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KAGISO MEDIA LIMITED - Firm intention announcement

Release Date: 10/09/2013 16:38
Code(s): KGM     PDF:  
Wrap Text
Firm intention announcement

Kagiso Media Limited
(Incorporated in the Republic of South Africa)
Registration number: 1957/000036/07
Ordinary share code: KGM       ISIN: ZAE000014007
("KML") or ("the Company")
Kagiso Tiso Holdings Proprietary Limited
(Incorporated in the Republic of South Africa)
Registration number: 2011/000848/07
("KTH")

JOINT ANNOUNCEMENT RELATING TO A FIRM INTENTION BY KTH, THROUGH ITS WHOLLY-OWNED SUBSIDIARY KTH MEDIA, TO 
MAKE AN OFFER TO ACQUIRE THE ENTIRE ISSUED AND TO BE ISSUED ORDINARY SHARE CAPITAL OF KML THAT KTH DOES NOT 
ALREADY BENEFICIALLY OWN ("FIRM INTENTION ANNOUNCEMENT") AND WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT

Highlights

- Cash offer of R28.50 per KML ordinary share;
- KML ordinary shares will be delisted from the securities exchange
  operated by the JSE Limited ("JSE"); and
- consolidation of KTH's existing interest in KML.

1. Introduction
   KML shareholders are referred to the cautionary announcement released on SENS on
   10 June 2013 ("Cautionary Announcement") and are advised that the board of directors
   of KML (the "KML Board") has received communication of a firm intention to make an
   offer (the "Offer") from KTH Media, a wholly-owned subsidiary of KTH, to acquire the
   entire issued and to be issued ordinary share capital of KML that KTH does not already
   beneficially own ("Offer Shares"). If implemented, the Offer will result in KTH Media
   becoming the registered and beneficial owner of all of the Offer Shares. KTH Media is
   acting as principal in relation to the Offer and is not acting in concert with any other party
   other than KTH (the controlling shareholder of KML which holds 51.1% of the entire
   issued share capital of KML).
   KTH Media proposes that the KML Board implement the Offer with its shareholders other
   than KTH ("the KML Shareholders") by way of a scheme of arrangement (the "Scheme")
   in terms of section 114 of the Companies Act, 2008, as amended (the "Companies Act")
   and by way of a comparable offer by KTH Media to participants in terms of the KML Share
   Option Scheme that hold vested options to subscribe for shares in KML (the "Options").
   The Scheme will be subject to the terms and conditions to be included in a circular to
   be sent to KML shareholders ("the Circular"). The posting of the Circular will be subject
   to the conditions precedent set out in paragraph 5 below ("Posting Conditions") and
   the Scheme will be subject to the conditions precedent set out in paragraph 6 below
   ("Scheme Conditions").
   Upon implementation of the Scheme the listing of KML shares on the JSE will be
   terminated ("Delisting") (the Scheme, together with the Delisting, referred to herein as the
   "Proposed Transaction").

2. Terms of the Offer
   2.1   Offer Consideration
         In terms of the Offer, KML Shareholders will be entitled to receive a cum dividend
         cash consideration of R28.50 per Offer Share ("Consideration").
         The table below illustrates the Consideration premium:

                                Before the             
                                Cautionary             
                              Announcement   Premium   
                                       (R)       (%)   
Market price on 7 June 2013       20.80(1)      37.0   
30-day VWAP to 7 June 2013        21.19(2)      34.5   
60-day VWAP to 7 June 2013        21.52(3)      32.4   
90-day VWAP to 7 June 2013        22.02(4)      29.4   

Notes:
1. Closing price of KML shares on the JSE on 7 June 2013, being the last trading day prior
to the publication of the Cautionary Announcement.
2. VWAP at which KML shares traded on the JSE for the 30 trading days up to and
including 7 June 2013, being the last trading day prior to the publication of the Cautionary
Announcement.
3. VWAP at which KML shares traded on the JSE for the 60 trading days up to and
including 7 June 2013, being the last trading day prior to the publication of the Cautionary
Announcement.
4. VWAP at which KML shares traded on the JSE for the 90 trading days up to and
including 7 June 2013, being the last trading day prior to the publication of the Cautionary
Announcement.

