ADCORP HOLDINGS LIMITED - Joint Announcement of a Firm Intention by Adcorp and Withdrawal of Kelly's Cautionary Announcement

Release Date: 24/07/2014 16:15
Code(s): ADR KEL
 
Wrap Text
Joint Announcement of a Firm Intention by Adcorp and Withdrawal of Kelly's Cautionary Announcement

ADCORP HOLDINGS LIMITED                             KELLY GROUP LIMITED
Incorporated in the Republic of South Africa        Incorporated in the Republic of South Africa
Registration number 1974/001804/06                  Registration number 1999/026249/06
Share code ADR                                      Share code KEL
ISIN: ZAE000000139                                  ISIN: ZAE000093373
(“Adcorp”)                                          (“Kelly”)



JOINT ANNOUNCEMENT OF A FIRM INTENTION BY ADCORP TO MAKE AN OFFER TO ACQUIRE THE ISSUED SHARE CAPITAL 
OF KELLY THAT IT DOES NOT ALREADY OWN AND WITHDRAWAL OF KELLY’S CAUTIONARY ANNOUNCEMENT


1.    INTRODUCTION

      Adcorp and Kelly shareholders are referred to the announcement released on the Stock Exchange
      News Service ("SENS") on Thursday, 3 April 2014 announcing Adcorp's acquisition of
      approximately 30% of the issued ordinary shares of Kelly (“Initial Acquisition”).

      The respective boards of directors of Adcorp and Kelly are pleased to announce that a wholly-
      owned subsidiary of Adcorp has made an offer ("Offer") to acquire the Kelly ordinary shares that
      Adcorp does not already own, excluding the Kelly ordinary shares held by subsidiaries of Kelly,
      (“Kelly Shares”) (“Proposed Transaction”) by way of a scheme of arrangement (“Scheme”) in
      terms of section 114 of the Companies Act 71 of 2008, as amended, (the "Companies Act"), to be
      proposed by the board of directors of Kelly ("Kelly Board") between Kelly and the holders of Kelly
      Shares (“Kelly Shareholders”). In this regard, Adcorp, the wholly-owned subsidiary of Adcorp and
      Kelly have concluded a written implementation agreement dated 24 July 2014 (“Implementation
      Agreement”) in relation to the Proposed Transaction.

      The purpose of this joint firm intention announcement (“Firm Intention Announcement”) is to
      advise Kelly Shareholders and Adcorp shareholders of the terms and conditions of the Offer.

2.    SALIENT TERMS OF THE OFFER

      The Offer has been made by Paracon Holdings Limited, a wholly-owned subsidiary of Adcorp,
      ("Offeror"). In terms of the Offer, Kelly Shareholders (excluding Kelly Shareholders with registered
      addresses outside the Republic of South Africa ("Foreign Shareholders")) will, if the Scheme
      becomes operative, at their election receive:
      • 1 Adcorp ordinary share (“Adcorp Share”) for every 13.75 (“Switch Ratio”) Kelly Shares held
           by them on the Scheme consideration record date (“Share Consideration”); or
      • R2.50 in cash for every Kelly Share held by them on the Scheme consideration record date
           (“Cash Consideration”),
      (collectively the “Purchase Consideration”).

      Kelly Shareholders who have not made an election to receive either the Share Consideration or the
      Cash Consideration will be deemed to have elected to receive the Share Consideration. Foreign
      Shareholders will be deemed to have elected the Cash Consideration in respect of their Kelly
      Shares, irrespective of their actual election.
     The Share Consideration represents a premium of:
     • 32.4% to the volume weighted average price ("VWAP") of Adcorp and Kelly Shares traded on
        the securities exchange operated by the JSE Limited ("JSE") over the 30 days prior to the date
        on which Adcorp submitted its expression of interest to the Kelly Board, being Thursday, 6
        March 2014 (the "EOI Date"); and
     • 26.3% to the VWAP of Adcorp and Kelly Shares traded on the JSE over the 30 days prior to the
        date on which the first cautionary announcement was released on SENS, being Thursday, 27
        March 2014 (the "Publication Date").

