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Sekunjalo - Acquisition, Withdrawal Of Cautionary And General Issue Of B
Ordinary Shares For Cash
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/006093/06)
Share code: SKJ & ISIN: ZAE000017893
("Sekunjalo")
ACQUISITION BY SEKUNJALO OF A 49.99% EQUITY INTEREST IN BIOCLONES (PROPRIETARY)
LIMITED ("BIOCLONES"), WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND GENERAL ISSUE
OF B ORDINARY SHARES FOR CASH
ACQUISITION BY SEKUNJALO OF A 49.99% EQUITY INTEREST IN BIOCLONES
1. Introduction
Shareholders are referred to the announcements dated 28 June 2005 and 4
July 2005 regarding Sekunjalo"s subscription for 4 100 new ordinary shares
in Bioclones ("the first tranche subscription"), the option granted to
Sekunjalo to acquire a further 800 ordinary shares in Bioclones ("the
second tranche option") and the further acquisition by Sekunjalo of 1 800
ordinary shares in Bioclones by no later than 15 July 2006 ("the third
tranche acquisition") (collectively "the acquisitions"). The terms of the
acquisitions have been under review since 4 July 2005 and shareholders have
been advised of this in various cautionary announcements, the most recent
of which was dated 8 May 2006. Revised terms of the acquisitions have now
been agreed and are set out below.
Sekunjalo, through its wholly owned subsidiary, African Biotechnological
and Medical Innovation Investments (Proprietary) Limited ("ABMI") has
entered into binding legal agreements dated 29 May 2006 ("the Bioclones
agreements") with JCI Limited ("JCI"), Futuremed Pharmaceuticals
(Proprietary) Limited ("Futuremed"), Bioclones (Proprietary) Limited
("Bioclones") and Dr Cyril Donninger ("Donninger") (collectively, "the
parties") in terms of which it will acquire a 49.99% equity interest in
Bioclones ("the proposed transaction").
The Bioclones agreements supercede all previous agreements between the
parties and will become effective upon fulfilment of the conditions
precedent set out in paragraph 6 below.
2. Nature of business of Bioclones
Bioclones is a biotechnology company dedicated to the development and
manufacture of modern biotechnology products for human pharmaceutical use,
with new developments focused on the treatment of diseases in man due to
failure of cellular immune responses. The biotechnology products are aimed
at areas relating to infectious diseases, cancer and autoimmune diseases.
Bioclones currently has 22 issued patents worldwide with a further 12
patents pending.
Bioclones currently has 4 000 shares in issue, 50% of which are owned by
JCI with the remaining 50% being held by Donninger, the current Director of
Bioclones. In addition, JCI has provided certain debt funding to Bioclones
since the acquisition of its equity interest in Bioclones in November 2000
("the JCI debt funding").
3. Rationale for the proposed transaction
Sekunjalo has an interest in the healthcare sector through its
pharmaceutical and rapid diagnostic subsidiaries and in the biotechnology
sector through its aquaculture and plant-biotechnology businesses.
Accordingly, the proposed transaction will provide it with the appropriate
platform and intellectual property with which to pursue the significant
growth opportunities which currently exist in these sectors. In addition,
it will afford Sekunjalo the opportunity to increase its local and global
presence in the pharmaceutical and biotechnology sectors through a
marketing and distribution agreement for the supply of biotechnology
products produced by Bioclones.
4. Consideration
The purchase consideration payable for the subscription by ABMI of 10 018
new Bioclones shares ("the Bioclones subscription shares"), representing
49.99% of the issued share capital of Bioclones after taking into account
the issue of the Bioclones subscription shares, is R19 932 447 ("the
purchase consideration") to be settled through the issue of 16 610 373 new
Sekunjalo shares ("the Sekunjalo consideration shares") to Bioclones.
5. Terms and conditions of the proposed transaction
The parties have entered into a series of indivisible legal agreements
which will result in the implementation of the following inter-related
transactions:
- the allotment and issue by Bioclones of 6 000 new ordinary shares to
JCI, in repayment of a portion of the JCI debt funding ("the JCI loan
capitalisation");
- the subscription by ABMI of the Bioclones subscription shares,
representing 49.99% of the issued share capital of Bioclones, through
the issue to Bioclones of the Sekunjalo consideration shares. The
issue of the Bioclones subscription shares will have the effect of
diluting JCI"s and Donninger"s equity interests in Bioclones, after
taking the JCI loan capitalisation into account, to 39.92% and 9.98%,
respectively, with the balance of 0.11% being held by Futuremed;
- the full repayment by Bioclones of the balance of the JCI debt,through
the transfer by Bioclones to JCI of 6 193 706 Sekunjalo consideration
shares; and
- the retention by Bioclones of 10 416 667 Sekunjalo consideration
shares to fund future working capital and short term capital expansion
projects. Should this occur, such funding shall occur after 1
September 2006.
6. Conditions precedent
The proposed transaction is subject to, inter alia, the approval by the JSE
Limited ("the JSE") of the listing of the Sekunjalo consideration shares by
Thursday, 29 June 2006.
The effective date of the proposed transaction is 10 business days after
the fulfilment of the conditions precedent, which shall be no later than
Thursday, 13 July 2006.
