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FSR/FST/DSY/RMH/REM- FirstRand/Discovery/RMBH/Remgro - Details terms

Release Date: 13/09/2007 17:15
Code(s): DSY FSR RMH REM
Wrap Text

FSR/FST/DSY/RMH/REM- FirstRand/Discovery/RMBH/Remgro - Details terms announcement FirstRand Limited (Incorporated in the Republic of South Africa) (Registration number: 1966/010753/06) ISIN: ZAE000066304 Share Code (JSE): FSR Share Code (NSX): FST ("FirstRand") Discovery Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 1999/007789/06) ISIN: ZAE000022331 Share Code (JSE): DSY ("Discovery") RMB Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 1987/005115/06) ISIN: ZAE000024501 Share Code (JSE): RMH ("RMBH") Remgro Limited (Incorporated in the Republic of South Africa) (Registration number: 1968/006415/06) ISIN: ZAE000026480 Share Code (JSE): REM ("Remgro") Detailed terms announcement regarding the: proposed disposal by FirstRand of, in aggregate, 21.6 million Discovery shares to certain members of Discovery`s senior management, the Discovery share trust and RMBH for an aggregate consideration of R577.4 million; proposed unbundling by FirstRand of its remaining Discovery shareholding (53.44% of Discovery); proposed acquisition by RMBH of, in aggregate, a further 49,7 million Discovery shares from Remgro and the FirstRand staff share trusts for an aggregate consideration of R1,330.5 million to be settled in cash and the issue of new RMBH ordinary shares; and withdrawal of the FirstRand cautionary announcement. 1. Introduction Further to the joint announcement and the FirstRand cautionary announcement released on SENS on 4 September 2007 and published in the press on 5 September 2007, the boards of FirstRand, Discovery, RMBH and Remgro are pleased to announce the detailed terms of the proposed: disposal by FirstRand of, in aggregate, 21,569,301 Discovery ordinary shares ("Discovery shares") to Adrian Gore (Chief executive officer of Discovery), Barry Swartzberg (Executive director of Discovery) and certain members of Discovery`s senior management ("Discovery senior management"), the Discovery Holdings Limited Share Trust ("Discovery share trust") and RMBH ("the FirstRand disposals") for an aggregate cash consideration of R577.4 million; unbundling by FirstRand of its 316,357,337 Discovery shares, remaining after the FirstRand disposals (53.44% of the entire issued share capital of Discovery), to FirstRand ordinary shareholders ("FirstRand shareholders") ("the unbundling"); and acquisition by RMBH, pursuant to the unbundling of, in aggregate, 49,700,040 Discovery shares from Remgro and the FirstRand Black Employee Trust, the FirstRand Staff Assistance Trust, the FirstRand Black Non-executive Trust and the FirstRand Limited Staff Trust ("the FirstRand staff trusts") for an aggregate consideration of R1,330.5 million to be settled in cash and the issue of new RMBH ordinary shares ("the RMBH transactions"). (collectively referred to as "the proposed transactions"). The proposed transactions will become effective on the fulfilment, or waiver as the case may be, of the last suspensive condition. 2. Details of the proposed transactions 2.1 The FirstRand disposals FirstRand raised a liability of approximately R553 million in order to follow its rights and acquire additional Discovery shares at the time of the Discovery claw-back offer in 2003 ("the liability"). FirstRand will, prior to the unbundling, dispose of, in aggregate, 21,569,301 Discovery shares to Discovery senior management, the Discovery share trust and RMBH resulting in net cash proceeds of the FirstRand disposals matching the liability. The FirstRand disposals are in terms of an existing pre-emptive right. The acquisition of Discovery shares by Discovery senior management and the Discovery share trust further enhances Discovery senior management`s and Discovery staff`s ownership of Discovery and reinforces the existing "owner managed" culture of Discovery. The rationale for the acquisition of Discovery shares by RMBH is set out in 2.3.1 below. 