PLD PSG
 
PSG/PLD - PSG GROUP/PALADIN CAPITAL - Joint Detailed Cautionary
 
Announcement
 
PSG GROUP LIMITED
 
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
 
(REGISTRATION NUMBER 1970/008484/06)
 
SHARE CODE: PSG
 
ISIN CODE: ZAE000013017
 
("PSG")
 
PALADIN CAPITAL LIMITED
 
Incorporated in the Republic of South Africa
 
(Registration number: 2007/032836/06)
 
Share code: PLD
 
ISIN: ZAE000138970
 
("PALADIN")
 
JOINT DETAILED CAUTIONARY ANNOUNCEMENT RELATING TO THE UNBUNDLING
 
OF CURRO HOLDINGS LIMITED ("CURRO") TO PALADIN SHAREHOLDERS AND
 
THE CONDITIONAL INTENTION OF PSG TO MAKE AN OFFER TO ACQUIRE THE
 
ENTIRE ISSUED SHARE CAPITAL OF PALADIN BY WAY OF A SCHEME OF
 
ARRANGEMENT
 
1. INTRODUCTION
 
 
1.1 Shareholders are hereby advised that the Board of Paladin has
 
resolved to unbundle 125 007 040 shares in Curro which equates to
 
77.54% of the entire issued share capital of Curro ("Curro
 
Shares") to Paladin shareholders, in the ratio of 21.53126 Curro
 
Shares for every 100 Paladin ordinary shares held on the record
 
date ("the Curro Unbundling"), subject to irrevocable undertakings
 
supporting the below mentioned Scheme being received by Paladin
 
from at least 50% of shareholders eligible to vote at the Scheme,
 
, which condition PSG can waive.
 
1.2 Shareholders are further advised that PSG has submitted to
 
the Board of Paladin a conditional intention to make an offer to
 
acquire 100% of the issued ordinary shares in Paladin
 
("Conditional Intention"), which constitutes a total of 108 295
 
409 Paladin shares not already held by PSG through PSG Financial
 
Services Limited ("Scheme Shares"), for either the Share
 
Consideration of 4 PSG Shares for each 100 Scheme Shares disposed
 
of in terms of the Scheme or the Cash Consideration of 170 cents
 
for each Scheme Share disposed of ("the Scheme Consideration") in
 
terms of a Scheme of Arrangement ("the Scheme").
 
1.3 The Conditional Intention is subject to the condition
 
precedent that PSG Shareholders resolve to place sufficient shares
 
under the control of PSG directors in order to settle the Scheme
 
Consideration ("Pre-Condition to the Scheme"). Upon the fulfilment
 
of the Pre-Condition to the Scheme the Conditional Intention to
 
make an offer, as set out in this announcement, will become a firm
 
intention to make an offer. Shareholders will be advised as soon
 
as the aforementioned condition precedent has been fulfilled.
 
2. RATIONALE
 
 
2.1 The initial rationale to list Paladin as a separate
 
investment vehicle, included an opportunity to give investors
 
direct exposure to private equity deal flow at PSG and to use
 
Paladin script to facilitate transactions, for these reasons and
 
PSG's ability to manage same effectively, PSG would receive
 
management and performance fees. Since listing there hasn't been a
 
material change in share ownership at Paladin.
 
2.2 At the last practical date PSG owned 81.3% of Paladin and
 
PSG's directors and management owned an additional 5.6%, which
 
does not justify a separate listing as Paladin is in effect paying
 
PSG and its management to manage a company which they (including
 
associates) own 87% of and, in addition, Paladin does not envisage
 
any new issues to third parties over the short to medium term.
 
2.3 The rationale for Paladin minorities to vote in favour
 
of the Scheme includes:
 
 
2.3.1 Curro will be unbundled, Paladin shareholders will
 
therefore obtain a direct interest in Curro;
 
2.3.2 in respect of the balance of assets remaining following
 
the Curro unbundling, Paladin shareholders will receive a 30%
 
premium if they elect the share for share offer and a 17% premium
 
if they elect the cash offer on the estimated Paladin 30 day VWAP,
 
as at 1 July 2011, trading level following the unbundling; and
 
2.3.3 Paladin shareholders will also start receiving dividends
 
as Paladin was a non-dividend paying company.
 
