Nedcor- Partial Offer for Standard Bank Investment
Old Mutual PLC
15 November 1999
The text of this announcement is identical in all respects to that released for
the Company name Nedcor Ltd at 07:01 under RNS No 7946a.
OLD MUTUAL PLC
Announcement by Nedcor Limited of its
Intention to Make a Partial Offer for
Standard Bank Investment Corporation Limited
* The Board of Old Mutual plc ('Old Mutual') announces that
its subsidiary company, Nedcor Limited ('Nedcor') (in
which the Old Mutual Group has a 54 per cent. controlling
interest), has today announced its firm intention to make
a Partial Offer to shareholders of Standard Bank
Investment Corporation Limited ('Stanbic'), once the
permission of the Minister of Finance and the Registrar
of Banks in South Africa is obtained.
* Nedcor states that it intends ultimately to combine the
two businesses and therefore intends that consideration
will be given for a Scheme of Arrangement to be proposed
immediately following completion of the Partial Offer, in
order to acquire the remaining shares in Stanbic.
* The Board of Old Mutual believes there are significant
benefits to be achieved from such a combination and
strongly supports the proposed combination of Nedcor and
Stanbic.
* The Partial Offer will be for 50.1 per cent. of the
issued share capital of Stanbic.
* The Partial Offer will be on the basis of 1 new Nedcor
share for every 5.50 Stanbic shares. However, Nedcor
states that it will be prepared to improve the offer to
an exchange ratio of up to 1 Nedcor share for every 5.25
Stanbic shares in the event that the Stanbic Board
recommends to Stanbic shareholders a Scheme of
Arrangement for a full merger.
Mike Levett, Chairman of Old Mutual, commented:
'This transaction demonstrates our commitment to support
strategies which we believe will create value for our
shareholders. We are strongly supportive of Nedcor's
initiative in announcing its intention to make this offer,
with a view to creating a banking group with enhanced
prospects and the opportunity to generate considerable value
for the benefit of shareholders.'
Nedcor will be hosting an analyst presentation at their
offices in Johannesburg at 13.00 (local time) today which
will be video-linked to London. Analysts in London may view
the presentation by video-link at College Hill, 78 Cannon
Street, London, EC4N 6HH from 11.00 (London time).
15 November 1999
Enquiries:
Old Mutual plc
Mike Levett, Chairman Tel: +27 21 509 2005
Eric Anstee, Finance Director Tel: +44 171 569 0151
James Poole, Director - Investor Relations Tel: +44 171 569 0121
Roddy Sparks - Old Mutual, Cape Town
Tel: +27 21 509 2390
Merrill Lynch International
Marc Heilner, Managing Director Tel: +44 171 867 2989
James Agnew, Managing Director Tel: +44 171 772 1268
College Hill Tel: +44 171 457 2020
Alex Sandberg
Nicholas Williams
College Hill South Africa Tel: +27 11 447 3030
Graham Fiford /Tony Friend
OLD MUTUAL PLC
ANNOUNCEMENT BY NEDCOR LIMITED
OF ITS INTENTION TO MAKE A PARTIAL OFFER
FOR STANDARD BANK INVESTMENT CORPORATION LIMITED
The Board of Old Mutual plc ('Old Mutual') announces that
its approximately 54 per cent. controlled subsidiary
company, Nedcor Limited ('Nedcor'), has today announced its
firm intention to make a Partial Offer to shareholders of
Standard Bank Investment Corporation Limited ('Stanbic')
with a view to combining the two companies. The Partial
Offer will be made and the offer document issued once the
permission of the Minister of Finance and the Registrar of
Banks in South Africa is obtained. Following completion of
the Partial Offer, the enlarged Nedcor Group would be South
Africa's largest banking group. The Board of Old Mutual
strongly supports the proposed combination of Nedcor and
Stanbic.
Nedcor's ultimate aim is to acquire 100 per cent. of Stanbic
and achieve a full merger. However, given the substantial
number of shares in Stanbic held within the Stanbic Group,
Nedcor may not be able, in the absence of a recommendation
from the Stanbic board, to achieve its stated objective by
attaining the 90 per cent. acceptance level necessary for
compulsory acquisition of the remaining minority
shareholders.
Consequently, Nedcor intends to acquire a majority
shareholding through the Partial Offer, following which the
voting of the shares currently held within the Stanbic Group
could be reviewed. Immediately following completion of the
Partial Offer, Nedcor intends that consideration will be
given for a Scheme of Arrangement to be proposed to acquire
the remaining shares in Stanbic.
