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Distribution and Warehousing Network Limited - Announcement
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Share code: DAW ISIN code: ZAE 000018834
("DAWN" or "the Company")
ANNOUNCEMENT REGARDING:
- A SPECIFIC SHARE REPURCHASE;
- A CONVERSION OF AUTHORISED BUT UNISSUED ORDINARY SHARES INTO PREFERENCE
SHARES;
- AN ISSUE OF PREFERENCE SHARES; AND
- AN AMENDMENT TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION
1. TERMS OF THE SPECIFIC SHARE REPURCHASE
Bishop Corporate Finance (Proprietary) Limited is authorised to announce
that agreements have been reached between DAWN and inter alia, Clay Springs
Investments (Proprietary) Limited ("Clay Springs"), Mr N M Ingledew
("Ingledew"), Imperilog Limited ("Imperilog"), Greenways International
Holdings Limited ("Greenways") and Willot Investments (Proprietary) Limited
("Willot") respectively (collectively referred to as "the sellers"), subject
to the fulfilment of the suspensive conditions as indicated in paragraph 6
below, in terms whereof DAWN will acquire from the sellers 98 193 669
ordinary shares ("shares") in DAWN in aggregate, being 32,88% of the total
issued shares, as follows ("the specific share repurchase"):
- from Clay Springs, 25 856 397 shares at 48 cents per share payable in
cash;
- from Ingledew, 36 030 900 shares at 48 cents per share payable in cash;
- from Imperilog, 26 000 000 shares at 45 cents per share payable in cash;
- from Greenways, 8 006 372 shares at 48 cents per share payable in cash;
and
- from Willot, 2 300 000 shares at 48 cents per share payable in cash.
The shares acquired from the sellers will be cancelled in accordance with
the provisions of section 85(8) of the Companies Act, 1973 (Act 61 of 1973)
and an application for the termination of their listing on the JSE
Securities Exchange South Africa ("JSE") will be submitted on the first
business day after the closing date. The closing date of the transaction is
expected to be on 24 July 2002.
2. RATIONALE
DAWN has a significant overhang of its shares in the market which has had a
depressing influence on the share price of DAWN as traded on the JSE. It is
the opinion of the directors of DAWN ("the directors") that DAWN shares have
been trading below its fundamental value for some time. The directors have
consequently resolved to enter into agreements with the sellers to
repurchase in part or in full their shareholdings in DAWN, at prices which
should enhance fundamental share value to the remaining shareholders. The
opinion of the directors regarding the underlying fundamental value of DAWN
is supported by the financial effects disclosed in paragraph 4 below and
independent advice received from DAWN`s independent adviser,
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited. The
directors are further of the opinion that the specific share repurchase
should also decrease the overhang of shares in the market and may
consequently stabilise the price at which the company`s shares trade on the
JSE. The Imperilog repurchase was specifically entered into, in order to
maintain Imperilog`s shareholding in DAWN at below 35% of the total issued
ordinary shares, after implementation of the specific share repurchase.
3. THE CONVERSION, AMENDMENT TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION
OF DAWN AND THE PREFERENCE SHARE ISSUE
3.1 The preference share issue
In terms of a subscription agreement entered into between DAWN and Imperial
Bank Limited ("Imperial Bank"), which agreement forms part of the agreement
entered into between DAWN and Clay Springs ("the Clay Springs agreement"),
DAWN will simultaneously allot and issue, 25 856 397 cumulative, redeemable
preference par value shares of 1 cent each ("the preference shares") to
Imperial Bank, who will subscribe for the preference shares at a
subscription price equal to 48 cents per preference share, being par value
plus a premium of 47 cents per preference share, payable in cash ("the
preference share issue").
The preference share issue is subject to the fulfillment of the following
suspensive conditions:
- approval by the requisite majority of DAWN shareholders, excluding
related parties, in general meeting of the special and ordinary resolutions
necessary to implement the preference share issue;
- registration of the special resolutions with the Registrar of Companies;
and
- the Clay Springs agreement has become unconditional in all respects.
The preference shares so issued will not be listed on the JSE or any other
stock exchange.
The preference shares are dividend bearing, cumulative and redeemable
preference shares and subject to, inter alia, the following terms:
- the dividend rate of the preference shares shall be 8% per annum and
payable half yearly in arrears; and
- the preference shares shall be redeemable at the subscription price of 48
cents per preference share plus a premium of 4 cents per preference share in
thirty six months and one day after the date of issue.
