Adcock Ingram Holdings Limited : NOTICE OF RECEIPT OF AN UNSOLICITED LETTER FROM THE BIDVEST GROUP LIMITED ("BIDVEST") ("THE BIDVEST LETTER") PROPOSING A SCHEME OF ARRANGEMENT TO ACQUIRE 60.0% (ON A FULLY DILUTED BASIS) OF THE ENTIRE ISSUED SHARE CAPITAL OF ADCOCK INGRAM, INCLUDING
Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2007/016236/06
Share code: AIP
("Adcock Ingram" or "the Company")
NOTICE OF RECEIPT OF AN UNSOLICITED LETTER FROM THE BIDVEST GROUP LIMITED ("BIDVEST") ("THE BIDVEST LETTER") PROPOSING A SCHEME OF ARRANGEMENT TO ACQUIRE 60.0% (ON A FULLY DILUTED BASIS) OF THE ENTIRE ISSUED SHARE CAPITAL OF ADCOCK INGRAM, INCLUDING THE SHARES ALREADY OWNED BY BIDVEST, AND CAUTIONARY ANNOUNCEMENT
The shareholders of Adcock Ingram are advised that at approximately 19h00 South Africa time on Thursday, 21 March 2013, the board of directors of Adcock Ingram ("Adcock Ingram Board") received the Bidvest Letter.
The Adcock Ingram Board has constituted an independent board ("Adcock Ingram Independent Board") in order to consider the Bidvest Letter.
The full content of the Bidvest Letter is reproduced in paragraph 2 below without edit or modification in the interests of full and timeous disclosure. Shareholders are, however, alerted to the following:
* the Adcock Ingram Independent Board has had no opportunity to review or consider the Bidvest Letter;
* no negotiation has taken place between Adcock Ingram and Bidvest regarding the proposed structure, terms and conditions set out in the Bidvest Letter;
* by publishing the content of the Bidvest Letter, the Adcock Ingram Independent Board fully reserves its rights and makes no representation, concession or recommendation regarding the nature thereof or the proposals therein and gives no undertakings in relation thereto.
Acknowledging its statutory and fiduciary obligations to the Company and its shareholders, the Adcock Ingram Independent Board will together with the Company's external advisers consider its position and communicate its views to Adcock Ingram shareholders in due course.
2. THE BIDVEST LETTER
The content of the Bidvest Letter is set out verbatim hereunder.
1.1. AIH is listed on the Main Board of the Johannesburg Securities Exchange (the "JSE").
1.2. Bidvest currently owns 4,983,653 (four million nine hundred and eighty three thousand six hundred and fifty three) shares in AIH constituting approximately 2.54% (two point fifty four percent) of the issued share capital.
1.3. This letter serves as a firm intention to make an offer, as contemplated in Chapter 5 of the Companies Act, No. 71 of 2008, as amended (the "Companies Act") and Chapter 5 of the Companies Regulations, 2011 (the "Companies Regulations") to acquire so many additional shares in AIH as together with those shares already owned by Bidvest as set out in paragraph 1.2 above constitutes 60% (on a fully diluted basis) of the entire issued ordinary share capital of AIH (the "Remaining Shares") (the "Transaction"). In this regard to the extent that there are any shares in AIH which have not yet been issued but which may be issued at a subsequent time, whether in terms of the AIH BEE Scheme, or in terms of any Management Incentive Scheme or otherwise, then the 60% referred to above must be such that it is 60% of the enlarged ordinary share capital after taking account of the maximum number of shares that may be issued as aforesaid in some future time in terms of the aforegoing schemes.
Bidvest believes that the Transaction will enable AIH and its stakeholders to benefit from forming part of the wider Bidvest Group.
