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CPN - Capricorn - Pro Forma Financial Effects and Withdrawal of Cautionary
Announcement
CAPRICORN INVESTMENT HOLDINGS LIMITED
(formerly Cenmag Holdings Limited)
(Registration Number 1987/004821/06)
("Capricorn" or "the company")
Share code: CPN ISIN: ZAE000149951
PRO FORMA FINANCIAL EFFECTS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Shareholders are referred to the cautionary announcements dated 22 June 2011, 3
August 2011 and 12 September 2011 as well as the detailed cautionary
announcement on 15 December 2011 where shareholders were advised that a sale and
purchase agreement had been agreed between the Company, Water Utilities Limited
and Watermark Global PLC (together "Watermark") on 15 December 2011 regarding
the acquisition of 100% of the shares in, and loan account claims against,
Western Utilities Corporation (Proprietary) Limited ("WUC"), a wholly-owned
subsidiary of Watermark for a purchase consideration of GBP4.50 million ("the
Acquisition").
PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the Acquisition and the specific issue of 210 526 316 ordinary
Capricorn shares for cash ("the Cash Share Issue") and the specific issue of up
to 2 982 908 Capricorn ordinary shares in lieu of fees ("the Fee Share Issue"
and collectively "Share Issues" and collectively "the Transactions") on the
reviewed financial information of Capricorn for the six months ended 31 August
2011, had the Transactions occurred on 1 March 2011 for statement of
comprehensive income purposes and on 31 August 2011 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 Capricorn for the year ended 28 February 2011.
The unaudited pro forma financial effects set out below are the responsibility
of Capricorn`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, the results of operations or cashflows of Capricorn after the
Transactions.
Before1 After the After the % change
Acquisition Transactio
2,3 ns4,5
(cents per (cents per (cents per (%)
share) share) share)
Basic 0.07 (2.61) (1.39) (2197%)
earnings
per share
(cents)
Headline 0.05 (2.61) (1.40) (2778%)
(loss)/earn
ings per
share
(cents)
Net asset 9.48 (9.45) 3.53 (63%)
value per
share
Net 9.48 (31.32) (8.18) (186%)
tangible
asset per
share
Total 59 886 020 243 951 999 455 695 661%
number of 274
shares in
issue
Weighted 59 886 020 243 951 999 455 695 661%
number of 274
shares in
issue
Notes:
1. The "Before" basic earnings and headline earnings per share have been
extracted without adjustment from the reviewed, published, condensed
results of Capricorn for the six months ended 31 August 2011. The "Before"
net asset value and net tangible asset value per share have been calculated
from the financial information presented in the reviewed, published,
condensed results of Capricorn for the six months ended 31 August 2011.
2. The "After the Acquisition" earnings and headline earnings per share
assumes:
a. The consolidation of WUC`s income and expenditure, as extracted
without adjustment from the reviewed results of WUC for the six months
ended 30 June 2011;
b. The payment of estimated transaction costs amounting to R1 610 126,
which have been allocated to the Acquisition and expensed in terms of
IFRS 3: Business Combinations. This will not have a continuing effect
on Capricorn`s financial results;
c. The issue of 182 300 030 new Capricorn ordinary shares at 19 cents per
share in part settlement of the purchase consideration of the
Acquisition to Watermark; and
d. The issue of 1 765 948 new Capricorn ordinary shares at 19 cents per
share in part settlement of the fees due to the sponsor and corporate
adviser, in respect of the Acquisition.
3. The "After the Acquisition" net asset value and net tangible asset value
per share assumes:
a. The Acquisition is a reverse acquisition in terms of IFRS 3: Business
Combinations. Accordingly, Capricorn is regarded as the legal parent
and accounting acquiree and WUC is regarded as the legal subsidiary
company and the accounting acquirer. In accordance with this
accounting treatment:
i. The identifiable assets and liabilities of Capricorn have been
measured at fair-value;
ii. From a legal point of view Capricorn has obtained a 100% interest
in WUC. However, from an accounting point of view Watermark has
obtained a 74.7% interest in Capricorn (because Capricorn is
issuing 182 300 030 new Capricorn ordinary shares to Watermark in
part settlement of the purchase consideration relating to the
Acquisition), with the remaining 25.3% interest in Capricorn
being retained by Capricorn`s shareholders. Because Watermark
has, from an accounting perspective, obtained a 74.7% interest in
and gained control of the legal acquirer, being Capricorn, it is
necessary to calculate the fair-value of the consideration
effectively transferred ("the Consideration Transferred"). The
Consideration Transferred is effectively the fair-value of
Capricorn as an entity. If the business combination had taken the
form of WUC issuing additional ordinary shares to Capricorn`s
shareholders in exchange for their ordinary shares in Capricorn,
WUC would have had to issue 34 new WUC ordinary shares
((100/0.747)-100) to Capricorn`s shareholders, for the ratio of
ownership interest in the combined entity to be the same.
