21st Feb 2005 07:00
Lonrho Africa PLC21 February 2005 For immediate release Not for release, publication or distribution in or into the United States of America, Canada, Australia or Japan 21 February 2005 Lonrho Africa Plc ("Lonrho Africa" or "the Company") Proposed Demerger of Lonrho Africa Trade & Finance Limited Further to the announcement made on 13 September 2004, Lonrho Africa is todaypleased to announce details of the proposed demerger of its wholly ownedsubsidiary Lonrho Africa Trade & Finance Limited ("LATF"). The Board is today posting a circular, together with forms of proxy, to LonrhoAfrica Shareholders which details the proposals relating to the Demerger andseeks shareholders' approval for the Demerger at a Court Meeting and anExtraordinary General Meeting which have been convened for 16 March 2005. Under the terms of the Demerger, further details of which are set out below, anew holding company, Castle Acquisitions Plc, has been formed for LATF, which isto be demerged from the Lonrho Africa Group by way of a scheme of arrangement.It is intended that an application will be made for Castle Shares to be admittedto trading on AIM. It is expected that the Demerger will become effective on 21April 2005 and that Castle Shares will be admitted to trading on AIM from 3 May2005. Summary of the Proposals The Demerger of LATF and the establishment of a new corporate structure entailsa number of steps. In summary, the first of these is the creation of a new holding company, CastleAcquisitions. Thereafter, the entire issued share capital of LATF will betransferred by Lonrho Africa by means of a Court approved Scheme of Arrangementto Castle Acquisitions in consideration of the allotment of new Castle Shares toQualifying Shareholders. The result will be that Castle Acquisitions will be theparent company of LATF and the Lonrho Africa Group will no longer include LATFwithin its group. No changes will occur to any shareholdings in Lonrho Africa asa consequence of the Scheme. The shareholding structure of Castle Acquisitionswill be different to the shareholding structure of Lonrho Africa, suchdifferences being due to the fact that fractional entitlements will not beallotted to holders of Lonrho Africa Shares and shares will not be allotted toOverseas Shareholders pursuant to the Proposals. However, over 90 per cent ofthe issued Castle Shares will be held by the same persons who hold over 90 percent of the Lonrho Africa Shares at the Record Date. The share capital of Lonrho Africa will be reduced pursuant to a Court approvedreduction of capital. This will allow the transfer of the entire issued sharecapital of LATF to Castle Acquisitions and increase reserves available forfuture distribution to shareholders of Lonrho Africa. The share capital of LATF has also been reduced pursuant to a Court approvedreduction of capital in order to facilitate the Demerger and Admission. Background to and reasons for the Proposals The Lonrho Africa Group, through LATF, operates one defined benefit pensionscheme in the United Kingdom, the John Holt Pension Scheme ("UK Scheme"), theassets of which are held separately from those of the Lonrho Africa Group undera trust. The Law Debenture Trust Corporation plc is the sole independent trusteeof the UK Scheme. There are a variety of small overseas pension schemes whichare at different stages of being wound up. The Lonrho Africa Group does not haveany material post retirement benefits other than these pension schemes. The last triennial full actuarial valuation of the UK Scheme was carried out at30 September 2002. In order to comply with FRS17 this has been updated to30 September 2004 in the consolidated statutory accounts of the Lonrho AfricaGroup. This update showed that the market value at 30 September 2004 of the UKScheme's assets was some £44.2m and the actuarial liabilities were £16.7m,resulting in a surplus under FRS17 of £27.5m. Under FRS17 this surplus is notcurrently recognised, in whole or in part, in the LATF balance sheet. The liabilities of the UK Scheme arise predominantly from the benefitentitlements of deferred and pensioner members. The liabilities for pensionershave in part been secured by the purchase of annuity policies. At 30 September2004 the actuary to the UK Scheme estimated that the cash surplus wasapproximately £20m. The surplus in the UK Scheme will fluctuate over time allowing for the changesin investment market conditions. The assets of the UK Scheme are invested incorporate bonds, gilts and annuities to match the benefit entitlements formembers. The surplus in the UK Scheme is also affected by suspending futureemployer contributions. However, because the number of active members of the UKScheme has fallen significantly in recent years, the current surplus will not bereduced for some considerable time unless new employees are introduced into theUK Scheme. The trustee of the UK Scheme, the Law Debenture Trust Corporationplc, has considered with the Board of Lonrho Africa the manner in which thissurplus could best be utilised. The solution recommended by the IndependentDirectors is for Castle to effect a reverse takeover as a means of introducingnew members to the UK Scheme thereby utilising the surplus, and in this regardthe Board of Lonrho Africa has for some time searched for suitable