     The Cash Consideration represents a premium of:
     • 45.0% to the VWAP of Kelly Shares traded on the JSE over the 30 days prior to the EOI Date;
        and
     • 38.6% to the VWAP of Kelly Shares traded on the JSE over the 30 days prior to the Publication
        Date.

     The Purchase Consideration is determined on the basis that Kelly will not issue any further shares,
     any rights to any shares or any share appreciation rights or declare any dividends or distributions
     after the date of this Firm Intention Announcement, without the prior written consent of the Offeror.
     If Kelly should implement any such issue without the prior written consent of the Offeror, the
     Purchase Consideration will be adjusted pro rata per Kelly Share.

3.   RATIONALE FOR THE SCHEME

     Adcorp and Kelly believe that the Proposed Transaction will produce opportunities for the benefit of
     all Adcorp and Kelly stakeholders, including:

     3.1.   Kelly Shareholders receiving an attractive premium for their Kelly Shares;

     3.2.   Kelly Shareholders being entitled to receive Adcorp ordinary shares by electing the Share
            Consideration, which will provide such Kelly Shareholders with exposure to the future
            performance of the enlarged and more diversified Adcorp group;

     3.3.   greater penetration into large corporate clients and the ability to better service the existing
            client base of Kelly and Adcorp;

     3.4.   enhanced career prospects for staff in the enlarged Adcorp group and an opportunity to
            incentivise and retain top talent; and

     3.5.   knowledge sharing to achieve best of breed approach.


4.   CONDITIONS PRECEDENT TO THE POSTING OF THE SCHEME CIRCULAR TO KELLY SHAREHOLDERS

     The posting of the circular to Kelly Shareholders in relation to the Scheme (“Scheme Circular”) is
     subject to the fulfilment, or waiver (in whole or in part), of, inter alia, the following conditions
     precedent:

     4.1.   the independent board of Kelly ("Kelly Independent Board") and the Kelly Board
            unanimously recommending to Kelly Shareholders that they vote in favour of the Scheme;

     4.2.     Kelly Shareholders holding not less than 50% of Kelly Shares providing Adcorp with
              irrevocable undertakings to vote in favour of the Scheme; and

     4.3.     all requisite approvals being received from the JSE, the Financial Surveillance Department of
              the South African Reserve Bank (acting through an authorised dealer) (“SARB”) and the
              Takeover Regulation Panel (“TRP”) for the posting of the Scheme Circular.

     The conditions set out in paragraphs 4.1 and 4.2 above are for the benefit of the Offeror and may
     be waived by the Offeror in its sole discretion by notice in writing to Kelly. The condition set out in
     paragraph 4.3 above is of a regulatory nature and cannot be waived.


5.   CONDITIONS PRECEDENT TO THE IMPLEMENTATION OF THE SCHEME

     5.1. The Scheme will be subject to the fulfilment, or waiver (in whole or in part), of the following
          conditions precedent by not later than 180 days after the publication of this Firm Intention
          Announcement, or such later date as Adcorp, the Offeror and Kelly may agree to in writing:

     5.1.1.         the approval of the Scheme by the requisite majority of Kelly Shareholders, as
                    contemplated in section 115(2) of the Companies Act, and:

     5.1.1.1.             to the extent required, the approval of the implementation of such resolution by
                          the court; and

     5.1.1.2.             if applicable, Kelly not treating the aforesaid resolution as a nullity, as
                          contemplated in section 115(5)(b) of the Companies Act;

     5.1.2.         Kelly Shareholders holding more than 5% of the Kelly Shares not having exercised
                    their appraisal rights by giving valid demands in terms of section 164(7) of the
                    Companies Act, within 30 business days following the Kelly Shareholders’ meeting
                    convened to approve the Scheme ("Scheme Meeting");

     5.1.3.         the unconditional approval of the Proposed Transaction (or if such approval is
                    conditional, such conditions being satisfactory to the Offeror and the Offeror’s relevant
                    acceptance thereof to be evidenced in writing to Kelly) having been obtained from:

     5.1.3.1.             the TRP (in terms of a compliance certificate to be issued in terms of section
                          121 (b)(i) of the Companies Act);

