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Summarised pro forma financial effects in respect of the proposed acquisition of Daybrook Fisheries, Inc.
OCEANA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1939/001730/06)
JSE share code: OCE
NSX share code: OCG
ISIN: ZAE000025284
(“Oceana” or “the Company” or “the Group”)
SUMMARISED PRO FORMA FINANCIAL EFFECTS IN RESPECT OF THE PROPOSED
ACQUISITION OF DAYBROOK FISHERIES,INC. AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders of Oceana (“Oceana Shareholders”) are referred to the
announcement released on the Stock Exchange News Service (“SENS”) of the
JSE Limited (“JSE”) on Tuesday, 19 May 2015 and published in the press on
Wednesday, 20 May 2015 (“the Terms Announcement”) which set out the salient
terms of the proposed acquisition by Oceana of the entire issued share capital of
Daybrook Fisheries, Inc. (“Daybrook Fisheries”) (“the Proposed Acquisition”) for a
purchase consideration of USD 382.3 million (approximately ZAR 4,588 million)
(“the Purchase Consideration”).*
*Unless otherwise noted, all USD figures have been converted at the USD/ZAR
exchange rate of 12.00, being the hedged forward exchange rate at which the
Proposed Acquisition is expected to be completed. Capitalised terms used in this
section have the same meaning as ascribed in the body of this announcement.
At the time of the Terms Announcement the summarised pro forma financial
effects of the Proposed Acquisition (“the Pro Forma Financial Effects”) had not
been completed. Further to the Terms Announcement, the Pro Forma Financial
Effects are set out in paragraph 3 below.
2. FUNDING OF THE PROPOSED ACQUISITION
As set out in the Terms Announcement, Oceana intends to fund the Purchase
Consideration plus transaction expenses through a combination of:
- Up to ZAR 2,400 million from (i) Oceana cash on hand, and (ii) to the extent
that the Oceana cash on hand available to fund the Purchase Consideration is
less than ZAR 2,400 million, on or about the date that the Proposed
Acquisition will be implemented, the utilisation of a tranche of Term Funding to
fund any shortfall to the extent required;
- Up to USD 142 million (ZAR 1,704 million) from debt raised in the US (“the US
Funding”) and secured by US Group companies only; and
- ZAR 1,200 million from an equity bridge facility (“the Equity Bridge Facility").
Lucky Star Limited, a wholly-owned subsidiary of the Company, will also raise a
ZAR 2,700 million term facility (“Term Funding”) principally to refinance an
existing short term facility drawn down to fund the Group’s working capital
commitments.
The Equity Bridge Facility is expected to be repaid out of the proceeds of a
renounceable rights offer that will raise equity capital of ZAR 1,200 million
(“Proposed Rights Offer"), which Oceana intends to undertake after the Proposed
Acquisition has been completed. The implementation of the Proposed Acquisition
is however not conditional on the Proposed Rights Offer. Details of the Proposed
Rights Offer will be released on SENS and the Namibian Stock Exchange at the
time of announcing the finalisation information in relation to the Proposed Rights
Offer.
The ZAR denominated Term Funding and the Equity Bridge Facility has been
underwritten by The Standard Bank of South Africa Limited (acting through its
Corporate and Investment Banking division) (“Standard Bank”) and the USD
denominated funding required has been underwritten by Bank of Montreal and/or
its affiliates (together “the Debt Funders”). The Debt Funders have provided
Oceana with their respective commitments to fund the re-finance of the existing
Oceana group company short-term working capital facility and the US debt
funded portion of the Proposed Acquisition (subject to market standard
conditions).
The Company and Standard Bank (“the Equity Underwriter”) have entered into a
standby underwriting commitment in terms of which Oceana agrees to conduct,
and Standard Bank agrees to underwrite, the Proposed Rights Offer. The
standby underwriting commitment contemplates a further underwriting agreement
being entered into in respect of the Proposed Rights Offer in due course prior to
the issue of the Proposed Rights Offer circular. Details of the Proposed Rights
Offer will be released on SENS and the Namibian Stock Exchange at that stage.
The Equity Bridge Facility is conditional on the underwriting arrangements
remaining in force with the Equity Underwriter, which in turn is conditional on,
among other customary conditions: (a) Oceana shareholder approvals; (b) the
transaction agreements remaining in force; (c) no material adverse change event;
(d) no force majeure event; and (e) no change of control of Oceana.
Further details regarding the terms of the financing associated with the Proposed
Acquisition will be set out in the circular to Oceana Shareholders which will
include the full terms of the Proposed Acquisition (“the Circular”), to be posted to
Oceana Shareholders on or about Friday, 12 June 2015. A further
announcement setting out the salient dates and times of the Proposed
Acquisition, posting of the Circular and the general meeting of Oceana
Shareholders will be released in due course.
3. PRO FORMA FINANCIAL EFFECTS
Capitalised terms used in this section have the same meaning as ascribed in the
Terms Announcement.
The table below sets out the Pro Forma Financial Effects of the Proposed
Acquisition.
