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Yorkcor - Acquisition; BEE transaction; Offer to Shareholders & withdrawal of

Release Date: 06/11/2006 12:28
Code(s): YRK
Wrap Text

Yorkcor - Acquisition; BEE transaction; Offer to Shareholders & withdrawal of cautionary The York Timber Organisation Limited (Incorporated in the Republic of South Africa) (Registration number 1916/004890/06) Share code: YRK & ISIN: ZAE000008108 ("Yorkcor" or "the company") Aquisition of control of Yorkcor by Blackstar Investors Plc ("Blackstar") Introduction of BEE Shareholders Offer to all Yorkcor Shareholders ..Withdrawal of Cautionary announcement INTRODUCTION Further to the cautionary announcement dated 26 September 2006, Yorkcor"s board of directors (the "board") is pleased to announce that agreement (the "transaction agreement") has been reached between companies controlled by the Tucker family and their associates (the "Tucker companies"), Yorkcor and Blackstar in terms of which, subject to fulfilment of certain conditions precedent set out below: Blackstar and the company will jointly make an offer (the "joint offer") to acquire 100% of the company"s issued share capital for a cash consideration of R9,80 per offer share, on the basis that the company will be the purchaser in respect of the first 26% of the company"s entire issued share capital and Blackstar will be the purchaser in respect of the balance tendered; the Tucker companies irrevocably undertake to accept the joint offer in respect of all the offer shares held by them, constituting 84,75% of the company"s entire issued share capital; in substitution for the 26% ordinary issued share capital repurchased by the company in terms of the joint offer, it is intended that a new class of non- redeemable convertible cumulative preference shares in the capital of the company ("preference shares") carrying full voting rights and convertible into ordinary shares on a one-for-one basis after 31/2 years will be created and issued to special purpose vehicles ("SPVs") still to be incorporated and to be owned by trusts established for the benefit of: - the employees of Yorkcor and its subsidiaries (the "Yorkcor group") 94% of whom are "black people" within the meaning of the draft codes of good practice (the "draft codes") issued by the Department of Trade and Industry; and - certain historically disadvantaged Mpumalanga communities and strategic black economic empowerment partners; and it is intended that Blackstar will fund the BEE component of the transaction by subscribing for cumulative redeemable preference shares in the capital of the SPVs (collectively, "the transactions"). BACKGROUND TO AND RATIONALE FOR THE TRANSACTIONS Blackstar is a public company listed on the Alternative Investment Market (which is operated by the London Stock Exchange) and has raised GBP80 million for investment primarily in South African BEE transactions. Blackstar Managers advises Blackstar"s South African funds. Blackstar Managers identified a unique opportunity presented by the sale of the Tucker family"s interest to play a significant role in the timber industry in South Africa, both as an investor and as the facilitator of black empowerment within Yorkcor. Blackstar has associated itself with Yorkcor, Yorkcor management and the BEE parties detailed below to acquire the Tucker family interests and reconstitute the Yorkcor board. BLACK ECONOMIC EMPOWERMENT One of Yorkcor"s principal strategic objectives is the implementation of a broad based BEE structure that will result in approximately 26% of the company"s equity and voting rights being beneficially held by black people. Moreover, the company recognises the need to address the lack of participation by black women and broad-based structures in BEE consortia and has structured the BEE component of the transaction with these considerations foremost in mind. Yorkcor continues to improve its status in respect of empowerment at board and management level, employment equity, skills development, preferential procurement and enterprise development. In terms of the BEE component of the transactions, it is intended that the preference shares giving the holders an aggregate 26% interest in the company will be issued to the following SPVs: 10% will be issued to an SPV the entire issued ordinary share capital of which will be owned by a trust (the "staff trust") to be established for the benefit of the Yorkcor group"s current employees (of all races), which the board believes is consonant with the company"s policy of "equal opportunity for all employees". The salient features of the staff trust are intended to be: - that preferential participation will be given to black people and women; - that in determining the extent of an employee"s participation, regard will be had to his or her length of service with the Yorkcor group; and - 10% of the participation in the staff trust will be reserved for black people in managerial positions for the purpose of attracting and retaining first-class talent. Based on the foregoing, it is