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VOX - Vox - A firm intention to make an offer to acquire the entire issued share
capital of Vox and withdrawal of cautionary
VOX TELECOM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/016433/06)
(Share code: VOX)
(ISIN: ZAE000097234)
("Vox" or "the Company")
ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER TO ACQUIRE THE ENTIRE ISSUED
SHARE CAPITAL OF VOX ("FIRM INTENTION ANNOUNCEMENT") AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Vox is pleased to announce that it has received an offer from Business
Venture Investments No 1542 (Proprietary) Limited ("BidCo"), a special
purpose vehicle held by Lereko Metier Trustees (Proprietary) Limited,
acting in its capacity as a trustee of Lereko Metier Capital Growth Fund,
Master`s reference number IT 11855/06 and the LMCGF Parallel Trust 1,
Master`s reference number IT 12788/07 ("Lereko Metier") and Investec Bank
Limited (collectively, the "Consortium") for that purpose, to acquire the
entire issued and to be issued share capital in Vox ("Vox Shares"), by way
of a scheme of arrangement in terms of section 114 of the Companies Act,
No. 71 of 2008, as amended from time to time, ("Companies Act") to be
proposed by the board of directors of Vox between Vox and its shareholders
("Vox Shareholders") ("Scheme").
The independent board of Vox, being those directors of Vox who act
independently as contemplated in the Regulations issued pursuant to the
Companies Act ("Independent Board"), BidCo and the Consortium have
concluded a written implementation agreement dated 14 July 2011
("Implementation Agreement") in relation to the Scheme.
The Implementation Agreement contains provisions relating to the
implementation of the Scheme and certain undertakings of Vox, including
terms regarding the conduct of the business of Vox in the interim period
between the date of this Firm Intention Announcement and the implementation
of the Scheme.
Vox has, in addition, entered into an exclusivity and non-solicitation
agreement with the Consortium dated 26 June 2011 ("Exclusivity Agreement"),
containing provisions which regulate the manner in which third party
approaches will be dealt with by Vox, as more fully set out in paragraph 10
of this Firm Intention Announcement.
Vox Shareholders will, if the Scheme becomes operative, be entitled to
receive, at their election:
* R0.45 (forty five cents) for every Vox Share held ("Cash
Consideration"); or
* 1 (one) BidCo share for every 10 (ten) Vox Shares held ("Consideration
Shares" or "Reinvestment Option"); or
* a combination thereof,
provided that, in the event that the Scheme becomes operative, any Vox
Shareholder who has not made an election will be deemed to have elected to
receive the Cash Consideration.
The Cash Consideration represents a premium of:
* 21.6% (twenty one point six percent) to the closing price of Vox
Shares on the securities exchange operated by the JSE Limited ("JSE")
as at 13 September 2010, being the last business day immediately prior
to the date of the first cautionary announcement (the "Publication
Date");
* 40.8% (forty point eight percent) to the volume weighted average price
("VWAP") of Vox Shares on the JSE for the 30 (thirty) days up to and
including the Publication Date;
* 47.1% (forty seven point one percent) to the VWAP of Vox Shares on the
JSE for the 6 (six) months up to and including the Publication Date;
* 25.8% (twenty five point eight percent) to the VWAP of Vox Shares on
the JSE for the 12 (twelve) months up to and including the Publication
Date;
* 21.6% (twenty one point six percent) to the closing price of Vox
Shares as at 13 July 2011, being the last business day immediately
prior to the date of this Firm Intention Announcement;
* 23.4% (twenty three point four percent) to the VWAP of Vox Shares on
the JSE for the 30 (thirty) days up to and including 13 July 2011;
* 19.3% (nineteen point three percent) to the VWAP of Vox Shares on the
JSE for the 6 (six) months up to and including 13 July 2011; and
* 19.0% (nineteen percent) to the VWAP of Vox Shares on the JSE for the
12 (twelve) months up to and including 13 July 2011.