The Consideration is determined on the basis that:
- the Offer for the Offer Shares is made on a cum dividend basis;
- if, between the date of this Firm Intention Announcement and the date of the
implementation of the Scheme, KML conducts any capital reductions or makes
any distributions, dividends (including the proposed dividend to be declared
and paid in respect of the 2012/2013 financial year) or similar payments
("KML Distribution") to KML Shareholders, the Consideration will be adjusted
downwards by the amount of the KML Distribution on a per share basis;
- KML will not, between the date of this Firm Intention Announcement and the
date of the implementation of the Scheme:
i. without the prior written consent of KTH and KTH Media, incur any further
financial debt. In the event that KML incurs any further financial debt, the
Consideration will be adjusted downwards by the amount of the financial
debt on a per-share basis; or
ii. issue any further shares. In the event that KML issues any further shares,
the Consideration will be adjusted pro rata per share.



2.2   Settlement of the Consideration
      If the payment of the Consideration occurs after 30 December 2013 (by reason of
      a delay in the fulfilment, extension of the date/s for fulfilment or waiver, if applicable,
      of the conditions precedent to the Scheme), the Consideration payable to the KML
      Shareholders on the record date for the Scheme will be increased by an amount
      equivalent to the prime overdraft rate, as published by The Standard Bank of
      South Africa Limited from time to time, plus 200 basis points (calculated daily from
      31 December 2013 to the date of actual payment, both dates inclusive).

2.3   Cash confirmation
      The total funding required to satisfy the Consideration and the comparable offer
      to holders of Options is R1 873 144 545.00. KTH Media has furnished a bank
      guarantee from Nedbank Limited, a South African registered bank, for the sole
      purpose of fully satisfying the Consideration and the comparable offer to holders
      of Options, which is in a form acceptable to the Takeover Regulation Panel ("TRP")
      and which complies with regulations 111(4) and 111(5) of the takeover regulations
      constituting Chapter 5 of the Companies Regulations of 2011 ("Takeover
      Regulations"). The bank guarantee has been provided to the TRP in favour of KML
      Shareholders for the sole purpose of fully satisfying the Consideration subject to the
      Scheme becoming operative.

2.4   KML Options
      The Options will be treated on the basis that an agreement will be reached between
      the relevant holders ("Participants") of the Options and KTH Media , as a comparable
      offer, in terms of which the Participants will participate in the Proposed Transaction
      by receiving a cash consideration equivalent to the "in the money" value of such
      Options, on a net cash cancellation basis, being an amount equal to the difference
      between the Consideration and the strike price of the relevant Options, upon the
      Scheme becoming operative, in consideration for the Participants agreeing to the
      cancellation of their Options on the date of the Scheme becoming operative.

      KML has agreed not to issue any further Options following the date of this Firm
      Intention Announcement, without the prior written consent of KTH Media and KTH.

2.5   Irrevocable undertakings from KML Shareholders
      KTH Media has received irrevocable undertakings from the following KML
      Shareholders to vote in favour of the Offer, which shareholders, collectively, hold
      17.8% of the Offer Shares:

                                      Number of        Percentage of Offer   
                                            KML        Shares beneficially   
                                       ordinary         held or controlled   
Shareholder                            shares     (directly or indirectly)   
Coronation Asset Management                                                  
Proprietary Limited                   3 569 284                        5.4   
First Avenue Investment Management                                           
Proprietary Limited                   3 189 292                        4.9   
Sanlam Investment Management                                                 
Proprietary Limited                   2 712 403                        4.1   
Cannon Asset Managers                                                        
Proprietary Limited                   2 250 000                        3.4   
Total                                11 720 979                       17.8   

KTH Media has also received letters of support for the Proposed Transaction from
holders of a beneficial interest in KML constituting 16.0% of the Offer Shares.
2.6   Beneficial shareholding in KML
KTH currently holds 68 386 068 KML ordinary shares, which equates to 51.1% of
the entire issued share capital of KML.