estimated that 94% of the participatory interest in the staff trust will benefit black people; and 16% will be issued to an SPV the entire issued ordinary share capital of which will be owned by a trust (the "community trust") to be established for the benefit of certain historically disadvantaged Mpumalanga communities and other strategic BEE partners described more fully below. The salient features of the community trust are intended to be: - the strategic BEE partners are new BEE ownership entrants and will become 40% beneficiaries of the community trust; - the community trust will target various community groupings and the strategic BEE partners will assist them in the purchasing of forestry businesses; - Yorkcor will by means of a supply agreement facilitate the funding to purchase any forestry business acquired and will assist with the management of these businesses; - the strategic BEE partners will provide advisory services to these community groupings to establish businesses and become suppliers to Yorkcor thereby enhancing the value to shareholders; - the community groups will therefore improve Yorkcor BEE targets in respect of preferential procurement and enterprise development. The company has identified Silulu Investment Services (Pty) Ltd ("Silulu") as the key strategic BEE partner of Yorkcor. Silulu brings with it substantial experience and skill in the areas of enterprise development and transformation. Silulu Investment Services is managed and controlled by Gay Mokoena, who is a non-executive director of Yorkcor. SALIENT TERMS OF THE PREFERENCE SHARES TO BE ISSUED TO THE SPVs It is intended that the salient terms and conditions of the preference shares to be issued by Yorkcor to the SPVs will be the following: on a winding-up, the preference shares will rank prior to the ordinary shares as regards dividends and return of capital; the preference shares will be convertible on a one-for one basis into ordinary shares at the option of the holder after 3 years and six months from the date of issue; the coupon payable on the preference shares will be the prime overdraft rate of The Standard Bank of South Africa Limited less 1,25 percentage points; save as aforesaid, they will rank pari passu with the ordinary shares and accordingly carry full voting rights. With regard to the issue of the preference shares to the SPVs, it is intended that: the aggregate number of preference shares to be issued will equate to 26% of the combined issued ordinary and preference share capital in the company immediately after implementation of the transaction (i.e. the ordinary shares repurchased will be substituted one-for-one); and the subscription price per preference share will be the same as the offer consideration per offer share payable by the company in respect of its repurchase of 26% of its entire issued share capital in terms of the joint offer (i.e. R9,80 per preference share). CONDITIONS PRECEDENT AND THE OFFER PROCESS Posting of the joint offer document (and, accordingly, the making of the joint offer) is subject to fulfilment of the following conditions precedent within 30 business days of the date of this announcement: approval of the relevant documentation and the offer process by the JSE Limited ("JSE") and the Securities Regulation Panel ("SRP"); exchange control approval; final agreement between Blackstar and the company on: - the terms and conditions of the preference shares to be issued by Yorkcor to the SPVs; - the terms and conditions of the SPV preference shares to be issued by the SPVs to Blackstar; - the terms and conditions of the memorandum and articles of association of each of the SPVs; and - the terms and conditions of the deeds of the trusts that will hold the entire ordinary issued share capital of the aforesaid SPVs, and such trust deeds being lodged for registration by the Master of the High Court having jurisdiction in terms of the Trust Property Control Act, 1988. Moreover, the joint offer itself will be subject to fulfilment of the following conditions precedent by not later than 10 February 2007: that the indivisibly inter-related ordinary and special resolutions necessary for the transaction to proceed are passed by the company"s shareholders in general meeting (notice of which general meeting will be given in the joint offer document); and such approval as may be required in terms of the Competition Act, 1998. The joint offer will open on the day on which the joint offer document is posted and will close in accordance with JSE, SRP and STRATE requirements at least 14 days following an announcement that all the foregoing conditions have been fulfilled and that the joint offer is accordingly unconditional in all respects. The joint offer shall be unconditional as to acceptances. Blackstar has provided confirmation to the satisfaction of the SRP that sufficient resources are available to it to meet its commitments in terms of the joint offer. The Tucker companies have irrevocably undertaken to accept the joint offer in respect of their shareholding, which