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SBK - Standard Bank Group Limited - Proposed disposal of controlling
shareholdings in Standard Bank Argentina S.A. and its affiliated companies to
Industrial and Commercial Bank of China Limited ("the proposed transaction")
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/017128/06)
South African Share Code: SBK
Namibian Share Code: SNB
ISIN: ZAE000109815
("Standard Bank Group" or "the group")
Proposed disposal of controlling shareholdings in Standard Bank Argentina S.A.
and its affiliated companies to Industrial and Commercial Bank of China Limited
("the proposed transaction")
Introduction
Shareholders of Standard Bank Group are advised that the group has agreed the
terms of the disposal of a 55% stake in Standard Bank Argentina S.A. and a 50%
stake in each of Standard Investments S.A. Sociedad Gerente de Fondos Comunes de
Inversion ("SI") and Inversora Diagonal S.A. ("ID") (the three companies
collectively referred to as "SBA") to Industrial and Commercial Bank of China
Limited ("ICBC"), which is a 20% shareholder in the group. After the
implementation of the proposed transaction, Standard Bank Group will remain a
20% shareholder in SBA.
Rationale
Standard Bank Group`s refined strategy is to focus on serving the needs of our
customers through first-class, on-the-ground operations in chosen countries in
Africa. We will also connect other selected emerging markets to Africa and to
each other, applying our sector expertise, particularly in natural resources,
globally.
ICBC is the group`s strategic partner and since 2008 the two groups have
cooperated on a wide range of initiatives in Africa and other emerging markets,
particularly with a focus on growing trade and investment flows between China
and Africa. ICBC`s global expansion strategy is to establish a global and
multi-
functional service chain to follow and serve multi-national companies, enhance
global service capability to high-end clients and put emphasis on development in
high growth markets. As Argentina is a high growth emerging market with strong
trade links to China, ICBC`s acquisition of control of SBA while retaining a
continuing Argentinean partnership with Standard Bank Group achieves multiple
objectives for ICBC.
Standard Bank Group has operated in Argentina for over twelve years,
meaningfully increasing its presence in 2007 when Standard Bank Argentina S.A.
completed the acquisition of the Argentinean operations of BankBoston N.A.
While SBA has been a profitable and well-managed acquisition for the group, it
is currently the group`s only universal banking operation outside of the African
continent. The group`s refined strategy will constrain the growth potential of
SBA in the medium term and the prospect of partnering with ICBC, the world`s
largest bank by market capitalisation, in growing the business of SBA offers
opportunities for growth that would not be available to the group on a stand-
alone basis.
The proposed transaction will further enhance the group`s relationship with ICBC
and provide ICBC with an entry point into Argentina as the first Chinese bank to
operate there, despite China being Argentina`s second largest trading partner.
The group`s remaining 20% shareholding will provide a continuing platform for
the group to connect Argentina to Africa and other selected emerging markets
(including Brazil and China).
The proposed transaction also presents an opportunity to realise value from the
group`s successful investment in Argentina and to partner with ICBC in growing
the business in a country in which Standard Bank Group would not currently
expand, in terms of its refocused strategy. The proceeds on disposal will
realise and release a significant amount of capital for the group from outside
of the African continent.
Terms of the proposed transaction
Standard Bank Group holds 75% of the issued shares of Standard Bank Argentina
S.A. and 70% of the issued shares of each of Standard Bank Argentina S.A.`s
affiliates, SI and ID. The balance of the shareholding in each company is
presently held by the group`s Argentinean partners.
The group and its Argentinean partners have agreed with ICBC that ICBC will
acquire 80% of the shares of each of Standard Bank Argentina S.A., SI and ID
for a cash consideration of USD600 million (valuing 100% of SBA at USD750
million). This consideration is subject to variation based on the increase
in the peso net asset value of SBA from 1 January 2011 to the closing date of
the proposed transaction (which is expected to be in the first half of 2012)
converted into USD at that date and adjusted on a dollar for dollar basis from
an agreed USD68 million, should such increase be less than USD63 million or
more than USD73 million. ICBC will acquire a 55% stake in Standard Bank
Argentina S.A. and a 50% stake in SI and ID from the group, with Standard
Bank Group retaining 20% of each company. The net proceeds after estimated
transactions costs attributable to the group would be approximately USD400
million. This estimate is based on the assumption that there will be no
adjustment to the purchase consideration arising from the net asset value
variation mechanism described above.
In order to facilitate the future growth of SBA, it is proposed that the
capital base of Standard Bank Argentina S.A. will be increased by an additional
USD100 million equity injection by its shareholders, of which Standard Bank
Group`s share is USD20 million, after the closing of the proposed transaction.
ICBC will assume management responsibility for SBA from the date of closing
of the proposed transaction.
Standard Bank Group`s shareholder relationship in SBA with ICBC will be
regulated by a shareholders` agreement that will provide, inter alia, standard
minority protections and the right for Standard Bank Group to require ICBC to
acquire its remaining shares in SBA at the final transaction value determined
after any net asset value adjustment as described above and adjusted for the
agreed capital injection, between the second and seventh anniversary of the
closing of the proposed transaction.
Pro forma financial effects
The pro forma financial effects set out below reflect an approximate 1.4%
reduction in headline earnings per Standard Bank Group ordinary share
("HEPS") and diluted HEPS as presented under International Financial Reporting
Standards ("IFRS"). The pro forma financial effects set out below reflect an
approximate 10.5% increase in earnings per share ("EPS") and diluted EPS
presented under IFRS. The primary reason for the difference in the effects
on HEPS and EPS is that, in terms of South African reporting requirements, a
gain arising from a disposal of an interest in a strategic subsidiary is
excluded from HEPS.
