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PSG GROUP - DISPOSAL BY CHANNEL LIFE LIMITED OF ITS ENTIRE INTEREST IN CHANNEL
LIFE NAMIBIA LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
PSG GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1970/008484/06)
Share code: PSG ISIN: ZAE000013017
("PSG Group" or "the company")
DISPOSAL BY CHANNEL LIFE LIMITED ("Channel") OF ITS ENTIRE INTEREST IN CHANNEL
LIFE NAMIBIA LIMITED ("Channel Namibia") AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. THE DISPOSAL
1.1 Further to the cautionary announcement published on SENS on Monday, 27
September 2004 and in the press on Tuesday, 28 September 2004, shareholders
of PSG Group are advised that Channel, a company 43% held directly by PSG
Group and 37% indirectly, together with black-controlled Arch Equity
Limited, has accepted an offer by Metropolitan Life Namibia ("the
purchaser") for the disposal by Channel of its entire interest in Channel
Namibia, with effect from the first business day after the fulfilment of
all the suspensive conditions ("the disposal").
1.2 The effective disposal consideration is N$82,7 million.
1.3 The disposal and the implementation thereof are subject to the fulfilment
of certain conditions precedent as described in 6 below.
2. RATIONALE FOR THE DISPOSAL
2.1 Channel acquired Channel Namibia on 1 September 2001. Channel and PSG
Group, together with the management team of Channel Namibia, managed to
consolidate and grow the Channel Namibia business. Channel and the
management of Channel Namibia agree that the Namibian life insurance
industry is mature and in need of consolidation. After considering its
options in this regard, Channel decided to rather focus its efforts on its
niche in the South African market and let the purchaser and others lead
such consolidation in Namibia.
2.2 Both the purchaser and Channel Namibia are highly successful companies in
their own right, with specific areas of experience in the Namibian life
assurance market. Their respective businesses have a natural fit and by
joining forces, these strengths will be further enhanced, making the
combined entity the player with the largest estimated new business market
share in Namibia.
2.3 Channel will utilise the disposal consideration to grow its core life
insurance business in South Africa. Channel has been growing its South
African business rapidly over the last number of years. The cash realised
will alleviate the constant new business strain. Channel is poised not
only to grow its assets under management, but also its profitability.
2.4 Messrs Lennie Louw and Franz Husfeld, who played a key role in the success
of Channel Namibia, will be appointed by Channel to assist with the growth
of its South African operations.
3. CONSIDERATION
3.1 The disposal consideration for Channel Namibia amounts to N$ 82,7 million.
3.2 Settlement is expected to take place on Monday, 6 December 2004.
3.3 The disposal consideration shall be settled by the purchaser as follows -
3.3.1 Payable in cash N$73,9 million
3.3.2 Settlement of Channel Namibia
loan to Channel N$ 3,2 million
3.3.3 Transfer of Fedbond
Participation Mortgage Bond
("Fedbond") N$ 5,6 million
N$82,7 million
3.4 Interest shall be added to the disposal condideration at a rate of 9% per
annum from 1 September 2004 to the date of settlement.
4. WARRANTIES AND RESTRAINTS
4.1 In terms of the disposal agreement, Channel provided certain warranties
that are customary in transactions of this nature.
4.2 Messrs Lennie Louw and Franz Husfield will be restrained from engaging in
any financial services activities in Namibia for a period of 3 years.
4.3 Channel and PSG Group will similarly be restrained for a period of 5 years
from competing with the purchaser in Namibia.
5. FINANCIAL EFFECTS
5.1 The table below sets out the unaudited pro forma financial effects of the
disposal on the earnings, headline earnings, net asset value and net
tangible asset value per PSG Group share, based on the assumptions that:
5.1.1 for purposes of the earnings and headline earnings per share
calculations,
- the disposal was effective during the interim period of six
months ended 31 August 2004;
- the whole of the disposal consideration was received on 1 March
2004 and that such consideration was invested to earn an annual
return of:
- 10% on the N$ 73,9 million cash receipt;
- 11% saving on the N$ 3,2 million loan from Channel
Namibia; and
- 7% on the Fedbond.
Channel has an assessed tax loss and would not have paid tax on these
returns.
5.1.2 for purposes of the net asset value and net tangible asset value per
share calculations, the disposal was effected on 31 August 2004:
Unaudited(1) Pro forma
Before After % change
(cents) (cents)
Earnings per share(2) 28,3 29,2 3,2
Headline earnings per 36,9 37,1 0,5
share(2)
Net asset value per 339 335 (1,2)
share(3)
Tangible net asset value 320 324 1,3
per share(3)
(1) Extracted from the unaudited interim financial statements of PSG Group
for the six months ended 31 August 2004.
(2) Based on a weighted average of 110,8 million shares in issue during
the interim period ended 31 August 2004.
(3) Based on 115 million shares in issue at 31 August 2004.
5.2 The financial effects contained in the table in 5.1. above have been
prepared for the purposes of illustrating how the disposal would have
affected the relevant financial ratios of PSG Group for the historic
financial period indicated and are pro forma only. Accordingly, such
effects do not necessarily represent a true reflection of the financial
effects of the disposal on PSG Group"s current and future earnings and net
asset value.
6. CONDITIONS PRECEDENT
The disposal is subject to the following conditions precedent :
6.1 the approval of the Registrar of Long-Term Insurance in Namibia; and
6.2 the approval of the respective boards of directors of Channel, Metropolitan
Holdings Limted and the purchaser.
7. WITHDRAWAL OF CAUTIONARY
Shareholders of PSG Group are advised that caution is no longer required
when dealing in PSG Group shares on the JSE Securities Exchange South
Africa.
Stellenbosch
15 November 2004
Corporate adviser to Channel and joint sponsor to
PSG Group
PSG Capital Limited
(Registration number 2002/017362/06)
Lead sponsor
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
(Registration number 1970/003711/07)
Date: 15/11/2004 08:00:08 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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