Proposed Acquisition by Nedcor Investment Bank
OLD MUTUAL PLC
28 October 1999
Acquisition by Nedcor Investment Bank Holdings Limited of Edward Nathan &
Friedland Inc's Corporate Commercial Business ('the ENF business')
Shareholders of Old Mutual plc ('Old Mutual') are referred to the joint
announcement by Nedcor Investment Bank Holdings Limited ('NIB'), Nedcor Limited
('Nedcor') and Edward Nathan & Friedland Inc ('ENF') issued today. The text of
that announcement is outlined below:
1. Introduction
Further to the cautionary announcement by Nedcor Investment Bank Holdings
Limited ('NIB') on 25 October 1999, Nedcor Limited, NIB and Edward Nathan &
Friedland Inc ('ENF') have concluded a unique agreement in South African history
in terms of which a new concept has been born - the merging of the corporate
commercial activities of a major law firm with the business of a leading
investment bank. For the 1998 year ENF was ranked first in a survey by Ernst &
Young in respect of advice given on 89 announced mergers worth R99 billion.
Those activities that may be conducted only by legal practitioners, particularly
litigation, conveyancing and company registrations, are not being acquired by
NIB, but will be conducted as stand alone practices by the partners and
personnel currently involved, where clients will continue to enjoy the same
standards, service and expertise.
The strategic intent of the acquisition by NIB is to create an integrated
business which combines the best of legal skills in a commercial context with
the best of the financial skills, to the enduring benefit of existing and future
clients of the integrated business and to enable it to be at the forefront of
meeting the demands which will be made on investment banks in the future both in
the region and internationally.
A separate division of NIB trading as 'ENF' will include the acquired ENF
business which will continue to render commercial and corporate legal advice and
services on the same basis as hitherto. It is intended to integrate other
advisory services of NIB, when appropriate, into this division. The commitment
of ENF to advisory excellence and problem solving will continue unabated as will
its focus on training and the recruitment of the top graduates, with particular
emphasis on those from previously disadvantaged backgrounds.
Michael Katz the senior partner of ENF and at present a director of Nedcor and
NIB, will become the chairman of NIB in place of Richard Laubscher, the Nedcor
chief executive officer, who, with other Nedcor directors will remain directors
of NIB. Izak Botha, as the group managing director will continue to be
responsible for the management of the NIB group and implementation of strategy,
policy and directives.
Nedcor's strategy of consolidating its investment banking activities,
culminating in the separate listing of NIB, created the suitable vehicle at an
opportune time for this ground breaking acquisition. NIB continues to be a vital
part of the Nedcor group with Nedcor holding a significant portion of NIB's
equity. It is believed that this transaction will add substantial value, not
only to NIB, but to the wider Nedcor group.
2. History and nature of ENF
Edward Nathan who founded the firm was admitted to practice as an attorney in
1905. The firm incorporated in 1977. ENF has maintained a well established and
dynamic pre-eminence among South African law firms. Recent independent surveys
confirm that ENF attracts the major share of South Africa's corporate merger and
acquisition work when compared to other law firms.
The activities of the ENF business to be acquired by NIB include the following
areas:
Mergers and Acquisitions Employee benefits and
retirement funds
structuring
Infrastructure finance Tax
Competition law Corporate Finance
Structured finance International trade and foreign investment
Labour Law Intellectual property and trade
marks
Aviation Environmental regulation
Information technology Banking and finance
Media, telecommunications Privatisation,private publicand regulatory
partnerships and concessions
Risk management Mining and energy
Sports/sponsorships
Healthcare Tourism and Entertainment
3. Salient terms of the agreement
3.1. The ENF business comprises inter alia the names 'Edward
Nathan & Friedland' and 'ENF' with the goodwill
associated with the ENF business.
3.2. All the partners and the other practitioners in the ENF
business will be employed within the NIB group.
Appropriate restraints of trade will be given in favour
NIB.
3.3. The effective date of the acquisition will be no later
than 31 December 1999.
3.4. The purchase price is R400 000 000 which NIB will
finance by way of an issue of new NIB shares and/or such
other funding instruments as it considers appropriate.
3.5. The acquisition of the ENF business is subject to the
condition that the necessary regulatory authorities'
consents and approvals are obtained.
4. Financial effects
4.1. It is intended that the attributable intangible value of
the ENF business will be written off against NIB's share
premium account.
4.2. Had the acquisition of the ENF business been implemented
on 30 June 1999, (the date of NIB's unaudited interim
financial results), NIB's net asset value per share
would have reduced by a maximum of 9 cents per share
from 131,6 cents to 122,6 cents per share, a reduction
of 6,8%. The effect of the acquisition of the ENF
business on NIB's current earnings is not material and
the acquisition will significantly underpin NIB's
sustainable growth in earnings over a wide spectrum of
activities.
5. Rationale
5.1. The acquisition of the ENF business will provide added
diversity of a skills base.
5.2. NIB will have the ability to translate ENF's leading
advisory role in South Africa, as evidenced by ENF's
ranking in the recent survey by Ernst & Young referred
to above, into banking assets and transactions.
5.3. NIB will be positioned to take advantage of significant
additional deal flow, with the skills to deliver to
clients an integrated and efficient all-encompassing
legal, corporate finance and transactional services,
including the ability to service the needs of
governments and authorities both domestically and within
the region.
5.4. The international relationships of the ENF business will
enhance NIB's skills base and will enable NIB to expand
its international activities.
5.5. NIB will be better placed to play a leading role in
procuring finance for the development of the SADC
region, commercialisation and tourism infrastructure for
South Africa.
6. The litigation and conveyancing business of ENF
These businesses will not be acquired by NIB for regulatory
reasons and will operate as separate law firms owned by the
partners who practice in those law firms. These businesses
will continue to render legal services in those spheres to
the same standards of excellence as is currently the case.
7. The future
From the point of view of clients, the ENF business will
continue to render value added services to them as it has
always done, but with the integrated benefits provided by the
NIB group.
Issued by:
Investor Relations
Old Mutual plc
London
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