3.2 The conversion and amendment to the memorandum and articles of
association of DAWN
In order to effect the preference share issue, the company proposes to
convert 25 856 397 authorised but unissued shares into 25 856 397 preference
shares ("the conversion"). As the memorandum and articles of association of
DAWN does not currently provide for the preference shares, the company
proposes that the memorandum and articles of association be amended
accordingly.
FINANCIAL EFFECTS
The pro forma financial effects of the specific share repurchase and the
preference share issue on the earnings, headline earnings, net asset value
and net tangible asset value per share, before and after the specific share
repurchase and the preference share issue, are set out below:
a) Financial effects per share based on the unaudited financial results for
the six months ended 31 December 2001:
Notes Before After Change
Per DAWN share
(cents) (cents) (%)
Earnings 1 4,25 4,76 12,01
Headline earnings 1,3 2,85 2,67 (6,21)
Net asset value 2 40,63 37,23 (8,39)
Net tangible asset 2 40,39 36,86 (8,75)
value
Notes:
1. The amount in the "Before" column represents the unaudited headline
earnings and earnings per share disclosed in the unaudited financial results
for the six months ended 31 December 2001. The amount in the "After" column
represents the unaudited headline earnings and earnings per share after the
specific share repurchase and the preference share on the following
assumptions:
- the specific share repurchase and the preference share issue were
effective 1 July 2001;
- an after tax funding cost of 11,2% per annum on the borrowings required
to fund the specific share repurchase;
- an after tax provision for the redemption premium on the preference
shares;
- an after tax preference dividend cost of 9,0% per annum which includes
Secondary Tax on Companies ("STC") of 12,5%; and
- STC of 12,5% of the specific share repurchase funded out of distributable
reserves.
The amounts in the "Before" column represent the unaudited net asset value
and net tangible asset value per share as disclosed in the unaudited results
of DAWN for the six months ended 31 December 2001. The amounts in the
"After" column represents the unaudited net asset value and net tangible
asset value based on the unaudited results for the six months ended 31
December 2001 adjusted for the specific share repurchase and the preference
share issue had they been effected on 31 December 2001.
The financial effect of the specific share repurchase and the preference
share issue on the headline earnings for the six months ended 31 December
2001 has been negatively effected by a once-off STC charge of R480 250
resulting from that portion of the specific share repurchase which was
funded out of distributable reserves. Headline earnings after the specific
share repurchase and the preference share issue excluding the once-off STC
charge amounts to 2,92 cents per share and represents an increase of 2,45%
over the previously reported figure.
b) Financial effects per share based on the audited financial results for
the year ended 30 June 2001:
Notes Before After Change
Per share
(cents) (cents) (%)
Earnings 1 6,95 7,57 8,84
Headline earnings 1 11,77 14,84 26,08
Net asset value 2 36,29 30,95 (14,73)
Net tangible 2 36,06 30,55 (15,28)
asset value
Notes:
1. The amount in the "Before" column represents the audited headline
earnings and earnings per share disclosed in the audited financial results
for the year ended 30 June 2001. The amount in the "After" column represents
the headline earnings and earnings per share after the specific share
repurchase and the preference share issue on the following assumptions:
- the specific share repurchase and the preference share issue were
effective 1 July 2000;
- an after tax funding cost of 11,2% per annum on the borrowings required
to fund the specific share repurchase;
- an after tax provision for the redemption premium on the preference
shares;
- an after tax preference dividend cost of 9,0% per annum which includes
STC of 12,5%; and
- STC of 12,5% of the specific share repurchase funded out of distributable
reserves.
2. The amounts in the "Before" column represent the audited net asset value
and net tangible asset value per share as disclosed in the audited results
of DAWN for the year ended 30 June 2001. The amounts in the "After" column
represents the audited net asset value and net tangible asset value based on
the audited results for the year ended 30 June 2001 adjusted for the
specific share repurchase and the preference share issue had they been
effected on 30 June 2001.
3. The financial effects of the specific share repurchase and the
preference share issue on the financial results for the year ended 30 June
2001 are presented to shareholders in addition to the financial effects on
the financial results for the six months ended 31 December 2001 as required
by the JSE Listings Requirements, as the directors believe that the positive
effect of the specific share repurchase and the preference share issue on
the financial results of DAWN is not sufficiently illustrated by only
disclosing the financial results for the six months ended 31 December 2001
resulting from the unusually low earnings base reported by the company for
that financial period.
