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Illovo/ ABF - Illovo Sugar Limited - Firm Intention of Offer
Illovo Sugar Limited
(Incorporated in the Republic of South Africa)
(Registration number 1906/000622/06)
(JSE share code: ILV)
(ISIN: ZAE000003547)
("Illovo")
Associated British Foods plc
(Incorporated in England)
(Registration number 293262)
(LSE share code: ABF)
(ISIN: GB0006731235)
("ABF")
FIRM INTENTION TO MAKE AN OFFER TO ACQUIRE 51% OF THE FULLY DILUTED ORDINARY
SHARE CAPITAL OF ILLOVO AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements published by Illovo on 14 February, 10
March, 15 March and 26 April 2006, Illovo shareholders are advised that ABF has
submitted to the board of directors of Illovo ("the board") a notice of its firm
intention to make an offer to acquire 51% of the fully diluted issued ordinary
shares of Illovo ("Illovo shares") ("the offer shares") for a cash consideration
of R21.00 ("the offer price") per Illovo share, to be effected, subject to the
conditions set out in paragraphs 3 and 5 below, by way of a scheme of
arrangement in terms of section 311 of the Companies Act 61 of 1973, as amended
("the Act"), to be proposed by ABF, or a wholly owned subsidiary of it, ("the
offeror") between Illovo and all of its ordinary shareholders ("the scheme").
Subject to the same conditions, the offeror will be entitled to make a
substitute offer at not less than the offer price should the scheme not become
operative for any reason other than failure to obtain all necessary regulatory
approvals ("the substitute offer").
The scheme and the substitute offer are collectively referred to below as "the
offer".
2. RATIONALE
The board and ABF are of the view that the transaction as envisaged should be
beneficial to both parties in the fields of technology transfer and marketing.
The offer also represents an opportunity for shareholders to dispose of a
portion of their holdings in Illovo at a significant premium to historical
trading levels, as indicated in paragraph 10 below.
3. CONDITIONS TO THE MAKING OF THE OFFER
The offer will be extended to Illovo shareholders subject, inter alia, to the
fulfilment, by 2 July 2006, of the following conditions:
3.1 the receipt of a positive "fair and reasonable" opinion from an
appropriate external adviser acceptable to the Securities
Regulation Panel ("the SRP"). Standard Bank has been appointed in
this regard;
3.2 the approval of the offer documentation by the relevant regulatory
authorities, including the South African Reserve Bank, the JSE
Limited ("the JSE") and the SRP; and
3.3 the written certification by Illovo that, to the best of its
knowledge and belief and after reasonable enquiry, no material
adverse condition has arisen, which will only arise in the event
of civil commotion or unrest, a coup d"etat taking place, the
outbreak of war or the occurrence of a nationalisation or
expropriation, which results or could reasonably be expected to
result in any material business, or a material part thereof, of
Illovo or any of its material subsidiaries ceasing to operate or
ceasing to be held by Illovo, permanently or on a long-term basis.
In addition, the offer will proceed in the form of the scheme on condition that
the High Court of South Africa ("the Court") orders that a scheme meeting be
convened.
4. WAIVER OF MANDATORY OFFER
Subject to an ordinary resolution to such effect being passed by a simple
majority of independent Illovo shareholders in general meeting, the SRP has
indicated to ABF that it will waive the requirement arising pursuant to Rule 8
of the Securities Regulation Code on Takeovers and Mergers ("the Code") for the
offeror to extend an offer to Illovo shareholders to acquire all of their Illovo
shares following the implementation of the offer ("the waiver").
5. CONDITIONS PRECEDENT TO THE OFFER
5.1 The implementation of the scheme is subject, inter alia, to the
fulfilment of the following conditions precedent:
- all necessary regulatory approvals having been obtained,
including that of the South African Competition Authorities;
- the approval of the scheme by 75% of the votes exercisable by the scheme
members present and voting, in person or by proxy, at the scheme meeting;
- the passing by Illovo shareholders in general meeting of the resolution
referred to in paragraph 4 above;
- the sanctioning of the scheme by the Court ("the sanctioning"); and
- prior to the sanctioning, there being no change or proposed change in any law,
regulation or policy regarding exchange controls over the offshore transmission
to or from South Africa of capital or dividends.
