- June 27, 2008
- Posted by: admin
- Category: SENS Announcements
Shareholders are informed that in terms of an agreement entered into between HCI and Coronation Asset Management Proprietary) Limited (“Coronation”) finalised on 27 June, 2008, HCI has undertaken to acquire from Coronation its 28.6% shareholding in Johnnic (the “Acquisition”) for a consideration of R16.75 per Johnnic ordinary share (the “Purchase Price”). HCI is considering concluding the Acquisition in terms of section 440A of the Companies Act, 1973 (Act 61 of 1973), as amended (“the Potential Offer”). The purpose of this announcement is to provide information on the Acquisition in terms of the JSE Listings Requirements.
Prior to the Acquisition, HCI held a 67% interest in Johnnic. HCI has embarked on a strategy to increase its shareholding in Johnnic when an appropriate opportunity arises. The HCI board of directors believes that the Acquisition may also provide an opportunity to delist Johnnic and create a single entry point for the HCI group.
3. BUSINESS OF JOHNNIC
Johnnic is an investment holding company with interests in gaming, hotel and exhibition businesses. Johnnic is listed on the JSE Limited and comprises the following major investments:
– 100% Gallagher Estate and properties;
– 30.2% interest in Suncoast Casino through Durban Add-Ventures;
– 9.5% effective interest in the Tsogo Sun Group; and
– 90.5% interest in Montauk Energy Capital.
4. THE ACQUISITION
In terms of the Acquisition, HCI will acquire the entire shareholding of Coronation of 47 654 721 ordinary shares in Johnnic.
4.2. The Purchase Consideration
HCI will pay R16.75 for every Johnnic ordinary share held by Coronation, totalling R798 million (the “Purchase Consideration”), and will settle the Purchase Consideration as follows:
4.2.1. a cash settlement of R720 million; and
4.2.2. 993 542 HCI ordinary shares.
4.3. Pro forma financial effects of the Acquisition on HCI shareholders for the 12 month period ended 31 March 2008 The table below illustrates the unaudited pro forma financial effects of the Acquisition based on the published, audited results for the 12 month period ended 31 March 2008. The preparation of the unaudited pro forma financial effects is the responsibility of the directors of HCI. The unaudited pro forma financial effects have been prepared for illustrative purposes only to provide information on how the Acquisition may have impacted on HCI`s results and financial position before and after the Acquisition and due to the nature thereof may not give a fair reflection of HCI`s results and financial position.
12 months ended Before the After the Change 31 March 2008 Acquisition Acquisition2,3 ,4 (R) (R) (%)
Headline earnings 702.10 673.65 -4.05% per share Earnings per 562.95 529.66 -5.91% share Net asset value 2 375.92 2 356.02 5 -0.84% per share Net tangible 1 471.46 1 199.41 5 -18.49% asset value per share
The financial effects are indicative only and have been based on the assumptions set out below:
1. The “Before the Acquisition” column for the 12 months ended 31 March 2008 reflects the published HCI audited financial results for the 12 months ended 31 March 2008.
2. The “After the Acquisition” column has been adjusted for the effects of the Acquisition by HCI.
3. Calculations for the “After the Acquisition” column have been based on the assumption that the Acquisition was effected on 1 April 2007 for income statement purposes and on 31 March 2008 for balance sheet purposes.
4. The “After the Acquisition” column assumes that the consideration is funded by the issue of 993,542 HCI ordinary shares at a price of R78.72 per HCI share, R340 million of group cash resources and raising debt funding of R380 million, assuming an average interest rate on call funds of 7.84%, an average debt funding rate of 11.29% and a South African corporate tax rate of 28%.
5. For purposes of calculating Net asset value per share and Net tangible asset value per share “After the Acquisition”, it was assumed that the excess paid over the net book value of the assets acquired relates to goodwill which is not impaired.
In terms of the JSE Listings Requirements the Acquisition is categorised as a category two transaction.
6. POTENTIAL OFFER TO REMAINING MINORITY SHAREHOLDERS IN JOHNNIC
The HCI board of directors is considering making the Potential Offer to all Johnnic minority shareholders on the following basis:
– R16.75 per Johnnic ordinary share in cash; or
– R15.11 in cash and 0.02084876 HCI ordinary shares for every Johnnic ordinary share held.
Further details in this regard will be provided in due course.