE
2000. THE AMOUNT IN THE "AFTER" COLUMN REPRESENTS THE EARNINGS THAT WOULD HAVE
ACCRUED PER SANLAM SHARE HAD THE OFFER BEEN EFFECTIVE FROM 1 JULY 1999. IT IS
ASSUMED THAT THE FUNDING COST TO SANLAM WAS AT AN AVERAGE AFTER-TAX RATE OF 6%
PER ANNUM.
AT A VALUE FOR EACH GENSEC SHARE OF R33,54 THERE IS NO IMPACT ON THE NET ASSET
VALUE OR EMBEDDED VALUE PER SANLAM SHARE AFTER THE TRANSACTION. THE VALUE OF
GENSEC IN FUTURE WILL BE DEPENDENT ON CORPORATE RESTRUCTURING AND THE
REALISATION OF SYNERGISTIC BENEFITS.
5. RECOMMENDATIONS AND OPINION
THE DIRECTORS OF GENSEC WHO ARE ALSO DIRECTORS OF SANLAM HAVE RECUSED
THEMSELVES FROM OPINING ON THE OFFER. THE OTHER GENSEC DIRECTORS (THE
"INDEPENDENT DIRECTORS") HAVE CONSIDERED THE TERMS OF OFFER AND ARE OF THE
UNANIMOUS OPINION THAT THEY ARE FAIR AND REASONABLE TO GENSEC SHAREHOLDERS.
ACCORDINGLY, THE INDEPENDENT DIRECTORS OF GENSEC RECOMMEND THAT GENSEC
SHAREHOLDERS VOTE IN FAVOUR OF THE SCHEME OR ACCEPT THE CONDITIONAL SUBSTITUTE
OFFER, AS THE CASE MAY BE. ALL OF THE DIRECTORS OF GENSEC INTEND TO VOTE IN
FAVOUR OF THE SCHEME AT THE SCHEME MEETING OR TO ACCEPT THE CONDITIONAL
SUBSTITUTE OFFER IN RESPECT OF THEIR OWN HOLDINGS OF GENSEC SHARES.
MORGAN STANLEY SOUTH AFRICA (PROPRIETARY) LIMITED ("MORGAN STANLEY"), ACTING AS
INDEPENDENT FINANCIAL ADVISER TO THE INDEPENDENT DIRECTORS, HAS ISSUED AN
OPINION LETTER TO THE BOARD OF GENSEC WHICH STATES, SUBJECT TO TERMS CONTAINED
THEREIN, THAT MORGAN STANLEY IS OF THE OPINION THAT THE CASH CONSIDERATION TO
BE RECEIVED BY GENSEC SHAREHOLDERS IS FAIR FROM A FINANCIAL POINT OF VIEW.
MORGAN STANLEY HAS ADVISED THE BOARD OF DIRECTORS OF GENSEC ACCORDINGLY. IN
PROVIDING ADVICE TO THE INDEPENDENT DIRECTORS, MORGAN STANLEY HAS RELIED, INTER
ALIA, ON THE INDEPENDENT DIRECTORS' COMMERCIAL ASSESSMENT OF THE OFFER. THE
FULL TEXT OF THIS LETTER WILL BE SET OUT IN THE SCHEME DOCUMENTATION REFERRED
TO BELOW.
6. TERMINATION OF LISTING
UPON THE SCHEME BECOMING OPERATIVE, SANLAM WILL OWN THE ENTIRE ISSUED ORDINARY
SHARE CAPITAL OF GENSEC. THE LISTING OF THE ORDINARY SHARES IN GENSEC ON THE
JSE WILL BE SUSPENDED FROM THE CLOSE OF BUSINESS ON WEDNESDAY, 13 DECEMBER 2000
AND TERMINATED WITH EFFECT FROM THE CLOSE OF BUSINESS ON FRIDAY, 22 DECEMBER
2000, OR SUCH LATER DATES AS MAY BE ANNOUNCED.
7. IMPORTANT DATES AND TIMES
2000
LAST DAY TO LODGE FORM OF PROXY FOR THE
SCHEME MEETING (BY 10:00) MONDAY, 4 DECEMBER
LAST DAY TO REGISTER IN ORDER TO VOTE AT THE
SCHEME MEETING (CLOSE OF BUSINESS) MONDAY, 4 DECEMBER
SCHEME MEETING HELD (AT 10:00) WEDNESDAY, 6 DECEMBER
APPLICATION TO COURT TO SANCTION THE SCHEME TUESDAY, 12 DECEMBER
SUSPENSION OF GENSEC'S LISTING ON THE JSE,
(CLOSE OF TRADING) WEDNESDAY, 13 DECEMBER
RECORD DATE TO PARTICIPATE IN THE SCHEME
(CLOSE OF BUSINESS) FRIDAY, 15 DECEMBER
OPERATIVE DATE OF SCHEME MONDAY, 18 DECEMBER
TERMINATION OF GENSEC'S LISTING ON THE JSE
(CLOSE OF TRADING) FRIDAY, 22 DECEMBER
EXPECTED DATE FROM WHICH THE CASH CONSIDERATION
WILL BE MADE AVAILABLE OR POSTED TO GENSEC SHAREHOLDERS
(IF DOCUMENTS OF TITLE ARE RECEIVED ON OR PRIOR TO THE
RECORD DATE OR, FAILING THAT, WITHIN FIVE BUSINESS DAYS
OF RECEIPT THEREOF BY THE TRANSFER SECRETARIES) FRIDAY, 22 DECEMBER
NOTES:
1. IF A FORM OF PROXY IS NOT RECEIVED BY THE TIME AND DATE SHOWN ABOVE, IT MAY
BE HANDED TO THE CHAIRMAN OF THE SCHEME MEETING NOT LATER THAN 10 MINUTES
BEFORE THE SCHEME MEETING IS DUE TO COMMENCE.
2. ANY CHANGE TO THE ABOVE DATES AND TIMES WILL BE AGREED BY SANLAM AND GENSEC
AND, IF NECESSARY, APPROVED BY THE SRP AND ADVISED BY NOTIFICATION IN THE PRESS
3. ALL TIMES INDICATED ABOVE ARE SOUTH AFRICAN TIMES.
4. ALL THE TRANSACTIONS IN GENSEC SHARES ON THE JSE DURING THE WEEK ENDING ON
THE RECORD DATE WILL BE FOR IMMEDIATE SETTLEMENT.
8. DOCUMENTATION
DOCUMENTATION CONTAINING DETAILS OF THE SCHEME AND THE CONDITIONAL SUBSTITUTE
OFFER AND NOTICES CONVENING THE SCHEME MEETING, ARE EXPECTED TO BE MAILED TO
SHAREHOLDERS ON OR ABOUT 20 NOVEMBER 2000.
BELLVILLE AND JOHANNESBURG
17 NOVEMBER 2000
FINANCIAL ADVISER TO GENSEC
MORGAN STANLEY DEAN WITTER
MORGAN STANLEY SOUTH AFRICA (PROPRIETARY) LIMITED
(REGISTRATION NUMBER 1994/000261/07)
INVESTMENT BANK TO GENSEC
GENSEC BANK LIMITED
(REGISTRATION NUMBER 1996/004744/06)
FINANCIAL ADVISER TO SANLAM
CHASE
LEGAL ADVISER TO GENSEC
WEBBER WENTZEL BOWENS
LEGAL ADVISERS TO SANLAM
JOWELL, GLYN & MARAIS INC
(REGISTRATION NUMBER 1990/000849/21)
CANCA INCORPORATED
REGISTRATION NUMBER 1996/006459/21