To view the PDF file, sign up for a MySharenet subscription.

ADCOCK INGRAM HOLDINGS LIMITED - Notice of receipt of an unsolicited letter from the Bidvest Group Limited and Cautionary Announcement

Release Date: 22/03/2013 09:00
Code(s): AIP     PDF:  
Wrap Text
Notice of receipt of an unsolicited letter from the Bidvest Group Limited and Cautionary Announcement

Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2007/016236/06
Share code: AIP
ISIN: ZAE000123436
(“Adcock Ingram” or “the Company”)

NOTICE OF RECEIPT OF AN UNSOLICITED LETTER FROM THE BIDVEST GROUP
LIMITED (“BIDVEST”) (“THE BIDVEST LETTER”) PROPOSING A SCHEME OF
ARRANGEMENT TO ACQUIRE 60.0% (ON A FULLY DILUTED BASIS) OF THE
ENTIRE ISSUED SHARE CAPITAL OF ADCOCK INGRAM, INCLUDING THE SHARES
ALREADY OWNED BY BIDVEST, AND CAUTIONARY ANNOUNCEMENT

1. INTRODUCTION
The shareholders of Adcock Ingram are advised that at approximately
19h00 South Africa time on Thursday, 21 March 2013, the board of
directors of Adcock Ingram (“Adcock Ingram Board”) received the
Bidvest Letter.

The Adcock Ingram Board has constituted an independent board
(“Adcock Ingram Independent Board”) in order to consider the Bidvest
Letter.

The full content of the Bidvest Letter is reproduced in paragraph 2
below without edit or modification in the interests of full and
timeous disclosure. Shareholders are, however, alerted to the
following:
* the Adcock Ingram Independent Board has had no opportunity to
review or consider the Bidvest Letter;
* no negotiation has taken place between Adcock Ingram and Bidvest
regarding the proposed structure, terms and conditions set out in
the Bidvest Letter;
* by publishing the content of the Bidvest Letter, the Adcock Ingram
Independent   Board  fully   reserves  its  rights   and  makes   no
representation, concession or recommendation regarding the nature
thereof or the proposals therein and gives no undertakings in
relation thereto.

Acknowledging its statutory   and fiduciary obligations to the Company
and its shareholders, the      Adcock Ingram Independent Board will
together with the Company’s    external advisers consider its position
and communicate its views      to Adcock Ingram shareholders in due
course.