     5.1.3.2.             the JSE for the delisting of Kelly; and

     5.1.3.3.             the Competition Commission, Competition Tribunal and/or Competition Appeal
                          Court, as the case may be, in terms of the Competition Act 89 of 1998, as
                          amended;

     5.1.4.         the receipt of consents to the change of control in Kelly required in respect of material
                    contracts to which any member of the Kelly group is a party;

     5.1.5.         by the date on which the last of the abovementioned conditions precedent is fulfilled or
                    waived (as the case may be) none of the following events or circumstances having
                    occurred or arisen:
      5.1.5.1.           in relation to Kelly, Inn-Staff Proprietary Limited, Torque Holdings Proprietary
                         Limited, Torque Technical Computer Training Proprietary Limited, Paxsal
                         Business Process Outsourcing Proprietary Limited, M Squared Consulting MSP
                         Proprietary Limited or Adcorp:

      5.1.5.1.1.            any corporate action, legal proceedings or other procedure or step (including
                            an application to court, proposal of a resolution or convening of a meeting of
                            shareholders, members, directors or other officers) is taken by any person
                            with a view to:

                            a. a moratorium, compromise, composition, business rescue or similar
                               arrangement with any of its creditors;

                            b. its winding-up, dissolution or commencement of business rescue
                               proceedings, or for the seeking of relief under any applicable bankruptcy,
                               insolvency, company or similar law, or any such resolution;

                            c.   the enforcement of any security interest over any of its assets; or

      5.1.5.1.2.            the value of its assets is less than its liabilities (taking into account contingent
                            and prospective liabilities) or it is unable to pay its debts as they fall due;

      5.1.5.2.           the Offeror has not given written notice to Kelly of a material adverse change
                         (“MAC”) (being an event, fact or circumstance which will have an adverse
                         impact of more than 10% on the equity value of the Kelly group); or

      5.1.5.3.           the Offeror has given written notice of a MAC to Kelly ("MAC Notice") and a big
                         four audit firm agreed between Adcorp, the Offeror and Kelly has, within
                         10 business days of the date of such MAC Notice, advised Adcorp, the Offeror
                         and Kelly in writing that a MAC has not occurred. If the appointed audit firm
                         advises Adcorp, the Offeror and Kelly in writing that a MAC has occurred, and
                         this condition precedent has not been waived, the Scheme will not become
                         effective; and

      5.1.6.       the VWAP of an Adcorp Share on the JSE for the five trading days up to and including
                   the business day on which the Scheme Meeting is held is more than R30.20 per
                   Adcorp Share.

      The conditions set out in paragraphs 5.1.2, 5.1.4, 5.1.5 and 5.1.6 above are for the benefit of the
      Offeror and may be waived by the Offeror in its sole discretion by notice in writing to Kelly. Adcorp
      shall exercise its right of waiver in respect of the condition in paragraph 5.1.6 by no later than the
      date of the Scheme Meeting. The conditions set out in paragraphs 5.1.1 and 5.1.3 are of a
      regulatory nature and cannot be waived

6.    PRO FORMA EARNINGS AND NET ASSET VALUE EFFECTS PERTAINING TO THE SCHEME

6.1   Adcorp pro forma financial effects

      The pro forma financial effects of the Offer on shareholders of Adcorp ("Adcorp Shareholders"),
      for which the directors of Adcorp are responsible, are provided for illustrative purposes only to
      provide information about how the Offer will affect the financial position of the Adcorp Shareholders
      by illustrating the effect thereof on the earnings per share (“EPS”), normalised earnings per share
      (“NEPS”) and headline earnings per share (“HEPS”) of Adcorp as if the Offer had become
      operative on 1 March 2013, and, for the purpose of net asset value per share (“NAVPS”) and net
      tangible asset value per share ("NTAVPS”) of Adcorp, as if the Offer had become operative on 28
      February 2014. Because of their nature, the pro forma financial effects may not give a fair
      presentation of Adcorp’s financial position and performance after the Offer has been implemented.
     The pro forma financial effects have been compiled using accounting policies that comply with
     International Financial Reporting Standards (“IFRS”) and that are consistent with those applied in
    the audited consolidated financial statements of Adcorp for the 12 months ended 28 February 2014.

