Wrap Text
SHF - Steinhoff International Holdings Limited - Proposed disposal of
Steinhoff assets and granting of options on JD Group Limited shares
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration Number 1998/003951/06)
Share code: SHF
ISIN: ZAE000016176
("Steinhoff")
PROPOSED DISPOSAL OF STEINHOFF`S INDUSTRIAL ASSETS TO KAP INTERNATIONAL
HOLDINGS LIMITED AND THE GRANTING TO STEINHOFF OF CALL OPTIONS IN RESPECT OF
JD GROUP LIMITED SHARES
1. Introduction
The board of directors of Steinhoff announces that in-principle
agreement (the "Agreement") has been reached between Steinhoff and KAP
International Holdings Limited ("KAP"), in terms of which Steinhoff
will, subject to the fulfillment or waiver of the conditions precedent
set out in paragraph 3.4 of the announcement by KAP released
contemporaneously herewith ("the KAP Announcement"), dispose of the
entire issued ordinary share capital of PG Bison Holdings (Proprietary)
Limited ("PG Bison"), Unitrans Holdings (Proprietary) Limited
("Unitrans"), and Steinhoff`s raw materials subsidiaries ("Steinhoff Raw
Materials") (together the "Steinhoff Industrial Assets"), to KAP in
exchange for ordinary shares in KAP and the crediting of a loan account
in favour of Steinhoff, as detailed below (the "KAP Transaction").
Furthermore, Steinhoff has secured call options to acquire 27.2 million
ordinary shares in JD Group Limited ("JD Group"), exercisable at
Steinhoff`s sole discretion, in exchange for KAP shares on the basis of
16 KAP shares for each JD Group share held (the "JD Group Call
Options"). The JD Group Call Options are subject to the conditions set
out in paragraph 4 below.
The KAP Transaction and the JD Group Call Options are hereinafter
collectively referred to as the "Transactions".
2. Rationale for the Transactions
The Transactions represent a further step towards establishing,
dedicated focused and separately listed operating entities, in line with
Steinhoff`s key strategic objectives. The operating entities will
comprise:
- Steinhoff`s integrated European household goods retail operations,
which Steinhoff already controls;
- JD Group`s retail assets in southern Africa complemented by its
consumer finance platform, which Steinhoff will gain control of if
it elects to exercise the JD Group Call Options; and
- KAP, a diversified industrial business, which Steinhoff will gain
control of through the implementation of the KAP Transaction.
In addition, the Transactions will simplify Steinhoff`s existing
reporting structure and will enhance shareholders` ability to evaluate
performance and the ability of these constituent businesses to deliver
sustainable earnings growth in their local currencies, within their
respective and specialised spheres of activity, with Steinhoff as the
controlling shareholder.
3. The KAP Transaction
3.1 Nature of the Steinhoff Industrial Assets
3.1.1 PG Bison
PG Bison manufactures and distributes sawn timber, poles, wood-
based panel products, decorative laminates and solid surfacing
materials through its comprehensive national footprint.
PG Bison`s integrated timber operations comprise forestry
plantations, timber beneficiation processes sawmills, particle
board and decorative laminate plants. PG Bison`s products are
ultimately distributed to a diverse customer base in southern
Africa.
3.1.2 Unitrans
Unitrans comprises a specialist supply chain business that
designs, implements and manages supply chains and logistics
for a diverse customer base on a long term contractual basis.
Services include comprehensive warehouse-, logistics- and
related supply chain solutions for customers in southern
Africa.
In addition to the supply chain solutions, Unitrans Passenger
provides comprehensive passenger transport solutions to
various sectors, which include, inter alia, contractual
commuter and personnel transport services, intercity transport
services, tourism services, as well as management and
operations relating to the Gautrain fleet of commuter buses.
3.1.3 Steinhoff Raw Materials
Steinhoff Raw Materials manufactures various products as
highlighted below.
Steinhoff Raw Materials includes:
- Vitafoam, a flexible polyurethane foam producer active in the
furniture, packaging, insulation and cleaning industries in
South Africa and Namibia;
- BCM, a manufacturer of components predominantly used in
bedding products; and
- DesleeMattex, a technologically advanced supplier of woven
jacquard and knitted textiles to bedding and related
industries.
3.2 Nature of the KAP business
KAP is a holding company which, through its subsidiaries, is
invested in a portfolio of diverse manufacturing businesses across
some of South Africa`s most buoyant industrial and consumer
sectors. These include, inter alia, leather products, footwear,
speciality fibres, bottle resin, automotive products, towelling
products and food products.
KAP, via its subsidiaries, is operationally focused through an
industrial segment (Feltex Automotive, Industrial Footwear and
Hosaf Fibres), and a consumer segment (Jordan Shoes, Glodina, Bull
Brand and Brenner Mills).
3.3 Terms of the KAP Transaction
Subject to the fulfillment or waiver of the conditions precedent
detailed in the KAP Announcement, KAP will acquire the Steinhoff
Industrial Assets at an enterprise value of R8 921 million (the
"KAP Purchase Consideration").