2. RATIONALE FOR THE SCHEME
The last 3 (three) years have been challenging for Vox as a result of the
following factors:
* a negative perception of small capitalisation companies exacerbated by
the economic fallout from the global financial crisis which has
resulted in poor liquidity in Vox Shares and a lack of institutional
investor support;
* poor share price performance which has limited Vox`s ability to
conclude acquisitions, removed any value from employee share incentive
schemes and had a negative effect on employee morale;
* an uncertain regulatory environment in the South African
telecommunications industry; and
* the Dealstream collapse which created negative publicity.
As greater certainty and stability has more recently begun to prevail in
the telecommunications regulatory environment, Vox has been required to
evolve and adjust its strategy to continue providing compelling
telecommunications products and services to its clients. The Consortium
supports this strategy and believes that it will be best achieved in an
unlisted environment where management can focus on delivering the new
strategy without distraction, particularly as there is a potential for an
impact on short term profitability as this change is implemented. To
improve the prospects of success the Consortium has agreed to provide
management with a revised incentive plan to align their interests with
those of the Consortium to deliver long term value from Vox.
The Scheme, if it becomes operative, will result in the delisting of Vox as
detailed in paragraph 8 below. The Scheme will allow Vox Shareholders a
cash exit opportunity at an attractive premium to the current and
historical market prices of Vox Shares or the opportunity to remain
invested in the business in an unlisted environment.
3. CONDITIONS PRECEDENT TO THE POSTING OF THE CIRCULAR
The posting of the circular to Vox Shareholders in relation to the Scheme
is subject to the fulfilment or waiver (in whole or in part), by BidCo of
the following conditions precedent:
3.1 the independent expert appointed by the Independent Board confirming
in writing to the Independent Board and the Vox Shareholders that the
Cash Consideration offered by BidCo to Vox Shareholders in terms of
the Scheme is fair and reasonable;
3.2 the Independent Board recommending to the Vox Shareholders that they
vote in favour of the Scheme;
3.3 registration of a prospectus in relation to BidCo with the Companies
and Intellectual Property Commission and the requisite approvals being
received from the JSE and the Takeover Regulation Panel ("TRP") for
the posting of the circular (including the prospectus); and
3.4 the consents necessary in respect of the Scheme being obtained from
all material service providers to the Company.
4. CONDITIONS PRECEDENT TO THE SCHEME
4.1 The implementation of the Scheme is subject to the fulfilment or, if
appropriate, waiver, of the following outstanding conditions
precedent, which must be fulfilled, or where appropriate waived, on or
before the date which is 150 (one hundred and fifty) days from
publication of this Firm Intention Announcement, or such later date as
may be agreed in writing between Vox and BidCo:
4.1.1 all regulatory approvals and consents necessary in respect of the
Scheme being obtained, including, but not limited to approvals
and consents from the JSE, the TRP, the South African competition
authorities and the Financial Surveillance Department of the
South African Reserve Bank;
4.1.2 the special resolution necessary to approve the Scheme being
proposed at a shareholders meeting of Vox Shareholders and
adopted by a majority representing not less than 75% (seventy
five percent) of the votes exercised by Vox Shareholders present
and entitled to vote on such resolution, either in person or by
proxy;
4.1.3 the special resolution necessary to approve the Scheme not being
opposed by 15% (fifteen percent) or more of the voting rights
exercised on such resolution, or, should the resolution be
opposed by 15% (fifteen percent) or more of the voting rights
exercised on it, no person who voted against the special
resolution requiring the Company to seek court approval in terms
of section 115(3) of the Companies Act. This condition may be
waived by BidCo;
4.1.4 if the special resolution necessary to approve the Scheme is
opposed by 15% (fifteen percent) or more of the voting rights
exercised on such resolution, and a person who voted against the