                                                       After the
                                     Before the          Initial        After the
                                       Offer          Acquisition         Offer         % Change
                                      (Note 1)          (Note 2)         (Note 3)        (Note 4)
 EPS (cents)                           176.9             164.1            126.9            -22.6
 HEPS (cents)                          188.6             185.6            169.9             -8.5
 NEPS (cents)                          384.3             376.8            359.9             -4.5
 NAVPS (cents)                       2,097.7           2,123.5          2,169.9              2.2
 NTAVPS (cents)                        204.7             272.0            310.8             14.3
 Weighted average number of           93,299            95,542          100,932              5.6
 shares in issue (‘000)
 Number of shares in issue at        100,092           102,334          107,725              5.3
 year end (‘000)


 Notes:
 1) The financial information in the "Before the Offer" column has been prepared based on
     Adcorp’s audited consolidated financial results for the 12 months ended 28 February 2014.
 2) The financial information included in the "After the Initial Acquisition" column has been
     prepared based on Adcorp’s audited consolidated financial results for the 12 months ended
     28 February 2014 and by adding Kelly’s 12 month rolling financial results from continuing
     operations, to 31 March 2014, based on the following assumptions:
        2.1) Kelly’s basic earnings and headline earnings have been calculated from 1 April
               2013 to 31 March 2014;
        2.2) The Initial Acquisition was funded by the issue of 2.2 million new Adcorp Shares,
               in terms of a vendor placement, to the value of R73.5 million (assuming the
               Adcorp Shares are issued at a R32.75, being a 5% discount to the 30 day VWAP
               ended 18 June 2014); and
        2.3) The Initial Acquisition has been accounted for as an investment in an associate.
 3) The financial information included in the "After the Offer" column has been prepared based
    on Adcorp’s audited consolidated financial results for the 12 months ended 28 February 2014
    and by adding Kelly’s 12 month rolling financial results from continuing operations, to 31
    March 2014, based on the following assumptions:
        3.1) Kelly’s basic earnings and headline earnings - have been calculated from 1 April
               2013 to 31 March 2014;
        3.2) The Purchase Consideration is funded by the issue of 7.6 million new Adcorp
               Shares, into the market by means of a vendor placement, to the value of R247.1
               million (assuming Adcorp’s Shares are issued at R32.75 in respect of the Initial
                      Acquisition and at R32.21, a 5% discount to the spot share price of R33.90, being
                      the Adcorp share price as at 18 July 2014 in respect of the balance of the
                      Purchase Consideration);
               3.3) Once off transaction costs of R9.2 million have been assumed and expensed.
                      These have been excluded from the calculation of NEPS;
               3.4) The Purchase Consideration and consideration paid for the Initial Acquisition to
                      Kelly Shareholders is R0.7 million more than the net asset value (excluding
                      goodwill) at 31 March 2014 which has been treated as goodwill;
               3.5) There are no other post balance sheet events which require adjustment of the pro
                      forma financial effects; and
               3.6) With the exception of the once off transaction costs, all adjustments are expected
                      to have a continuing effect.
        4) The percentage change in Adcorp’s EPS, HEPS, NEPS, NAVPS and NTAVPS has been
           calculated by comparing the pro forma financial effects in the “After the Initial Acquisition”
           column to the pro forma financial effects calculated in the “After the Offer” column.
        5) The above assumes that all Kelly Shareholders accept the Cash Consideration in terms of
           the Initial Acquisition and Offer. If all Kelly Shareholders were to elect the Share
           Consideration at the Switch Ratio (in terms of the Offer), the financial effects would be as set
           out in the table below, based on the assumptions outlined in paragraph 3 above, with the
           exception of the Initial Acquisition being funded by the issue of 2.2 million new Adcorp
           Shares, in terms of a vendor placement, to the value of R73.5 million (assuming the Adcorp
           Shares are issued at a R32.75, being a 5% discount to the 30 day VWAP ended 18 June
           2014).

