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JDH - John Daniel Holdings Limited - JDH Investment in Lazaron
JOHN DANIEL HOLDINGS LIMITED LAZARON BIOTECHNOLOGIES (SA)
LIMITED
Incorporated in the Republic of Incorporated in the Republic
South Africa of South Africa
Registration number Registration number
1998/013215/06 2004/004630/06
JSE Code: JDH - ISIN: ("Lazaron")
ZAE000136677
("the Company" or "JDH" or "the
Group")
POTENTIAL INCREASE IN JOHN DANIEL HOLDINGS LIMITED`S ("JDH") SHAREHOLDING IN
LAZARON BIOTECHNOLOGIES (SA) LIMITED ("LAZARON") PURSUANT TO AN UNDERWRITTEN
RIGHTS OFFER AND WAIVER OF THE REQUIREMENT FOR JDH TO MAKE A MANDATORY OFFER, A
PROPOSED SECTION 112 DISPOSAL BY LAZARON AND A VOLUNTARY OFFER BY JDH TO LAZARON
MINORITY SHAREHOLDERS
JDH INVESTMENT IN LAZARON
The directors of JDH and Lazaron have reached agreement whereby JDH will
partially underwrite a rights offer in Lazaron through the conversion of JDH`s
shareholder loan account in Lazaron, subject to certain conditions and the
necessary approvals. The rights offer is intended to improve Lazaron`s financial
position and facilitate the proposed purchase of the major portion of the
Lazaron going concern undertaking by JDH, a requirement of the establishment of
the JDH/Cryo-Save NV joint venture in South Africa as announced on SENS on 2
June 2011.
PARTIALLY UNDERWRITTEN RIGHTS OFFER
Shareholders are advised that the board of directors of Lazaron has agreed to
proceed with a non-renounceable rights offer to Lazaron shareholders of R4.4
million at 1 cent per share, of which JDH proposes to partially underwrite, to
the extent of its loan account, a minimum of R1.5 million, in order to
recapitalise the Lazaron business. The new cash is also intended to enable
Lazaron to meet ongoing working capital requirements.
As at the date of this announcement, JDH holds 27.45% of the issued share
capital of Lazaron. If the Lazaron rights offer is successfully implemented and
Lazaron shareholders do not follow all, or part of their rights, JDH may, as a
consequence of fulfilling its underwriting obligations, increase its
shareholding in Lazaron from 27.45% to a maximum of approximately 82%, assuming
a minimum loan account balance of R1.5 million. JDH will not be charging an
underwriting fee.
The rights offer is conditional on successfully achieving the waiver of a
mandatory offer as detailed below. Excess applications will be allowed.
WAIVER OF A MANDATORY OFFER BY LAZARON SHAREHOLDERS
JDH`s potential increase in shareholding in Lazaron may constitute an "affected
transaction" for Lazaron in terms of the Companies Act, 71 of 2008 and the
Regulations thereto, and accordingly in the event that JDH`s shareholding equals
or exceeds 35% in Lazaron, JDH would be required to make a mandatory offer to
all Lazaron shareholders.
However, the Companies Act, 71 of 2008 and the Regulations thereto (collectively
referred to as "the Act") allows for a waiver to be given to an offeror /
acquirer from the obligation to make a mandatory offer, if such waiver is
approved by independent shareholders, in person or by proxy, holding more than
50% of the general voting rights of all the issued shares of Lazaron in a
general meeting ("waiver").
SECTION 112 DISPOSAL
In terms of a memorandum of understanding, as announced on SENS on 02 June 2011,
Cryo-Save Group N.V. ("Cryo-Save") and JDH are embarking on establishing a joint
venture which will provide for the harvesting and banking of stem cells from
both cord blood as well as cord tissue, which action requires that the major
portion of the going concern undertaking of the Lazaron business be disposed of
to JDH at a purchase price of R1 million, which business will then be injected
as a capital contribution into the joint venture with Cryo-Save. This
consideration of R1 million will be set off against the JDH loan account in
Lazaron. In terms of Section 112 of the Companies Act, No 71 of 2008, as
amended, this disposal is both a fundamental transaction and an "affected
transaction" and will require Lazaron shareholder approval by way of special
resolution and TRP approval ("Section 112 disposal"). Lazaron will retain the
existing stem cell bank and its associated annuity revenue as well as all rights
to the intellectual property related to the equine stem cell research and
development.
GENERAL OFFER TO LAZARON MINORITIES
Shareholders are referred to today`s JDH SENS announcement dealing, inter alia,
with a proposed rights offer underwritten by Escalator Capital Limited
("Escalator"). Upon conclusion of the JDH rights offer, a general offer will be
made to Lazaron minorities to acquire their shares in Lazaron in exchange for
shares in JDH ("general offer"). The offer ratio will be 1 JDH share for every 5
Lazaron shares held. The rationale for this general offer is to afford Lazaron
minorities the opportunity to swap into a tradable listed share as well as
making Lazaron a wholly-owned subsidiary of JDH. The Lazaron minorities will
then continue to participate in the new JDH/Cryo-Save NV joint venture through
the new shareholding in JDH.