3. Transaction Mechanism
3.1. The firm intention to pursue the Transaction in terms of this letter will be implemented by means of a Scheme of Arrangement (the "Scheme") subject to the condition that by not later than 2 April 2013, Bidvest receives an undertaking by the Board of directors of AIH to cooperate with Bidvest in the implementation of the Transaction and in particular to propose the Scheme. Such undertaking shall consist of a written confirmation by AIH to Bidvest by countersignature and return of a duplicate original of this letter (attached herewith marked Annexure "A")[Per Adcock Ingram: *Annexure A is a duplicate of the Bidvest Letter with provision for signature on behalf of Adcock Ingram and has therefore been omitted from this announcement], that it will cooperate with Bidvest and propose the Scheme to AIH shareholders in accordance with the terms and conditions of this letter. The undertaking by AIH in terms hereof to propose the Scheme is firm and is not dependent on any recommendation relating to the merits of the Scheme which the Board may give at some future time.
3.2. The Scheme will be proposed by Bidvest as between AIH and its shareholders other than Bidvest (the "Remaining Shareholders") pursuant to which Bidvest will acquire the Remaining Shares in AIH held by the Remaining Shareholders on the following basis :-
3.2.1. the Scheme will be proposed in terms of section 114 of the Companies Act as read together with section 115 of the Companies Act;
3.2.2. the Scheme will be subject to the fulfilment of the Conditions Precedent referred to in paragraph 8 hereunder;
3.2.3. the price payable, and the terms of payment to the Remaining Shareholders for their shares in AIH will be as is set out in paragraph 4 hereunder.
4. Offer Consideration
4.1. The effect of the Scheme is that each holder of the Remaining Shares will :-
4.1.1. retain 40% (forty percent) of such Remaining Shareholders' shares, subject to clause 4.5 below; and
4.1.2. dispose in terms of the Scheme of 60% (sixty percent) of the Remaining Shares held by each such Remaining Shareholder.
4.2. Subject as is provided in paragraph 4.3 the purchase consideration (the "Scheme Consideration") payable by Bidvest in terms of the Scheme will be settled as to :-
4.2.1. 50% in cash, based on a cash consideration of R65.00 (sixty-five rand) per AIH Share subject to paragraph 4.3(i)(a) below; and
4.2.2. 50% by the issue of Bidvest Shares at an exchange ratio of 1 Bidvest Share for every 4 AIH Shares acquired, subject to paragraph 4.3(i)(b) below (the "AIH Switch Ratio").
By way of example, for each 100 AIH Shares held by the Remaining Shareholders prior to the Scheme, the Remaining Shareholders will :-
4.2.3. retain 40 AIH Shares (the "Remaining AIH Shares");
4.2.4. receive a cash consideration R65.00 (sixty-five rand) per AIH Share in respect of 30 AIH Shares i.e. a total cash consideration of R1,950; and
4.2.5. receive Bidvest Shares in the ratio of 1 Bidvest Share for every 4 AIH Shares i.e. a total of 7.5 Bidvest shares.
4.3. The purchase consideration has been based on the fact that AIH's diluted headline earnings per share from continuing operations calculated on the same basis as hitherto for the 6 (six) month period ending 31 March 2013 will not be less than R2,00 (two rand) per share. To the extent that such diluted headline earnings are less than R2,00 (two rand) per share, the purchase consideration payable in terms of the Scheme will be reduced in accordance with the following formula :-
(i) for each completed 1% (one percent) that the said diluted headline earnings fall short of the amount of R2,00 (two rand) per share (the total shortfall hereinafter referred to as the "completed percentage shortfall") :-
(a) the cash portion of the consideration referred to in paragraph 4.2.1 will be reduced by 1.1% (one point one percent);
(b) the share portion of the consideration referred to in paragraph 4.2.2 will be reduced by increasing the AIH Switch Ratio from "4" to "4 multiplied by (1,01)N" where "N" equals the completed percentage shortfall expressed as a whole number;-
(ii) if the amount of the completed percentage shortfall is more than 10% (ten percent) then Bidvest shall be entitled, in the exercise of its absolute discretion by written notice to AIH, either to reduce the purchase consideration as set out in paragraph (i) above or to desist from making the offer.
4.4. The Remaining Shareholders may elect to receive a greater portion of the Scheme Consideration to be payable in Bidvest Shares rather than cash. To the extent that such election is made it will be effected in accordance with the AIH Switch Ratio.