constitutes 84,75% of the company"s entire issued share capital. By reason thereof, if the offer is successfully concluded, the company will repurchase 26% of its entire issued ordinary share capital from the Tucker companies, and Blackstar will acquire from the Tucker companies a controlling interest in the company of at least 58,75%. The JSE has ruled that with regard to the resolutions creating the preference shares and issuing them to the SPVs, the Tucker companies are required to delegate the authority to vote on those resolutions to Blackstar in view of the fact that Blackstar will be the future controlling shareholder. Blackstar has irrevocably undertaken to vote those shares in favour of those resolutions. Sasfin Capital, a division of Sasfin Bank Limited, has been appointed by the board to advise it on the joint offer and the preference share issue. Sasfin"s opinion will be contained in the joint offer document relating to the transaction to be sent to Yorkcor shareholders in due course. BLACKSTAR"S EXISTING HOLDINGS OF SECURITIES As at the date of this announcement, neither Blackstar nor any person with whom it is acting in concert holds any securities in Yorkcor, nor do any of the foregoing have any option to purchase any securities in Yorkcor. CONTINUED LISTING OF THE COMPANY It is intended that Yorkcor will remain listed on the JSE and accordingly Blackstar has agreed not to invoke the provisions of s440K of the Companies Act, 1973, should same be of application. Accordingly, there will be no compulsory or forced acquisition of any minority shareholders" shares. A listing is seen as the ideal vehicle to serve as a platform for growth. Blackstar intends to place 10% to 15% of Yorkcor"s entire issued share capital with other investors and/or institutions over a period of time, at an appropriate price, in order to increase the free-float and to take its investment below a 50% controlling position. MARKET AND FINANCIAL INFORMATION Information regarding the price at which Yorkcor shares traded on the JSE immediately prior to the publication of Yorkcor"s first cautionary announcement and the publication of this announcement, as well as a comparison of the offer consideration to the published unaudited net asset value and tangible net asset value per Yorkcor share as at 30 June 2006, Yorkcor"s financial half-year, are set out in the table below. The financial information in this table is the responsibility of the directors of Yorkcor. Before the joint The joint offer Percentage
offer consideration difference (cents per share) (cents per share) Market price on 31 March 2006 1250 (1) 980 (21.6) 30-day volume-weighted average price to 31 March 2006 1256 (2) 980 (21.9) Market price on 3 November 2006 1297 (3) 980 (24.4) 30-day volume-weighted average price up to 3 November 2006 1255 (4) 980 (21.9) Net asset value 743 (5) 980 31.8 Net tangible asset value 743 (5) 980 31.8 Notes: 1. Closing price of shares on the JSE on 31 March 2006, being the last trading day preceding the publication of Yorkcor"s first cautionary announcement in respect of the joint offer. 2. Volume-weighted average price at which shares traded on the JSE for the 30 trading days up to and including 31 March 2006, being the last trading day preceding the publication of Yorkcor"s first cautionary announcement in respect of the joint offer. 3. Closing price of shares on the JSE on 3 November 2006, being the last practicable trading day preceding the publication of this announcement. 4 Volume-weighted average price at which shares traded on the JSE for the 30 trading days up to and including 3 November 2006, being the last practicable trading day preceding the publication of this announcement. 5. Net asset value and net tangible asset value per share attributable to shareholders as at 30 June 2006. The pro forma financial effects of the Yorkcor share repurchase and the preference share issue, based on the published unaudited half year results of Yorkcor for the six months ended 30 June 2006 are set out below. The pro forma earnings figures illustrate the possible financial effects if the transactions had been implemented on 1 January 2006, that is for a period of six months, whereas the pro forma net asset value figures illustrate the possible financial effects if the transactions were implemented on 30 June 2006. The pro forma financial effects have been prepared for illustrative purposes only to provide information on how the Yorkcor share repurchase and the preference share issue may have impacted on the results and financial position of Yorkcor. Preparation of the pro forma financial effects is the responsibility of the directors. Because of their nature, the pro forma financial effects may not fairly present Yorkcor"s financial position after the Yorkcor share repurchase and the preference share issue or the effect on future earnings: Before After Percentage