As at 9 November 1999, the last practicable date before this
announcement, the Old Mutual Group owned approximately 22.4
per cent. of Stanbic's issued ordinary share capital,
excluding approximately 2.3 per cent. in managed funds held
on behalf of third parties. Members of the Old Mutual Group,
in aggregate, have given irrevocable commitments to accept
the Partial Offer in respect of Stanbic shares representing
21.9 per cent. of the current issued share capital of
Stanbic. The irrevocable commitment in respect of the 1.9
per cent. interest in Stanbic held in shareholders' funds
may be scaled down to the extent that it is not required for
Nedcor to achieve the desired 50.1 per cent. level of
acceptances. Consistent with the terms of the irrevocable
commitments given by others, the members of the Old Mutual
Group concerned have the right to sell up to approximately
20 per cent. of the shares in Stanbic which are subject to
the irrevocable commitments they have given.
Assuming acceptance of the Partial Offer in full by all
Stanbic shareholders, the Old Mutual Group's effective
interest in Nedcor would be approximately 43 per cent.,
although the Old Mutual Group's effective interest may be
higher than this to the extent that Nedcor accepts excess
tenders under the Partial Offer. The intention of the Board
of Old Mutual is that in any event the Old Mutual Group's
interest in the enlarged Nedcor Group will not exceed 50 per
cent. As a result, following completion of the Partial
Offer, Nedcor would cease to be a subsidiary undertaking
within the Old Mutual Group and Old Mutual would instead
hold its investment as an interest in an associated
undertaking.
In view of the size of the proposed acquisition by Nedcor of
shares in Stanbic pursuant to the Partial Offer and the fact
that, either as a consequence of that offer or subsequent
related transactions, the enlarged Nedcor Group is expected
to cease to be a subsidiary of Old Mutual (collectively the
'Transaction'), Old Mutual is required under the provisions
of the London Stock Exchange's listing rules to obtain the
approval of its shareholders.
The Directors of Old Mutual, who have received financial
advice from Merrill Lynch International, consider the
Transaction to be in the best interests of Old Mutual. In
providing advice, Merrill Lynch International has placed
reliance on the Directors' commercial assessment of the
Transaction.
Overview of the Partial Offer
The Partial Offer will be made on the basis of 1 Nedcor
share for every 5.50 Stanbic shares (the 'Partial Offer
Ratio'). However, Nedcor states that it will be prepared to
improve the offer to an exchange ratio of up to 1 Nedcor
share for every 5.25 Stanbic shares (the 'Recommended Offer
Ratio') in the event that the Stanbic Board recommends to
Stanbic shareholders a Scheme of Arrangement for a full
merger.
Nedcor will invite all Stanbic shareholders to tender their
entire holding of Stanbic shares, or any portion thereof, in
exchange for Nedcor shares at the Partial Offer Ratio.
Should the total number of shares tendered exceed 50.1 per
cent. of the issued share capital of Stanbic, shares
tendered in excess of 50.1 per cent. of each shareholder's
entire holding will be scaled down proportionately to result
in an overall level of acceptances of 50.1 per cent. of the
issued share capital of Stanbic. Nedcor reserves the right
to reduce such required level of overall acceptances to less
than 50.1 per cent. of the issued share capital of Stanbic,
subject to the approval of Old Mutual.
Should the Partial Offer become unconditional, Nedcor
intends consideration will be given for a Scheme of
Arrangement to be proposed between Stanbic and its
shareholders, other than Nedcor, in terms of which Nedcor
will offer to acquire all of the shares in Stanbic not then
held by Nedcor on similar terms to those offered under the
Partial Offer. In the event that the Scheme of Arrangement
is for any reason not proposed or successfully completed,
Nedcor will make an unconditional offer to acquire all the
remaining shares in Stanbic on similar terms to those
offered under the Partial Offer. Stanbic and Nedcor
shareholders will each hold approximately 50 per cent. of
the merged group in the event that the full merger is
ultimately accomplished at the Partial Offer Ratio.
The Nedcor shares to be delivered to offerees who accept the
Partial Offer will be issued credited as fully paid and will
rank pari passu in all respects with existing Nedcor shares
and will be entitled to all dividends and other
distributions declared, made or paid after the date that the
Partial Offer is declared unconditional, save for the Nedcor
1999 final dividend. The intention is that Stanbic and
Nedcor shareholders will receive the normal final dividends
declared by the respective companies in which they are
invested in respect of the year ending 31 December 1999.