2.4 Paladin shareholders should also not that Paladin shares were
 
increased by way of a rights offer at R1.17 per share immediately
 
after it listed on the JSE and today Paladin trades at
 
approximately R2.70 per share, two years later. Shareholder wealth
 
has therefore been created and Paladin shareholders could
 
potentially share in further long term wealth creation by
 
accepting the PSG Group shares and holding onto their Curro
 
shares.
 
 
3. THE SCHEME
 
3.1 Subject to the fulfilment of the Pre-Condition to the Scheme,
 
the terms of the Scheme will be as set out below.
 
 
3.2 PSG is proposing to acquire the Scheme Shares by way of a
 
scheme of arrangement between Paladin and its shareholders
 
("Scheme Members") in terms of section 114(1)(c) of the Companies
 
Act, No 71 of 2008, as amended, as may be applicable.
 
3.3 In terms of the Scheme, PSG will acquire the Scheme Shares
 
from the Scheme Members registered as such on the record date
 
determined by the Board of Paladin, being the date on which
 
Paladin shareholders must be recorded in the share register of
 
Paladin in order to participate in the Scheme and received the
 
Scheme Consideration.
 
 
3.4 PSG has nominated its wholly owned subsidiary PSG Financial
 
Services Limited to take delivery of all Scheme Shares acquired
 
from Scheme Members pursuant to the Scheme.
 
 
3.5 As consideration for the disposal of their Scheme Shares,
 
Scheme Members will become entitled to receive either the Share
 
Consideration of 4 PSG Shares for each 100 Scheme Shares disposed
 
of in terms of the Scheme or the Cash Consideration of 170 cents
 
for each Scheme Share disposed of in terms of the Scheme.
 
3.6 As at 1 July 2011, being the date the Paladin Board resolved
 
to proceed with the Curro Unbundling and the Scheme, the VWAP of
 
Paladin's shares on the JSE for the 30 days up to and including 1
 
July 2011, was 275 cents per share.
 
 
3.6.1 The closing price of Curro on the JSE on 1 July 2011 was
 
600 cents per share and therefore it is assumed that the Curro
 
Unbundling will reduce the trading price of Paladin shares by
 
approximately 130 cents per Paladin share.
 
 
3.6.2 Paladin estimates that the trading price of Paladin
 
shares post the Curro Unbundling will be approximately 145
 
cents
 
per share ("Estimated Trading Price").
 
3.6.3 The Share Consideration effectively places a value of
 
189 cents on each Scheme Share disposed of in terms of the
 
Scheme,
 
using the VWAP of PSG Shares on the JSE for the 30 days up to
 
and
 
including 1 July 2011 of R47.26 per share.
 
3.6.4 Therefore the Share Consideration represents a premium
 
of 30% to the Estimated Trading Price.
 
 
3.6.5 The Cash Consideration therefore represents a premium of
 
17% to the Estimated Trading Price.
 
 
3.7 PSG Collective Investments Limited (registration number
 
1997/016475/06) has provided an irrevocable confirmation to the
 
Takeover Panel that sufficient cash resources are available to
 
satisfy the Cash Consideration in terms of the Scheme.
 
 
4. CONDITIONS PRECEDENT OF THE SCHEME
 
4.1 The Scheme will be subject to the fulfilment, or waiver (in
 
whole or in part) by PSG, of the following conditions by no later
 
than 30 November 2011:
 
4.1.1 the approval of the Scheme by the requisite majority of
 
Shareholders as contemplated in section 115(2)(a) of the
 
Companies
 
Act, and: (a) to the extent required, the approval of the
 
implementation of such resolution by a Court in terms of
 
section
 
115(2) and/or section 115(3) of the Companies Act; and (b) if
 
applicable, Paladin not treating the aforesaid resolution as a
 
nullity, as contemplated in section 115(5)(b) of the Companies
 
Act;
 
