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BIDVEST/ MCCARTHY - CONDITIONAL OFFER TO MCCARTHY SHAREHOLDERS AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
THE BIDVEST GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/021180/06)
Share code: BVT ISIN: ZAE000050449
("Bidvest")
McCarthy Limited
(Incorporated in the Republic of South Africa)
(Registration number 1991/003245/06)
Share code: MCC ISIN: ZAE000034823
("McCarthy" or "the company")
CONDITIONAL OFFER TO MCCARTHY SHAREHOLDERS AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
McCarthy shareholders are referred to the announcement published on the
Securities Exchange News Service ("SENS") of the JSE Securities Exchange South
Africa ("JSE") on November 5 2003 and in the press on November 6 2003. In terms
of the aforementioned announcement, McCarthy was advised that Bidvest had
entered into an agreement with the major shareholders of McCarthy ("the
consortium of banks"), in terms of which, subject to the fulfilment of certain
conditions precedent:
* Bidvest undertook to make an offer to acquire all the McCarthy ordinary shares
at a price of 33 cents per McCarthy ordinary share;
* the consortium of banks irrevocably undertook to accept such offer in respect
of their ordinary shares, representing 88,27% of the issued McCarthy ordinary
shares;
* Bidvest agreed to acquire the McCarthy preference shares held by the
consortium of banks, representing 99,69% of the issued McCarthy preference
shares; and
* Bidvest undertook to make an offer to acquire the balance of the McCarthy
preference shares, ("the Bidvest transaction").
McCarthy shareholders are also referred to the announcement published on SENS
on December 19 2003 and in the press on December 20 2003, in terms of which
McCarthy was advised that Bidvest intended to submit to the board of directors
of McCarthy ("the McCarthy Board") a firm intention to make an offer to acquire
the McCarthy ordinary shares at a revised price of 36 cents per McCarthy
ordinary share.
Further to the abovementioned announcements, Bidvest has submitted a letter to
the McCarthy Board detailing Bidvest"s firm intention to make an offer to
acquire all the McCarthy ordinary shares at a price of 36 cents per McCarthy
ordinary share, on terms as detailed below ("the offer").
2. THE OFFER
2.1 Terms of the offer
Bidvest hereby offers to acquire all the McCarthy ordinary shares from
McCarthy shareholders for a cash consideration of 36 cents per McCarthy ordinary
share ("the offer price").
To the extent that the offer is accepted on or before February 28 2004 by an
offeree and the offer price has not been paid to such offeree, the offer price
shall, from February 28 2004, bear interest equal to the highest rate of
interest payable by FirstRand Bank Limited from time to time in respect of
monies which would be held on overnight call with FirstRand Bank Limited by
Bidvest, compounded monthly in arrear and calculated on a 365-day factor ("call
rate"), less 30% thereof for the months of March 2004 and April 2004 (or any
part thereof) and the call rate plus 2% for the ensuing months (or any part
thereof), until final payment is made ("interest").
If, after the implementation of the offer, McCarthy receives from Retail
Apparel Group Limited ("RAG"), Retail Apparel (Proprietary) Limited ("RAP"), RAG
Capital (Proprietary) Limited, the RAG Security Trust and any subsidiaries and
affiliates of RAG (collectively, "the RAG Group") any amounts in addition to the
advance interim liquidation dividend of R105 882 000 received from RAP on or
about December 31 2002 together with any interest accrued thereon by McCarthy,
("the advance interim liquidation dividend"), this additional amount ("the RAG
dividend"), equal to the net (including tax) receipt by McCarthy shall be paid
as follows:
* up to the first R10 000 000 thereof plus any costs incurred by the consortium
of banks associated with all matters relating to McCarthy"s claims against the
RAG Group (inclusive of VAT) shall be paid to the consortium of banks as an
indemnity fee ("the indemnity fee"); and
* the balance, if any, shall be paid to the McCarthy shareholders pro rata to
their shareholdings in McCarthy, as at the appropriate date, by means of an
increase in the offer price.
2.2 Offer consideration
Each McCarthy shareholder who accepts the offer will receive the offer price
(and if applicable, interest thereon) plus a pro rata entitlement to the RAG
dividend (if it materialises) after settling the indemnity fee ("the offer
consideration").
2.3 Offer condition precedent
The offer is conditional upon the approval by the Competition Authorities by
no later than June 30 2004 ("the condition precedent"). The Competition
Commission has notified Bidvest that it has approved the merger without
conditions; however, final approval from the Competition Tribunal is still
required.