In terms of a ruling received from the JSE, the Pro Forma Financial Effects are
based on the published summarised audited results of Oceana for the twelve
months ended 30 September 2014, released on SENS on Thursday, 6 November
2014 (“Oceana Results”) and the International Financial Reporting Standards
(“IFRS”) converted audited results of Daybrook Group for the twelve months
ended 31 December 2014 (“Daybrook Results”).
The Pro Forma Financial Effects have been prepared to assist Oceana
Shareholders in assessing the impact of the Proposed Acquisition and Proposed
Rights Offer on the Company’s earnings per share (“EPS”), diluted EPS, headline
earnings per share (“HEPS”), diluted HEPS, net asset value per share (“NAV”)
and tangible net asset value per share (“TNAV”).
The Pro Forma Financial Effects have been prepared in a manner consistent in
all respects with IFRS, the accounting policies adopted by Oceana as at 30
September 2014, and the Revised SAICA Guide on Pro Forma Financial
Information and the Listings Requirements of the JSE.
The Proposed Acquisition has been accounted for in terms of IFRS 3: Business
Combinations.
The board of directors of Oceana is responsible for the compilation, contents,
accuracy and presentation of the Pro Forma Financial Effects, and for the
financial information from which it has been prepared.
The Pro Forma Financial Effects have been prepared for illustrative purposes
only, and, because of their nature, will not fairly present Oceana’s financial
position, changes in equity, results of operations or cash flows in subsequent
periods.
A simple consolidation of the historical financial information will not appropriately
reflect the future prospects of the combined businesses due to, inter alia, the
following factors:
- efficiencies to be derived from recent upgrades to the Daybrook Group
processing plant;
- efficiencies in the optimal funding structure of the combined group;
- movements in the USD/ZAR exchange rate; and
- the ability to realise value from further synergies
Consequently historical performance will not be an appropriate reflection of future
prospects.
Pro forma Pro forma
Before the After the After the
Proposed Proposed % Proposed %
Acquisition Acquisition Change# Rights Offer Change
Refer note 1 Refer note 2 Refer note 2 #
EPS (cents) 571.6 622.8 9.0 559.4 (2.1)
Diluted EPS (cents) 517.0 563.4 9.0 510.9 (1.2)
HEPS (cents) 565.0 616.3 9.1 553.5 (2.0)
Diluted HEPS (cents) 511.0 557.4 9.1 505.5 (1.1)
Weighted average 100.4 100.4 0.0 111.8 11.4
number of shares in
issue for EPS and
HEPS (millions)
NAV (cents) 1 668.8 1 614.9 (3.2) 2 496.7 49.6
TNAV (cents) 1 571.7 (1 814.2) (215.4) (583.0) (137.1)
Number of shares in 100.5 100.5 0.0 111.9 11.3
issue for NAV and
TNAV (millions)
# Percentage change is with reference to the “Before the Proposed Acquisition” column.
Notes:
1. The “Before the Proposed Acquisition” financial information has been extracted from
Oceana's audited results for the 12 months ended 30 September 2014, released on SENS on
Thursday, 6 November 2014.
2. The Pro forma “After the Proposed Acquisition” financial information comprises the “Before
the Proposed Acquisition” financial information, Daybrook Group’s IFRS converted results for
the 12 months ended 31 December 2014 and adjustments based on the following principal
assumptions:
2.1 For the purposes of the Pro Forma Financial Effects only, the transaction date is
assumed to be 1 October 2013, the start date of Oceana’s 2014 financial year, for
the statement of comprehensive income and 30 September 2014 for the statement
of financial position items. Statement of comprehensive income items have been
converted to ZAR at the average exchange rate for the period 1 October 2013 to 30
September 2014 of USD1: ZAR10.55 and statement of financial position items at the
closing rate at 30 September 2014 of USD1: ZAR11.28.
Overhead expenditure
2.2 Transaction costs amounting to ZAR 53 million, excluding debt commitment fees,
have been expensed. These costs are to be funded out of acquisition funding.
2.3 The Put Option is accounted for as a derivative in terms of IAS 39 with gains/losses
on revaluations, from the date of signature of the agreement until the earlier of
exercise date or expiry of option period, being recognised through profit and loss. As
a result an adjustment of ZAR 8 million relating to the gain on revaluation of the Put
Option in the first financial period has been included as an adjustment to overhead
expenditure. In terms of the Westbank Membership Agreement, notification of
exercise of the Put Option can only be provided, at the earliest, during the second
financial period following the Proposed Acquisition, following which the exercise will
only be effective 12 months after the date of such notification. As a result, the impact
of the potential exercise has not been included in the Pro Forma Financial Effects.
Should the Put Option be effectively exercised as described, there will be a cash
outflow being the put strike price of USD 31.5 million plus the Put Premium of USD
15 million (payable only if the Put Option is exercised within 3 years) as well as any
unpaid distributions, while there will be a cash inflow, based on prevailing market
values, from the new shareholder acquiring the 75% shareholding. Other than the
gain/loss on revaluation of the put option, there will be no further impact on the
statement of comprehensive income following the settlement under the option. In the
event that the put option is not exercised, the fair value of the Put Option liability or
asset will be derecognised through profit and loss.