investmentopportunities. In order to facilitate the unlocking of the potential shareholder value inherentwithin the UK Scheme and make this potential asset more visible and attractiveto potential purchasers, it is proposed that a Demerger be implemented, therebycreating a separate AIM quoted company with access, with the consent of thetrustee, to the pension surplus and with the freedom to pursue its own strategicdevelopment without any exposure to the Lonrho Africa Group's residual assetsand liabilities. On Demerger, LATF will essentially have on its balance sheet a cash balance inthe order of £1.57m and will continue to operate the UK Scheme, therebyaffording the potential opportunity to access the pension surplus whenadditional active employees are introduced to the UK Scheme. Lonrho Africa willretain ownership of the Lonrho Africa Group's residual assets and liabilitiesand maintain its own separate AIM listing whilst it continues with its currentdisposal programme. Description of the Proposals Lonrho Africa will declare a dividend of an amount equal to the book value ofits shareholding in LATF ("Demerger Dividend") which will be satisfied in specieby the issue by Castle Acquisitions of Castle Shares, credited as fully paid, toshareholders of Lonrho Africa on the bases set out below, in consideration ofthe transfer of LATF to Castle Acquisitions. Castle Acquisitions will issueCastle Shares to shareholders of Lonrho Africa on completion of the Demerger onthe basis of: for every 1,000 Lonrho Africa Shares held one Castle Share Fractional entitlements will not be allotted to Qualifying Shareholders nor willOverseas Shareholders receive Castle Shares. Instead such fractionalentitlements and Castle Shares will be aggregated and allotted to GPG (UK)Holdings plc, as underwriter, pursuant to the Underwriting Agreement. GPG are aninstitutional investor who are interested in becoming a shareholder in Castle.GPG will acquire Castle Shares at a price of £25 per Castle Share. The net cashproceeds of the allotment will be paid to Overseas Shareholders who were notallotted Castle Shares and to Qualifying Shareholders who were entitled tofractional entitlements. It is intended that an application will be made for the entire issued sharecapital of Castle Acquisitions to be admitted to AIM following the CapitalReduction and the Scheme becoming effective. However, Admission could be delayedor never happen. In the event that Admission does not occur, Castle Acquisitions will remain anunlisted company with the inherent characteristics such companies have includingwithout limitation liquidity restrictions being applicable in the event of aproposed sale or purchase of Castle Shares. Castle does not intend to apply for a secondary listing on the JSE. Lonrho Africa Capital Reduction The Court will at the same hearing to approve the Scheme be asked to considerthe Lonrho Africa Capital Reduction. Under the Lonrho Africa Capital Reductionthe capital of Lonrho Africa will be reduced by decreasing the nominal amount ofeach Lonrho Africa Share from 20 pence to 1 penny. If the Lonrho Africa CapitalReduction is approved by a special resolution of the Shareholders of LonrhoAfrica and is subsequently confirmed by the Court, this will create a newreserve in the books of Lonrho Africa of approximately £3.6m which will beavailable for future distributions to Shareholders of Lonrho Africa or otherwiseto facilitate any future transactions at the discretion of the directors ofLonrho Africa. Conditions to the Scheme The Scheme will become effective and binding if: (i) the Scheme is approved by a majority in number, representing not less than three-fourths in value, of the shareholders present and voting, either in person or by proxy, at the Court Meeting; (ii) a Special Resolution of Lonrho Africa to approve the matters necessary to implement the Scheme is duly passed at the EGM; (iii) the Scheme is sanctioned (with or without modification) and the reduction of capital of Lonrho Africa provided for under the Scheme is confirmed by the Court; and (iv) an office copy of each of the orders of the Court sanctioning the Scheme and confirming the reduction of capital of Lonrho Africa provided for under the Scheme is delivered to the Registrar of Companies for registration and, in the case of the order of the Court confirming the reduction of capital of Lonrho Africa provided for under the Scheme, is registered by him. The Directors will not take the necessary steps to enable the Scheme to besanctioned by the Court unless, at the relevant time, they consider that itcontinues to be in Lonrho Africa's best interests that the Scheme should becomeeffective. Conditions to the Lonrho Africa Capital Reduction The implementation of the Lonrho Africa Capital Reduction is subject to thefollowing conditions being satisfied: (i) the Scheme having become fully effective; (ii) the Special Resolution which will be proposed at the EGM to approve, inter alia, the Lonrho Africa Capital Reduction being passed; (iii) the confirmation of the Lonrho Africa Capital Reduction by the Court; and (iv) the registration by the Registrar of Companies of an office copy of the Court order confirming the Lonrho Africa Capital Reduction. The directors of Lonrho Africa will not take the necessary steps to