special resolution requires the Company to seek court approval
and BidCo waives the condition precedent in paragraph 4.1.3, and
the Company does not elect to treat the special resolution as a
nullity in terms of section 115(5) of the Companies Act, the
court approves the special resolution in terms of section 115(3)
of the Companies Act;
4.1.5 no leave to review the transaction being granted by the court, on
an application within 10 (ten) business days after the vote, to
any person who voted against the special resolution and who
applied to the court for a review of the Scheme in terms of
section 115(7) of the Companies Act. This condition may be
waived by BidCo on condition that the court approves the special
resolution in terms of section 115(3) of the Companies Act;
4.1.6 within the period prescribed under section 164(7) of the
Companies Act, no valid demands having been received by Vox in
terms of such section which, in aggregate, represent more than 5%
(five percent) of the Vox Shares. This condition may be waived
by BidCo; and
4.1.7 by the date on which each of the abovementioned conditions are
fulfilled or waived (as the case may be), an adverse effect,
fact, circumstance which is or might reasonably be expected
(alone or together with any other such adverse effect, fact or
circumstance) to be material with regard to the operations,
continued existence, business, condition, assets and liabilities
of Vox and its subsidiaries (whether as a consequence of the
Scheme or not) has not occurred. For the purposes of this
clause, to be material, the adverse effect, fact or circumstance
must -
4.1.7.1 have (or be reasonably expected to have) an adverse effect upon
Vox`s annual profit after tax ("PAT"), of not less than
R10,000,000.00 (ten million rand); or
4.1.7.2 constitute a change in the laws of the Republic of South Africa
(including, without limitation, laws relating to taxation) which
has (or may reasonably be expected to have) a material adverse
effect upon the Scheme such that the effective direct or indirect
cost of the Scheme would increase by 15% (fifteen percent) or
more; or
4.1.7.3 consist of a fall in the JSE All Share Index of 15% (fifteen
percent) or more compared with such index as at the last trading
day of June 2011.
4.2 Vox and BidCo have undertaken in favour of one another to use their
respective reasonable commercial endeavours to do all things and take
all steps as may be reasonably necessary or desirable in order to
procure, insofar as it is lawfully able, the fulfilment of the above
conditions.
5. PRO FORMA EARNINGS AND NET ASSET VALUE EFFECT PERTAINING TO THE
REINVESTMENT OPTION
The unaudited pro forma financial effects of the Reinvestment Option, for
which the directors of Vox and BidCo are responsible, are provided for
illustrative purposes only to provide information about how the Scheme will
affect the financial position of the Vox shareholders who elect to receive
the Reinvestment Option and the effect thereof on the earnings per share
("EPS"), diluted earnings per share ("DEPS"), headline earnings per share
("HEPS") and diluted headline earnings per share ("DHEPS") of Vox compared
to BidCo as if the Scheme had become operative on 1 September 2010, and,
for the purpose of net asset value per share ("NAVPS") and net tangible
asset value per share ("NTAVPS") of Vox as compared to BidCo as if the
Scheme had become operative on 28 February 2011. Because of their nature,
the unaudited pro forma financial effects may not give a fair presentation
of BidCo`s financial position and performance. The unaudited pro forma
financial effects have been compiled from the reviewed consolidated
financial statements of Vox for the six months ended 28 February 2011 and
are presented in a manner consistent with the format and accounting
policies adopted by Vox and have been adjusted as described in the notes
set out below:
Before the After the % Change
Scheme Scheme
(Note 1) (Notes 2-5)
EPS (cents) 2.16 -0.15 -107%
DEPS (cents) 2.16 -0.15 -107%
HEPS (cents) 2.14 -0.17 -108%
DHEPS (cents) 2.14 -0.17 -108%
NAVPS (cents) 46.71 44.93 -4%
NTAVPS (cents) 9.08 7.30 -20%
Weighted average number of 1,108,501 1,108,501 0%
shares in issue (`000)
Diluted weighted average 1,108,501 1,108,501 0%
number of shares in issue
(`000)
Notes:
1.) The financial information in the "Before the Scheme" column has been
based on the financial effects of the reviewed consolidated financial
statements of Vox for the six months ended 28 February 2011.