DOCUMENTATION
Lazaron is in the process of preparing a circular to shareholders which will
include the terms of the Lazaron rights offer, an ordinary resolution to obtain
the waiver, a special resolution to approve the Section 112 disposal, a special
resolution to approve the issue of more than 30% of the issued shares as well as
the terms of the general offer to the remaining Lazaron shareholders, which
circular will be posted in due course. The circular to shareholders will also
include an independent expert`s opinion regarding the fair and reasonableness of
the waiver, the section 112 disposal, as well as the general offer price.
No documentation is required for JDH shareholders as the maximum acquisition
categorisation in terms of the JSE Listings requirements is a category 2
transaction.
PROSPECTS FOR LAZARON
Lazaron is engaged in research and subsequent commercialisation of stem cell
technologies. However, additional funding is required to further expand and
market the underlying business, including the upgrading of the laboratory
equipment and development of the sales and marketing division. The directors of
JDH and Lazaron believe that the disposal of the major portion of Lazaron`s
going concern undertaking into the abovementioned joint venture will return
Lazaron to a profitable position.
PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the potential increase in shareholding in Lazaron on the reported
financial information of JDH for the six months ended 31 December 2010, had the
rights offer, Section 112 disposal and general offer occurred on 1 July 2010 for
statement of comprehensive income purposes and on 31 December 2010 for statement
of financial position purposes. The pro forma financial effects have been
prepared using accounting policies that comply with IFRS and that are consistent
with those applied in the audited results of JDH for the year 30 June 2010.
The unaudited pro forma financial effects set out below are the responsibility
of JDH`s directors and have been prepared for illustrative purposes only and
because of their nature may not fairly present the financial position, changes
in equity, results of operations or cashflows of JDH after the transaction.
Before After Change After Change After Change
rights (%) Section (%) JDH (%)
offer 112 general
disposal offer
Earnings per (1.42) (1.21) 32%
share (cents) 15% (1.21) 0% (0.82)
Diluted (1.38) (1.17) 31%
earnings per
share (cents) 15% (1.17) 0% (0.81)
Headline (1.38) (1.17) 32%
earnings per
share (cents) 15% (1.17) 0% (0.79)
Diluted (1.34) (1.13) 31%
headline
earnings per
share (cents) 15% (1.13) 0% (0.78)
Net asset (0.64) (0.64) 425%
value per
share (cents) 0% (0.64) 0% 2.08
Tangible net (1.27) (1.27) 231%
asset value
per share
(cents) 0% (1.27) 0% 1.66
Weighted 150 500 150 500 47%
average
number of
shares in
issue (`000) 0% 150 500 0% 221 620
Number of 150 500 150 500 47%
shares in
issue (`000) 0% 150 500 0% 221 620
Assumptions:
1. The "Before" column is extracted from the Company`s unaudited, published
results for the six months ended 31 December 2010.
2. JDH held 27.45% of the issued capital of the company throughout the six
month period and the impact of the non-controlling interest is incorporated
in the pro-forma financial results.
3. The unaudited pro forma information assumes that the Lazaron rights offer
will be fully subscribed, generating rights offer proceeds totaling R4.4
million.
4. The proceeds of the rights offer would be utilised to fund working capital
requirements, shareholders` loans and settle current creditors.
5. The "After Rights Offer" column assumes that the R4.4 million rights offer
proceeds were received at the beginning of the period for statement of
comprehensive income purposes and that the interest and transaction fees
savings were realized over the course of the six months. The interest
savings will have a continuing effect on the Group whilst the transaction
fees of R500 000 will be a once off effect.
6. The "After Rights Offer" column for statement of financial position
purposes assumes the rights offer proceeds were received in cash as at 31
December 2010.
7. The "After Section 112 Disposal" column assumes that Lazaron disposed of a
portion of its going concern undertaking at fair value for R1 million which
includes the fixed assets at net book value.
8. The profit arising on the disposal comprises entirely of the recoupment of
income tax allowances for income tax purposes, which will be a once off
effect.
9. The "After JDH General Offer" column assumes that all Lazaron minority
shareholders will accept the general offer to acquire their shares for
shares in JDH at an offer ratio of 1 JDH share for every 5 Lazaron shares
held, assuming the issue of 71 119 936 new shares.
10. JDH share price will continue to trade at 8 cents a share throughout the
corporate action timetable.
11. Transaction costs of R500 000 have been assumed.
12. Notional taxation of 28% has been assumed.
DIRECTORS RESPONSIBILITY STATEMENT
The directors of Lazaron collectively and individually accept full
responsibility for the accuracy of the information given and certify that to the
best of their knowledge and belief there are no facts that have been omitted
which would make any statement false or misleading, and that all reasonable
enquiries to ascertain such facts have been made, and that the announcement
contains all information required by law and the JSE Listings Requirements.
By order of the board
Johannesburg
10 June 2011
Sponsor
Arcay Moela Sponsor (Proprietary) Limited
Date: 10/06/2011 17:27:01 Supplied by www.sharenet.co.za
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