Wrap Text
EXX - Exxaro Resources Limited - Unaudited pro forma financial effects of the
proposed transaction with Tronox Incorporated and withdrawal of cautionary
announcement
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/011076/06)
Issuer Code: EXX
ISIN: ZAE000084992
("Exxaro")
UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION WITH TRONOX
INCORPORATED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Exxaro shareholders are referred to the announcement released on SENS on 26
September 2011 and published in the press on 27 September 2011 relating to the
proposed transaction between Exxaro and Tronox Incorporated ("Tronox"), which
entails the combination of Exxaro`s Mineral Sands Operations with the businesses
of Tronox under a newly-formed Australian holding company ("New Tronox") in
exchange for approximately 38.5% of the shares in New Tronox (the "Proposed
Transaction").
The unaudited pro forma financial effects of the Proposed Transaction on Exxaro
have now been finalised and are set out below. The financial effects of the
Proposed Transaction on Exxaro have been prepared using Exxaro`s interim
financial results for the 6 months ended 30 June 2011, which were released on
SENS on 18 August 2011. For purposes of the impact of the Proposed Transaction
on the consolidated statement of comprehensive income, it is assumed that the
Proposed Transaction occurred on 1 January 2011, and for purposes of adjusting
the consolidated statement of financial position, it is assumed that the
Proposed Transaction occurred on 30 June 2011. The consolidated statement of
comprehensive income of Exxaro includes the statement of comprehensive income of
Tronox for the 6 months ended 30 June 2011, while the pro forma consolidated
statement of financial position of Exxaro includes the statement of financial
position of Tronox as at 30 June 2011. The unaudited pro forma financial
information is presented for illustrative purposes only, and because of its
nature, may not fairly present Exxaro`s financial position, changes in equity,
results of operations or cash flows going forward.
The unaudited pro forma financial information has been prepared using accounting
policies that are consistent with International Financial Reporting Standards
(IFRS) and have been presented on the same basis using the accounting policies
that Exxaro has adopted in its historical financial information.
The Exxaro Board is responsible for the compilation, contents and presentation
of the unaudited pro forma financial information contained in this announcement
and for the financial information from which it has been prepared. Their
responsibility includes determining that the unaudited pro forma financial
information has been properly compiled on the basis stated; that the basis is
consistent with the accounting policies of Exxaro; and that the pro forma
adjustments are appropriate for the purposes of the unaudited pro forma
financial information disclosed in terms of the JSE Limited Listings
Requirements.
Unaudited pro forma financial effects Before(1) After % change
Earnings Per Share (Cents)
- basic 921 3,272 255%
- diluted 885 3,145 255%
Headline Earnings Per Share(Cents)(1)
- basic 1,045 981 (6%)
- diluted 1,005 943 (6%)
Net Asset Value Per Share (Rands) 55 78 42%
Net Tangible Asset Value Per Share
(Rands) 55 77 40%
Ordinary shares (million)
- issue 359 359 0%
- weighted average number of shares 348 348 0%
- diluted 362 362 0%
Notes:
(1) Based on Exxaro`s reviewed interim results for the six months ended 30 June
2011, as published on 18 August 2011.
(2) The adjusted earnings per share shows the illustrative effect of the
Proposed Transaction on earnings per share after adjusting for certain non-
recurring accounting entries arising from the implementation of the Proposed
Transaction.
The items that have been adjusted for in the calculation of the illustrative
adjusted earnings per share, and their impact, are as follows:
Illustrative headline earnings (Rand) Gross Tax Net
Rm Rm Rm
Exxaro headline earnings for the period ended 3 637
30 June 2011
Pro forma transactions(1) 8 181 8 181
Adjusted for:
Gains on disposal of property, plant and (18) 5 (13)
equipment
Gain on disposal of subsidiaries and joint (8 391) (8 391)
ventures
Headline earnings 3 414
Illustrative headline earnings per share
(Cents)
Basic 981
Diluted 943
Notes:
(1) The pro forma financial effects assume that Exxaro disposed of 74% of the
shares and intercompany debt in Exxaro`s South African Mineral Sands Operations
(the Namakwa Sands and KZN Sands mines and smelters (collectively the South
African Operations)) and Exxaro`s 50% interest in the Tiwest Joint Venture in
Australia on 1 January 2011, in return for 38.5% of the shares of New Tronox.