2.) The EPS, DEPS, HEPS and DHEPS included in the "After the Scheme"
column have been prepared by including the earnings effects of the
Scheme to the reviewed consolidated financial statements of Vox for
the six months ended 28 February 2011, as if the Scheme had become
operative on 1 September 2010.
3.) The NAVPS and NTAVPS included in the "After the Scheme" column have
been prepared by including the balance sheet effects of the Scheme to
the reviewed consolidated financial statements of Vox for the six
months ended 28 February 2011, as if the Scheme had become operative
on 28 February 2011.
4.) The EPS, DEPS, HEPS and DHEPS included in the "After the Scheme"
column have been adjusted for the following:
* to include the additional charge in terms of IFRS 2: Share -based
Payments, amounting to R4.3 million, incurred as a result of the
accelerated vesting cancellation of management`s Share
Appreciation Rights ("SARS"), totalling 15,8m SARS;
* to include the additional charge in terms of IFRS 2: Share -based
Payments amounting to R1.5m, incurred as a result of the new
management incentive scheme whereby preference shares will be
issued to management, linked to a notional loan accruing
interest at prime + 5% and sharing equally in dividends of BidCo.
* to include the once-off transaction costs amounting to R19.7
million;
* no dilutive impact by the SAR`S scheme for dilutive earnings per
share or dilutive headline earnings per share calculation as
these SAR`s have a strike price of 54 cents per share and are
currently out of the money;
* to include the tax effect of R0.1m as a result of all the
adjustments mentioned above;
5) The NAVPS and NTAVPS included in the "After the Scheme" column have
been adjusted to include the once-off transaction costs amounting to
R19.7 million. The additional charge in terms of IFRS 2: Share -based
Payments, amounting to R4.3 million, incurred as a result of the
accelerated vesting cancellation of management`s Share Appreciation
Rights ("SARS"), totalling 15,8m SARS as well as the additional charge
of R1.5m as a result of the new management incentive scheme whereby
preference shares will be issued to management, linked to a notional
loan accruing interest at prime + 5% and sharing equally in dividends
of BidCo does not have an impact on the NAVPS and NTAVPS included in
the "After the Scheme" column.
6) For ease of comparability, the pro forma calculations do not take into
account the new capital structure proposed by BidCo, which will
consist of 1 BidCo share for every 10 Vox shares in issue.
6. UNDERTAKINGS
BidCo has received irrevocable undertakings and letters of intent from
certain Vox Shareholders holding between them 444,319,700 (four hundred and
forty four million three hundred and nineteen thousand seven hundred) Vox
Shares to vote in favour of the Scheme and the resolutions to be proposed
at the shareholders meeting, representing in aggregate 40.1% (forty point
one percent) of the existing issued ordinary share capital of Vox and 53.4%
(fifty three point four percent) of the Vox Shareholders entitled to vote
at the Scheme meeting.
Vox Shareholders holding in aggregate 137,500,000 (one hundred and thirty
seven million five hundred thousand) Vox Shares and representing in
aggregate 12.4% (twelve point four percent) of the existing issued ordinary
share capital of Vox have irrevocably undertaken to accept the Cash
Consideration.
Vox Shareholders holding in aggregate 259,819,700 (two hundred and fifty
nine million eight hundred and nineteen thousand seven hundred) Vox Shares
and representing in aggregate 23.4% (twenty three point four percent) of
the existing issued ordinary share capital of Vox have irrevocably
undertaken to accept Consideration Shares. In addition, Lereko Metier has
undertaken to accept Consideration Shares in return for the 275,396,137
(two hundred and seventy five million three hundred and ninety six thousand
one hundred and thirty seven) Vox Shares held by it.
As a result, the maximum amount payable by BidCo if all other Vox
Shareholders elect (or are deemed to have elected) to receive the Cash
Consideration in return for their Vox Shares is R257,978,174.00 (two
hundred and fifty seven million nine hundred and seventy eight thousand one
hundred and seventy four rand).