                                                            After the
                                           Before the         Initial         After the
                                             Offer         Acquisition          Offer         % Change
       EPS (cents)                           176.9            164.1             127.4           -22.4
       HEPS (cents)                          188.6            185.6             170.4            -8.2
       NEPS (cents)                          384.3            376.8             361.1            -4.2
       NAVPS (cents)                       2,097.7          2,123.5           2,177.3             2.5
       NTAVPS (cents)                        204.7            272.0             311.8            14.6
       Weighted average number of           93,299           95,542           100,592             5.3
       shares in issue (‘000)
       Number of shares in issue at        100,092          102,334           107,385             4.9
       year end (‘000)

6.2   Kelly pro forma financial effects

      The pro forma financial effects of the Scheme on Kelly Shareholders, for which the directors of
      Kelly are responsible, are provided for illustrative purposes only to provide information about how
      the Scheme will affect the financial position of the Kelly Shareholders who elect the Share
      Consideration, by illustrating the effect thereof on the EPS, NEPS and HEPS of the Kelly Shares
      exchanged for new Adcorp Shares at the Switch Ratio, as if the Scheme had become operative on
      1 April 2013, and, for the purpose of NAVPS and NTAVPS, as if the Scheme had become
      operative on 31 March 2014. These pro forma financial effects are based on the rolling 12 months
      to 31 March 2014. Because of their nature, the pro forma financial effects may not give a fair
      presentation of Kelly Shareholders’ financial position and performance following the implementation
      of the Scheme.
                                    Less:          Add:
                  Audited 12      Interim 6      Interim 6      Before the      After the
                  months to       months to      months to       Scheme         Scheme        % Change
                   Sep 2013         March          March         (Note 1)       (Note 2)
                                    2013           2014
EPS (cents)           38.4            0.4            6.2            44.2             9.3         -79.1
Continuing
                     -38.9           -4.5            6.2           -28.2             9.3         132.9
operations
Discontinued          77.3            4.9            0.0            72.4             0.0        -100.0
operations
HEPS (cents)           9.0            0.4            5.7            14.3            12.4         -12.8
Continuing
                      -5.4           -4.5            5.7             4.8            12.4         160.3
operations
Discontinued          14.4            4.9            0.0             9.5             0.0        -100.0
operations
NEPS (cents)           9.0            0.4            5.7            14.3            26.3          84.7

Continuing            -5.4           -4.5            5.7             4.8            26.3         451.5
operations
Discontinued
                     14.4             4.9            0.0             9.5             0.0         -79.1
operations
NAVPS (cents)                                                      252.3           158.3         -37.2

NTAVPS                                                             140.8            22.7         -83.9
(cents)
Weighted
average
number of                                                         98,442          100,592
shares in issue
(‘000)
Number of
shares in issue
                                                                  98,825          107,385
at year end
(‘000)


       Notes:
       1) The financial information in the "Before the Scheme" column has been prepared based on
          the rolling 12 month results for Kelly to 31 March 2014 as extracted from Kelly’s interim
          results for the six months ended 31 March 2014 and 31 March 2013, and audited year end
          results for September 2013.
       2) The financial information included in the "After the Scheme" column has been derived by
           taking the “After the Offer” financial effects for Adcorp as illustrated in note 5 to paragraph
           6.1 above and dividing these results by the Switch Ratio to provide the pro forma financial
           effects for those Kelly Shareholders who elect the Share Consideration.
       3) Kelly does not disclose normalised earnings in their financial statements. However, as
           normalised earnings is Adcorp’s primary measure of financial performance, it has been
           calculated and included in the Kelly pro forma financial effects based on Kelly’s HEPS figure.

7.    SHAREHOLDER UNDERTAKINGS

      To date, irrevocable undertakings to vote in favour of the Scheme have been received from certain
      Kelly Shareholders holding in aggregate 27,742,921 Kelly Shares, representing in aggregate
      39.9% of the voting rights at the Scheme meeting or any adjournment thereof. The following Kelly
        Shareholders have provided irrevocable undertakings to vote the stated number of Kelly Shares in
        favour of the Scheme:

         Shareholder                      Date of irrevocable        Shares subject to      Scheme voting
                                          undertaking                     undertaking           rights (%)
         Safika Holdings                  17 July 2014                     23,766,249                 34.2
         Flagship Asset Management        04 July 2014                      3,976,672                  5.7
                                                                           27,742,921                 39.9



8.      GUARANTEES AND CONFIRMATIONS TO THE TRP

        FirstRand Bank Limited, acting through its Rand Merchant Bank Division, has delivered an
        irrevocable, unconditional bank guarantee for the maximum possible Cash Consideration to the
        TRP in compliance with regulations 111(4) and 111(5) of the regulations published in terms of
        sections 120 and 223 of the Companies Act (the "Takeover Regulations").