The purpose of the financial effects is to illustrate the impact of the
transaction on:
- attributable and headline earnings per share for the period 1 January 2011
to 30 June 2011; and
- net asset value and net tangible asset value per share at 30 June 2011, on
the assumption that the transaction had been implemented on 30 June 2011.
ASSUMPTIONS IN THE PREPARATION OF THE FINANCIAL EFFECTS
1.Flip-up option
The flip-up option has not been included in the calculation of the financial
effects because it is expected that the current South African legislation in
relation to Black Economic Empowerment will not change in the near future. For
this reason it has been assumed that the option will not be exercised in the
near future.
2.Impairment reversals
No impairment reversals of the 2006 and 2009 KZN Sands Operations have been
taken into account in the financial effects.
3.Accounting for the South African assets
Exxaro will own a direct shareholding of 26% and an indirect shareholding
of 38,5% through New Tronox of the total South African Operations. This results
in an effective shareholding of 54,49 % of the South African Operations. Equity
accounting has been applied in the preparation of the financial effects. It is
expected that Exxaro will not have the power to govern the financial and
operating policies of the operations, so as to benefit from their activities. It
has been assumed that the control of the operations will rest with New Tronox,
although Exxaro will have significant influence.
4.The determination of fair value
The pro forma equity value of New Tronox used in the preparation of the
financial effects is R27,8 billion, based on the volume weighted average price
at which Tronox`s common shares traded for the 30 trading days to 23 September
2011 ("30 day VWAP"), being USD130,42 (R1 078,95 using a ZAR/USD exchange rate
of 8,27 on 23 September 2011). The implied Exxaro value used was therefore R10,7
billion.
5.Proceeds on disposal
The purchase price will be settled by the issue of shares. These proceeds on
disposal are based on the volume weighted average price at which Tronox`s common
shares traded for the 30 trading days to 23 September 2011 ("30 day VWAP"),
being USD130,42 (R1 078,95 using a ZAR/USD exchange rate of 8,27 on 23 September
2011). The implied Exxaro value used was therefore R10,7 billion.
6.Accounting policies
The pro forma financial effects have been prepared using accounting policies
consistent with IFRS and have been presented on the same basis using the
accounting policies that Exxaro has adopted in its historical financial
information.
7.Tronox reorganisation income
The pro forma financial information excludes Tronox`s reorganisation
income.
8.Conversion of Tronox Results for the period ended 30 June 2011
Tronox`s results used in the preparation of the financial effects have been
converted from US GAAP to IFRS and in accordance with the accounting policies of
Exxaro.
9.Exchange rates used
Against ZAR USD AUD
The following exchange rates were 6.78 7.28
used for the translation of the
statements of financial position
10.Transaction fees
All transaction fees incurred and forecast have been included in the financial
effects.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
In light of the above, Exxaro shareholders are advised that caution is no longer
required to be exercised when dealing in Exxaro securities.
FORWARD-LOOKING STATEMENTS
This announcement contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (a United States Act).