7. GUARANTEES AND CONFIRMATIONS TO THE TAKEOVER REGULATION PANEL
Investec Bank Limited has delivered an irrevocable, unconditional bank
guarantee in compliance with the TRP requirements in favour of Vox to Vox
and the TRP in an amount of R190,953,218.03 (one hundred and ninety million
nine hundred and fifty three thousand two hundred and eighteen rand and
three cents). In addition, Cliffe Dekker Hofmeyr Inc, on behalf of Lereko
Metier, has provided to Vox and the TRP irrevocable written confirmation in
compliance with the TRP requirements to the effect that it holds the sum of
R67,024,956.38 (sixty seven million twenty four thousand nine hundred and
fifty six rand and thirty eight cents) in its trust account in favour of
Vox. The aggregate amount of the bank guarantee and the written
confirmation is sufficient for the purpose of fully satisfying the Cash
Consideration payable in terms of the Scheme having regard to the
irrevocable undertakings received from Vox Shareholders to date to accept
Consideration Shares in return for Vox Shares as referred to in paragraph 6
above.
BidCo will have sufficient authorised and unissued shares available to
issue the maximum Consideration Shares.
8. TERMINATION OF VOX LISTING
Following implementation of the Scheme, application will be made to the JSE
to terminate the listing of Vox Shares on the JSE.
9. SHAREHOLDINGS IN VOX AND ACTING AS PRINCIPAL
Lereko Metier Capital Growth Fund is the beneficial owner of 275,396,137
(two hundred and seventy five million three hundred and ninety six thousand
one hundred and thirty seven) Vox Shares, comprising 24.84% (twenty four
point eight four percent) of the issued share capital of Vox. Investec
Bank Limited does not currently hold or control any Vox Shares or options
to acquire any Vox Shares.
BidCo is the ultimate prospective purchaser and is acting alone and not in
conjunction with, or as agent or broker for, any other party.
Paul Botha, a director of Lereko Metier, currently holds 250,000 (two
hundred and fifty thousand) Vox Shares and the trustees for the time being
of the Botha Family Trust, Master`s reference number IT 55/1994 currently
hold 220,000 (two hundred and twenty thousand) Vox Shares.
RMB Investments and Advisory (Proprietary) Limited holding 259,819,700 (two
hundred and fifty nine million eight hundred and nineteen thousand seven
hundred) Vox Shares has irrevocably committed to vote in favour of the
Scheme and has elected to receive the Consideration Shares in respect of
all their Vox Shares.
Mvelaphanda Group Limited holding 137,000,000 (one hundred and thirty seven
million) Vox Shares has irrevocably committed to vote in favour of the
Scheme and has elected to receive the Cash Consideration in respect of all
their Vox shares.
Industrial Development Corporation of South Africa Limited holding
47,000,000 (forty seven million) Vox Shares has irrevocably committed to
vote in favour of the Scheme.
10. THIRD PARTY APPROACHES
Vox has, in terms of the Exclusivity Agreement, agreed that it will not
(and will procure that certain other related persons will not) directly or
indirectly:
(i) solicit or initiate any expression of interest, enquiry, proposal or offer
regarding any merger, amalgamation, share exchange, business combination,
take-over bid, sale or other disposition of all or substantially all of
Vox`s assets, recapitalisation, reorganisation, liquidation, material sale
or issue of treasury securities or rights or interests therein or thereto
or rights or options to acquire any material number of treasury securities
or any type of similar transaction, or series of transactions, which is
likely to constitute a change of control in Vox (as defined in the
Companies Act) or could reasonably be considered to be likely to preclude
the Scheme or its implementation (each an "Alternative Proposal");
(ii) participate in any negotiations with a third party regarding the
implementation of any Alternative Proposal unless it constitutes a Superior
Proposal (as defined below), it being agreed that any discussions (which do
not constitute negotiations) with a third party in relation to any
Alternative Proposal will be limited to those required to determine whether
the Alternative Proposal is a Superior Proposal and to those which the
Independent Board is required to enter into in order to discharge its
lawful obligations;
(iii)agree to, approve or recommend an Alternative Proposal (unless it
constitutes a Superior Proposal); or
(iv) enter into any agreement related to an Alternative Proposal (unless it
constitutes a Superior Proposal).