change Earnings and headline earnings per share (cents) 83.9 97.8 12 Diluted earnings per share (cents) and diluted headline earnings per share (cents) 83.9 83.9 - Net asset value per share and tangible net asset value per share 743.3 1 004.4 35 Diluted net asset value per share and diluted tangible net asset value per share 743.3 743.3 - Number of shares in issue 11 040 497 8 169 968 Number of shares in issue assuming full dilution 11 040 497 11 040 497 Notes: 1. The figures in the "Before" column are extracted from the published unaudited interim results of the company for the six months ended 30 June 2006; 2. The figures in the "After" column assume the repurchase in terms of the joint offer was implemented, and the preference shares were issued and the cash received on 30 June 2006 for asset value purposes; 3. The earnings per share and headline earnings per share in the "After" column are based on the assumption that the preference shares were issued and the share repurchases in terms of the joint offer were implemented on 1 January 2006. The average prime interest rate used in calculating the financial effects was 11.5%; 4. Diluted figures are given assuming conversion of the preference shares on 1 January 2006; 5. The "Percentage change" column reflects the change between the before and after situations. RECONSTITUTION OF THE YORKCOR BOARD After all the conditions precedent have been fulfilled and the joint offer implemented, Blackstar Managers, on behalf of Blackstar, intends to work with existing management to reconstitute the Yorkcor board. The objective of these changes would be to give Yorkcor the appropriate BEE credentials and to give Blackstar and other institutional shareholders the appropriate independent non- executive representation. FUTURE STRATEGY OF YORKCOR FOLLOWING THE TRANSACTIONS The South African forestry industry has gone from an historic sawlogs surplus to a growing deficit in recent years, primarily because of the limited stock of trees and the robust local demand for wood products. As a result, prices at all levels of the value chain - from forests lands to finished lumber - have doubled over the past 5 years. Prices are expected to continue to increase until constrained. Yorkcor is one of the few timber companies to own its own forests, sawmills, manufacturing plants, warehouse and sales and trading operations, making for a highly efficient and cost effective operation. Yorkcor"s log mills convert round softwood logs into a wide range of sawn lumber products such as structural timber, scaffolding, furniture components, wood laminates, kitchen cupboard parts, brush and broom handles as well as wood chips for pulp and paper. Yorkcor markets sawn lumber to the construction, furniture, packaging and other industries, as well as to timber merchants generally, partly through a network of independent timber agents. Yorkcor markets and sells the finished product for its own account and on behalf of others. Yorkcor currently has small operations in the downstream wood industry in basic furniture component manufacturing and will look to grow this higher margin business. Yorkcor is strategically well placed to benefit (and is benefiting) from the infrastructure and development boom currently underway. Prices are expected to increase if regional demand for lumber increases as a result of economic growth in South Africa and neighbouring markets. The growth in this sector is expected to continue for the next 4 to 5 years due to state infrastructure spend and the lead up to the 2010 World Cup. Blackstar has taken the view that Yorkcor"s existing management team can grow the business in the medium and longer term. This includes organic growth through re-investment, growth through potential acquisitions of other industry players as well as growth through extending the value chain both up-stream, through acquisition of forests, and down-stream, through acquisition/starting-up timber value-add businesses. Yorkcor intends to increase its sales in the increasingly attractive South African market and continue to grow its foreign trade. Blackstar is investing on the basis that management intentions are in line with its own strategic thinking. DOCUMENTATION AND FURTHER ANNOUNCEMENT A further announcement will be made in due course giving the salient dates pertaining to the transactions and the joint offer. Subject to JSE and SRP requirements, a circular will be posted to shareholders containing details of the joint offer, the acceptance process, and the preference share issue, as well as incorporating a notice of general meeting of shareholders to pass the necessary resolutions to implement the transactions. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT In the light of the above information shareholders are no longer required to exercise caution when dealing in their Yorkcor shares. Pretoria 6 November 2006 Sponsor and independent adviser Sasfin Capital Legal adviser to Yorkcor Edward Nathan Sonnenbergs Adviser to Blackstar Blackstar Managers South Africa Legal adviser to Blackstar Webber Wentzel Bowens Date: 06/11/2006 12:28:38 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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