Forward-looking statements are statements that are not historical facts,
including statements concerning the anticipated timing of filings and approvals
relating to the Proposed Transaction; the expected timing of the completion of
the Proposed Transaction; the expected benefits and costs of the Proposed
transaction; management plans relating to the Proposed transaction; the ability
to complete the Proposed Transaction in view of the various closing conditions;
the possibility that the Proposed Transaction may not be completed; any
projections of earnings, revenues, synergies, accretion, margins or other
financial items; any statements of operations, including the execution of
integration plans; any statements of expectation or belief; and any statements
of assumptions underlying any of the foregoing. Any statement in this
announcement that expresses or implies Tronox`s, Exxaro`s or New Tronox`s
intentions, beliefs, expectations or predictions (and the assumptions underlying
them) is a forward-looking statement. Forward-looking statements involve
inherent risks, uncertainties and assumptions, including, without limitation,
risks related to the timing or ultimate completion of the Proposed Transaction;
the possibility that expected benefits may not materialize as expected; that,
prior to the completion of the Proposed Transaction, Tronox`s business or
Exxaro`s business may not perform as expected due to uncertainty; that the
parties are unable to successfully implement integration strategies or otherwise
realise the synergies anticipated for the Proposed Transaction; and other risks
and uncertainties that are beyond the parties` control. If such risks or
uncertainties materialise or such assumptions prove incorrect, actual results
could differ materially from those expressed or implied by such forward-looking
statements and assumptions. The forward-looking statements contained in this
announcement are made as of the date hereof, and Tronox and Exxaro each
expressly disclaim any obligation to update or correct any forward-looking
statements made herein due to the occurrence of events after the issuance of
this announcement.
IMPORTANT ADDITIONAL INFORMATION
This announcement is for informational purposes only and is not an offer to sell
or the solicitation of an offer to purchase or exchange any securities, nor
shall there be any sale of securities, in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. The publication and
distribution of this announcement and any separate documentation regarding the
Proposed Transaction, the making of any offer for shares or the issuance and
offer to purchase New Tronox`s shares may be subject to specific regulations or
restrictions in certain jurisdictions. As a result, persons in possession of
this announcement must seek information as to any applicable local restrictions
and comply therewith. None of Tronox, Exxaro, New Tronox or any of their
respective affiliates undertakes any liability of any kind for any violation of
applicable law. The solicitation of Tronox shareholder consent for the Proposed
Transactions and the offer of the New Tronox`s shares will only be made pursuant
to a solicitation and information statement and related materials that are
intended to be filed with the SEC.
Tronox and Exxaro intend for New Tronox to file a registration statement and
solicitation and information statement, together with other related materials,
with the SEC in connection with the Proposed Transaction. Information regarding
the participants in the Proposed Transaction and a description of their direct
and indirect interests, by security holdings or otherwise, will be contained in
the relevant materials to be filed with the SEC when they become available.
TRONOX SHAREHOLDERS ARE URGED TO READ THESE MATERIALS REGARDING THE PROPOSED
TRANSACTION CAREFULLY PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO THE PROPOSED
TRANSACTION, IF AND WHEN THESE MATERIALS BECOME AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION, INCLUDING THE TERMS AND CONDITIONS OF THE
PROPOSED TRANSACTION.
Exxaro shareholders and Tronox stockholders will be able to obtain a free copy
of such materials without charge at the SEC`s website (www.sec.gov) or from the
information agent named in such materials once they have been filed with the
SEC. These materials will also be made available for inspection at Exxaro`s
registered offices, Exxaro Corporate Centre, Roger Dyason Road, Pretoria West,
0183, South Africa for a period of 30 Days after filing.
For enquiries:
Wim de Klerk
Exxaro Resources Limited
Finance Director
Tel: + 27 12 307 4848
Mobile: +27 82 652 5145
Email: wim.deklerk@exxaro.com
11 November 2011
Pretoria
Financial advisor to Exxaro
J.P. Morgan
Reporting accountants
PWC
US, European and Asian legal counsel to Exxaro
Orrick, Herrington & Sutcliffe LLP
SA legal counsel to Exxaro
Norton Rose South Africa
SA legal counsel to Exxaro
CLS Attorneys
Australian legal counsel to Exxaro
Freehills
Sponsor to Exxaro
Deutsche Securities SA (Proprietary) Limited
Financial advisor to Tronox
Goldman, Sachs & Co.
Financial advisor to Tronox
Moelis & Company
US legal counsel to Tronox
Kirkland and Ellis LLP
SA legal counsel to Tronox
Werksmans
Australian legal counsel to Tronox
Blake Dawson
Date: 11/11/2011 10:00:01 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.