4.1.2 the receipt of unconditional approvals, consents or
 
waivers from all regulatory bodies, necessary to implement the
 
Scheme, to the extent required, including, but not limited to,
 
the
 
Takeover Regulation Panel ("Takeover Panel") (in terms of a
 
compliance certificate to be issued in terms of the Companies
 
Act
 
in relation to the Scheme) and the JSE, to the extent that any
 
such approvals, consents or waivers are subject to conditions,
 
such conditions being satisfactory to PSG; and
 
4.1.3 a fair and reasonable opinion being obtained by the
 
independent Paladin board committee.
 
4.1 Paladin and PSG will use their reasonable endeavours to
 
procure the fulfilment of each of the Conditions Precedent as soon
 
as reasonably practicable.
 
4.2 The Conditions Precedent in paragraphs 4.1.1, 4.1.2 and 4.1.3
 
are not capable of being waived.
 
 
4.3 Should all the Conditions Precedent not have been fulfilled
 
or waived, as the case may be, on or before 30 November 2011 or by
 
such later date as may be agreed upon between Paladin and PSG in
 
writing, subject to the approval by the Takeover Panel (if
 
necessary), the Scheme shall not become operative and shall be of
 
no force or effect.
 
4.4 An announcement will be published on SENS and in the South
 
African press as soon as practicable after all the Conditions
 
Precedent have been fulfilled or waived, as the case may be or if
 
the Scheme lapses pursuant to the provisions of paragraph 4.4.
 
5. PRO FORMA FINANCIAL EFFECTS OF THE CURRO UNBUNDLING AND
 
SCHEME FOR PSG
 
The table below summarises the unaudited pro forma financial
 
effects of the Curro Unbundling and Scheme of Arrangement on
 
PSG shareholders based on the audited results of PSG for the
 
year ended 28 February 2011.
 
 
The unaudited pro forma financial effects are the
 
responsibility of the PSG directors and have been prepared
 
for illustrative purposes only to provide information about
 
how the Curro Unbundling and Scheme of Arrangement may have
 
affected the financial position of the PSG shareholders on
 
the relevant reporting date. Due to its nature, the unaudited
 
pro forma financial effects may not be a fair reflection of
 
PSG's financial position after the implementation of the
 
Curro Unbundling and Scheme of Arrangement or of PSG's future
 
earnings.
 
 
Audited Unaudited Unaudited Total
 
financial pro forma pro forma change
 
results at results results (%)
 
28 February after after
 
2011 before Curro Curro
 
Curro Unbundling Unbundling
 
Unbundling (cents) and Scheme
 
and Scheme (cents)
 
(cents)
 
 
Basic earnings 424.1 424.1 449.2 5.9%
 
per share
 
Diluted basic 420.2 420.2 445.3 6.0%
 
earnings per
 
share
 
Headline 306.7 306.7 317.4 3.5%
 
earnings per
 
share
 
Diluted 303.9 303.9 314.6 3.5%
 
headline
 
earnings per
 
share
 
Recurring 241.9 241.9 242.0 -
 
headline
 
earnings per
 
share
 
Net asset value 2 156.1 2 156.1 2 244.5 4.1%
 
per share
 
Net tangible 1 539.5 1 539.5 1 643.5 6.8%
 
asset value per
 
share
 
Weighted 167.1 167.1 171.5 2.6%
 
average number
 
of shares in
 
issue (million)
 
Diluted 168.6 168.6 173.0 2.6%
 
weighted number
 
of shares in
 
issue (million)
 
Number of 166.3 166.3 170.6 2.6%
 
shares in issue
 
(million)
 
Notes and assumptions:
 
1. The basic earnings per share, diluted basic earnings per
 
share, headline earnings per share, diluted headline earnings per
 
share and recurring headline earnings per share figures have been
 
calculated on the basis that the Curro Unbundling and the Scheme
 
were effected on 1 March 2010.
 
