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Proposed transaction relating to TFG’S 55% interest in RCS
The Foschini Group Limited
(Registration number 1937/009504/06)
Incorporated in the Republic of South Africa
Share code: TFG ISIN code: ZAE000148466
(“TFG”)
PROPOSED TRANSACTION RELATING TO TFG’S 55% INTEREST IN RCS
1. INTRODUCTION
Further to its announcement, dated 16 August 2013, in terms of which shareholders were
advised that TFG had received an unsolicited expression of interest to acquire 100% of
RCS Investment Holdings Limited (“RCS”), TFG shareholders are advised that TFG and
The Standard Bank of South Africa Limited (“SBSA”) (collectively the “RCS
Shareholders”), RCS and BNP Paribas Personal Finance S.A. (“BNPPF”) (the European
leader in personal loans) and a subsidiary of BNP Paribas S.A. have entered into
agreements which will result in BNPPF becoming the 100% shareholder of RCS (the
“Proposed Transaction”).
2. NATURE OF THE BUSINESS
RCS is an operationally independent consumer finance company that focuses primarily on
providing retail credit card facilities (general purpose, private label and co-branded),
personal loans and insurance to the mass middle market. RCS provides a broad range of
financial services under its own brand and in association with a number of retail entities in
South Africa, Namibia and Botswana.
The net asset value of RCS as at 30 September 2013 was R1,7 billion, with profit before
tax attributable to RCS Shareholders for the six months to 30 September 2013 of R207,2
million. The profit before tax for the year ended 31 March 2013 was R414,8 million.
3. RATIONALE FOR THE PROPOSED TRANSACTION
TFG’s stated intention has been to reduce its shareholding in RCS to below 50% as
currently a large portion of its net debt relates to RCS. The Proposed Transaction will
reduce its gearing and its exposure to the unsecured lending market.
4. EFFECTIVE DATE
The effective date of the Proposed Transaction is expected to be on or about 31 July
2014, subject to the fulfilment of the conditions precedent referred to in paragraph 6 below
(“Effective Date”).
5. CONSIDERATION
The consideration to be received by the RCS Shareholders in terms of the Proposed
Transaction is an amount equal to the aggregate of:
5.1 R2,3 billion; based on a net asset value of R1,7 billion as at 31 July 2013;
5.2 the increase or decrease (as the case may be) of the tangible net asset value of
RCS during the period from 31 July 2013 to the Effective Date; and
5.3 interest calculated at the prime rate on the aggregate of the amounts referred to in
clauses 5.1 and 5.2 from the Effective Date to the closing date of the Proposed
Transaction, expected to be on or about 1 September 2014 (“Closing Date”).
The total consideration is expected to be approximately R2,65 billion and will be settled in
cash. TFG’s share of net proceeds is estimated to be approximately R1,4 billion.
6. CONDITIONS PRECEDENT TO THE PROPOSED TRANSACTION
The Proposed Transaction is subject to the fulfilment or waiver of conditions precedent
normal for a transaction of this nature, including, inter alia,:
6.1 the approval of the relevant competition authorities;
6.2 RCS’ commercial funders approving of the change in control in RCS, if applicable;
6.3 other requisite regulatory approvals, including exchange control and Takeover
Regulation Panel approval being obtained, if required;
6.4 audited financial statements in respect of RCS and its subsidiaries as at the
Effective Date being prepared, issued and presented to each of SBSA, TFG and
BNPPF; and
6.5 no material adverse change occurring prior to the Closing Date.
7. FINANCIAL EFFECTS
The unaudited pro forma financial effects set out below have been prepared for illustrative
purposes only in order to assist TFG shareholders in assessing the impact of the
Proposed Transaction on the earnings per share, headline earnings per share, net asset
value per share and tangible net asset value per share. The unaudited pro forma financial
effects are based on TFG’s unaudited interim results for the six months ended
30 September 2013.
These unaudited pro forma financial effects have been prepared in accordance with the
Listing Requirements of the JSE Limited (“JSE Listing Requirements”), the Guide on Pro
Forma Financial information issued by the South African Institute of Chartered
Accountants and the measurement and recognition requirements of the International
Financial Reporting Standards (“IFRS”). The accounting policies used to prepare the
unaudited pro forma financial effects are consistent with those applied in the preparation of
the financial statements for the six months ended 30 September 2013.
Before the After the
Proposed Proposed
Transaction Transaction %
(cents) (cents) Change
Earnings per share 412.1 372.7 (9.6%)
Diluted earnings per share 410.3 371.0 (9.6%)
Headline earnings per share 413.0 373.5 (9.6%)
Diluted headline earnings per
411.2 371.9 (9.6%)
share
Net asset value per share 3 375.0 3 630.7 7.6%
Tangible net asset value per
3 317.4 3 612.4 8.9%
share
Weighted average number of
207.9 207.9 -
shares ('million)
Diluted weighted average
208.8 208.8 -
number of shares ('million)
Number of shares in issue
206.2 206.2 -
(‘million)
Notes to the unaudited pro forma financial effects:
For illustrative purposes, the effects on earnings, diluted earnings, headline earnings,
diluted headline earnings, net asset value and tangible net asset value per TFG share are
based on:
a. a consideration for the Proposed Transaction of R2.3 billion plus an estimated NAV
increase and interest (collectively R350 million);
b. TFG’s share of net proceeds assumed to be approximately R1.4 billion with no use
being made of these proceeds and no interest earned on cash received;
c. all adjustments are expected to have a continuing effect;
d. an effective income tax rate of 28% is assumed; and
e. the unaudited pro forma financial effects are the responsibility of the board of
directors of TFG (“The Board”) and have not been reviewed by TFG’s auditors.
8. USE OF PROCEEDS
The Board will evaluate all alternatives as regards use of TFG’s share of the net proceeds
from the Proposed Transaction that will allow it to optimise its balance sheet. At this stage,
the Board’s intention is to utilise its share of these net proceeds to facilitate a general
share repurchase. The ultimate use of proceeds will, however, depend on market
conditions at the time. For illustrative purposes only, assuming the aforementioned net
proceeds were used to implement a share repurchase at the current TFG market price of
approximately R106 per share, the pro forma headline earnings per share after the
Proposed Transaction in paragraph 7 above would have increased from 373.5 cents to
398.8 cents or 6.8% (please refer note e in paragraph 7 above).
9. CATEGORISATION OF THE PROPOSED TRANSACTION
The Proposed Transaction has been categorised as a category 2 transaction in terms of
section 9.5(a) of the JSE Listings Requirements and accordingly no shareholder approval
is required.
Cape Town
10 April 2014
Joint Investment Banks to TFG Legal advisor to TFG
Investec Bank Limited and The Standard Bank Edward Nathan Sonnenberg
of South Africa Limited
Sponsor to TFG
UBS South Africa Proprietary Limited
Date: 10/04/2014 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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