7. Financial effects of the proposed transaction
The table below sets out the pro forma financial effects of the proposed
transaction on the loss, headline loss, net asset value ("NAV") and
tangible NAV per Sekunjalo ordinary share. The pro forma financial
information has been prepared for illustrative purposes only and because of
its nature may not give a true picture of Sekunjalo"s financial position
and results of operations, nor the effect and impact of the transaction
going forward and is the responsibility of Sekunjalo"s directors.
Per Sekunjalo ordinary share Before the After the Percentage
(cents) proposed proposed change
transaction transaction
(cents) (1) (cents) (2)
Loss (3.31) (3.79) (3) 15%
Headline loss (3.31) (3.79) (3) 15%
NAV 80.50 82.49 (4) 2%
Tangible NAV 59.20 62.26 (4) 5%
Number of shares for EPS and 296 421 313 031
HEPS purposes ("000)
Number of shares for NAV and 313 417 330 027
tangible NAV purposes ("000)
Notes:
1. Based on Sekunjalo"s published unaudited interim results compiled in
accordance with International Financial Reporting Standards ("IFRS")
for the six months ended 28 February 2006
2. Based on the assumption that the proposed transaction was effected on
1 September 2005 for income statement purposes, 28 February 2006 for
balance sheet purposes and that Sekunjalo has paid the purchase
consideration of R19 932 447 million through the issue of 16 610 373
Sekunjalo ordinary shares at 120 cents per share.
3. Basic and headline earnings per share take into account Sekunjalo"s
49.99% equity accounted share of the losses attributable to Bioclones
based on Bioclones" unaudited interim results compiled in accordance
with South African Statements of Generally Accepted Accounting
Practice ("GAAP") for the six months ended 30 September 2005. The
directors of Sekunjalo are of the opinion that the conversion of
Bioclones financial statements to IFRS will not materially change the
financial effects.
4. NAV and tangible NAV take into account Sekunjalo"s 49.99% investment
into Bioclones at a cost of R19 932 447.
8. Categorisation
The proposed transaction is a Category 3 transaction in terms of the JSE
Listings Requirements.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to the above, Sekunjalo shareholders no longer need to exercise caution
when dealing in their Sekunjalo shares.
GENERAL ISSUE OF B ORDINARY SHARES FOR CASH
1. Introduction
Shareholders are referred to the announcement dated 17 February 2006 in
which they were advised that Sekunjalo had undertaken issues for cash
totalling 20 000 000 B ordinary shares in which R13 500 000 was raised
("the previous cash issues"). Shareholders are now advised that Sekunjalo
has issued a further 22 697 841 B ordinary shares for cash ("the subsequent
cash issue"), in terms of the general authority to issue shares for cash
granted by Sekunjalo shareholders at the annual general meeting held on
Monday, 27 February 2006 .
2. Consideration and number of new Sekunjalo B ordinary shares issued in terms
of the subsequent cash issue
Details of the subsequent cash issue are set out below.
Date Number of Issue Cash value Details
B ordinary price (R)
shares (cents)
issued
8 June 22 697 841 83 18 839 208 Issued at a
2006 discount of 2% to
the 30 day
weighted average
traded price prior
to 29 May 2006
A total cash amount of R18 839 208 has been raised in terms of the
subsequent cash issue and the new Sekunjalo B ordinary shares issued in
terms of the subsequent cash issue will rank pari passu with the existing
issued B ordinary shares.
The subsequent cash issue was undertaken in order to reduce short term
borrowings incurred to fund Sekunjalo acquisitions and to facilitate
investment in subsidiaries for expansion purposes.
3. Financial effects of the subsequent cash issue
The pro forma financial effects of the subsequent cash issue on loss,
headline loss, NAV and tangible NAV per share are set out below. This
unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature may not give a fair
reflection of Sekunjalo"s financial position and results of operations, nor
the effect and impact of the subsequent cash issue going forward and is the
responsibility of Sekunjalo"s directors.
Per Sekunjalo ordinary share Before the After the Percentage
(cents) subsequent subsequent change
cash issue cash
(1) issue(2)
Loss (3.31) (2.90)(3) (12)%
Headline loss (3.31) (2.90)(3) (12)%
NAV 80.50 80.67 0.21%
NTAV 59.20 60.81 2.71%
Number of shares for EPS and 296 421 319 118
HEPS purposes ("000)
Number of shares for NAV and 313 417 336 115
tangible NAV purposes ("000)
Notes:
1. Based on Sekunjalo"s published unaudited interim results for the six
months ended 28 February 2006.
2. Based on the assumption that the subsequent cash issue took place on 1
September 2005 for income statement purposes and on 28 February 2006
for balance sheet purposes.
3. After taking into account the adjustment for a reduced interest
expense as a result of R12 million of the total cash amount raised in
terms of the subsequent cash issue being used to reduce Sekunjalo"s
short term borrowings. The reduced interest expense was arrived at by
using an interest rate of 10.50%, being the average interest rate
incurred by Sekunjalo on its long-term borrowings for the 6 months
ended 28 February 2006.
4. An adjustment to loss and headline loss per share has not been made
for the remaining R6,839 million raised in terms of the subsequent
cash issue as this amount was used for expansion purposes in
subsidiaries.
Sandton
15 June 2006
Transaction advisor
Tlotlisa Corporate Finance
Sponsor
Nedbank Capital
Attorneys to Sekunjalo
Grant Gunston
Date: 15/06/2006 02:52:13 PM Supplied by www.sharenet.co.za
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