The pro forma financial effects set out below have been prepared to assist
ordinary shareholders of Standard Bank Group to assess the impact of the
proposed transaction on the EPS and HEPS, diluted EPS and diluted HEPS, Net
Asset Value per Standard Bank Group ordinary share ("NAVPS") and Tangible
NAVPS ("TNAVPS"). The material assumptions used in deriving these financial
effects are set out in the notes following the table. These pro forma financial
effects have been disclosed in terms of the Listings Requirements of the
JSE Limited ("the JSE") ("the Listings Requirements") and do not constitute a
representation of the future financial position of Standard Bank Group on
implementation of the proposed transaction. The pro forma financial effects
are the responsibility of the board of directors of Standard Bank Group ("the
board") and are provided for illustrative purposes only. Due to their nature,
the pro forma financial effects may not fairly present the financial position,
changes in equity, results of operations or cash flows of Standard Bank Group
after the proposed transaction. Consistent with the group`s reporting practices,
these financial effects have been presented on the basis of IFRS and on a
normalised basis. The group normalises or adjusts its IFRS results for three
specific accounting circumstances where IFRS does not reflect the underlying
economic and legal substance of the following arrangements:
- the group`s Black Economic Empowerment Ownership (Tutuwa) initiative;
- group shares held by Liberty for the benefit of policyholders; and
- group share exposures entered into to facilitate client trading activities.
Before the After the Change
proposed proposed %
transaction transaction
(cents) (cents)
IFRS
EPS 722 798 10.5%
Diluted EPS 696 769 10.5%
HEPS 735 725 (1.4%)
Diluted 709 699 (1.4%)
HEPS
NAVPS 5 785 5 915 2.2%
TNAVPS 5 095 5 228 2.6%
Normalised
EPS 704 776 10.2%
Diluted EPS 697 769 10.3%
HEPS 716 706 (1.4%)
Diluted 710 700 (1.4%)
HEPS
NAVPS 5 726 5 849 2.1%
TNAVPS 5 071 5 197 2.5%
Notes:
1 The EPS, diluted EPS, HEPS and diluted HEPS, NAVPS and TNAVPS "Before the
proposed transaction" are based on the results for the 12 months ended 31
December 2010 per the audited annual financial statements.
2 The EPS and diluted EPS "After the proposed transaction" are based on the
assumption that the proposed transaction was implemented on 1 January 2010,
but using the audited NAV of SBA, reserve balances and prevailing exchange
rates as at 31 December 2010, and the fair value of the group`s remaining
20% stake in SBA and the fair value of the put option granted by ICBC to
calculate the pro forma gain recognised on completion of the proposed
transaction. Interest earned on the cash proceeds of the proposed
transaction was calculated using market interest rates and average exchange
rates over the period.
3 The HEPS and diluted HEPS "After the proposed transaction" are based on the
same assumptions as those used in calculating the EPS and diluted EPS
"After the proposed transaction" except that the profit recognised on the
disposal of shares to ICBC, the restatement of the Standard Bank Group`s
remaining 20% shareholding in SBA to fair value, the recognition of the
fair value of the put option granted by ICBC and estimated transaction
costs are not taken into consideration for the purposes of the calculation.
4 The NAVPS and TNAVPS "After the proposed transaction" are based on the
assumption that the proposed transaction was implemented on 31 December
2010.
5 The EPS and HEPS "After the proposed transaction" are based on a weighted
average number of Standard Bank Group ordinary shares in issue of 1 491 956
133 (IFRS) and 1 576 091 961 (normalised).
6 The diluted EPS and diluted HEPS "After the proposed transaction" are based
on a diluted weighted average number of Standard Bank Group ordinary shares
in issue of 1 548 000 723 (IFRS) and 1 590 082 782 (normalised).
7 The NAVPS and TNAVPS "After the proposed transaction" are based on a number
of Standard Bank Group ordinary shares in issue of 1 505 093 160 (IFRS) and
1 585 037 321 (normalised).
Independent fairness opinion
In terms of the Listings Requirements, the proposed transaction is categorised
as a small related party transaction. Accordingly, an opinion on the fairness
of the transaction to shareholders of the group is required to be given by an
independent professional expert acceptable to the JSE. JPMorgan Chase Bank N.A.,
Johannesburg Branch ("J.P. Morgan") has been appointed by the board to advise
whether the terms and conditions of the proposed transaction are fair to
shareholders of the group.
J.P. Morgan`s opinion given to the board is that the transaction is fair to
shareholders of the group. The opinion of J.P. Morgan will lie for inspection at
Standard Bank Group`s registered office, 9th floor, 5 Simmonds Street,
Johannesburg, for a period of 28 days from the release of this announcement.
Conditions precedent
The proposed transaction is subject to customary conditions precedent,
including, inter alia:
- approval by the Chinese Banking Regulatory Commission;
- no decision having been taken by the State Administration of Foreign
Exchange of China to prevent finalisation of the proposed transaction; and
- approval by Argentinean regulatory authorities including the Banco Central
de la Republica Argentina.
The completion date in respect of the proposed transaction is expected to be in
the first half of 2012 and the proceeds on such disposal will only be received
at that time.
Johannesburg
5 August 2011
Investment bank and sponsor to Standard Bank Group
Standard Bank
Legal advisers to Standard Bank Group
Jones Day
Independent professional expert
JPMorgan Chase Bank N.A., Johannesburg Branch
Lead independent sponsor to Standard Bank Group
Deutsche Securities (SA) Proprietary Limited
Date: 05/08/2011 07:17:01 Supplied by www.sharenet.co.za
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