To view the PDF file, sign up for a MySharenet subscription.

PSG Group /PSL /Arch Equity / Channel Life - Joint announcement relating to the

Release Date: 11/08/2005 15:40
Code(s): PSG ACH PGFP
Wrap Text

PSG Group /PSL /Arch Equity / Channel Life - Joint announcement relating to the disposal; Withdrawal of joint cautionary and New Arch Equity cautionary
PSG GROUP LIMITED Incorporated in the Republic of South Africa) Registration number 1970/008484/06) JSE share code: PSG & ISIN: ZAE000013017 ("PSG Group") PSG Financial Services Limited Registration number 1919/000478/06 JSE share code: PGFP & ISIN code: ZAE000060166 ("PSL") ARCH EQUITY LIMITED Incorporated in the Republic of South Africa Registration number 2004/004019/06 JSE share code: ACH & ISIN: ZAE000061073 ("Arch Equity") CHANNEL LIFE LIMITED Incorporated in the Republic of South Africa Registration number: 1969/012487/06 ("Channel Life") JOINT ANNOUNCEMENT RELATING TO THE DISPOSAL OF A 50% INTEREST IN CHANNEL LIFE; WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT BY PSG GROUP, ARCH EQUITY AND CHANNEL LIFE; and NEW ARCH EQUITY CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION 1.1 Further to the joint cautionary announcement published on the Securities Exchange News Service ("SENS") of the JSE Limited ("JSE") on 13 July 2005 a the press on 14 July 2005, shareholders of PSG Group, Arch Equity and Chann Life are advised that agreement has been reached on 10 August 2005 with San Life Insurance Limited ("Sanlam Life") who will acquire a 50% interest in Channel Life from PSG Financial Services Limited ("PSL") and Channel Life Holdings (Proprietary) Limited ("Channel Holdings") (collectively referred "the sellers"). 1.2 The disposal to Sanlam Life referred to in 1.1 above ("the transaction"), constitutes an affected transaction in terms of the Securities Regulation Panel ("SRP") Code on Take-overs and Mergers ("the Code") and a category 3 transaction in terms of the JSE Listings Requirements. On the basis that all the remaining shareholders of Channel Life have in writing waived the protection to which they may have been entitled to in terms of the Code, the SRP has granted a dispensation to waive the requirement that a mandatory offer be made by Sanlam Life to acquire the Channel Life shares held by the minority shareholders of Channel Life. No action is required by PSG Group or Arch Equity shareholders with regards to the transaction. 2. DETAILS OF CHANNEL LIFE Channel Life is a niche life insurance company that provides life assurance products as well as investment products to both retail and institutional clients. At 28 February 2005 it had an asset base of R2 096 million and generated headline earnings of R39,0 million for the financial year then ended. 3. RATIONALE FOR THE TRANSACTION 3.1 Channel Life has grown its business significantly over the past three years. It has now reached a stage where it requires a shareholder of refere that would not only be able to continue funding this growth but will be abl unlock further synergies. 3.2 Channel Life became part of the PSG Group during 1997. In line with its philosophy of making, nurturing and ultimately unlocking value of investments, PSG Group believes it is now the opportune time to realise some of the value created in Channel Life over the past eight years. It will however retain a 35% shareholding in Channel Life. 3.3 Arch Equity obtained its indirect interest in Channel during May 2004. Arch Equity has in the last year substantially increased its shareholding in PSG Group, thereby further increasing its indirect exposure to Channel Life. With Sanlam Life"s involvement, Arch Equity"s influence in Channel Life would have been drastically diminished. Arch Equity accordingly resolved to sell its interest to PSG Group, so as to allow PSG Group to continue, following this transaction, to exert meaningful influence in Channel Life. 4. PARTICULARS OF THE DISPOSAL - Subject matter of the disposal PSL and Channel Holdings will dispose of 74 410 419 and 18 766 000 Channel Life shares, respectively, to Sanlam Life. - Disposal consideration The sellers shall, subject to the fulfilment of the suspensive conditions set out in 4.4 below, dispose of their interests in Channel Life to Sanlam Life for a total consideration of R116 470 524. This represents a price of 125 cents per share and implies a value of approximately R230 million for Channel Life. R106 221 118 (equal to 114 cents per share) of the purchase consideration will be paid in cash by Sanlam Life on the first business day following the date of fulfilment of the last suspensive condition ("the closing date"). The balance of the purchase consideration of R10 249 406 (equal to 11 cents per share) is payable as soon as reasonably possible after 31 July 2006, subject to the value of new business generated by Channel Life for the period 1 August 2005 to 31 July 2006 being above certain agreed thresholds. This amount may be reduced to R5 124 703 or R nil should the value of new business generated be below the agreed thresholds. - Effective date The effective date of the transaction is 1 August 2005. - Suspensive Conditions The transaction is subject to and conditional upon the following unfulfilled conditions: - Obtaining of such regulatory approval as may be required by regulatory authorities, including the Competition Commission, Financial Services the SRP by 31 October 2005. - Obtaining of certain letters of comfort and finalisation of certain internal documentation and related matters by 31 August 2005. - Other significant terms of the agreement - Normal warranties for a transaction of this nature have been provided. - Trading of Channel Life shares on the "over the counter" platform will continue. - The agreement provides for minority protection whereby certain matters require approval by the holders of at least 75% of the issued shares. - Channel Life will acquire the 55% interest held in Safrican Insurance Company Limited ("Safrican") by Sanlam Life for a total consideration of R10 million ("the Safrican transaction"). The purchase consideration will be settled by the issue of 8 million Channel Life shares to Sanlam Life at 125 cents each. - Application of transaction proceeds PSG Group will apply the proceeds to finance further investment activities. 