2. THE BIDVEST LETTER
The content of the Bidvest Letter is set out verbatim hereunder.
“1. Introduction
1.1. AIH is listed on the Main Board of the Johannesburg Securities
Exchange (the “JSE”).
1.2. Bidvest currently owns 4,983,653 (four million nine hundred and
eighty three thousand six hundred and fifty three) shares in AIH
constituting approximately 2.54% (two point fifty four percent) of
the issued share capital.
1.3. This letter serves as a firm intention to make an offer, as
contemplated in Chapter 5 of the Companies Act, No. 71 of 2008, as
amended (the “Companies Act”) and Chapter 5 of the Companies
Regulations, 2011 (the “Companies Regulations”) to acquire so many
additional shares in AIH as together with those shares already owned
by Bidvest as set out in paragraph 1.2 above constitutes 60% (on a
fully diluted basis) of the entire issued ordinary share capital of
AIH (the “Remaining Shares”) (the “Transaction”). In this regard to
the extent that there are any shares in AIH which have not yet been
issued but which may be issued at a subsequent time, whether in
terms of the AIH BEE Scheme, or in terms of any Management Incentive
Scheme or otherwise, then the 60% referred to above must be such
that it is 60% of the enlarged ordinary share capital after taking
account of the maximum number of shares that may be issued as
aforesaid in some future time in terms of the aforegoing schemes.
2.   Rationale
Bidvest believes that the Transaction will enable AIH and its
stakeholders to benefit from forming part of the wider Bidvest
Group.
3.   Transaction Mechanism
3.1. The firm intention to pursue the Transaction in terms of this
letter will be implemented by means of a Scheme of Arrangement (the
“Scheme”) subject to the condition that by not later than 2 April
2013, Bidvest receives an undertaking by the Board of directors of
AIH to cooperate with Bidvest in the implementation of the
Transaction and in particular to propose the Scheme.             Such
undertaking shall consist of a written confirmation by AIH to
Bidvest by countersignature and return of a duplicate original of
this letter (attached herewith marked Annexure “A”)[Per Adcock
Ingram: *Annexure A is a duplicate of the Bidvest Letter with
provision for signature on behalf of Adcock Ingram and has therefore
been omitted from this announcement], that it will cooperate with
Bidvest and propose the Scheme to AIH shareholders in accordance
with the terms and conditions of this letter.     The undertaking by
AIH in terms hereof to propose the Scheme is firm and is not
dependent on any recommendation relating to the merits of the Scheme
which the Board may give at some future time.
3.2. The Scheme will be proposed by Bidvest as between AIH and its
shareholders other than Bidvest (the “Remaining Shareholders”)
pursuant to which Bidvest will acquire the Remaining Shares in AIH
held by the Remaining Shareholders on the following basis :-
3.2.1.    the Scheme will be proposed in terms of section 114 of the
Companies Act as read together with section 115 of the Companies
Act;
3.2.2.    the Scheme will be subject to the fulfilment of the
Conditions Precedent referred to in paragraph 8 hereunder;
3.2.3.    the price payable, and the terms of payment to the
Remaining Shareholders for their shares in AIH will be as is set out
in paragraph 4 hereunder.
4.   Offer Consideration
4.1. The effect of the Scheme is that each holder of the Remaining
Shares will :-
4.1.1.    retain 40% (forty percent) of such Remaining Shareholders’
shares, subject to clause 4.5 below; and
4.1.2.    dispose in terms of the Scheme of 60% (sixty percent) of
the Remaining Shares held by each such Remaining Shareholder.
4.2. Subject as is provided in paragraph 4.3 the purchase
consideration (the “Scheme Consideration”) payable by Bidvest in
terms of the Scheme will be settled as to :-
4.2.1.    50% in cash, based on a cash consideration of R65.00
(sixty-five rand) per AIH Share subject to paragraph 4.3(i)(a)
below; and
4.2.2.    50% by the issue of Bidvest Shares at an exchange ratio of
1 Bidvest Share for every 4 AIH Shares acquired, subject to
paragraph 4.3(i)(b) below (the “AIH Switch Ratio”).
By way of example, for each 100 AIH Shares held by the Remaining
Shareholders prior to the Scheme, the Remaining Shareholders will :-
4.2.3.    retain 40 AIH Shares (the “Remaining AIH Shares”);
4.2.4.    receive a cash consideration R65.00 (sixty-five rand) per
AIH Share in respect of 30 AIH Shares i.e. a total cash
consideration of R1,950; and
4.2.5.    receive Bidvest Shares in the ratio of 1 Bidvest Share for
every 4 AIH Shares i.e. a total of 7.5 Bidvest shares.
4.3. The purchase consideration has been based on the fact that
AIH’s diluted headline earnings per share from continuing operations
calculated on the same basis as hitherto for the 6 (six) month
period ending 31 March 2013 will not be less than R2,00 (two rand)
per share.   To the extent that such diluted headline earnings are
less than R2,00 (two rand) per share, the purchase consideration
payable in terms of the Scheme will be reduced in accordance with
the following formula :-
     (i) for each completed 1% (one percent) that the said diluted
headline earnings fall short of the amount of R2,00 (two rand) per
share (the total shortfall hereinafter referred to as the “completed
percentage shortfall”) :-
     (a) the cash portion of the consideration referred to in