Based on the closing share price of 11700c per Nedcor share
on 12 November 1999, being the last trading day before this
announcement, the Partial Offer Ratio values each Stanbic
share at approximately 2127c and the current issued ordinary
share capital of Stanbic at approximately R29.2 billion. The
Recommended Offer Ratio values each Stanbic share at
approximately 2228c and the current issued ordinary share
capital of Stanbic at approximately R30.6 billion.
The Partial Offer will proceed once approved by the Minister
of Finance and the Registrar of Banks in South Africa, and
will be subject, inter alia, to the approval of shareholders
of each of Nedcor and Old Mutual and to certain regulatory
approvals.
The Partial Offer may make provision, with the approval of
the Securities Regulation Panel (the 'SRP') and at the
instance of Nedcor, for the suspension of the Partial Offer,
should, prior to the closing of the Partial Offer, the
directors of Stanbic resolve to recommend a Scheme of
Arrangement under which Nedcor will seek to acquire the
entire issued capital of Stanbic on terms comparable to
those of the Partial Offer. In such circumstances, Nedcor
shall proceed with the support of Stanbic to seek, as
expeditiously as possible, the approval of the Stanbic
shareholders and the sanctioning by the High Court in South
Africa of such Scheme of Arrangement.
Under the provisions of the Listings Requirements of The
Johannesburg Stock Exchange, the Old Mutual Group, in
respect of its approximately 54 per cent. interest in
Nedcor, will not be entitled to vote on the resolution to
approve the Partial Offer at Nedcor's Extraordinary General
Meeting.
Reasons for and benefits of the Transaction
Consistent with its stated intention to support strategies
adopted by Nedcor which are aimed at enhancing shareholder
value, the Board of Old Mutual is strongly supportive of the
combination of the businesses of Nedcor and Stanbic. The
Board believes that there are significant benefits to be
achieved from such a combination of two of South Africa's
leading banking organisations.
The directors of Nedcor state in today's announcement that
they consider that the proposed merger would give rise to a
number of benefits:
* 'The creation of a bank with the scale and efficiency to
compete with international banks
* The ability to eliminate duplicated costs and thereby
achieve globally competitive levels of efficiency and
profitability
* The ability to accelerate the development and share the
significant investment costs of future state-of-the-art
technology
* The creation of a bank of increased critical mass and
diversity, with a stronger capital structure and reduced
risk profile
* The creation of a bank with improved returns and greater
free cashflow
* The application of the merged group's low cost base to
extend banking services to the under-banked sector of the
community
* A range of opportunities for Black Economic Empowerment.'
Nedcor's announcement also states:
'Over recent months, Nedcor has conducted an extensive study
of the potential synergies achievable through a merger of
Nedcor and Stanbic. On the basis of this analysis, Nedcor
estimates that recurring annual pre-tax cost synergies of
approximately R3.1 billion can be realised by the end of
2002 following a full merger of the two banks.
The cost synergies will be derived primarily from
rationalisations of the combined branch networks, back
office functions and head office structures, as well as
reduced unit costs from increased economies of scale and the
sharing of future technology and research & development
costs, for example for Smart cards, Internet banking and e-
commerce.
In addition, revenue losses are expected to arise from
losses in market share in certain sectors, principally the
corporate and commercial markets as clients redistribute
their banking portfolios. Other revenue losses will arise
from exiting certain high risk or highly competitive
business activities, although such actions should increase
profitability where the business lost is unprofitable.
Conversely, revenue gains are expected to arise from the
merger as the Group expands into new areas, including the
provision of further services to the historically under-
banked, and further cost synergies identified but not
included. This results in estimated annual net revenue
losses of approximately R0.4 billion by the end of 2002.
The net result of cost synergies and net revenue losses is
conservatively estimated to be R2.7 billion pre-tax, or R1.9
billion post-tax, by the end of 2002.
Nedcor expects to incur pre-tax restructuring costs of R1.5
billion to R2.0 billion, or R1.1 billion to R1.5 billion
post-tax, to achieve the expected synergies, which is in
line with international norms of 10-20% of pre-merger
combined expenses. Even at the highest levels, this
represents less than one year of the estimated annually
recurring net merger benefits.
In the event that Nedcor is not able to acquire 100% of
Stanbic, Nedcor believes it will nevertheless be able to
realise a substantial proportion of the expected synergies,
albeit over a slightly longer timeframe.'
