Wrap Text
WHL - Woolworths Holdings - Sale by Woolworths and withdrawal of cautionary
announcement
WOOLWORTHS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1929/001986/06)
Share code: WHL & ISIN: ZAE000063863
("Woolworths" or "the Company")
SALE BY WOOLWORTHS (PROPRIETARY) LIMITED OF 50% PLUS ONE ORDINARY SHARE OF
WOOLWORTHS FINANCIAL SERVICES (PROPRIETARY) LIMITED ("WFS") TO ABSA GROUP
LIMITED ("ABSA") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements dated 14 December 2007, 25 January 2008
and 7 March 2008, the board of directors of Woolworths ("the board") is pleased
to announce that Woolworths (Proprietary) Limited has entered into an agreement,
in terms of which Woolworths (Proprietary) Limited will, subject to the
fulfillment of the conditions precedent to which the agreement is subject, some
of which are set out in paragraph 3.4 below, dispose of 50% plus one ordinary
share of its interest in WFS to Absa ("the Proposed Transaction").
2. RATIONALE FOR THE PROPOSED TRANSACTION
Financial services is important to the Woolworths strategy and overall customer
proposition and provides Woolworths with a deeper understanding of customers`
behaviour, enabling the business to tailor the retail offering to better meet
customer needs.
The WFS business, which includes the store card, personal loans, Visa credit
card and selected insurance products, has grown significantly and has become a
sizeable business with an active credit account base of over 1.6 million
customers. At December 2007, the last reported 26 week period, Woolworths had
net financial services assets of R5 558,7 million, which included the
consolidated assets of Account on Us (Proprietary) Limited ("AOU") under the
securitised asset backed note programme.
The board, after having assessed the strategy for financial services, identified
the need to access specialist financial services skills to accelerate future
growth and to consider new funding arrangements to support this growth. It was
decided that access to the required specialist skills and funding would best be
achieved through a partnership with Absa and the disposal of a 50% plus one
ordinary share interest in WFS to Absa.
Absa, supported by Barclays Bank PLC, manages one of the leading consumer
finance businesses in South Africa, offering a full range of credit card and
other financial services to individual customers, together with card and other
payment facilities to retailers and other businesses.
The Proposed Transaction is expected to deliver significant financial and
operational benefits to WFS through access to Absa`s funding, leading credit
risk and customer value management capabilities, and expertise in enhancing
existing and launching new consumer finance products including a premium
Barclaycard offering.
The joint venture also intends to maximise the opportunities presented by the
Barclaycard brand, which Absa will make available through its license agreement
with Barclays Bank PLC.
The joint venture therefore brings together three powerful brands in Woolworths,
Absa and Barclaycard with a common vision of extending the existing WFS brand
into an even more compelling and attractive proposition for existing and new
customers.
3. PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED TRANSACTION
3.1 Purchase consideration
The purchase price payable by Absa for 50% plus one ordinary share of the issued
share capital of WFS is R875 million. The purchase price is payable on the
completion date of the Proposed Transaction, which is the last business day of
the month in which the last of the conditions precedent to the Proposed
Transaction, as documented in the share purchase agreement, is fulfilled.
3.2 Warranties and indemnities
Warranties and indemnities, as are normal for a transaction of this nature, have
been given by Woolworths to Absa.
3.3 Effective date
The Completion Date for the Proposed Transaction is expected to be in the third
quarter of the 2008 calendar year.
3.4 Conditions precedent
The Proposed Transaction is subject to the fulfilment of, inter alia, the
following conditions precedent before 30 September 2008:
- a restructure of WFS to include all existing financial services products
under WFS;
- unconditional approval of the Proposed Transaction by the South African
Competition Authorities or approval on such conditions as are reasonably
acceptable to both Woolworths and Absa; and
- the execution of other ancillary legal agreements necessary to give effect
to the Proposed Transaction.
3.5 Debt funding of WFS
Absa has agreed to provide all required debt funding to WFS on the Completion
Date on a non-recourse basis and hence it is the intention to repay holders of
the asset backed notes issued by AOU, under the store card securitisation
programme. Woolworths will be communicating with note holders in due course in
this regard.
4. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION
The unaudited pro forma financial effects set out below have been prepared to
assist Woolworths shareholders to assess the impact of the Proposed Transaction
on earnings per share ("EPS"), headline EPS ("HEPS"), net asset value ("NAV")
per share and tangible NAV ("TNAV") per share and are based on the unaudited
results for the 26 weeks ended December 2007. Due to the nature of these pro
forma financial effects, they are presented for illustrative purposes only and
may not fairly present the Company`s financial position, changes in equity and
the results of its operations after the Proposed Transaction.
The pro forma financial effects, which have been prepared in terms of the JSE
Limited ("JSE") Listings Requirements, are the responsibility of the board. The
material assumptions are set out in the notes following the table.
Pro forma financial Before the After the Change
effects for the 26 Proposed Proposed (%)
weeks ended December Transaction(1) Transaction
2007
EPS (cents) 56.9 101.9 (2) 79.1
HEPS (cents) 56.9 60.2 (2) 5.8
NAV per share (cents) 415.4 460.2 (3) 10.8
TNAV per share (cents) 412.6 457.4 (3) 10.9
Ordinary shares in 812.1 812.1 -
issue (net of treasury
shares) (million)
Weighted average number 810.0 810.0 -
of ordinary shares in
issue (net of treasury
shares) (million)
Notes:
1. Extracted from the published audited results of Woolworths for the 26 weeks
ended December 2007.
2. For the purposes of calculating EPS and HEPS it was assumed that the
Proposed Transaction was implemented on 1 July 2007 and that the
consideration received by Woolworths, net of estimated transaction costs
and capital gains tax, was used to settle interest bearing liabilities at
an after tax interest rate of 8.0% for the 26 weeks ended December 2007.
For the purposes of calculating HEPS the profit on the disposal, net of
estimated transaction costs and capital gains tax, has been excluded.
3. For the purposes of calculating NAV per share and TNAV per share it was
assumed that the Proposed Transaction was implemented at end December 2007.
5. CATEGORISATION
The Proposed Transaction has been categorised as a category 2 transaction in
terms of section 9.5(a) of the JSE Listings Requirements.
6. FURTHER ANNOUNCEMENT
Woolworths shareholders will be advised by way of a SENS announcement when all
the conditions precedent have been fulfilled and once the Completion Date has
occurred.
It is the current intention of the board following the Completion Date to
distribute R2,25 billion of the cash proceeds arising from the disposal and the
cash realised from the transfer of the financial services assets into the joint
venture after settling the notes issued by AOU.
The balance of cash realised will be utilised to retire other debt.
It is expected that the distribution to shareholders will be implemented by way
of a special dividend of R750 million, and, subject to prevailing market
conditions at the time, an open market share repurchase of the balance.
7. WITHDRAWAL OF CAUTIONARY
Shareholders are advised that, given the disclosure of the terms of the Proposed
Transaction, caution is no longer required to be exercised by shareholders when
dealing in their Woolworths securities.
Cape Town
16 April 2008
Investment bank to Woolworths
The Standard Bank of South Africa Limited
Legal advisor to Woolworths
Tabacks and Associates (Proprietary) Limited
Sponsor to Woolworths
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 16/04/2008 08:30:03 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.
Sharenet Sites 