2.4 Irrevocable undertakings and intention to invoke the provisions of section
440K of the Companies Act, 1973 (Act 61 of 1973) ("the Act")
McCarthy ordinary shareholders, collectively holding 1 917 078 752 McCarthy
ordinary shares representing 90,92% of the McCarthy ordinary shares not held by
Bidvest have, in writing, irrevocably undertaken to accept the offer.
As irrevocable undertakings to accept the offer have been obtained in respect
of more than nine-tenths of the McCarthy ordinary shares, Bidvest will invoke
the provisions of section 440K of the Act in order to compulsorily acquire all
of the McCarthy ordinary shares in respect of which acceptances are not
received.
2.5 Cash confirmation
The Securities Regulation Panel ("SRP") has been furnished with written
confirmation that Bidvest has sufficient cash resources and/or facilities with
which to meet its obligations in terms of the offer.
2.6 Special arrangements
The consortium of banks has, in terms of the Bidvest transaction, subject to
the fulfilment of the condition precedent:
2.6.1 accepted the terms of the offer and undertaken to accept the offer to sell
its McCarthy ordinary shares to Bidvest at a price equal to 33 cents per
McCarthy ordinary share (and if applicable, interest thereon) plus a pro rata
entitlement to the RAG dividend (if it materialises) after settling the
indemnity fee;
2.6.2 undertaken to sell 830 757 065 McCarthy preference shares to Bidvest at a
price equal to 33 cents per McCarthy preference share less the amount of the
December 2003 preference share dividend (and if applicable, interest thereon)
plus a pro rata entitlement to the RAG dividend (if it materialises) after
settling the indemnity fee;
2.6.3 irrevocably undertaken not to accept any increases in the price of 33
cents per McCarthy ordinary share;
2.6.4 provided an indemnity to Bidvest and the McCarthy Group in respect of any
claims which the creditors (including without limitation the South African
Revenue Services) of the RAG Group or the liquidators of RAP or which the
shareholders or ex-shareholders of the RAG Group or RAP may have against
McCarthy, its subsidiaries and associates howsoever and whensoever arising and
the advance interim liquidation dividend and any interest thereon being recalled
in return for the indemnity fee; and
2.6.5 waived the right to any interim dividend or distribution in respect of the
McCarthy ordinary shares for the period from July 1 2003 to the later of the
date on which the consortium of banks accept the offer and the date on which the
offer becomes unconditional.
On the offer becoming unconditional, McCarthy shall redeem the McCarthy
preference shares, other than those held by the consortium of banks ("the
McCarthy minority preference shares"), at a price determined in accordance with
the terms attaching thereto (which, as at the date hereof, amounts to 27 cents
per McCarthy minority preference share). To comply with the rules of the SRP,
Bidvest shall forthwith thereafter pay to the holders of the McCarthy minority
preference shares the difference between 36 cents and the abovementioned
redemption price (and, if applicable, interest thereon) plus a pro rata
entitlement to the RAG dividend (if it materialises) after settling the
indemnity fee.
In addition to the consortium of banks providing written irrevocable
undertakings to accept the offer in respect of their McCarthy ordinary shares, S
C McCarthy, a non-executive director of McCarthy, who controls 11 000 000
McCarthy ordinary shares representing 0,52% of the McCarthy ordinary shares
which are the subject of the offer has, in writing, irrevocably undertaken to
accept the offer. T Rosenberg who controls 11 922 235 McCarthy ordinary shares
representing 0,57% of the McCarthy ordinary shares which are the subject of the
offer has, in writing, also irrevocably undertaken to accept the offer.
Certain employees of McCarthy who hold 99 731 020 McCarthy ordinary shares
representing 4,73% of the McCarthy ordinary shares which are the subject of the
offer as a result of exercising their options under the McCarthy option scheme,
have, in writing, irrevocably undertaken to accept the offer.
3. MCCARTHY OPTION SCHEME
To enable the holders of options under the McCarthy Limited 1994 share option
scheme, as amended on August 31 2001 ("the McCarthy option scheme") to
participate in the offer, the McCarthy Board has undertaken, in terms of clause
8.1 of the McCarthy option scheme, that all outstanding options be exercisable
and that all shares purchased be delivered and paid for by the last day for
McCarthy shareholders to trade in McCarthy ordinary shares on the JSE to be
eligible to participate in the offer and that any options not exercised by such
date shall lapse and that the sale in respect of any shares not paid for by such
date shall be cancelled on that date.
Bidvest has undertaken to make available the necessary finance to the holders
of options under the McCarthy option scheme in order to facilitate the exercise
of their options and be able to participate in the offer.