The Board of Old Mutual considers the proposed Transaction
to be in the best interests of Old Mutual and its
shareholders for the following reasons:
* it provides the opportunity to benefit from the value that
can be created through the proposed combination of Nedcor
and Stanbic, thus enhancing the value of the Old Mutual
Group's investments; and
* the increased scale of the combined entity will provide
greater scope to develop opportunities for the benefit of
both the Old Mutual Group and the enlarged Nedcor Group.
Relationship between Old Mutual and Nedcor following the
Partial Offer
Nedcor and Old Mutual intend to continue to explore and
develop opportunities for co-operation. Any arrangements
that may be concluded would always ensure clients' best
interests are served, with particular regard to prevailing
legislation and codes of best practice. The different areas
of joint activity would, in particular, cover the
development and sale of certain of each other's products
through their respective distribution channels and would
also encompass any possible future involvement or interest
by Nedcor in any insurance company.
In addition, Nedcor intends that Old Mutual should continue
to have non-executive director representation on the Nedcor
board broadly proportionate to its shareholding in the
merged group.
Financial effects of the Transaction for Old Mutual
Stanbic's financial results are drawn up in accordance with
South African generally accepted accounting policies
('GAAP'). It is not practicable to restate the results of
Stanbic in accordance with UK GAAP in order to determine
what adjustments would be required to show the effect of the
Transaction on the net assets or earnings of Old Mutual. In
the absence of any such adjustments, on an SA GAAP basis the
inclusion of the enlarged Nedcor Group as an associate
undertaking in Old Mutual's accounts would be expected to
give rise to an uplift in the consolidated net assets of Old
Mutual.
Information on Nedcor
Nedcor is a leading bank in South Africa and its activities
include retail, commercial, corporate, international and
investment banking.
In its audited financial statements for the period of 15
months ended 31 December 1998, stated on a South African
GAAP basis, Nedcor reported net income before taxation for
the period of R2,957 million (£302 million) and total assets
and net assets at the period end of R117,527 million
(£12,005 million) and R9,131 million (£933 million)
respectively, and in its unaudited results for the six
months ended 30 June 1999, reported net income before
taxation of R1,251 million (£131 million), total assets of
R126,817 million (£13,335 million) and net assets of R9,862
million (£1,037 million).
Nedcor shares are listed on The Johannesburg Stock Exchange
and, with a share price of 11700c as at close of business on
12 November 1999, the last trading day before publication of
this announcement, Nedcor had a market capitalisation of
approximately R27.7 billion (£2.8 billion).
Information on Stanbic
Stanbic is one of South Africa's leading banking and
financial services groups with activities including retail,
commercial, corporate, international and merchant banking
and life assurance through its partly owned subsidiary
company, Liberty Life Association of Africa Limited
('Liberty Life').
In its audited financial statements for the year ended 31
December 1998, Stanbic reported income before taxation for
the year of R2,430 million (£248 million) and total assets
and net assets at the year end of R160,384 million (£16,382
million) and R12,603 million (£1,287 million) respectively,
and in its unaudited results for the six months ended 30
June 1999, reported aggregated income before taxation in
respect of the operations of Stanbic and Liberty Life of
R2,859 million (£301 million), total assets of R239,671
million (£25,202 million) and net assets of R13,362 million
(£1,405 million).
Stanbic shares are listed on The Johannesburg Stock Exchange
and, with a share price of 2140c as at close of business on
12 November 1999, the last trading day before the
publication of this announcement, Stanbic had a market
capitalisation of approximately R29.4 billion (£3.0
billion).
Expected timetable
It is expected that the circular concerning the Transaction
and containing notice of an Extraordinary General Meeting of
Old Mutual will be posted to Old Mutual shareholders as soon
as practicable.
Exchange rates
Unless otherwise indicated, Rand figures have been converted
into pounds sterling at the rate of R9.79 : £1 for
information as at 31 December 1998, and R9.51 : £1 for
information as at 30 June 1999, and R9.88 : £1 for all other
information (being the latest practicable available rate
prior to publication of this announcement).
Merrill Lynch International, which is regulated in the
United Kingdom by the Securities and Futures Authority
Limited, is acting for Old Mutual in connection with the
Transaction described in this announcement and for no-one
else and will not be responsible to anyone other than Old
Mutual for providing the protections afforded to customers
of Merrill Lynch International or for providing advice in
relation to the Transaction.
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