Watermark would then own 100 of the 134 issued shares in WUC,
amounting to 74.7% of the combined entity. As a result, the
Consideration Transferred by WUC to Capricorn`s shareholders is
the fair-value of the 34 new WUC shares issued to Capricorn to
give Capricorn shareholders a 25.3% interest in the combined
entity. The Consideration Transferred is required to be based on
the most reliable measure, and has been calculated using the
quoted market price of Capricorn`s shares of 19 cents per share,
as this is considered to provide a more reliable basis for
measuring the Consideration Transferred than the estimated fair-
value of WUC`s shares and, therefore, the Consideration
Transferred (in respect of the portion of the purchase
consideration settled through the issue of 182 300 030 Capricorn
ordinary shares) is 34 WUC shares multiplied by 19 cents per WUC
share; and
iii. The raising of goodwill in respect of the reverse acquisition,
which is measured as the excess of the fair-value of the
consideration effectively transferred over the net amount of
Capricorn`s assets and liabilities at fair-value.
b. Raising of a current liability in respect of the cash portion of the
purchase consideration of R23 407 594;
c. Raising of a current liability in respect of transaction costs of R1
274 596, directly relating to the Acquisition;
d. The issue of 182 300 030 new Capricorn ordinary shares at 19 cents per
share in part settlement of the purchase consideration of the
Acquisition to Watermark; and
e. The issue of 1 765 948 new Capricorn ordinary shares at 19 cents per
share in part settlement of the fees due to the sponsor and corporate
adviser, in respect of the Acquisition.
4. The "After the Transactions" earnings and headline earnings per share
assumes:
a. The adjustments as set out in 2(a) to (d) above;
b. The issue of 210 526 316 new Capricorn ordinary shares at 19 cents per
share, in respect of the Cash Share Issue;
c. The issue of 1 216 960 new Capricorn ordinary shares at 19 cents per
share in part settlement of the fees due to the sponsor and corporate
adviser, in respect of the Cash Share Issue; and
d. No income benefit has been attributed to the cash received in respect
of the Cash Share Issue, as the proceeds will be used for the
Acquisition, the cash portion of the transaction costs and the
remainder to fund working capital.
5. The "After the Transactions" net asset value and net tangible asset value
per share assumes:
a. The adjustments as set out in 3(a) to (e) above;
b. Payment of the cash portion of R23 407 594 in respect of the
Acquisition;
c. Payment of the transaction costs of R1 274 596, directly relating to
the Acquisition and R878 356, directly relating to the Cash Share
Issue;
d. The raising of R40 000 000 through the issue of 210 526 316 new
ordinary Capricorn shares at 19 cents per share, in respect of the
Cash Share Issue;
e. The issue of 1 216 960 new Capricorn ordinary shares at 19 cents per
share in part settlement of the fees due to the sponsor and corporate
adviser, in respect of the Cash Share Issue; and
f. The deduction from equity of the estimated transaction costs of R1 109
579, directly attributable to the Cash Share Issue, accounted for in
accordance with IAS 32: Financial Instruments.
6. The "After the Transactions" column is measured as a percentage of the
"Before" column.
DOCUMENTATION AND SALIENT DATES
A circular to shareholders detailing the terms of the acquisition, incorporating
revised listing particulars, will be distributed to shareholders within 28 days
of this announcement.
Salient dates will be published in due course.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Accordingly, given that the final terms and pro forma financial effects of the
above-mentioned acquisition and reverse listing have been published, the
cautionary announcement is withdrawn.
Johannesburg
7 February 2012
Sponsor
Arcay Moela Sponsors (Proprietary) Limited
(Registration number 2006/033725/07)
Date: 07/02/2012 09:33:01 Supplied by www.sharenet.co.za
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