2.1.2 Details of the FirstRand disposals FirstRand will, subject to the fulfillment or waiver, as the case may be, of the suspensive conditions set out in 0 below, dispose of 21,569,301 Discovery shares for a total cash consideration of R577.4 million. This translates into a price of R26.77 per Discovery share which is the 10 day volume weighted average price ("VWAP") of the Discovery share traded on the JSE Limited ("JSE") up to the close of trading on 10 September 2007. FirstRand, Discovery senior management, the Discovery share trust and RMBH have reached agreement in terms of which: Discovery senior management will acquire 15,062,820 Discovery shares from FirstRand, equating to 2.54% of Discovery, for R403.2 million; the Discovery share trust will acquire 3,297,180 Discovery shares from FirstRand, equating to 0.56% of Discovery, for R88.3 million; and RMBH will acquire 3,209,301 Discovery shares from FirstRand, equating to 0.54% of Discovery, for R85.9 million. Accordingly, following the FirstRand disposals, Adrian Gore and Barry Swartzberg will together own 13.88% of Discovery, other members of Discovery senior management will own 3.58% of Discovery and the Discovery share trust will own 2.94% of Discovery. RMBH will initially acquire 0.54% of Discovery in terms of the FirstRand disposals, however, RMBH will, pursuant to the unbundling and following the RMBH transactions (discussed further in 2.2 and 2.3 below), increase its shareholding to 25.01% of the entire issued share capital of Discovery. 2.2 The unbundling 2.2.1 Rationale for the unbundling FirstRand`s strategy of owning two insurance companies has been consistently monitored by the boards of FirstRand, Discovery and Momentum Group Limited ("Momentum"). This strategy has produced significant growth and created shareholder value as both businesses were able to balance growth in market share with increasing levels of competition. However, with Discovery`s impending launch of its investment business and Momentum`s ambitions in the health care sector, the FirstRand board has decided that it is, at this time, appropriate to unbundle FirstRand`s shareholding in Discovery. The FirstRand board believes that the unbundling will unlock value for FirstRand shareholders by, inter alia: giving FirstRand shareholders a direct shareholding in Discovery; increasing the liquidity and free float of Discovery shares on the JSE; and increasing the strategic flexibility of both Discovery and Momentum, allowing them to pursue their respective business objectives. 2.2.2 Details of the unbundling FirstRand will, subject to the fulfillment or waiver, as the case may be, of the suspensive conditions set out in paragraph 3.1 below, distribute, in compliance with section 90 of the Companies Act, 1973 and in terms of section 46 of the Income Tax Act, 1962, all of its remaining shareholding in Discovery (which, following the FirstRand disposals, will be equal to 316,357,337 Discovery shares or 53.44% of the entire issued share capital of Discovery) to FirstRand shareholders in proportion to such FirstRand shareholders shareholding in FirstRand. In terms of the unbundling, FirstRand shareholders can expect to receive approximately 5.63 Discovery shares for every 100 FirstRand shares held on the record date of the unbundling. 2.3 Details of the RMBH transactions 2.3.1 Rationale for the RMBH transactions RMBH, a 30.07% shareholder in FirstRand, believes in the strategic and value proposition of Discovery and, accordingly, would like to increase its shareholding in Discovery to 25.01%. The unbundling provides RMBH with the opportunity to effectively increase its shareholding in Discovery to meet this objective. 2.3.2 Details of the RMBH transactions RMBH, in terms of the FirstRand disposals, will acquire 3,209,301 Discovery shares equating to 0.54% of Discovery. In addition, RMBH will receive 95,138,974 Discovery shares pursuant to the unbundling. Immediately following the unbundling, RMBH will hold a 16.61% shareholding in Discovery. RMBH has reached agreement with the trustees of the FirstRand staff trusts to acquire, subject to the fulfilment or waiver, as the case may be, of the suspensive conditions set out in paragraph 3.2 below, the Discovery shares that the FirstRand staff trusts receive pursuant to the unbundling. In terms of this agreement, RMBH will acquire 22,691,417 Discovery shares for a total consideration of R607.5 million, at the acquisition price of R26.77 per Discovery share. RMBH will therefore own a 20.45% shareholding in Discovery following the unbundling and the acquisition of the Discovery shares from the FirstRand staff trusts. RMBH has, in terms of a separate agreement with Remgro, agreed to acquire the 27,008,623 Discovery shares that Remgro (through a subsidiary) will receive pursuant to the unbundling for an aggregate consideration of R723.0 million, based on the acquisition price of R26.77 per Discovery share. RMBH will settle the aggregate consideration by issuing 21,302,912 new RMBH ordinary shares ("RMBH shares") to Remgro (or a subsidiary nominated by Remgro) at a price of R33.94 per RMBH share, which is the 10 day historic VWAP of the RMBH share traded on the JSE up to the close of trading on 10 September 2007. Following the FirstRand disposals, the unbundling and the RMBH transactions, RMBH will hold 25.01% of the entire issued share capital of Discovery. 