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SHF - Steinhoff International Holdings Limited - Firm intention by Steinhoff

Release Date: 26/01/2012 10:00
Code(s): SHF
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SHF - Steinhoff International Holdings Limited - Firm intention by Steinhoff to make a partial offer to the shareholders of JD Group Limited to acquire control of JD Group, in exchange for shares in KAP International Holdings Limited STEINHOFF INTERNATIONAL HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration Number 1998/003951/06) Share code: SHF ISIN: ZAE000016176 ("Steinhoff") FIRM INTENTION BY STEINHOFF TO MAKE A PARTIAL OFFER TO THE SHAREHOLDERS OF JD GROUP LIMITED ("JD GROUP") TO ACQUIRE CONTROL OF JD GROUP, IN EXCHANGE FOR SHARES IN KAP INTERNATIONAL HOLDINGS LIMITED ("KAP") 1. INTRODUCTION AND BACKGROUND Steinhoff shareholders are referred to the announcement published on the Securities Exchange News Service ("SENS") on 18 October 2011 ("October Announcement") in which it was announced that Steinhoff`s South African Industrial assets would be disposed of to KAP International Holdings Limited ("KAP") in exchange for KAP shares ("KAP Transaction") and that Steinhoff had been granted call options in respect of 27.2 million JD Group shares ("JD Group Call Options"). The JD Group Call Options , if and to the extent exercised, would give Steinhoff the right to acquire from the grantors of the JD Group Call Options ("Option Grantors") such underlying JD Group shares in exchange for KAP shares on the basis of 16 KAP shares for every JD Group share acquired. In addition to the JD Group Call Options, Steinhoff received indications from other JD Group shareholders, holding, in aggregate, 11 million JD Group shares, of their intention to make all or any of these shares available to Steinhoff for purchase on the same terms and conditions as the JD Group Call Options. 2. STATUS OF THE KAP TRANSACTION AND JD GROUP OFFER As stated in the SENS announcement published by KAP on 18 January 2012, all resolutions required to give effect to the KAP Transaction were approved by the requisite majorities of KAP shareholders at the general meeting held on 18 January 2012. Accordingly, the only remaining condition precedent to the KAP Transaction is the approval of the Competition Authorities. In line with the rationale as set out in the October Announcement, Steinhoff has communicated its firm intention to the board of directors of JD Group to extend a partial offer to the JD Group shareholders ("JD Group Offer") to acquire control of JD Group ("JD Group Change of Control") in accordance with the terms as summarised in paragraph 4 below. The JD Group Offer will be conditional, inter alia, on the Competition Authorities approving the JD Group Change of Control. Following the implementation of the JD Group Offer, the listings of KAP and JD Group on the main board of the JSE Limited ("JSE") will be retained. KAP and JD Group will both become listed operating subsidiaries of Steinhoff, in which Steinhoff will hold approximately 62% and 50.1%, respectively. 3. RATIONALE As stated, Steinhoff is an active investment holding company focusing on investing in complementary assets that could provide benefits to, or derive benefits from, the existing businesses within its portfolio. The JD Group Offer represents such an investment opportunity and will be a major step towards Steinhoff formalising its strategic positioning as a listed investment holding company which has listed or listable operating subsidiaries and associates, as distinct business units, each with its own investment and growth focus, namely: * Steinhoff Europe, an integrated mass-market retailer of furniture and household goods, predominantly serving the discount segment in Europe. Steinhoff Europe is wholly-owned by Steinhoff and may be listed separately at the appropriate time and subject to market conditions; * KAP, which after the implementation of the KAP Transaction, will be a listed diversified industrial operating subsidiary of Steinhoff focusing on Southern Africa and other emerging markets; * JD Group, which upon the implementation of the JD Group Offer, will be an emerging market retail subsidiary of Steinhoff distributing furniture and household goods, motor vehicles and DIY products, supported by a consumer finance business. JD Group will be the operating unit within which all of Steinhoff`s Southern African retail expansion initiatives will be accommodated; and * a worldwide property portfolio consisting of retail, industrial and commercial real estate assets. The above corporate structure will contribute to enhanced growth prospects of the operating subsidiaries, each with its own investment focus and autonomous management teams and governance policies. As a result, the underlying value of Steinhoff will become more visible and transparent and, together with enhanced financial flexibility, should contribute to growth in shareholder value at all levels. 