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JOINT ANNOUNCEMENT OF A MANDATORY OFFER BY HCI-KWV HOLDINGS PROPRIETARY LIMITED (“HCI–KWV HOLDINGS”), A SUBSIDIARY OF HCI TO ACQUIRE ALL OF THE ORDINARY SHARES IN THE ISSUED SHARE CAPITAL OF KWV (OTHER THAN THOSE THAT IT ALREADY OWNS)

 1.         INTRODUCTION

HCI and KWV hereby advise shareholders that HCI’s indirect shareholding in KWV has increased to 35.01% (net of treasury shares) subsequent to the acquisition of 688 KWV shares by HCI at a price of 850 cents per share.

Consequently, in terms of Section 123 of the Companies Act, No. 71 of 2008, as amended, (the “Companies Act”) read with the Takeover Regulations promulgated in terms of Sections 120 and 223 of the Companies Act (the “Takeover Regulations”) HCI, through its wholly owned subsidiary, HCI- KWV Holdings (the “Offeror”), is obligated to make an offer to all KWV shareholders to acquire all of the ordinary shares of KWV, other than those that it already owns (the “Offer Shares”), on the terms set out in paragraph 3.1 below (the “Offer”).

The Offeror has notified the board of directors of KWV of its obligation to proceed with the proposed acquisition of the Offer Shares. The Offer is an affected transaction as defined in section 117 (1) (c) of the Companies Act and, accordingly, will be regulated by the Companies Act, the Takeover Regulations and the Takeover Regulation Panel (“TRP”).

2.         RATIONALE FOR THE OFFER

 HCI’s indirect shareholding in KWV has increased to more than 35%, and HCI via the Offeror, is therefore required in terms of the Takeover Regulations to make a mandatory offer to KWV shareholders for the Offer Shares at the highest price paid by HCI in the past six months.

In addition, HCI is aware that there is limited liquidity in the KWV shares and the Offer provides KWV shareholders with an opportunity to realise their investment at a slight premium to the recent prevailing trading prices.

3.         THE OFFER

 3.1.  Terms of the Offer

HCI, via the Offeror, shall offer to acquire all of the Offer Shares in exchange for the Offer consideration of 850 cents per Offer Share (“Offer Consideration”) in cash. KWV shareholders may elect to accept the Offer in whole or in part.

The Offer Consideration represents a premium to the KWV market price of 832 cents as at 15 December 2011 (the “Last Practicable Date”) and to the 30 day volume weighted average trading price of KWV of 832 cents for the 30 day period to the Last Practicable Date.

In the event that the KWV shareholders holding at least 90% (ninety percent) of the Offer Shares accept the Offer within 4 (four) months after the date of the Offer, the Offeror reserves the right to invoke the provisions of Section 124 of the Companies Act to compulsorily acquire all of the Offer Shares in respect of which the Offer was not accepted.

Should the Offeror become entitled to and elect to exercise its entitlement in terms of Section 124 of the Companies Act, KWV will become a wholly-owned subsidiary of HCI, following which the KWV shares will cease to be traded over-the-counter.

3.2.  The Offer period

The Offer is expected to be open for acceptance from 09:00 on Monday, 23 January 2012 with the initial closing date being at 17:00 on Friday, 02 March 2012 (“Closing Date”) which is the minimum offer period in terms of the Takeover Regulations of 30 business days. HCI reserves the right to change the initial Closing Date to a later date.

3.3.  Payment of the Offer Consideration and cash confirmation

 Investec Bank Limited has furnished the TRP with an irrevocable bank guarantee that the Offeror has sufficient cash resources and/or facilities to conclude the Offer.

The payment of the Offer Consideration will be made to KWV shareholders on the basis set out in paragraph 8 below.

3.4.  No set-off of Offer consideration

Settlement of the Offer Consideration pursuant to the Offer will be implemented in accordance with the terms of the Offer without regard to any lien, right of set-off, counterclaim, deduction, withholding or other analogous right to which HCI may otherwise be, or claim to be, entitled against any shareholder.