2.4 Small related party transactions In terms of the JSE Listings Requirements ("listings requirements"): the acquisition of Discovery shares by Adrian Gore and Barry Swartzberg from FirstRand in terms of the FirstRand disposals will be categorised as a small related party transaction for FirstRand; the acquisition of Discovery shares by the Discovery share trust from FirstRand in terms of the FirstRand disposals will be categorised as a small related party transaction for Discovery; the disposal of Discovery shares by the FirstRand staff trusts to RMBH in terms of the RMBH transactions will be categorised as a small related party transaction for FirstRand; and the issue of RMBH shares to Remgro in settlement of the consideration payable for the Discovery shares acquired from Remgro in terms of the RMBH transactions will be categorised as a small related party transaction for RMBH. (collectively, the "small related party transactions"). Accordingly, FirstRand, Discovery and RMBH are required to appoint an independent professional expert to provide a fair and reasonable opinion to the JSE confirming that the terms and conditions of the small related party transactions are fair and reasonable to shareholders of FirstRand, Discovery and RMBH respectively. Details of the fair and reasonable opinions will be announced by FirstRand, Discovery and RMBH as soon as practicable after the publication of this announcement and the fair and reasonable opinion statement will lie for inspection at the registered offices of FirstRand, Discovery and RMBH for a period of 28 days from the date on which the announcement regarding the fair and reasonable opinions are released on SENS. 3. Suspensive conditions of the proposed transaction 3.1 Suspensive conditions of the unbundling The unbundling is conditional upon inter alia the following suspensive conditions being fulfilled, or waived as the case may be: approval by the FirstRand shareholders in general meeting of the implementation of the unbundling by ordinary resolution; implementation of the FirstRand disposals; the independent professional expert, where required, confirming to the JSE that the small related party transactions are fair and reasonable to shareholders of FirstRand, Discovery and RMBH respectively; and the approval of the Registrar of Long-Term Insurance, in accordance with section 26(2) of the Long Term Insurance Act, 1998, for RMBH to acquire more than 25.00% of the Discovery shares. 3.2 Suspensive conditions of the FirstRand disposals and the RMBH transactions The FirstRand disposals and the RMBH transactions are conditional upon the following suspensive conditions being fulfiled or waived, as the case may be: approval by the FirstRand shareholders in general meeting of the implementation of the unbundling by ordinary resolution; and the independent professional expert, where required, confirming to the JSE that the small related party transactions are fair and reasonable to ordinary shareholders of FirstRand, Discovery and RMBH respectively. 4. Pro forma financial effects 4.1 Pro forma financial effect of the proposed transactions on FirstRand The table below summarises the unaudited pro forma financial effects of the proposed transactions on FirstRand shareholders based on the unaudited results of FirstRand for the six month period ended 31 December 2006. The unaudited pro forma financial effects are the responsibility of the FirstRand directors and have been prepared for illustrative purposes only to provide information about how the proposed transactions may have affected the financial position of the FirstRand shareholders on the relevant reporting date. Due to their nature, the unaudited pro forma financial effects may not be a fair reflection of FirstRand`s financial position after the implementation of the proposed transactions or of FirstRand`s future earnings. Unaudited Unaudited Change
unadjusted adjusted FirstRand FirstRand pro before the forma after proposed the proposed
transactions transactions (cents) (cents) (%) Earnings per ordinary 103.8 106.2 2.3 share Fully diluted earnings 100.8 103.1 2.3 per ordinary share Headline earnings per 88.2 84.1 (4.6) ordinary share Fully diluted headline 85.6 81.7 (4.6) earnings per ordinary share Normalised earnings per 98.3 94.7 (3.6) ordinary share Fully diluted 98.2 94.6 (3.6) normalised earnings per ordinary share Net asset value per 743.7 693.3 (6.8) ordinary share Net tangible asset 661.1 612.1 (7.4) value per ordinary share Notes: The pro forma financial effects are based on unaudited interim financial results of FirstRand for the six months ended 31 December 2006. The financial impact on the earnings of FirstRand are illustrated as if the proposed transactions had been completed at the beginning of the 