3. Overview of KML and KTH
   3.1 Background on KML
       KML is a black-controlled investment holding company with interests in substantial
       media assets through its subsidiaries, joint ventures and associates. The assets of
       KML and its subsidiaries, joint ventures and associates are positioned in growth
       markets. KML operates primarily through:
       - Broadcasting: where it is a successful operator of highly productive radio
         assets such as East Coast Radio (100%), Jacaranda FM (80%), OFM (24.9%),
         Heart 104.9 (20%), Gagasi 99.5 (20%) and MediaMark (50.01%) and where it
         holds an economic interest in Kaya FM (47.5%);
       - Information and other: which includes Juta (100%), Knowledge Factory (70%),
         Kagiso Vantage (50%) and Kaufman Levin Associates (89.99%);
       - Digital Services: which includes Gloo Digital Design (60%) and Kagiso.MSN
         (100%); and
       - Content: where it holds a controlling stake (50.1%) in Urban Brew Studios.

   3.2 Background on KTH
       KTH was created in 2011 pursuant to the merger between Tiso Group (Proprietary)
       Limited and Kagiso Trust Investments (Proprietary) Limited, two of the most
       prominent and respected Black Economic Empowerment investment companies
       in South Africa.

       KTH invests in businesses in specific sectors that have proven management, robust
       cash flows and deliver attractive capital growth and returns to its shareholders on
       a sustainable basis. KTH is managed by a strong, experienced, professional black
       management team with a proven track record of investment performance and
       delivering shareholder value.

       The shareholders of KTH consist of a diversified group of entities with the largest
       shareholder grouping comprising of two Public Benefit Organisations, namely
       the Kagiso Charitable Trust and the Tiso Foundation, in addition to Industrial
       Partnership Investments Limited (a wholly-owned subsidiary of Remgro Limited)
       and Tiso Investment Holdings Proprietary Limited.

       KTH believes that it can be a catalyst for transformation in the business sector
       through active participation in its portfolio companies whilst delivering superior
       investment returns to its shareholders.

4. Rationale for the Offer and growth plans for KML
   The Scheme presents an opportunity for KTH to consolidate its shareholding in KML, a
   leading media company, and to partner with management in pursuing its growth strategy,
   in a leading transformational transaction.

   KTH controls 51% of KML and has been a major shareholder in and supporter of KML
   since 1997. The Proposed Transaction is in line with KTH's strategy to fully consolidate
   assets it controls and increase exposure in sectors in which it has experience. KML is a
   strategic asset in KTH's investment portfolio and an unlisted KML would allow KTH to
   better align KML's strategic imperatives with those of KTH.

   KTH is a long-term shareholder and believes that KML will be better placed to implement
   its strategy as a wholly-owned subsidiary, so as to focus on longer-term business
   objectives and to further build on its position in the South African media sector.

5. Posting Conditions
   The posting of the Circular to KML Shareholders will be subject to the fulfilment, or waiver
   (in whole or in part), of the conditions that, by no later than 17:00 on 7 October 2013:
   - the KML Board has retained the Independent Expert in terms of section 114(2) of
     the Companies Act and the Takeover Regulations and the Independent Expert has
     prepared and issued a report concerning the Scheme and the Offer in terms of
     section 114(3);
   - the Independent Expert's report contemplated above confirms that the Consideration
     is fair and reasonable to KML Shareholders and Participants holding Options;
   - the Independent Board resolves to recommend to the KML Shareholders, without
     qualification, that they will vote in favour of the Scheme; and
   - all requisite approvals have been received from the JSE, the TRP and the Financial
     Surveillance Department of the South African Reserve Bank for the posting of the
     Circular.