Notwithstanding the above, nothing shall prevent Vox and/or the Independent
Board from furnishing non-public information to, or entering into a
confidentiality agreement and/or discussions with, any person in response to a
bona fide Alternative Proposal that is submitted by such person after the
signature date of the Exclusivity Agreement which is not withdrawn, provided:
(i) the Independent Board concludes that such action is required in order for
them to comply with their fiduciary obligations under applicable law,
including without limitation their obligations under the Companies Act
and/or any regulations promulgated thereunder;
(ii) Vox informs BidCo in the event that it receives an Alternative Proposal,
such information to be conveyed to BidCo by no later than 48 (forty eight)
hours after receipt by Vox of the Alternative Proposal; and
(iii)in the event that Vox provides such non-public information to such
person, Vox provides BidCo with copies of all such due diligence
materials exchanged between such person and Vox, to the extent not already
provided to BidCo.
"Superior Proposal" means a bona fide Alternative Proposal received by Vox
which the Independent Board determines would, if consummated in accordance
with its terms, result in a transaction more favourable to Vox Shareholders
than the Scheme, taking into account, inter alia, the likelihood of such
transaction being completed within a reasonable period of time and the
financing risks relating thereto.
Vox has agreed that should it receive an Alternative Proposal which the
Independent Board determines is a Superior Proposal, it shall give BidCo
written notice of such determination within 48 (forty eight) hours of the
determination being made.
11. RECOMMENDATION AND FAIRNESS OPINION
The Independent Board intends, based on the information currently available
to it, to make a unanimous recommendation to Vox Shareholders to vote in
favour of the resolutions to be proposed at the shareholders meeting to
approve the Scheme, provided that the Independent Board receives an opinion
from the independent expert to the effect that the Cash Consideration is
fair and reasonable and that the Reinvestment Option is reasonable.
The Independent Board has appointed KPMG Services (Proprietary) Limited, an
independent advisor acceptable to the TRP, to provide it with external
advice in relation to the Scheme and to make appropriate recommendations to
the Independent Board for the benefit of Vox Shareholders.
The substance of the external advice and the views of the Independent Board
will be detailed in the circular to be sent to Vox Shareholders in relation
to the Scheme.
12. DOCUMENTATION
Further details of the Scheme will be included in the circular to be sent
to Vox Shareholders, containing, inter alia, a notice of the meeting of Vox
Shareholders, a form of proxy, a form of surrender and transfer and a
prospectus in relation to BidCo. The circular is expected to be posted to
Vox Shareholders on or about 19 August 2011. The salient dates in relation
to the Scheme will be published prior to the posting of the circular.
13. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Following the release of this Firm Intention Announcement, the cautionary
announcement originally published by Vox on 13 September 2010 and
subsequently renewed, the last renewal of which took place on 2 June 2011,
is hereby withdrawn and caution is no longer required to be exercised by
Vox Shareholders when dealing in Vox Shares.
14. RESPONSIBILITY STATEMENT
BidCo and the Independent Board accept responsibility for the information
contained in this Firm Intention Announcement. To the best of their
respective knowledge and belief, the information contained in this
announcement is true and nothing has been omitted which is likely to affect
the import of the information.
Johannesburg
14 July 2011
Corporate advisor and Designated Advisor to Vox
Grindrod Bank Limited
Independent expert to Vox
KPMG Services (Proprietary) Limited
Legal and tax advisor to Vox
Webber Wentzel
Corporate advisor to the Consortium and BidCo
Investec Corporate Finance (a division of Investec Bank Limited)
Legal advisor to the Consortium and BidCo
Cliffe Dekker Hofmeyr Inc.
Auditors and Reporting Accountants to Vox and BidCo
Deloitte & Touche
Communications advisor to the Consortium
Brunswick South Africa Limited
Date: 14/07/2011 16:07:01 Supplied by www.sharenet.co.za
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