4.5. In addition it shall be a further term of the Scheme that subject to the Scheme being approved and becoming unconditional each holder of the Remaining Shares shall be entitled to require Bidvest to acquire up to a further 15% (fifteen percent) of the shares held by such Remaining Shareholder in consideration for Bidvest shares based on the AIH Switch ratio set out in paragraph 4.2 subject to :-
4.5.1. the Remaining Shareholder having exercised its voting rights in respect of such shares in favour of the Scheme; and
4.5.2. the maximum amount of shares which will be acquired by Bidvest in terms of the Scheme not exceeding 75% (seventy five percent) of the fully diluted entire issued ordinary share capital of AIH.
4.6. Provision will also be made in the Scheme for the reconstruction, on the date on which the consideration is paid in terms of the Scheme, of the Board of AIH so as to consist of a majority of directors appointed by Bidvest.
4.7. The aforementioned consideration will be discharged on the dates as is set out in accordance with the Scheme.
4.8. It will be a term of the Scheme that no dividends of whatsoever nature will be declared by AIH before the closing date of the Scheme other than the dividend for the period ending 31 March 2013. This dividend will be calculated in accordance with previous practice, being three times cover of headline earnings.
4.9. It will be a further term of the Scheme that before the closing date of the Scheme there will be no distributions by AIH, increases in the share capital of AIH or any amendments to the share capital of AIH.
Bidvest proposes to fund the cash portion of the consideration from its own resources.
6. Management and Employees
Bidvest recognises the importance of a motivated, aligned and engaged management team and employees in order to achieve consistent growth in client and customer loyalty. Bidvest will therefore make a concerted effort to retain members of the management team and employees to ensure the smooth implementation of the Transaction and continued growth from post integration benefits going forward.
7. Firm Intention Announcement
In terms of Regulation 101 of the Companies Regulations, it is required that a firm intention announcement be published. Bidvest proposes that Bidvest and AIH publish a joint announcement on SENS and in the press in a form agreed by Bidvest and AIH.
8. Conditions Precedent
8.1. Implementation of the Transaction is subject to the fulfilment or waiver of the following Conditions Precedent by no later than 30 September 2013 which, to the extent not satisfied or waived as at the time of the posting of the Circular shall be included in the Circular, substantially in the form set out below:
8.1.1. receipt of approvals, consents or waivers from all regulatory bodies, governmental or quasi governmental entities necessary to implement the Transaction (in each case either unconditionally or subject to conditions reasonably acceptable to the persons on whom such conditions are imposed) including, but not limited to
188.8.131.52. the JSE;
184.108.40.206. the TRP (in terms of a compliance certificate to be issued in terms of the Companies Act in relation to the Scheme);
220.127.116.11. the South African Reserve Bank;
18.104.22.168. the competition authorities;
8.1.2. receipt of written notice from the directors of AIH :-
22.214.171.124. confirming that the implementation of the Scheme will not materially contravene, violate, cause a default and/or breach of the terms of, and/or otherwise conflict with any material contract to which any company in the AIH Group is a party and that the material contracts will continue after the Scheme on terms not less favourable than those currently in force;
126.96.36.199. confirming that the implementation of the Scheme will not materially contravene, violate, cause a default and/or breach of the terms of and/or otherwise conflict with any regulatory requirement to which AIH or any company in the AIH Group to which the company is a party;
188.8.131.52. confirming that to the best of their knowledge, neither AIH or any of its subsidiaries is involved in any anti-competitive practice;
184.108.40.206. stating that the directors are not aware of any fact or circumstance which would be material to a reasonable party making the offer as set out in terms hereof in deciding whether or not to make such offer and the terms on which to make it; and
220.127.116.11. providing details of AIH's BEE Scheme and all Share Incentive Schemes applicable to employees of AIH. Such details shall include in respect of the BEE Scheme and each Employee Incentive Scheme, the number of shares under option or which may be eligible for issue at a future date the price of the shares/options, vesting dates, and key terms and conditions and all provisions relating to the impact of a change of control of AIH on the BEE Scheme and each Employee Incentive Scheme.
This Conditions Precedent must be fulfilled within 14 (fourteen) business days from date hereof;
8.1.3. receipt of written notice from the directors of AIH confirming that there has been no material adverse change :
18.104.22.168. in AIH; or