6. Scheme Conditions
   The implementation of the Scheme will be subject to the fulfilment, or waiver (in whole or
   in part) of the following conditions by no later than 17:00 on 29 November 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 materially in the form set out below):
   - the approval of the Scheme and adoption of the special resolution approving the
     Scheme by the requisite majority of KML Shareholders, as contemplated in section
     115(2) of the Companies Act, and following the KML Shareholders' meeting convened
     to approve the Scheme no KML Shareholder exercises any rights to seek court
     approval or a court review of the Scheme in terms of section 115(3)(a) or 115(3)(b)
     of the Companies Act within the time periods prescribed in those sections, provided
     that to the extent such rights are validly exercised, if the relevant dissenting KML
     shareholder withdraws any court application or requirement that KML seeks court
     approval, made thereunder, or the court does not set aside the resolution approving
     the Scheme in terms of section 115(7), this condition will be deemed to have been
     fulfilled;
   - by the time that the resolution to approve the Scheme is voted on at KML Shareholders'
     meeting convened to approve the Scheme ("Scheme Meeting"), KML Shareholders give
     notice objecting to the Scheme as contemplated in section 164(3) of the Companies
     Act and vote against the special resolution proposed at the Scheme Meeting in respect
     of no more than 5% of the issued ordinary shares in KML;
   - the receipt of unconditional approval from the TRP (in terms of a compliance
     certificate to be issued in terms of the Companies Act in relation to the Scheme)
     to implement the Scheme (or if such approval is conditional, such conditions being
     satisfactory to KTH Media and KTH (acting reasonably));
   - in relation to any company in the KML group which contributes 5% or more of
     the earnings before interest, tax, depreciation and amortisation ("EBITDA"), assets
     or turnover of the KML group, receipt by KML of consents or waivers from the
     contractual counter-parties to any shareholders' agreement in relation to such
     company, to which KML or any of its subsidiaries is a party, in respect of any rights
     such counter-parties may have or any events of default which may be triggered by
     the Offer;
   - the following events have not occurred in relation to any company in the KML group
     which contributes 5% or more of the EBITDA, assets or turnover of the KML group:

           i.    it is dissolved or de-registered; or
           ii.   an order or declaration is made, or a resolution is passed, for the administration,
                 custodianship, bankruptcy, liquidation, business rescue, winding-up, judicial
                 management, receivership, supervision, trusteeship, de-registration or
                 dissolution (and, in each case, whether provisional or final) of it, its assets or its
                 estate or an order or declaration is made, or a resolution is passed, to authorise
                 the commencement of any business rescue proceeding in respect of it, its assets
                 or its estate; or
           iii.  it convenes any meeting to consider the passing of a resolution for the
                 administration, custodianship, bankruptcy, liquidation, business rescue, winding-
                 up, judicial management, receivership, supervision, trusteeship, de-registration
                 or dissolution (and, in each case, whether provisional or final) of it, its assets or its
                 estate or to authorise the commencement of any business rescue proceedings
                 in respect of it, its assets or its estate; or
           iv.  it seeks or requests the appointment of an administrator, liquidator (whether
                 provisional or final), business rescue practitioner, conservator, receiver, trustee,
                 judicial manager, judicial receiver, administrative receiver, compulsory manager,
                 custodian or other similar official for it or for all or substantially all its assets or
                 estate; or
           v.  it has a secured party take possession of all or substantially all its assets or has
                 a distress, execution, attachment, sequestration or other legal process levied,
                 enforced or sued on or against all or substantially all its assets and such secured
                 party maintains possession, or any such process is not dismissed, discharged,
                 stayed or restrained, in each case within 30 (thirty) days thereafter; or
           vi.  it is unable (or admits inability) to pay its debts generally as they fall due or is
                 (or admits to being) otherwise insolvent or stops, suspends or threatens to stop
                 or suspend payment of all or a material part of its indebtedness or proposes or
                 seeks to make or makes a general assignment or any arrangement, compromise
                 or composition with or for the benefit of its creditors or any class of its creditors
                 or a moratorium is agreed or declared in respect of or affecting all or a material
                 part of its indebtedness; or
           vii.  it takes or proposes to its creditors any proceeding for, or seeks to make or
                 makes, a general re-adjustment, rescheduling or deferral of its indebtedness
                 (or any part thereof which it would otherwise be unable to pay when due); or
           viii. any receiver, administrative receiver, judicial receiver, judicial manager,
                 administrator, compulsory manager, judicial custodian, trustee in bankruptcy,
                 liquidator (whether provisional or final), business rescue practitioner or the like is
                 appointed in respect of it, its estate or any material part of its assets; or
           ix.   it causes or is subject to any event with respect to which, under the applicable
                 laws of any jurisdiction, has an analogous effect to any of the events specified in
                 the above paragraphs; and
    - by the date on which each of the above conditions referred to in this paragraph 6 have
      been fulfilled or waived (as the case may be), there not having occurred an adverse
      effect, fact, circumstance or any potential adverse effect, fact or circumstance which
      has arisen or occurred, or might reasonably be expected to arise or occur and which
      is or might reasonably be expected (alone or together with any other such actual
      or potential adverse effect, fact or circumstance) to be material with regard to the
      operations, continued existence, business, condition, assets and liabilities of any
      member of the KML group or the KML group as a whole (whether as a consequence
      of the Scheme or not) and/or any restrictive undertaking or undertakings or similar
      provision entered into by any member of the KML group which may materially reduce
      the operating performance of KML. For the purposes of this paragraph 6, to be
      material, the adverse effect, fact or circumstance or covenant or provision must
      have (or be reasonably expected to have) an adverse impact upon KML's annual
      consolidated EBITDA for the 12-month rolling period ending on the date on which
      the above conditions referred to in this paragraph 6 have been fulfilled or waived (as
      the case may be) of no less than 10% when measured against the EBITDA for the
      financial year ending 30 June 2012.