5. RELATED PARTY TRANSACTION - PSL is a wholly-owned subsidiary of PSG Group and holds 74% of the issued shares in Channel Holdings. Arch Equity holds the remaining 26% of Channel Holdings" issued shares. Prior to the disposal of the Channel Life shares h by Channel Holdings to Sanlam Life, PSL will acquire the 26% shareholding i Channel Holdings held by Arch Equity ("the Channel Holdings transaction"). - The purchase consideration payable in terms of the Channel Holdings transaction is R29 147 110, which is equal to the underlying value of the Channel Life shares held indirectly by Arch Equity, based on 125 cents per Channel Life share. R26 582 164 of this amount will be paid on the closing date, and the balance of R2 564 946 is dependent on the second payment by Sanlam Life in terms of paragraph 4.3 above. Arch Equity will therefore receive the exact same proceeds from its sale of the 26% shareholding in Channel Holdings as it would have received had Channel Holdings sold its entire shareholding in Channel Life to Sanlam Life. - PSG Group, through its wholly-owned subsidiary PSL, holds approximately 20% of Arch Equity"s ordinary issued share capital. Arch Equity, in turn, holds approximately 23% of PSG Group"s issued share capital. In terms of the JSE Listings Requirements, the Channel Holdings transaction is regarded as a small related party transaction for PSG Group and requires written confirmation from an independent professional expert confirming the fairness and reasonableness of the terms of the Channel Holdings transaction to PSG Group shareholders ("the fair and reasonable opinion"). - Suspensive condition The Channel Holdings transaction is subject to the finalisation of an agreement between PSG Group and Arch Equity and PSG Group obtaining the fair and reasonable opinion referred to in 5.3 above. A further announcement in this regard will be made in due course. - Application of transaction proceeds Arch Equity will apply the proceeds to repay the financing specifically associated with the purchase of its stake in Channel Holdings. Surplus proceeds will be used to make new investments. 6. FINANCIAL EFFECTS The pro forma financial effects of the transaction are presented for illustrative purposes only and because of their nature may not give a fair reflection of PSG Group"s or Arch Equity"s financial positions nor of the effect on future earnings after the transaction. - Financial effects on PSG Group. Set out below are the unaudited pro forma financial effects of the transaction and Channel Holdings transaction, based on the audited consolidated financial results of PSG Group for the year ended 28 February 2005. The directors are responsible for these pro forma financial effects. Audited Pro forma Change
Before the After the (%) transactions Transactions (cents) (cents) Earnings per share 90,7 121,8 34,3 Headline earnings per 103,0 97,4 (5,4) share Net asset value per 375 409 9,1 share Net tangible asset 365 406 11,1 value per share 1. The earnings and headline earnings per share figures in the "Pro form After the transactions" column have been calculated: - on the basis that the transactions were effected on 1 March 2004; - the net proceeds would have earned interest at an after tax interest rate of 6%. 2. The net asset value and net tangible asset value per share figures in "Pro forma After the transactions" column have been calculated on the ba the transactions were effected on 28 February 2005. 3. The effects of the Safrican transaction have not been taken into account in any of the above calculations. - Financial effects on Arch Equity. Set out below are the unaudited pro forma financial effects of the Channel Holdings transaction, based on the audited consolidated financial results of Arch Equity for the year ended 28 February 2005. The directors are responsible for these pro forma financial effects. Audited Pro forma Change Before the After the (%) transaction Transaction
(cents) (cents) Earnings per share 99,9 108,8 8,9 Headline earnings per 106,0 101,8 (4,0) share Net asset value per 173,5 176,8 1,9 share Net tangible asset 173,5 176,8 1,9 value per share 1. The earnings and headline earnings per share figures in the "Pro form After the transaction" column have been calculated: - on the basis that the transaction was effected on 1 March 2004; a - the proceeds would have earned interest at an after tax interest rate of 6%. 2. The net asset value and net tangible asset value per share figures in "Pro forma After the transaction" column have been calculated on the bas the transaction was effected on 28 February 2005. 3. The effects of the Safrican transaction have not been taken into account in any of the above calculations. 7. WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT As a result of the conclusion of the transaction, shareholders of PSG Group, Arch Equity and Channel Life are hereby advised that the joint cautionary announcement of 13 July 2005 is hereby withdrawn and caution is no longer required to be exercised when dealing in the respective companies" shares. 8. NEW ARCH EQUITY CAUTIONARY ANNOUNCEMENT Shareholders of Arch Equity are however advised that Arch Equity has entered into other discussions which, if successfully concluded, may have an effect on its share price. Shareholders of Arch Equity are accordingly advised to continue to exercise caution when dealing in Arch Equity shares until a further announcement is made in this regard. Stellenbosch 11 August 2005 PSG Capital Sponsor to PSG Group Designated Advisor to Arch Equity Date: 11/08/2005 03:40:13 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

Share This Story