5.2 Should the substitute offer be made, its implementation will be subject,
inter alia, to the following conditions precedent:
- the offeror receiving acceptances in respect of all of the offer shares and
not part thereof;
- all necessary regulatory approvals having been obtained, including that of the
South African Competition Authorities;
- the passing by Illovo shareholders in general meeting of the resolution
referred to in paragraph 4 above; and
- prior to the date on which the substitute offer becomes unconditional as to
acceptances, there being no change or proposed change in any law, regulation or
policy regarding exchange controls over the offshore transmission to or from
South Africa of capital or dividends.
6. BOARD AND OTHER APPOINTMENTS
On implementation of the offer, Illovo and ABF will use their reasonable
endeavours to procure the appointment of three ABF-nominated directors as non-
executive directors to the board and the resignation, as directors, of three
existing directors (two of whom will be executive directors), as well as the
appointment of one of the ABF-nominated non-executive directors to Illovo"s
Executive and Group Executive Committees. Immediately following these
appointments and resignations, the board will comprise five executive directors,
three non-executive directors who are ABF appointees and seven independent non-
executive directors.
Mr Robbie Williams will be asked to remain non-executive independent Chairman of
Illovo and Mr. Don MacLeod will be asked to join the Executive Committee of
British Sugar plc, a wholly owned subsidiary of ABF.
7. DIVIDENDS
Existing Illovo shareholders will participate in the final dividend for the
financial year ended 31 March 2006 of 42.5 cents per Illovo share, details of
which have been included in the announcement of Illovo"s financial results for
this period published on the Securities Exchange News Service today.
Furthermore, if the offer is implemented on any date subsequent to 30 September
2006, Illovo will declare and pay an advance dividend to the ordinary
shareholders registered as such on the record date of the scheme (or the date on
which the substitute offer becomes unconditional, as the case may be) ("the
advance dividend"). The advance dividend, calculated in accordance with Illovo"s
dividend policies, principles, practices and methods, will be equal to the pro
rata dividend entitlement of ordinary shareholders for the period from the then
most recent past dividend record date to the operative date of the scheme (or
the 7th day after the substitute offer becomes unconditional, as the case may
be).
8. MINORITY PROTECTIONS
Should the offer be implemented, the following undertakings to Illovo and its
shareholders will be incorporated (with the approval of Illovo shareholders in
general meeting) into the Memorandum and/or Articles of Association of Illovo so
that they will be capable of being enforced by Illovo and by Illovo shareholders
holding, in aggregate, 5% or more of the issued ordinary share capital of
Illovo.
8.1 Territorial expansion
ABF will procure that, should any expansion opportunities within the sugar
industry in Africa (including Mauritius and Madagascar) come to the attention of
ABF or any of its subsidiaries ("the ABF Group"), such opportunities will be
explored and undertaken by the ABF Group only through Illovo unless Illovo is
unwilling or unable to explore or undertake them. However, this will not
preclude Illovo from exploring sugar cane opportunities outside Africa,
Mauritius or Madagascar, or preclude any member of the ABF Group from pursuing
an acquisition opportunity in Africa (including Mauritius and Madagascar)
provided that neither sugar cane, sugar products nor such other products as may
be agreed between Illovo and ABF are the main purpose of such acquisition.
8.2 Disposals
ABF will not dispose of any of its subsidiaries (or any of its subsidiaries"
businesses or material assets) to Illovo without such acquisition by Illovo
having been approved by a majority of those directors of Illovo who are
independent from ABF and, to the extent required by the Act or the Listings
Requirements of the JSE, by the shareholders of Illovo. ABF has warranted that
no such disposals are currently being contemplated by the ABF Group.
8.3 Commercial arrangements
Any commercial arrangements between any member of the ABF Group and Illovo are
to be considered by the board (or, where appropriate, the executive management
of Illovo) to be in the best interests of Illovo, will be conducted by those
parties on an arms length basis and will not be implemented until they have been
approved, to the extent required by the Act or the Listings Requirements of the
JSE, by the shareholders of Illovo. All such arrangements, being arrangements
between related parties, will require disclosure in Illovo"s annual report.
8.4 Standstill
Should the offer be implemented, ABF has undertaken to refrain from acquiring or
controlling, through any means, more than 60% of the fully diluted issued
ordinary shares of Illovo ("the ownership cap").