5. FUNDING OF THE SPECIFIC SHARE REPURCHASE
DAWN will fund the specific share repurchase with the preference share issue
and a funding facility granted by the Company`s bankers, Standard Bank of
South Africa Limited. The directors have considered the effect of the
specific share repurchase and are satisfied as to the following:
- DAWN and DAWN`s subsidiaries ("the DAWN group") will be able in the
ordinary course of business to pay its debts for a period of 12 months after
the date following the approval of the circular to shareholders as envisaged
in paragraph 8 below ("approval date");
- the assets of DAWN and the DAWN group will be in excess of the
liabilities of DAWN and the DAWN group for a period of 12 months after the
approval date, having been recognised and measured in accordance with the
accounting policies used in the audited financial statements for the year
ended 30 June 2001;
- the adequacy of ordinary capital and reserves of DAWN and the DAWN group
for a period of 12 months after the approval date; and
- the adequacy of working capital of DAWN and the DAWN group for a period
of 12 months after the approval date.
6. SUSPENSIVE CONDITIONS
The specific share repurchase is subject to the fulfilment of the following
suspensive conditions:
6.1 approval by the requisite majority of DAWN shareholders in general
meeting of the special and ordinary resolutions necessary to implement the
specific share repurchase and to create and issue the preference shares;
6.2 registration of the special resolutions with the Registrar of Companies;
6.3 approval by the JSE of the specific share repurchase, including a
circular to DAWN`s shareholders in compliance with the JSE Listings
Requirements and the application for the termination of the DAWN shares;
6.4 the agreements between DAWN and, inter alia, Ingledew, Imperilog,
Greenways and Willot respectively are conditional upon the Clay Springs
agreement becoming unconditional in all respects and the Clay Springs
agreement is conditional upon the agreement between DAWN and Imperilog
becoming unconditional in all respects;
6.5 the Clay Springs agreement is further conditional upon an agreement for
the sale and purchase of 25 856 397 shares between Clay Springs and the
Greenways Trust becoming unconditional in all respects and the preference
share issue becoming unconditional in all respects; and
6.6 the agreement between DAWN and Greenways ("the Greenways agreement") is
further conditional upon the Central Securities Depository Participant of
Greenways delivering to DAWN an irrevocable and unconditional written
undertaking to deal with the Greenways shares in accordance with the
Greenways agreement.
7. RELATED PARTY TRANSACTIONS
Imperilog and Ingledew holds 28,35% and 12,07% respectively of the total
issued shares in DAWN and are therefore classified as related parties in
terms of the JSE Listings Requirements. As Imperilog is a subsidiary of
Imperial Holdings Limited and Clay Springs and Imperial Bank is a subsidiary
and an associated company of Imperial Holdings Limited respectively, Clay
Springs and Imperial Bank are also classified as related parties. The
specific repurchase from Imperilog, Ingledew and Clay Springs respectively
and the preference share issue to Imperial Bank are therefore classified as
transactions entered into with related parties and as such they will be
excluded from determining the quorum and voting at the general meeting in
respect of the specific share repurchase and the preference share issue.
The directors have appointed PricewaterhouseCoopers Corporate Finance
(Proprietary) Limited as independent advisers to provide them with a fair
and reasonable opinion regarding the specific share repurchase and the
preference share issue.
8. NOTICE OF GENERAL MEETING AND CIRCULAR TO SHAREHOLDERS
A circular, subject to JSE approval, containing full details of the specific
share repurchase, the conversion, the preference share issue and the
amendments to the memorandum and articles of association and giving notice
of a general meeting to be held at 10:00 on 24 July 2002, at which the
special and ordinary resolutions required to implement the specific share
repurchase, the conversion, the preference share issue and amendments to
the memorandum and articles of association will be proposed, will be posted
to shareholders in due course.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 23 May 2002,
and are advised that, as full disclosure of the negotiations referred to
therein has been made in this announcement, caution is no longer required.
Johannesburg
26 June 2002
Corporate adviser Sponsor Attorneys
Bishop Corporate Finance D & T Sponsor Services Hofmeyr
Reporting accountants Independent adviser
PricewaterhouseCoopers Incorporated PWC Corp Finance
Date: 26/06/2002 05:37:00 PM Produced by the SENS Department
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