2007 financial year, while the impact on the net assets of FirstRand are shown as if the proposed transaction had been implemented on 31 December 2006. The unbundling will be implemented in compliance with section 90 of the Companies Act, 1973 and in terms of section 46 of the Income Tax Act, 1962. The following common assumptions have been used in the calculation of both FirstRand and RMBH pro-forma financial effects: an income tax rate of 29%; a capital gains tax rate of 14.5%; and an overnight JIBAR rate of 9.6% NACM. In terms of the FirstRand disposals, 21.6 million Discovery shares will be sold by FirstRand at a price per Discovery share of R26.77. An allowance of capital gains tax has been included in the calculations. The net proceed received from the FirstRand disposal is assumed to be invested at JIBAR. As a result of the unbundling, Discovery`s assets and liabilities, together with their effective proportional share of post acquisition reserves will be eliminated. The financial effects set out above have been prepared based on IFRS and interpretations of IFRS applicable at 30 June 2007. It should be noted that IFRS is continuing to evolve through the issue and or endorsement of new Standards and Interpretations and developments in the application of recently issued Standards. For that reason, it is possible that the financial impact and adjustments reflected above may change before the presentation of the results of FirstRand Limited for the year ending 30 June 2008. 4.2 Pro forma financial effect of the RMBH acquisitions on RMBH The table below summarises the unaudited pro forma financial effects of the RMBH acquisitions on RMBH shareholders based on the unaudited results of RMBH for the six month period ended 31 December 2006. The unaudited pro forma financial effects are the responsibility of the RMBH directors and have been prepared for illustrative purposes only to provide information about how the RMBH acquisitions may have affected the financial position of the RMBH shareholders on the relevant reporting date. Due to their nature, the unaudited pro forma financial effects may not be a fair reflection of RMBH`s financial position after the implementation of the RMBH acquisitions or of RMBH`s future earnings. Unaudited Unaudited Change unadjusted adjusted RMBH RMBH before pro forma
the RMBH after the RMBH acquisitions acquisitions (cents) (cents) (%) Earnings per ordinary 157.7 163.5 3.7 share Fully diluted earnings 153.5 159.3 3.7 per ordinary share Headline earnings per 134.8 133.0 (1.4) ordinary share Fully diluted headline 131.3 129.5 (1.3) earnings per ordinary share Normalised earnings per 155.1 153.1 (1.2) ordinary share Fully diluted normalised 155.0 153.1 (1.2) earnings per ordinary share Net asset value per 1,235.7 1,283.4 3.9 ordinary share Net tangible asset value 1,234.8 1,282.6 3.9 per ordinary share Notes: The pro forma financial effects are based on unaudited interim financial results of RMBH for the six months ended 31 December 2006. The financial impact on the earnings of RMBH are illustrated as if the RMBH acquisitions and the Discovery shares acquired by RMBH in terms of FirstRand disposals had been completed at the beginning of the 2007 financial year, while the impact on the net assets of RMBH are shown as if the RMBH acquisitions and the Discovery shares acquired by RMBH in terms of FirstRand disposals had been implemented on 31 December 2006. It has been assumed that RMBH will acquire, in aggregate, 53.0 million Discovery shares for a total consideration of R1.416 million with R693 million being settled in cash and R723 million being settled through the issue of 21.3 million new RMBH shares at a value of R33.94 per RMBH share. The R693 million cash portion is assumed to funded through the issue of preference shares with a coupon of 8.8% per annum. A related STC charge has been included in the calculations. The common assumption in note 3 under paragraph 4.1 above have been used to calculate the pro-forma financial effects for RMBH. The Financial effects set out above have been prepared based on IFRS and interpretations of IFRS applicable at 30 June 2007. It should be noted that IFRS is continuing to evolve through the issue and or endorsement of new Standards and Interpretations and developments in the application of recently issued Standards. For that reason, it is possible that the financial impact and adjustments reflected above may change before the presentation of the results of RMBH for the year ending 30 June 2008. 4.3 Pro forma financial effects of the unbundling on Discovery and the pro forma financial effects of the acquisition by the Discovery share trust on Discovery The unbundling and the acquisition by the Discovery share trust in terms of the FirstRand disposals will not have a material financial impact on Discovery or the Discovery shareholders (other than FirstRand). 