enable theLonrho Africa Capital Reduction to be confirmed by the Court unless, at therelevant time, they consider that it continues to be in Lonrho Africa's bestinterests that the Lonrho Africa Capital Reduction should become effective. Modifications to the Scheme The Scheme contains a provision for Lonrho Africa and Castle jointly to consent,on behalf of all concerned, at the Court hearing to sanction the Scheme, tomodifications of, or additions to the Scheme or to any condition which the Courtmay think fit to impose or approve. The Court would be unlikely to approve anymodifications or additions or to impose or approve any condition which might bematerial to the interests of shareholders in Lonrho Africa unless theshareholders in Lonrho Africa were informed of any such modification, additionor condition. It will be a matter for the Court to decide, at its discretion,whether or not further meetings of shareholders in Lonrho Africa should be held.Similarly if a modification, addition or condition is put forward which, in theopinion of the Independent Directors, is of such a nature or importance as torequire the consent of shareholders in Lonrho Africa at a further meeting, theIndependent Directors will not take the necessary steps to enable the Scheme tobecome effective unless and until such consent is obtained. Relationship between Lonrho Africa and Castle following the Demerger Following the Demerger, Lonrho Africa and Castle will operate as independentseparately trading companies. Directors of Castle Acquisitions The Directors of Castle Acquisitions are: Christopher H B Mills Non-executive ChairmanRichard J Wilkinson Non-executive DirectorMichael S Wilson Non-executive Director Overseas Shareholders The implications of the Proposals for Overseas Shareholders may be affected bythe laws of the relevant jurisdictions. Overseas Shareholders should informthemselves about and observe any applicable legal requirements. It is theresponsibility of each Overseas Shareholder to satisfy himself or herself as tothe full observance of the laws of the relevant jurisdiction in connection withthe Proposals, including the obtaining of any governmental exchange control orother consents which may be required and/or the compliance with other necessaryformalities which are required to be observed and the payment of any issue,transfer or other taxes due in such jurisdiction. In any case, where Lonrho Africa and/or Castle is advised that the allotment andissue of Castle Shares to a shareholder in Lonrho Africa with a registeredaddress in a jurisdiction outside the United Kingdom, Republic of Ireland orSouth Africa or whom Lonrho Africa and/or Castle as the case may be, reasonablybelieves to be a citizen, resident or national of a jurisdiction outside theUnited Kingdom, Republic of Ireland or South Africa, would or may infringe thelaws of such jurisdiction, or would or may require Lonrho Africa and/or Castleto comply with any governmental or other consent or any registration, filing orother formality with which Lonrho Africa and/or Castle is unable to comply, orcompliance with which Lonrho Africa and/or Castle regards as unduly onerous,then Lonrho Africa and/or Castle may determine either (i) that the holder'sentitlement to Castle Shares shall be issued to a person appointed by Castle andthen sold at the price of £25 per Castle Share, with the net proceeds of salebeing remitted to the holder concerned; or (ii) that the holder's entitlement toCastle Shares pursuant to the Proposals shall be issued to such holder and thensold on his behalf as soon as reasonably practical at the price of £25 perCastle Share, with the net proceeds of sale being remitted to the holderconcerned. In this regard, it will be assumed that the allotment and issue of Castle Sharesto any shareholders in Lonrho Africa with a registered address in South Africa(or whom Lonrho Africa and/or Castle reasonably believe to be a resident ofSouth Africa or to be subject to the South African Exchange Control Regulations)would infringe the South African Exchange Control Regulations unless suchshareholder(s) provide Castle with a letter from an authorised dealer in foreignexchange, as such term is defined in the South African Exchange ControlRegulations, confirming that the allotment and issue of Castle Shares to theshareholder(s) concerned will not constitute an infringement of the SouthAfrican Exchange Control Regulations. Any such letter should be addressed toCastle Acquisitions PLC c/o Computershare Investor Services 2004 (Pty) Ltd, POBox 61763, Marshalltown 2107, South Africa, to be received by no later than theRecord Date. Overseas Shareholders who do not receive Castle Shares will receive theequivalent of 2.5p per Lonrho Africa Share held by them. Lonrho Africa Shareholder meetings The Scheme requires the approval of shareholders in Lonrho Africa at the CourtMeeting and, for its implementation, at the Extraordinary General Meeting. TheScheme also requires the sanction of the Court. The directors of Lonrho Africa are authorised to implement the Lonrho AfricaCapital Reduction only if shareholders in Lonrho Africa pass the SpecialResolution which will be proposed at the EGM to approve the same. Notices of the Court Meeting and the Extraordinary General Meeting are set outon in the circular