paragraph 4.2.1 will be reduced by 1.1% (one point one percent);
     (b) the share portion of the consideration referred to in
paragraph 4.2.2 will be reduced by increasing the AIH Switch Ratio
from “4” to “4 multiplied by (1,01)N” where “N” equals the completed
percentage shortfall expressed as a whole number;-
     (ii) if the amount of the completed percentage shortfall is
more than 10% (ten percent) then Bidvest shall be entitled, in the
exercise of its absolute discretion by written notice to AIH, either
to reduce the purchase consideration as set out in paragraph (i)
above or to desist from making the offer.
4.4. The Remaining Shareholders may elect to receive a greater
portion of the Scheme Consideration to be payable in Bidvest Shares
rather than cash. To the extent that such election is made it will
be effected in accordance with the AIH Switch Ratio.
4.5. In addition it shall be a further term of the Scheme that
subject to the Scheme being approved and becoming unconditional each
holder of the Remaining Shares shall be entitled to require Bidvest
to acquire up to a further 15% (fifteen percent) of the shares held
by such Remaining Shareholder in consideration for Bidvest shares
based on the AIH Switch ratio set out in paragraph 4.2 subject to :-
4.5.1.    the Remaining Shareholder having exercised its voting
rights in respect of such shares in favour of the Scheme; and
4.5.2.    the maximum amount of shares which will be acquired by
Bidvest in terms of the Scheme not exceeding 75% (seventy five
percent) of the fully diluted entire issued ordinary share capital
of AIH.
4.6. Provision   will  also   be   made  in   the   Scheme  for   the
reconstruction, on the date on which the consideration is paid in
terms of the Scheme, of the Board of AIH so as to consist of a
majority of directors appointed by Bidvest.
4.7. The aforementioned consideration will be discharged on the
dates as is set out in accordance with the Scheme.
4.8. It will be a term of the Scheme that no dividends of whatsoever
nature will be declared by AIH before the closing date of the Scheme
other than the dividend for the period ending 31 March 2013. This
dividend will be calculated in accordance with previous practice,
being three times cover of headline earnings.
4.9. It will be a further term of the Scheme that before the closing
date of the Scheme there will be no distributions by AIH, increases
in the share capital of AIH or any amendments to the share capital
of AIH.
5.   Funding
Bidvest proposes to fund the cash portion of the consideration from
its own resources.
6.   Management and Employees
Bidvest recognises the importance of a motivated, aligned and
engaged management team and employees in order to achieve consistent
growth in client and customer loyalty. Bidvest will therefore make
a concerted effort to retain members of the management team and
employees to ensure the smooth implementation of the Transaction and
continued growth from post integration benefits going forward.
7.   Firm Intention Announcement
In terms of Regulation 101 of the Companies Regulations, it is
required that a firm intention announcement be published.     Bidvest
proposes that Bidvest and AIH publish a joint announcement on SENS
and in the press in a form agreed by Bidvest and AIH.
8.   Conditions Precedent
8.1. Implementation of the Transaction is subject to the fulfilment
or waiver of the following Conditions Precedent by no later than 30
September 2013 which, to the extent not satisfied or waived as at
the time of the posting of the Circular shall be included in the
Circular, substantially in the form set out below:
8.1.1.    receipt of approvals, consents or waivers from all
regulatory bodies, governmental or quasi governmental entities
necessary to implement the Transaction (in each case either
unconditionally or subject to conditions reasonably acceptable to
the persons on whom such conditions are imposed) including, but not
limited to
8.1.1.1. the JSE;
8.1.1.2. the TRP (in terms of a compliance certificate to be issued
in terms of the Companies Act in relation to the Scheme);
8.1.1.3. the South African Reserve Bank;
8.1.1.4. the competition authorities;
8.1.2.    receipt of written notice from the directors of AIH :-
8.1.2.1. confirming that the implementation of the Scheme will not
materially contravene, violate, cause a default and/or breach of the
terms of, and/or otherwise conflict with any material contract to
which any company in the AIH Group is a party and that the material
contracts will continue after the Scheme on terms not less
favourable than those currently in force;
8.1.2.2. confirming that the implementation of the Scheme will not
materially contravene, violate, cause a default and/or breach of the
terms of and/or otherwise conflict with any regulatory requirement
to which AIH or any company in the AIH Group to which the company is
a party;
8.1.2.3. confirming that to the best of their knowledge, neither
AIH or any of its subsidiaries is involved in any anti-competitive
practice;
8.1.2.4. stating that the directors are not aware of any fact or
circumstance which would be material to a reasonable party making
the offer as set out in terms hereof in deciding whether or not to
make such offer and the terms on which to make it; and
8.1.2.5. providing details of AIH’s BEE Scheme and all Share