4. PROPOSED MECHANICS OF THE JD GROUP OFFER Steinhoff currently holds 69.9 million JD Group shares representing 32.7% of JD Group`s issued share capital of 215.5 million shares (net of treasury shares). In order to ensure equal treatment of all JD Group shareholders (other than Steinhoff), including the Option Grantors ("JD Group Minorities"), and in compliance with the Companies Act 71 of 2008 (the "Companies Act") and the Regulations administered by the Takeover Regulation Panel ("TRP"), Steinhoff will, subject to the conditions precedent listed in paragraph 5 below, offer JD Group Minorities the right to sell to Steinhoff 26.22% of their JD Group shares in exchange for KAP shares on the basis of 16 KAP shares for every JD Group share tendered, equating to 38.2 million JD Group shares held. All JD Group Minorities shall have the right to tender more than 26.22% of their JD Group shareholdings in the JD Group Offer ("Excess Applications"). To the extent applicable, at the close of the JD Group Offer all Excess Applications will be proportionately reduced on an equitable basis, in order to ensure Steinhoff acquires 38.2 million JD Group shares in consideration for a total of 611.2 million KAP shares ("KAP Shares"). Irrevocable undertakings have been received from the Option Grantors and the holders of the other 11 million JD Group shares referred to in paragraph 1 above, in terms of which they have undertaken: i) to fully accept the JD Group Offer; and ii) if and to the extent that JD Group Minorities have accepted the JD Group Offer in respect of less than a total of 38.2 million JD Group shares, to tender additional JD Group shares representing such shortfall. 5. FINANCIAL EFFECTS On the assumption that Steinhoff will acquire an additional 17.4% of JD Group in consideration for the KAP Shares as set out above, the JD Group Change of Control will have an insignificant effect (less than 3%) on Steinhoff`s pro forma headline earnings, earnings and net asset value per share. The financial effects on a JD Group shareholder of accepting the JD Group Offer will be set out in the related circular ("Offer Circular") which will be mailed to JD Group Minorities within 20 business days of the date of this announcement, or such later date as may be approved by the TRP. 6. CONDITIONS PRECEDENT The JD Group Offer is subject to the fulfilment of the following conditions precedent, namely: a. the KAP Transaction becoming unconditional; b. the Competition Authorities approving the JD Group Change of Control; c. an Independent Expert acceptable to the TRP, to be appointed by the Independent Board of JD Group, expressing an opinion as to whether the terms and conditions of the JD Group Offer are fair and reasonable to JD Group Minorities. A copy of such opinion will be contained in the Offer Circular; d. the TRP and the JSE (insofar as the JD Group Offer represents a Category 2 transaction for Steinhoff in terms of the Listings Requirements of the JSE) approving the Offer Circular and other documents relevant thereto; e. Steinhoff receives acceptances from JD Group Minorities in respect of 38.2 million JD Group shares as contemplated by section 125(3)(b)(i) of the Companies Act. As stated in paragraph 4 above, irrevocable undertakings have been received from the Option Grantors and the holders of a further 11 million JD Group shares to tender up to a maximum of 38.2 million JD Group shares; f. the JD Group Offer being approved as a partial offer, as contemplated by section 125(3)(b)(ii) of the Companies Act, by independent holders of JD Group shares in aggregate controlling more than 50% of all JD Group shares, at a general meeting to be convened in terms of the Offer Circular ("JD Group General Meeting"). In this regard, irrevocable undertakings from independent holders holding 51% of the aggregate number of JD Group shares held by JD Group Minorities have been obtained to support all of the resolutions to be proposed at the JD Group General Meeting; g. the JSE giving effect to the listing of the KAP shares to be received by Steinhoff in terms of the KAP Transaction, which listing was already approved on 14 December 2011; and h. the Exchange Control Division of the South African Reserve Bank approving the Offer Circular. 7. OTHER MATTERS AND TIMING OF THE JD GROUP OFFER Upon the KAP Transaction being implemented, Steinhoff will have the KAP Shares available to discharge full acceptance of the JD Group Offer. It is currently estimated that the Offer Circular will be posted during the latter part of February 2012, following which the JD Group General Meeting will be held during March 2012. The JD Group Offer will open on the first business day after posting of the circular and will remain open for a period of not less than 30 business days. A copy of the circular to KAP shareholders dated 17 December 2011, which contains full details of the KAP Transaction and the business of KAP, as reconstituted after implementation of the KAP Transaction, will be attached to the Offer Circular marked "For Information Purposes". A copy of this circular is also available at www.kapinternational.com. Steinhoff will publish a SENS announcement forthwith after the fulfilment of the conditions precedent set out in paragraph 6 above, which will contain full details of the salient dates of the JD Group Offer, including the procedure for its acceptance. 8. STEINHOFF DIRECTORS RESPONSIBILITY STATEMENT The directors of Steinhoff accept responsibility for the information contained in this announcement. To the best of their knowledge and belief the information contained herein is true and nothing has been omitted which is likely to affect the importance of the information. Wynberg, Sandton 26 January 2012 Investment Bank: Investec Corporate Finance Sponsor: PSG Capital (Proprietary) Limited Joint Investment Bank to Steinhoff: The Standard Bank of South Africa Limited Legal Adviser: Cliffe Dekker Hofmeyr Inc Date: 26/01/2012 10:00:01 Supplied by www.sharenet.co.za 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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