which will be posted to shareholders today. Court Meeting The Court Meeting, which is held at the direction of the Court, has beenconvened for 11.00 a.m. on 16 March 2005 to enable shareholders in Lonrho Africato consider the Scheme. At the Court Meeting, voting will be by poll and not bya show of hands. A poll means that each shareholder in Lonrho Africa present (orhis or her proxy) who is entitled to be present and to vote has one vote forevery share which he or she holds or represents. The Scheme must be approved atthe Court Meeting by a majority in number representing not less than threequarters in nominal value of Lonrho Africa Shares held by those present andvoting, in person or by proxy. In order that the Court can be satisfied that the votes cast constitute a fairrepresentation of the views of shareholders in Lonrho Africa, it is importantthat as many votes as possible are cast at the Court Meeting. Voting informationis set out in the circular being sent to shareholders today. Extraordinary General Meeting The Extraordinary General Meeting is being convened to ask shareholders inLonrho Africa to consider a resolution to give effect to the Proposals andcertain other matters. The resolution provides for: (a) approval of the Scheme; and(b) approval of the Lonrho Africa Capital Reduction. The majority required for the passing of the resolution is not less than threequarters of the votes cast, as set out in the notice of Extraordinary GeneralMeeting in the circular which will be posted to shareholders today. Entitlement to attend and vote at the Court Meeting and the ExtraordinaryGeneral Meeting and the number of votes which may be cast at the Meetings willbe determined by reference to the register of members of Lonrho Africa at theVoting Record Time. Expected timetable of principal events A timetable showing the proposed principal events relating to the Demerger isset out below: Latest time and date for receipt of blue forms of proxy 11.00 a.m. on 14 March 2005for the Court Meeting Latest time and date for receipt of green forms of proxy 11.15 a.m. on 14 March 2005for the Extraordinary General Meeting Voting Record Time 6.00 p.m. on 14 March 2005 Court Meeting 11.00 a.m. on 16 March 2005 Extraordinary General Meeting 11.15 a.m. on 16 March 2005 Record Date for Qualifying Shareholders 5.00 p.m. on 18 April 2005 Court hearing of the petition to sanction the Scheme and 19 April 2005to confirm the reduction of capital of Lonrho Africa provided for under the Scheme Scheme Record Time 5.00 p.m. on 20 April 2005 Scheme Fully Effective Time 5.00 p.m. on 21 April 2005 Dealings in Castle Shares to commence on AIM 8.00 a.m. on 3 May 2005 Crest member accounts credited with Castle Shares 8.00 a.m. on 3 May 2005 Despatch of definitive share certificates relating to by 9 May 2005Castle Shares and cheques to those so entitled Note: All dates shown above are based on current expectations and may be subjectto change. Definitions Defined terms used in this announcement have the same meaning as those definedin the shareholder circular being posted to Lonrho Africa shareholders today. Copies of the shareholder circular and related documents posted to Lonrho Africashareholders today will be available to the public free of charge from theoffices of Strand Partners Limited, 26 Mount Row, London W1K 3SQ during normalbusiness hours on any weekday, Saturdays, Sundays and public holidays excepted,from the date of this announcement up to and including the Effective Date or thedate that the Scheme lapses or is withdrawn, whichever is the earlier. If Shareholders have sold or otherwise transferred all their Ordinary Shares inLonrho Africa, they should send the Circular they receive together with theaccompanying forms of proxy as soon as possible to the purchaser or transfereeor to the stockbroker, bank or other agent through whom the sale or transfer waseffected for onward transmission to the purchaser or transferee. Enquiries: Lonrho Africa Plc Tel: (020) 7409 3494Christopher Mills Strand Partners Limited Tel: (020) 7409 3494(Financial Adviser to Lonrho Africa)Simon RaggettMatthew Chandler Cardew Group Tel: (020) 7930 0777Nadja Vetter This announcement has been approved by Strand Partners solely for the purposesof section 21 of the Financial Services and Markets Act 2000. Strand Partners,which is authorised and regulated in the United Kingdom by the FinancialServices Authority, is acting exclusively for Lonrho Africa Plc and for no oneelse in connection with the matters described in this announcement and will notbe responsible to anyone else for providing the protections afforded tocustomers of Strand Partners or for advising any other person on the contents ofthis announcement or any matter referred to herein. This announcement has been prepared for information purposes only and is not tobe relied upon in substitution for the exercise of independent judgement. It isnot intended as investment advice and under no circumstances is it to be used orconsidered as an offer to sell, or a solicitation of an offer to purchase, anysecurities nor a recommendation to enter into any transaction; nor shall it orany part of it form the basis of or be relied on in connection with any contractor commitment whatsoever. 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