The KAP Purchase Consideration will be settled by way of a fresh
issue of 1 912.8 million KAP shares credited as fully paid at an
issue price of R2.50 per share, representing a premium of 2.5% to
KAP`s 30 day VWAP up to and including 14 October 2011 and by KAP
crediting an interest-bearing loan account in favour of Steinhoff
in an amount of approximately R4 139 million ("the Claims").
As a result of the KAP Transaction, Steinhoff will increase its
shareholding in KAP from 34% to 88% and will therefore be required
to make a mandatory offer to the remaining KAP shareholders ("KAP
Minorities"). Steinhoff will, at its election, either extend a
cash offer at R2.50 per KAP share, or, as a condition precedent to
the implementation of the KAP Transaction, request that the
requirement to make a mandatory offer be waived by the KAP
Minorities at the general meeting of KAP shareholders to be
convened to consider and, if deemed appropriate, to pass all
resolutions required in order to approve and implement the KAP
Transaction (the "KAP General Meeting"). Details in respect of
Steinhoff`s election to make a mandatory offer or to require the
waiver of such offer, will be contained in a further SENS
announcement and the circular to KAP shareholders in respect of the
KAP Transaction.
3.4 JSE Small Related Party Transaction
Mr CE Daun, is a director of Steinhoff and the major shareholder in
KAP. The KAP Transaction will therefore be categorised as a small
Related Party transaction for Steinhoff in terms of the Listing
Requirements ("the Listing Requirements") of the JSE Limited ("the
JSE"). This is based on the fact that Steinhoff will effectively
only dispose of 12% of the Steinhoff Industrial Assets to KAP,
therefore retaining control over 88% of the assets so disposed.
Accordingly, Steinhoff will require a positive fairness opinion
from an independent expert that the terms and conditions of the KAP
Transaction are fair to Steinhoff shareholders. Furthermore, Mr CE
Daun recused himself from the Steinhoff board meeting held to
consider the KAP Transaction.
3.5 Effective date of the KAP Transaction
The effective date of the KAP Transaction will be the first day of
the month following the date of fulfillment or waiver, as the case
may be, of the last of the conditions precedent to the KAP
Transaction.
3.6 Financial effects of the KAP Transaction on Steinhoff
The unaudited pro forma financial effects of the KAP Transaction on
the earnings and headline earnings per share for the year ended 30
June 2011, and the net asset value per share at 30 June 2011 are
not significant (being less than 3%) and are therefore not
disclosed in accordance with section 9.15 of the Listings
Requirements of the JSE.
3.7 Shareholder undertakings
KAP has received irrevocable undertakings from KAP shareholders
holding sufficient KAP shares to vote in favour of all resolutions
required to implement the KAP Transaction at the KAP General
Meeting.
4. The JD Group Call Options
Steinhoff has secured the JD Group Call Options which, subject to, inter
alia, the KAP Transaction becoming unconditional and Steinhoff receiving
the requisite regulatory approvals, if exercised, may result in
Steinhoff acquiring up to 27.2 million JD Group shares in exchange for
435.2 million KAP shares on the basis of 16 KAP shares for each JD Group
share held. In addition, and subject to the JD Group Call Options being
exercised, Steinhoff has received indication from other JD Group
shareholders of their intention to make available to Steinhoff a further
11 million JD Group shares to exchange for 176 million KAP shares on the
same terms and conditions as the JD Group Call Options.
If and to the extent that Steinhoff exercises the JD Group Call Options
and takes transfer of the aggregate number of 38.2 million of the above
JD Group shares during, or after the latter part of January 2012, its
shareholding in JD Group could increase from the current 32.4% to more
than 50% and its shareholding in KAP will reduce to 62%, thereby
restoring the requirement contained in the Listings Requirement of the
JSE that at least 20% of the KAP shares must be held by the public.
However, Steinhoff will not exercise the JD Group Call Options if such
exercise will result in Steinhoff being obliged to make a mandatory
offer to acquire all of the remaining JD Group shares not held by
Steinhoff. In this regard, Steinhoff has already procured the relevant
voting support of 42% of JD Group shareholders (excluding Steinhoff).
The JD Group Call Options are only capable of being exercised on the
later of: (i) 14 January 2012; (ii) the date on which the KAP
Transaction becomes unconditional in accordance with its terms, or (iii)
the date upon which the last of the requisite regulatory approvals
(including Competition Tribunal approval) in respect of the exercise of
the JD Group Call Options is obtained. Notwithstanding the
aforementioned, the JD Group Call Options, if not exercised on or before
31 March 2012, shall lapse and be of no further force or effect.
Steinhoff will make a further announcement regarding its election
whether or not to exercise the JD Group Call Options at the appropriate
time.
5. Steinhoff responsibility statement
The Steinhoff board of directors accepts responsibility for the
information contained in this announcement. To the best of its knowledge
and belief, the information contained in this announcement is true and
nothing has been omitted which is likely to affect the importance of the
information.
18 October 2011
Wynberg, Sandton
Investment Bank and Transaction Sponsor to KAP transaction
Investec Corporate Finance
Joint Investment Bank
The Standard Bank of South Africa Limited
Sponsor
PSG Capital (Proprietary) Limited
Legal advisor
Cliffe Dekker Hofmeyr Incorporated
Date: 18/10/2011 12:26:55 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.