4. PROPOSED DELISTING OF MCCARTHY
Taking into account that McCarthy will be wholly-owned by Bidvest after the
close of the offer and after successfully invoking section 440K of the Act, the
McCarthy board will propose that, subject to the necessary approvals being
obtained, the ordinary shares and preference shares of McCarthy be delisted from
the JSE ("the proposed
McCarthy delisting").
5. PRO FORMA FINANCIAL EFFECTS OF THE OFFER
Set out below are the unaudited pro forma financial effects of the offer to
McCarthy shareholders, based on the published audited results of McCarthy for
the year ended June 30 2003. The unaudited pro forma financial effects are
presented for illustrative purposes only and may not give a fair reflection of
the financial position of the McCarthy shareholders post the implementation of
the offer.
Before the After the
offer offer(10) Change
Per McCarthy ordinary share (cents) (cents) (%)
Market value (three-month weighted average) 43,1(1) 36,0(1) (16,5)
Market value (five-day weighted average) 52,8(2) 36,0(2) (31,8)
Market value - October 21 2003 44,0(3) 36,0(3) (18,2)
Market value - November 4 2003 50,0(4) 36,0(4) (28,0)
Market value - December 18 2003 36,0(5) 36,0(5) -
Earnings 9,8(6) 3,1(8) (68,4)
Headline earnings - fully diluted 5,7(6) 3,1(8) (45,6)
Net tangible asset value - fully diluted 23,1(7) 36,0(9) 55,8
Notes:
1. The "Before" column reflects the weighted average McCarthy ordinary share
price for the three months prior to the publication on SENS of the announcement
relating to the Bidvest transaction on November 5 2003. The "After" column
reflects the offer price.
2. The "Before" column reflects the weighted average McCarthy ordinary share
price for the five business days prior to the publication on SENS of the
announcement relating to the Bidvest transaction on November 5 2003. The
"After" column reflects the offer price.
3. The "Before" column reflects the closing market price on October 21 2003,
being the trading day immediately preceding the publication on SENS of the
cautionary announcement on October 22 2003. The "After" column reflects the
offer price.
4. The "Before" column reflects the closing market price on November 4 2003,
being the trading day immediately preceding the publication on SENS of the
cautionary announcement on November 5 2003. The "After" column reflects the
offer price.
5. The "Before" column reflects the closing market price on December 18 2003,
being the trading day immediately preceding the publication on SENS of the
further cautionary announcement on December 19 2003. The "After" column
reflects the offer price.
6. Being McCarthy"s reported earnings per share and fully diluted headline
earnings per share for the year ended June 30 2003.
7. Being McCarthy"s reported fully diluted net tangible asset value per share at
June 30 2003.
8. Based on the assumption that the offer price of 36 cents per share had been
invested to earn an average after-tax return of 8,65% during the year ended June
30 2003.
9. Being the offer price.
10. The calculations in the above table have been determined on the bases that:
* the offer was implemented on July 1 2002 for the purposes of calculating the
earnings per share and headline earnings per share;
* the offer was implemented on June 30 2003 for the purposes of calculating the
net tangible asset value per share; and
* no account has been taken of Capital Gains Tax or any costs associated with
the offer.
6. OPINIONS AND RECOMMENDATIONS
6.1 The opinion of the independent financial advisers
The McCarthy Board appointed Nedbank Corporate to provide them with advice as
to the fairness and reasonableness of the terms and conditions of the offer.
Nedbank Corporate has considered the terms and conditions of the offer and is of
the opinion that the offer price is not fair and reasonable to McCarthy
shareholders and has advised the McCarthy Board accordingly.
Nedbank Corporate has informed the McCarthy Board that it would have considered
the terms and conditions of the offer fair and reasonable had the offer price
been equal to a minimum of 37 cents per McCarthy ordinary share (all other terms
and conditions remaining the same).
6.2 The opinion of the McCarthy Board
The McCarthy Board has considered:
* the terms and conditions of the offer;
* the opinion of the independent financial advisers, Nedbank Corporate, as
referred to in 6.1 above;
* that McCarthy ordinary shareholders, collectively holding 1 917 078 752
McCarthy ordinary shares representing 90,92% of the McCarthy ordinary shares not
held by Bidvest have, in writing, irrevocably undertaken to accept the offer;
* that as irrevocable undertakings to accept the offer have been obtained in
respect of more than nine-tenths of the McCarthy ordinary shares which are the
subject of the offer, Bidvest will invoke the provisions of section 440K of the
Act in order to compulsorily acquire all of the McCarthy ordinary shares which
are the subject of the offer in respect of which acceptances are not received;
and
* that it is more beneficial for McCarthy shareholders to accept the offer and
receive the offer consideration rather than delaying until Bidvest invokes
section 440K of the Act and compulsorily acquires all of the McCarthy ordinary
shares in respect of which acceptances are not received, the date of which shall
be after the closing date of the offer and thus resulting in a loss of interest
income for McCarthy shareholders who do not accept the offer.