Incentive Schemes applicable to employees of AIH.       Such details
shall include in respect of the BEE Scheme and each Employee
Incentive Scheme, the number of shares under option or which may be
eligible for issue at a future date the price of the shares/options,
vesting dates, and key terms and conditions and all provisions
relating to the impact of a change of control of AIH on the BEE
Scheme and each Employee Incentive Scheme.
This Conditions Precedent must be fulfilled within 14 (fourteen)
business days from date hereof;
8.1.3.    receipt of written notice from the directors of AIH
confirming that there has been no material adverse change :
8.1.3.1. in AIH; or
8.1.3.2. in the economy as measured by a reduction of more than 15%
(fifteen percent) in the JSE All Share Index during the period
commencing on date hereof and terminating on the date on which the
Scheme Meeting is held.
This Condition Precedent must be fulfilled not later than 1 (one)
business day prior to the date of the Scheme Meeting.
8.2. The Scheme shall be used as the mechanism to implement the
Transaction. The Scheme shall, in addition to the Conditions
Precedent set out in paragraph 8.1, be subject to the fulfilment or
waiver (in whole or in part) of the following additional conditions
precedent :-
8.2.1.    the approval of the Scheme by the requisite majority of
the Remaining Shareholders, as contemplated in Section 115(2) of the
Companies Act, and to the extent required, the approval of the
implementation of such resolution by the Court;
8.2.2.    within    thirty    business    days    following   the  AIH
Shareholders'   meeting    convened   to   approve   the   Scheme, AIH
Shareholders exercise appraisal rights, in terms of Section 164 of
the Companies Act by giving valid demands in terms of Section 164(7)
of the Companies Act, in respect of no more than 5% of the issued
ordinary shares of AIH, provided that, in the event that AIH
Shareholders give notice objecting to the Scheme as contemplated in
Section 164(3) of the Companies Act and/or vote against the
resolutions proposed at the Scheme Meeting in respect of no more
than 5% of the issued ordinary shares of AIH, this Condition shall
be deemed to have been fulfilled at the time of the Scheme Meeting;
8.3. The Conditions Precedent other than of a regulatory nature are
stipulated for the benefit of Bidvest who alone shall be entitled,
in writing only, to waive the same or extend the date by which they
are or anyone of them is to be fulfilled.
8.4. Those conditions which are of a regulatory nature and which
cannot be waived in terms of the relevant Regulation may not be
waived by Bidvest.     However, Bidvest alone shall be entitled in
writing to extend the date by which they or anyone of them are to be
fulfilled.
9.   Discontinuation of the Scheme
If at any time it should emerge as demonstrated by Bidvest that the
requisite   approval   by    the   Remaining   Shareholders    for the
implementation of the Scheme will not be obtained Bidvest may in its
absolute discretion terminate the Scheme.
10. Support of the Scheme
Bidvest has approached, and has received, support in favour of the
Scheme from Shareholders holding approximately 28% (twenty-eight
percent) of the issued and listed share capital of AIH from the
limited number of shareholders approached.      It is the intention of
Bidvest to approach additional shareholders of AIH post the release
of the Firm Intention Announcement detailed in paragraph 7 above, in
order to receive further support for the Scheme.
11. Disclosure Requirements
11.1.     Bidvest’s advisors will work together with the AIH
Independent Directors in respect of both companies’ continuous
disclosure obligations.
11.2.     We further request that the AIH Independent Directors
undertake to provide us with a written draft of any proposed public
announcement, which contains any reference to ourselves or our
proposal, within a reasonable period before publication of such
announcement or any action which may affect the ability to maintain
the confidentiality of the information relating to the Transaction
and will take into account any reasonable comments provided by
ourselves.
12. Contacts
12.1.     Should you have any questions or comments on the contents
of this letter, please contact Brian Joffe of Bidvest on telephone
number (011) 772-8704.
12.2.     We appreciate the support afforded to Bidvest thus far and
look forward to our continued friendly engagement.”
3. CHANGE TO THE ADCOCK INGRAM BOARD
In terms of paragraph 3.59 of the JSE Limited Listings Requirements,
shareholders are advised that Mr Eric Diack, who is also an
independent non-executive director of Bidvest, has resigned as an
independent non-executive director of the Company, as well as
Chairman of the Company’s Audit Committee and as member of the
Company’s Risk and Sustainability Committee with effect from 22
March 2013. The Adcock Ingram Board wishes to thank Eric for his
service and contribution to the Company.

4. CAUTIONARY ANNOUNCEMENT
Shareholders are advised to exercise caution when dealing in the
Company’s securities until a further announcement is made.

For media enquiries:
Brunswick
Tel: +27 11 502 7300
Rob Pinker
Carol Roos
+27 72 690 1230

Midrand
22 March 2013

Sponsor
Deutsche Securities (SA) (Proprietary) Limited

Date: 22/03/2013 09:00:00 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.

Share This Story