3.5.  Offer not made where unlawful

The Offer shall not constitute an offer to purchase or the solicitation of an offer to sell any KWV shares in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the laws of such jurisdiction.

4.         CONDITIONS PRECEDENT

 HCI has obtained Competition Commission approval for the acquisition of control of KWV during April 2011 and, accordingly the Offer is not subject to any conditions precedent, other than the receipt of the required approval of the TRP, including the issuance by the TRP of the requisite compliance certificate.

5.         PRO FORMA FINANCIAL EFFECTS OF THE OFFER

 The table below sets out the pro forma financial effects of the Offer on a KWV shareholder who accepts the Offer:

 

Market value before the Offer (cents)

Offer consideration
(cents)

Change (%)

Financial effects as at the Last Practicable Date(1):
Market value (2)

832

850

2%

30-day volume weighted average (3)

832

850

2%

60-day volume weighted average (4)

830

850

2%

Issued shares, net of treasury shares (5)

68 537 663

 

Notes and assumptions:

(1)   All financial effects are calculated as at the Last Practicable Date.

(2)   The closing market price per KWV share at the Last Practicable Date.

(3)   The volume weighted average traded price of KWV shares over the 30 trading days up to and including the Last Practicable Date.

(4)   The volume weighted average traded price of KWV shares over the 60 trading days up to and including the Last Practicable Date.

(5)   Per the KWV annual report for the year ended 30 June 2011.

6.         HCI SHAREHOLDINGS IN KWV

Subsequent to the acquisition of 688 shares in KWV on 21 December 2011, the Offeror currently owns a direct and indirect beneficial interest of 35.01% in KWV ordinary shares (net of treasury shares).

7.         RECOMMENDATION AND FAIR AND REASONABLE OPINION

A sub-committee of the KWV board of directors comprising 5 independent directors of KWV (the “Independent Board”) was formed for the purposes of considering the Offer in accordance with the requirements of the Takeover Regulations. The Independent Board is comprised of the following directors:

−        F du Plessis;

−        N Ellis;

−        M Joubert;

−        K Moloko; and

−         L van Dyk.

The Independent Board has appointed KPMG, an independent advisor acceptable to the TRP, to provide it with external advice in relation to the Offer and to make appropriate recommendations to the Independent Board for the benefit of KWV shareholders. The substance of the external advice and the views of the Independent Board will be detailed in the Offer circular to be sent to KWV shareholders in relation to the Offer.

8.         SALIENT DATES AND TIMES

The salient dates and times of the Offer are set out below:

2012

Posting date for the combined Offeror and Offeree circular to KWV shareholders

Friday, 20 January

Opening date of Offer at 09:00

Monday, 23 January

Record date on which KWV shareholders must be recorded in the register in order to participate in the Offer

Friday, 02 March

Closing date of the Offer (17:00)

Friday, 02 March

Results of the Offer released on SENS

Monday, 05 March

Results of the Offer published in the press

Tuesday, 06 March

Offer consideration posted to Offer Participants (once documents of title have been received)

Offer Consideration settlement dates, being within six business days after acceptance of the Offer until the sixth business day after the Closing Date

 Notes:

1)     The above dates and times are subject to amendment by HCI. Any such change will be released on SENS and/or published in the press.

2)     All times indicated above are South African times.

 9.         CIRCULAR

 A circular containing full detail of the Offer, and including, inter alia, a form of acceptance, surrender and transfer, will be posted to KWV shareholders on or about Friday, 20 January 2011.

10.      RESPONSIBILITY STATEMENT

 HCI and the Independent Board accept responsibility for the information contained in this announcement. 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 import of the information.

Cape Town

21 December 2011

 

Investment Bank and Sponsor to HCI:

Investec Bank Limited

 

Legal Advisers to HCI:

Edward Nathan Sonnenbergs Inc