Joint venture and associate income
2.4 An adjustment of ZAR 1 million has been made to equity account the earnings of
Westbank as a result of Daybrook Fisheries' 25% interest in Westbank.
Interest paid
2.5 Settlement of the Purchase Consideration is to be funded partially through US debt
funding and existing Oceana cash resources.
2.6 Debt commitment fees and raising costs on the ZAR denominated Term funding,
Equity Bridge Facility and US funding, totalling ZAR 78 million are capitalised to the
debt raised and amortised over the period of the debt, using the effective interest
method. The amortised portion is included in interest paid, being ZAR 28 million.
2.7 Interest of ZAR 126 million on the ZAR denominated Term Funding is calculated at
JIBAR linked rates in accordance with the underlying agreements.
2.8 Interest of ZAR 47 million on the USD denominated term loan facility raised to
partially settle the Purchase Consideration, and the USD denominated working
capital facility is calculated at a LIBOR linked rate in accordance with the underlying
funding agreements.
2.9 Interest of ZAR 16 million on the ZAR denominated Equity Bridge Facility raised to
partially settle the Purchase Consideration is calculated, until the facility is repaid out
of proceeds received from the Proposed Rights Offer, at a JIBAR linked rate in
accordance with the underlying funding agreements.
2.10 Elimination of interest expense of ZAR 18 million and related taxation of ZAR 7
million from the repayment of Daybrook Group's existing long and short-term
borrowings.
Taxation
2.11 The applicable legislated tax rates utilised for South Africa is 28% and 40% (federal
tax) in the United States.
3. Tangible fixed assets are depreciated over their estimated remaining useful lives based on a
provisional fair value exercise in terms of IFRS 3: Business Combinations, using fair values
disclosed by Daybrook Group in their IFRS converted results for the year ended 31 December
2014. Intangible assets arising from the Proposed Acquisition of ZAR 3 100 million have been
assessed by management to comprise goodwill and customer relationships. Additional
adjustments may arise from the final purchase price allocation, the nature and quantum of
which are currently uncertain.
4. The effect of the new shares issued under the Proposed Rights Offer on per share metrics
have been included for illustrative purposes only and do not reflect the issue price or terms of
the Proposed Rights Offer, which will only be finalised at the time of announcing the
finalisation information in relation to the Proposed Rights Offer. The proceeds from the
Proposed Rights Offer is expected to be used to repay the Equity Bridge Facility, and the
illustrative issuance of the new Oceana shares has been included to provide Oceana
Shareholders with a better understanding of the potential effects of the proposed capital
structure on the per share accounting metrics. Other than noted above, the Proposed Rights
Offer does not have any impact on the statement of comprehensive income. Pro forma "After
the Proposed Rights Offer" comprises the Pro forma “After the Proposed Acquisition”
adjusted for the following assumption:
4.1 New shares issued of 11.4 million have been calculated with reference to Oceana's
30 day volume weighted average price of ZAR 105.25 as at 21 May 2015. The new
shares are assumed to be issued on 1 October 2013.
5. Transaction costs expensed amounting to ZAR 53 million, interest and transaction costs
relating to the Equity Bridge Facility of ZAR 29 million and expenses of ZAR 53 million in
Daybrook Group are considered to be non-recurring. These costs are included in the Pro
Forma Financial Effects.
6. There are no other subsequent events which require adjustment to the Pro Forma Financial
Effects.
4. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
As the Pro Forma Financial Effects have now been released, Oceana
Shareholders no longer need to exercise caution when dealing in their Oceana
securities.
Cape Town
27 May 2015
Investor relations contacts:
Imraan Soomra, Financial Director
+27 21 410 1458
Financial and Debt Adviser and Transaction Sponsor to Oceana
The Standard Bank of South Africa Limited
South African Legal Counsel to Oceana
Webber Wentzel
United States Legal Counsel to Oceana
Kean Miller LLP
Haynes and Boone LLP
K&L Gates LLP
Hogan Lovells US LLP
United States Financial Adviser to Oceana
Antarctica Advisors LLC
South African bookrunner, underwriter and Debt Funder
The Standard Bank of South Africa Limited
United States bookrunner, underwriter and Debt Funder
Bank of Montreal and/or its affiliates
Legal adviser to Standard Bank as South African book-runner, underwriter
and Debt Funder
Allen & Overy (South Africa) LLP
Sponsoring Broker to Oceana on the Namibian Stock Exchange
Old Mutual Investment Services (Namibia) Proprietary Limited
Reporting accountants and auditors to Oceana
Deloitte & Touche
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement may be considered forward-looking.
Although Oceana believes that the expectations reflected in any such forward-
looking statements relating to the Proposed Acquisition are reasonable, the
information has not been reviewed or reported on by the reporting accountants and
auditors and no assurance can be given by Oceana that such expectations will prove
to be correct. Oceana does not undertake any obligation to publicly update or revise
any of the information given in this announcement that may be deemed to be
forward-looking.
Date: 27/05/2015 10:00:00 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.
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