Taking account of the above considerations, and the fact that the offer is
not materially different from the fair and reasonable valuation of McCarthy"s
independent financial advisers, the McCarthy Board recommends that McCarthy
shareholders accept the offer which will result in them receiving 36 cents per
McCarthy ordinary share (and if applicable, interest thereon) plus a pro rata
portion of the RAG dividend (if it materialises) after settling the indemnity
fee.
Dr M T Lategan, who has a conflict of interest in respect of the offer
arising from his position as Chief Executive Officer of FNB Corporate, a
division of FirstRand Bank Limited, has recused himself from any meetings,
discussions, assessments, decisions and recommendations, including this
announcement, which the McCarthy Board has held or made in respect of the offer
and this announcement.
The directors of McCarthy who hold McCarthy ordinary shares have indicated
that they will dispose of their McCarthy ordinary shares in terms of the offer.
7. SALIENT DATES AND TIMES RELATING TO THE OFFER
2004
Offer opens (9:00) Monday, January 26
Last day for McCarthy shareholders to trade in
McCarthy ordinary shares on the JSE to be eligible
to participate in the offer Friday, February 13
McCarthy ordinary shares trade "ex" the offer Monday, February 16
Record date for participating in the offer Friday, February 20
Closing date of the offer (12:00) (Note 3) Friday, February 20
Results of offer announced on SENS Monday, February 23
Results of offer published in the press Tuesday, February 24
Notes:
1. Any changes to the above dates and times will be published on SENS and in the
press.
2. All times given in this announcement are local times in South Africa.3. The
SRP requires that the offer remain open for at least 21 days. When the offer
condition precedent is fulfilled the offer will become unconditional and
McCarthy shareholders will be advised on SENS and in the press. As the
fulfilment of the offer condition precedent is subject to the processes and
procedures of a regulatory body which are beyond the control of Bidvest, to the
extent necessary, Bidvest reserves the right to extend the closing date beyond
Friday, February 20 2004, in which event all amended dates and times relating
to the offer will be published on SENS and in the press as noted in note 1
above.
4. The offer consideration will be posted or transferred at the risk of the
McCarthy shareholder concerned as soon as possible after, but at least within
five business days of the later of:
4.1 the announcement that the offer has become unconditional; and
4.2 receipt of the documents of title and the form of acceptance and surrender,
or advice of acceptance of the offer being received from the Central Securities
Depository Participant or broker, as the case may be.
5. No dematerialisation or rematerialisation of McCarthy ordinary shares will
take place during the period commencing on the day after the last day for
McCarthy shareholders to trade in McCarthy ordinary shares on the JSE to be
eligible to participate in the offer and terminating on the closing date.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS AND DOCUMENTATION
McCarthy shareholders and Bidvest shareholders are referred to the further
cautionary announcements published on SENS on December 19 2003 and are advised
that as a result of this announcement, such cautionary announcements are now
withdrawn.
A circular giving details of the offer and the proposed McCarthy delisting
has been prepared and will be posted to McCarthy shareholders on
Monday, January 26 2004.
Sandton
January 23 2004
Corporate adviser and lead sponsor to Bidvest
Investec Bank Limited
(Registration number 1969/004763/06)
Joint sponsor to Bidvest
Deutsche Securities
Member of the Deutsche Bank Group
Deutsche Securities (SA) (Proprietary) Limited
(Registration number 1995/011798/07)
Corporate law advisers to McCarthy
COX YEATS ATTORNEYS
Lead sponsor to McCarthy
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Corporate law advisers to Bidvest
Edward Nathan & Friedland (Pty) Ltd
Corporate Law advisers & Consultants
(Registration number 1999/026464/07)
Transfer secretaries
Ultra Registrars (Pty) Limited
Independent reporting accountants and auditors to McCarthy
Deloitte & Touche Chartered Accountants (SA)
Registered Accountants and Auditors
Independent financial adviser and transaction sponsor to McCarthy
NEDBANK CORPORATE
Adviser to the lead bank
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Date: 26/01/2004 07:00:20 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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