5. Effect on BEE FirstRand has implemented a Black Economic Empowerment ("BEE") transaction in terms of which the FirstRand Empowerment Trust ("FRET"), the FirstRand Black Employee Trust, the FirstRand Staff Assistance Trust and the FirstRand Black Non-executive Trust (collectively "the BEE Staff Trusts") were created to hold c. 535 million FirstRand shares for the benefit of BEE parties and black employees of FirstRand. Pursuant to the unbundling, FRET will continue to hold the Discovery shares received pursuant to the unbundling. However, the BEE Staff Trusts will dispose of the Discovery shares received pursuant to the unbundling to RMBH. Accordingly, Discovery, post the unbundling, will have direct BEE ownership of approximately 9.53% which equates to approximately 10.36% of Discovery`s South African businesses. 6. Shareholding structure of Discovery The table below illustrates the shareholding structure before and immediately after the proposed transactions. Shareholder name Before the Immediately proposed after the transactions proposed transactions FirstRand 57.07% 0.00% RMBH 0.00% 25.01% Discovery senior management 14.92% 17.46% BEE 6.34% 9.53% Discovery share trust 2.38% 2.94% Other shareholders 19.29% 45.06% 7. Salient dates and times for the unbundling The salient dates and times for the unbundling are set out below. 2007
Post circular to FirstRand Monday, 08 October shareholders on Last day for receipt of proxy forms Monday, 22 October for the general meeting by 10:00 on General meeting to be held at 10:00 Wednesday, 24 October on Results of the general meeting Wednesday, 24 October released on SENS on Results of the general meeting Thursday, 25 October published in the press on Finalisation date announcement and Friday, 26 October release of entitlement ratio on SENS by no later than Last day to trade in FirstRand shares Friday, 2 November on the JSE to participate in the unbundling on FirstRand shares trade "ex" their Monday, 5 November entitlement to Discovery shares in terms of the unbundling on Announcement of specified ratio in Wednesday, 7 November respect of the apportionment of the cost/base cost of Discovery for taxation/CGT purposes on or about Record date to participate in the Friday, 9 November unbundling on Unbundling date on Monday, 12 November Dematerialised FirstRand shareholders Monday, 12 November will have their accounts with their CSDP or broker updated with the Discovery shares received pursuant to the unbundling on Share certificates in respect of the Monday, 12 November Discovery shares will be posted, by registered post, at the risk of the certificated FirstRand shareholder concerned, to certificated FirstRand shareholders on Notes: These dates and times are subject to change. Any such change will be released on SENS and published in the press. Any reference to time is a reference to South African time. No dematerialisation or rematerialisation of FirstRand share certificates may take place after the last day to trade in order to participate in the unbundling. 8. Posting of the FirstRand circular and the general meeting A circular to FirstRand shareholders providing information on the proposed transactions and containing a notice of general meeting will be posted to FirstRand shareholders on or about Monday, 8 October 2007. A general meeting of FirstRand shareholders, convened in terms of the notice of general meeting, will be held on Wednesday, 24 October 2007 at the registered office of FirstRand, 4th Floor, 4 Merchant Place, Corner of Fredman and Rivonia Roads, Sandton, 2196, for the purpose of considering and, if deemed fit, passing the resolution required to give effect to the unbundling. 9. Withdrawal of FirstRand cautionary announcement The FirstRand cautionary announcement released on SENS on 4 September 2007 and published in the press on 5 September 2007 is hereby withdrawn. Accordingly, FirstRand shareholders are no longer required to exercise caution when dealing in their FirstRand shares. 22691 13 September 2007 Johannesburg Merchant bank and sponsor to FirstRand, RMBH and Remgro Rand Merchant Bank, a division of FirstRand Bank Limited Financial advisor to Discovery and transaction sponsor to Discovery and FirstRand Deutsche Securities (SA) (Proprietary) Limited Sponsor to Discovery RMB Legal advisor to FirstRand and RMBH Webber Wentzel Bowens Legal Advisor to Discovery edward nathan sonnenbergs Legal Advisor to Remgro Hofmeyr, Herbstein and Gihwala Date: 13/09/2007 17:15:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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