Should the ownership cap be exceeded, ABF may, in its discretion, within 90 days
of such breach, either:
- dispose of sufficient Illovo shares to reduce its interest to or below the
ownership cap; or
- make an offer to minority shareholders as though such breach of the ownership
cap was an affected transaction in terms of the Code, with the rules specified
in the Code regarding "affected transactions" being deemed to apply to ABF,
unless a resolution is passed by minority shareholders in general meeting to
waive such offer to minority shareholders.
9. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS
The board has appointed Standard Bank as its financial adviser to advise it on
the offer. Standard Bank has indicated to the board that it has considered the
offer and is of the opinion that it is fair and reasonable to Illovo
shareholders. Standard Bank"s written opinion will be contained in the
documentation referred to in paragraph 13 below.
The board has considered the offer and the advice provided by Standard Bank in
respect thereof and is of the opinion that it is fair and reasonable to Illovo
shareholders. Accordingly, the board recommends that Illovo shareholders vote in
favour of the scheme and the resolution referred to in paragraph 4 above and the
directors of Illovo undertake to vote their own shares in favour of the scheme
at the scheme meeting and the waiver at the general meeting.
ABF has received conditional undertakings to support the offer from shareholders
representing 64% of Illovo"s issued ordinary shares. Approximately half of these
undertakings will remain in place unless another offer is received at a price
higher than R23.10 per Illovo share.
10. MARKET AND FINANCIAL INFORMATION
Information regarding the price at which Illovo shares traded immediately prior
to the publication of the cautionary announcement of 14 February 2006 and the
publication of this announcement as well as a comparison of the offer price to
the net asset value and tangible net asset value per Illovo share at 31 March
2006, Illovo"s financial year end, are set out in the table below.
Before the The offer
offer price Premium
(cents per (cents per
share) share)
Market price on 13 February 2006 1 440.01 2 100.0 46%
30-day volume-weighted average price 1 377.02 2 100.0 53%
to 13 February 2006
Market price on 18 May 2006 2 000.0 3 2 100.0 5%
30-day volume-weighted average price 1 786.0 4 2 100.0 18%
up to 18 May 2006
Net asset value 419.15 2 100.0 401%
Net tangible asset value 410.55 2 100.0 412%
Notes:
1 Closing price of Illovo shares on the JSE on Monday, 13 February 2006, being
the last trading day preceding the publication of the first cautionary
announcement.
2 Volume-weighted average price at which Illovo shares traded on the JSE for the
30 trading days up to and including Monday, 13 February 2006, being the last
trading day preceding the publication of the first cautionary announcement.
3 Closing price of Illovo shares on the JSE on Thursday, 18 May 2006, being the
last trading day preceding the publication of this announcement.
4 Volume-weighted average price at which Illovo shares traded on the JSE for the
30 trading days up to and including Thursday, 18 May 2006, being the last
trading day preceding the publication of this announcement.
5 Audited net asset value and net tangible asset value per share at 31 March
2006.
11. CONFIRMATION OF FUNDS
N M Rothschild & Sons (South Africa) (Proprietary) Limited has confirmed, to the
satisfaction of the SRP, that the offeror has sufficient resources to discharge
its obligations in terms of the offer.
12. THE ILLOVO SUGAR 1992 SHARE OPTION SCHEME
Illovo and ABF will jointly explore and implement a mechanism that, to the
satisfaction of the SRP, will enable current Illovo Sugar 1992 Share Option
Scheme Participants ("option holders") to be treated fairly and equally in
respect of all options, vested and unvested, as if the option holders were
participants under the scheme or offerees in respect of the substitute offer.
13. DOCUMENTATION
Subject to the fulfilment of the conditions referred to in paragraph 3 above, a
circular providing further information on the offer and containing, inter alia,
a notice of scheme meeting (if applicable), a notice of general meeting, forms
of proxy and a form of surrender will be posted to Illovo shareholders and an
announcement setting out the salient dates and times relating to the offer will
be published in due course.
14. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Illovo shareholders are advised that caution is no longer required when dealing
in their Illovo shares.
Mount Edgecombe
19 May 2006
Investment bank to Illovo
Standard Bank
Attorneys to Illovo
Cliffe Dekker Inc
Sponsor to Illovo
J.P. Morgan Equities Limited
Investment bank to ABF
Rothschild
Attorneys to ABF
Bowman Gilfillan
Date: 19/05/2006 08:00:43 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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