    1  The KML group shall include all direct and indirect subsidiaries, associates, investments and joint
        ventures of KML, including foreign entities incorporated in a jurisdiction other than the Republic of
        South Africa.

7.  Delisting
    In preparation for the implementation of the Scheme and subsequent Delisting of KML
    after KTH Media holds all of the Offer Shares, an application will be made by KML to the
    JSE to terminate the listing of KML Shares on the JSE.

8.  Independent board and fair and reasonable opinion
    The KML Board has established a Board sub-committee of independent non-executive
    directors of the Board consisting of Ms Mary Vilakazi (chairperson), Mr Willy Ross,
    Mr Ashraff Paruk and Ms Maud Motanyane, all of whom are independent directors for the
    purposes of the Takeover Regulations ("Independent Board"). The Independent Board
    has appointed Ernst & Young Advisory Services (Pty) Limited who will consider the terms
    and conditions of the Proposed Transaction and whether such terms and conditions are
    fair and reasonable to KML Shareholders. The full opinion of the Independent Expert and
    the basis for its conclusion will be included in the Circular. The opinion of the Independent
    Board after taking into consideration the opinion of the independent expert will also be
    published in the Circular.

9.  Documentation
    Further details of the Scheme will be included in the Circular to be sent to KML
    Shareholders, containing, inter alia, a notice of general meeting of KML Shareholders, a
    form of proxy and a form of surrender and transfer. Subject to the fulfilment or waiver, as
    the case may be, of the conditions to posting of the Circular contained in paragraph 5
    above, the Circular is expected to be posted to KML Shareholders on or about 8 October
    2013. The salient dates in relation to the Scheme will be published prior to the posting
    of the Circular.

10. Responsibility statement
    Each of KML, KTH Media and KTH and their respective directors (which in the case
    of KML, refers only to the Independent Board) accept responsibility for the information
    contained in this announcement insofar as it applies to it. To the best of their respective
    knowledge and belief, the information contained in this announcement is true and nothing
    has been omitted which is likely to affect the importance of such information.

11. Amendment or variation of the Offer
    No amendment to, or variation of, the Offer or the Scheme will be valid unless it is agreed
    to by KTH Media and the Independent Board of KML in writing and, where required,
    approved by the TRP.

12. Governing law
    The Offer, and this Firm Intention Announcement, are governed by South African law.

13. Withdrawal of cautionary announcement
    KML Shareholders are advised that, following the release of this Firm Intention
    Announcement, the Cautionary Announcement dated 10 June 2013 (and subsequent
    renewals of the Cautionary Announcement dated 23 July 2013 and 4 September
    2013 has been withdrawn and caution is no longer required to be exercised by KML
    Shareholders when dealing in KML shares.

Sandton
10 September 2013

For media enquiries please contact Brunswick:
Anne Dunn              +27 82 448 2684
Iris Pilane            +27 71 680 0236
Atusaye Mughogho       +27 71 670 0153

Merchant bank, sole financial advisor and 
transaction sponsor to KML
RAND MERCHANT BANK
A division of FirstRand Bank Limited

Sole financial advisor to KTH Media and KTH
Standard Chartered

Sole debt arranger to KTH Media and KTH
NEDBANK LIMITED

Legal advisor to KML
WERKSMANS ATTORNEYS

Legal advisor to KTH Media and KTH
WEBBER WENTZEL
in alliance with Linklaters

Independent Expert to KML
Ernst & Young Advisory Services (Pty) Limited

Communication advisor to KTH and KTH Media
BRUNSWICK

Date: 10/09/2013 04:38:00 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.

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