        Adcorp has confirmed to the Kelly Board that it has sufficient authorised and unissued Adcorp
        Shares available in order to issue the maximum number of new Adcorp Shares which may be
        required to fully satisfy the Share Consideration.

9.      TERMINATION OF THE KELLY LISTING

        Following implementation of the Scheme, application will be made to the JSE to terminate the
        listing of the Kelly Shares on the JSE.

10.     BENEFICIAL INTEREST IN KELLY AND ACTING AS PRINCIPAL

        Adcorp currently holds approximately 30% of the issued share capital of Kelly. The Offeror and
        Adcorp are acting in concert.

        The Offeror confirms that it is the ultimate proposed purchaser of all the Kelly Shares and that it is
        not acting as agent or broker for any other party.

11.     IMPLEMENTATION AGREEMENT

      11.1.       The Implementation Agreement contains provisions relating to the implementation of the
                  Scheme and certain undertakings of Kelly, Adcorp and the Offeror, including
                  undertakings regarding the conduct of the respective businesses of Kelly and Adcorp
                  during the period between the date of signature of the Implementation Agreement and
                  the operative date of the Scheme, as well as the manner in which third party approaches
                  will be dealt with by Kelly during the period between the date of signature of the
                  Implementation Agreement and the date of the Scheme Meeting ("Interim Period"). In
                  this regard the Offeror and Kelly have agreed, inter alia, that:

          11.1.1. during the Interim Period, Kelly will not (and it will procure that certain other persons
                  related to it will not) directly or indirectly:
                11.1.1.1.   solicit, initiate or encourage any expression of interest, enquiry, proposal or
                            offer regarding, inter alia, any merger, share acquisition or exchange,
                            business combination, sale or other disposition of all or substantially all of its
                            assets, recapitalisation, reorganisation, liquidation, material sale or issue of
                            securities or rights therein or thereto or any type of similar transaction or
                            series of transactions or which could reasonably be considered to be likely to
                            preclude or frustrate the Scheme or its implementation (an “Alternative
                            Proposal”);
                11.1.1.2.   participate in any discussion or negotiations regarding any Alternative
                            Proposal, unless the Kelly Board, acting pursuant to its fiduciary duties,
                            determines in good faith that it constitutes a bona fide written Alternative
                            Proposal which would, if consummated in accordance with its terms, result in
                            the aggregate value of the consideration payable in terms of such Alternative
                            Proposal being at least 10% greater than the aggregate value of the Scheme
                            Consideration taking into account, inter alia, the nature of the consideration,
                            the likelihood of such a transaction being completed within a reasonable
                            period of time and the financing risks relating thereto ("Superior Proposal");
                11.1.1.3.   agree to, approve or recommend an Alternative Proposal, unless it
                            constitutes a Superior Proposal; or
                11.1.1.4.   enter into any agreement related to an Alternative Proposal, unless it
                            constitutes a Superior Proposal,

                save where the Kelly Board concludes that such action is necessary to ensure
                compliance with its directors' fiduciary duties and/or obligations in terms of the
                Companies Act;

       11.1.2. Kelly will, from the date of signature of the Implementation Agreement until the
               implementation of the Scheme or the termination of the Implementation Agreement,
               promptly notify the Offeror of any Alternative Proposal which is made and which the Kelly
               Board considers to be serious and/or the Kelly Independent Board intends to pursue.
               Such notice shall include, to the extent that Kelly is permitted to do so, a description of
               the material terms and conditions of any such Alternative Proposal and the reasons why
               the Kelly Independent Board considers the Alternative Proposal to be a Superior
               Proposal. Kelly undertakes to promptly provide the Offeror with the same information and
               level of information made available to the person making such Alternative Proposal;

       11.1.3. should an Alternative Proposal constitute a Superior Proposal, then, prior to the Kelly
               Board approving or recommending and/or entering into an agreement in respect of the
               Superior Proposal, Kelly shall provide the Offeror with a copy of the document in which
               the Superior Proposal is made and afford the Offeror ten business days to amend the
               Offer on financial and/or other terms equivalent to, or more favourable than, those
               contained in the Superior Proposal.

