Sharenet Sites 
Sharenet Sites
Conduit - Acquisition Of A Controlling Interest In CICL & Renewal Of Cautionary Conduit Capital Limited (formerly IMR Investments Limited) Incorporated in the Republic of South Africa (Registration number 1998/017351/06) Share code: CND & ISIN: ZAE000073128 ("Conduit" or "the company") ACQUISITION OF A CONTROLLING INTEREST IN CICL INVESTMENT HOLDINGS (PTY) LTD ("CICL") AND RENEWAL OF CAUTIONARY ANNOUNCEMENT INTRODUCTION Conduit has concluded a number of agreements to acquire a significant controlling interest (in excess of 75%) in CICL. CICL is the holding company of a diversified insurer and risk services group deriving its revenue from both risk and non-risk bearing activities. The group comprises Constantia Insurance Company Limited, a short-term insurer, Constantia Life and Health Assurance Company Limited, Goodall and Bourne, a funeral and credit life assurer and CICL Intermediate Holdings which houses significant interests in a number of underwriting administrators and risk consultancy and services businesses. Group premium income for the year to 31 August 2005 exceeded R1.12 billion with net profit before taxation of R34.6 million. The acquisition of a controlling interest in CICL will complement Conduit"s existing investments in the insurance and risk solutions financial services industry, particularly the recently acquired stake in the credit recovery and call centre operator Anthony Richards & Associates. The transaction also provides an opportunity for Black Ginger 92 (Pty) Ltd ("Black Ginger"), CICL"s black economic empowerment shareholder, to refinance its current interest in CICL and swap out a portion of its CICL interest for Conduit shares on the basis set out more fully below. THE TRANSACTIONS 1. THE ELLERINES TRANSACTION Conduit has concluded an agreement with Ellerine Holdings Limited ("Ellerines") to, directly or through a wholly owned subsidiary, acquire Ellerines" shares in and claims against CICL for a purchase price of R47 500 000 payable in cash ("Ellerines transaction"). The shares being acquired in terms of the Ellerines transaction comprise 40% of the total issued share capital of CICL. 2. THE COPPER SUNSET TRANSACTIONS Copper Sunset Trading 186 (Pty) Ltd ("Copper Sunset"), a wholly owned subsidiary of Conduit, has concluded agreements with Anslow Management Consultants (Pty) Ltd, First National Investors (Pty) Ltd and Afrique Liability Acceptances (Pty) Ltd to acquire their shares in and claims against CICL for an aggregate consideration of R36 812 500, payable as follows: - R25 962 500 by the issue of 37 763 636 Conduit shares at a price of 68.75 cents per Conduit share; - R7 750 000 by the issue of cumulative redeemable preference shares in the issued share capital of Copper Sunset; and - R3 100 000 in cash. The shares being acquired in terms of the Copper Sunset transaction comprise 31% of the total issued share capital of the company. 3. THE BLACK GINGER TRANSACTION In terms of a funding arrangement between Industrial Development Corporation of South Africa ("IDC") and Black Ginger, IDC is warehousing 27.5% of the shares in CICL ("the Black Ginger shares") on behalf of Black Ginger. Black Ginger retains the voting rights on the shares and has an option to acquire them from IDC. It is intended that Conduit will provide (or procure) funding ("the Black Ginger funding") for Black Ginger to exercise the option and, in this context, Copper Sunset and Black Ginger have concluded an agreement in terms of which: - Copper Sunset will acquire the unencumbered portion of the Black Ginger shares (being that portion of the Black Ginger shares the value of which exceeds Black Ginger"s liabilities). The price for shares acquired will be equivalent to the price attributed to CICL shares by the Ellerines and Copper Sunset transactions and will be settled by the issue of Conduit shares at a price of 68.75 cents per share; and - Copper Sunset has, subject to Black Ginger having repaid the equivalent portion of the Black Ginger funding, granted Black Ginger options to dispose of the balance of the Black Ginger shares over a period of eight years at their then value in return for shares in Conduit, to be issued at a 10% discount to the volume weighted average price at which Conduit shares traded for the 30 days preceding the date on which the relevant option was exercised. It is the intention that at the outset Black Ginger"s interest in CICL remains in excess of 25%. Accordingly, if the acquisition of the unencumbered portion of the Black Ginger shares would result in Black Ginger"s interest in CICL (held directly and through Conduit) not exceeding 25% then the number of the Black Ginger shares to be acquired in terms of the Black Ginger transaction will be reduced to such lower number as is required to ensure Black Ginger"s interest in CICL remains above 25%. 4. FUNDING OF THE CASH PORTION OF THE PURCHASE PRICE Conduit intends raising the cash portion of the purchase price payable in terms of the transaction together with the amount required by Black Ginger to exercise the option by a combination of preference share funding and the issue of Conduit shares for cash. 5. CONDITIONS TO THE TRANSACTIONS The Ellerines transaction is conditional upon: - all other shareholders in CICL agreeing in writing, on or before 30 April 2006, to waive their pre-emptive rights and tag-along rights over the shares acquired from Ellerines. It is recorded that all of the shareholders have waived these rights, but that the waiver by IDC is in turn conditional on Black Ginger exercising its option to acquire the Black Ginger shares; - Conduit providing Ellerines, on or before 30 April 2006, with guarantees and/or undertakings reasonably acceptable to Ellerines in relation to the payment by Conduit of the purchase price; - to the extent required by the Listings Requirements of the JSE, the shareholders of Conduit approving the Ellerines transaction, on or before 31 August 2006; - the receipt, on or before 31 October 2006, to the extent required, of all Regulatory approvals for the Ellerines transaction; and - either Conduit agreeing in writing to become bound by the existing CICL shareholders agreement or the remaining shareholders waiving this requirement, on or before 30 April 2006. The Copper Sunset transactions are conditional upon the Ellerines transaction becoming unconditional and all necessary regulatory and shareholder approvals being obtained by 31 October 2006. The Black Ginger transaction is conditional upon Black Ginger acquiring the Black Ginger shares from IDC and all necessary regulatory and shareholder approvals being obtained by 31 October 2006. 6. FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT The transaction will have a material financial impact on Conduit Capital, however the pro forma financial effects of the transaction required to be prepared in terms of the JSE Listing Requirements are still being finalised and will be published in due course. Shareholders are advised to continue exercising caution when dealing in the company"s shares until a further announcement is made. 7. FURTHER DOCUMENTATION The transaction constitutes a category 1 transaction and a circular containing more detail in relation to the transaction and incorporating a notice of general meeting will be sent to Conduit shareholders in due course. Melrose Arch 16 March 2006 Corporate advisor, legal advisor and transaction sponsor Java Capital (Proprietary) Limited Sponsor Merchant Sponsors (Proprietary) Limited Date: 17/03/2006 11:59:05 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