 
2. The net asset value per share and net tangible asset value
 
per share figures have been calculated on the basis that the Curro
 
Unbundling and the Scheme were affected on 28 February 2011.
 
 
3. A taxation rate of 28% is assumed.
 
4. The basic earnings per share, diluted basic earnings per
 
share, headline earnings per share, diluted headline earnings per
 
share and recurring headline earnings per share have been
 
calculated based on the weighted average number of shares in issue
 
for the year ended 28 February 2011.
 
 
5. The net asset value per share and net tangible asset value
 
per share figures have been calculated based on the number of
 
shares in issue at 28 February 2011.
 
 
6. Ratio of 21.53126 Curro shares per 100 Paladin shares is
 
assumed for the Curro Unbundling.
 
 
7. Assumed that PSG will issue additional shares pursuant to the
 
Scheme based on an expected 100% take-up of the Share
 
Consideration.
 
 
6. OPINIONS AND RECOMMENDATIONS
 
An independent Paladin board committee has been appointed by
 
the Board of Paladin. The independent Paladin board committee
 
has appointed Questco Sponsors (Proprietary) Limited as an
 
independent adviser acceptable to the Takeover Panel to
 
provide the Board of Paladin with external advice in regard
 
to the Scheme and to make appropriate recommendations to the
 
Board of Paladin for the benefit of Scheme Members. The
 
substance of the external advice and the views of the
 
independent Paladin board committee will be detailed in the
 
circular that will be posted to Paladin shareholders.
 
 
7. DE-LISTING OF PALADIN FROM THE JSE
 
Following the implementation of the Scheme, an application
 
will be made by Paladin for the termination of the listing of
 
its issued share capital on the JSE.
 
8. EXISTING HOLDING OF SHARES IN PALADIN
 
 
As of the date of this announcement, PSG owned 81.3% of the
 
issued share capital in Paladin and PSG's directors and
 
management owned 5.6% of the issued share capital in Paladin.
 
 
9. FURTHER DOCUMENTATION AND SALIENT DATES
 
Further details of the Scheme will be included in a circular
 
to Paladin shareholders, containing, inter alia, a notice of
 
the Scheme meeting, a form of proxy and a form of surrender
 
and transfer, which will, subject to the approval of all
 
regulatory authorities, be posted to Paladin shareholders in
 
due course.
 
The salient dates in relation to the Scheme will be published
 
when the Pre-Condition to the Scheme is fulfilled, prior to
 
the issuing of the aforementioned documentation.
 
10. CAUTIONARY ANNOUNCEMENT
 
 
Paladin shareholders are referred to the cautionary
 
announcement dated 15 June 2011 and are advised to continue
 
exercising caution when dealing in Paladin shares until such
 
time as the Pre-Condition to the Scheme is fulfilled and this
 
cautionary is withdrawn.
 
PSG shareholders are advised to exercise caution when dealing
 
in PSG shares until such time as the Pre-Condition to the
 
Scheme is fulfilled and this cautionary is withdrawn.
 
11. PALADIN INDEPENDENT BOARD RESPONSIBILITY STATEMENT
 
The Independent Board of Paladin accepts responsibility for
 
the information contained in this announcement which relates
 
to Paladin and confirms that, to the best of its knowledge
 
and belief, such information which relates to Paladin is true
 
and the announcement does not omit anything likely to affect
 
the importance of such information.
 
 
12. PSG RESPONSIBILITY STATEMENT
 
PSG accepts responsibility for the information contained in
 
this announcement which relates to PSG and confirms that, to
 
the best of its knowledge and belief, such information which
 
relates to PSG is true and the announcement does not omit
 
anything likely to affect the importance of such information.
 
 
Stellenbosch
 
13 July 2011
 
Corporate adviser to Paladin and Sponsor to PSG: PSG Capital
 
(Proprietary) Limited
 
Designated adviser and independent adviser to Paladin:
 
Questco Sponsors (Proprietary) Limited
 
 
Date: 13/07/2011 13:23:11 Produced by the JSE SENS Department.
 
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