12.   RECOMMENDATION AND FAIRNESS OPINION

      The Kelly Independent Board has appointed Nodus Capital Proprietary Limited as the independent
      expert ("Independent Expert"), as required in terms of section 114(2) of the Companies Act and
      the Takeover Regulations, to provide it with external advice in relation to the Scheme and to make
      appropriate recommendations to the Kelly Independent Board in the form of a fair and reasonable
      opinion.

      Whilst the contents of the Independent Expert's advice and opinion and the final views of the Kelly
      Independent Board will be detailed in the Scheme Circular, the Kelly Independent Board, together
      with the Independent Expert, has formed an initial view that the Purchase Consideration is fair and
      reasonable to Kelly Shareholders.

      The Kelly Independent Board intends, based on the information currently available to it, to make a
      recommendation to Kelly Shareholders to vote in favour of the resolutions to be proposed at the
      Scheme Meeting, provided that the Kelly Independent Board receives a final opinion from the
      Independent Expert to the effect that the Purchase Consideration is fair and reasonable to Kelly
      Shareholders.

13.   DOCUMENTATION

      Details of the Scheme and Proposed Transaction will be included in the Scheme Circular, which
      will contain, inter alia, details of the Scheme, a notice of the Scheme Meeting, a form of proxy, and
      a form of election, surrender and transfer. The Scheme Circular is expected to be posted to Kelly
      Shareholders on or about 21 August 2014.

      The salient dates pertaining to the Scheme will be released on SENS and published in the press
      prior to the posting of the Scheme Circular.

      In terms of the JSE Listings Requirements, the Proposed Transaction is classified as a Category 2
      transaction for Adcorp and accordingly does not require Adcorp shareholder approval.

14.   WITHDRAWAL OF KELLY CAUTIONARY ANNOUNCEMENT

      Following the release of this Firm Intention Announcement, the cautionary announcement originally
      published by Kelly on 27 March 2014, and renewed on 3 April 2014, 21 May 2014 and 2 July 2014,
      is hereby withdrawn and caution is no longer required to be exercised by Kelly Shareholders when
      dealing in Kelly Shares.

15.   KELLY RESPONSIBILITY STATEMENT

      The Kelly Independent Board accepts responsibility for the information contained in this Firm
      Intention Announcement to the extent that it relates to Kelly. To the best of their knowledge and
      belief, the information contained in this Firm Intention Announcement is true and nothing has been
      omitted which is likely to affect the importance of the information.

16.   ADCORP RESPONSIBILITY STATEMENT

      The board of directors of Adcorp accepts responsibility for the information contained in this Firm
      Intention Announcement to the extent that it relates to Adcorp. To the best of their knowledge and
      belief, the information contained in this Firm Intention Announcement is true and nothing has been
      omitted which is likely to affect the importance of the information.


Johannesburg
24 July 2014

Joint Corporate Adviser and Transaction Sponsor to Adcorp
Investec Bank Ltd

Joint Corporate Adviser to Adcorp
Rand Merchant Bank (A division of FirstRand Bank Limited)

Sponsor and Due Diligence Adviser to Adcorp
Deloitte & Touche

Legal Adviser to Adcorp
Webber Wentzel

Competition Adviser to Adcorp
Nortons Incorporated

Corporate Adviser and Transaction Sponsor to Kelly
Merchantec Capital

Sponsor to Kelly
PSG Capital

Legal Adviser to Kelly
Van Zijl Incorporated

Independent Expert
Nodus Capital Proprietary Limited

Reporting Accountants to Kelly
Grant Thornton

Date: 24/07/2014 04:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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