Heads-up - Alexander Forbes SENS statement
Below please see a statement from Alexander Forbes that has just gone out over SENS.
Peter Moyo is on leave, but makes the following comments:
"We welcome the successful disposal of AFRSH to Lockton. It follows an extensive strategic review of our operations, and is a tangible deliverable in our drive to unlock value for shareholders and position Alexander Forbes for the future.
"The transaction benefits us in two ways - first, the proceeds allow us to strengthen our balance sheet significantly by settling interest-bearing debt in the UK and in South Africa and second, at a strategic level, we can now focus our full attention on the plans we have underway for our remaining operations.
"We remain committed to our flagship Risk and Insurance Services businesses in Africa, and firmly believe that we will continue to offer our clients the best solutions both locally and internationally through a network of global best-of-breed service providers.
The cautionary announcement
Sale of International Risk Services and further cautionary announcement
1. Introduction
Shareholders are referred to the cautionary announcements dated 7 June 2006 and 19 July 2006, in which shareholders were advised that the Company had entered into discussions with private investors which could result in the Company reducing its shareholding in its International Risk Services business. Shareholders are now advised that Alexander Forbes International Limited (a wholly owned subsidiary of the Company) has entered into an agreement to sell its entire interest in its subsidiary, Alexander Forbes Risk Services Holdings Limited (AFRSH) to Lockton International Holdings Limited (the Purchaser), for a total consideration of approximately 86 million, before adjusting for certain of the outstanding liabilities of AFRSH (the transaction).
The majority shareholder of the Purchaser is Lockton Companies Inc. (Lockton) with a minority equity interest held by Trident III, L.P., an investment fund managed by Stone Point Capital LLC, of Greenwich, Connecticut, a private equity firm that specialises in investments in the global insurance and financial services industries. Lockton is one of the largest insurance brokerage firms in the United States and the tenth largest retail broker worldwide.
AFRSH is the holding company of a group that provides insurance and reinsurance broking, risk and insurance programme management and consulting, alternative risk finance, claims management and insurance products and services in the United Kingdom, Asia and Latin America.
The transaction is subject to approvals from the South African Reserve Bank and the Financial Services Authority in the United Kingdom as well as clearance being received from the Pensions Regulator in the United Kingdom on the defined benefit scheme pension arrangements.
The group remains committed to its Risk and Insurance Services business in Africa and is confident that it will continue to have the right solutions to meet clients risk related needs in all relevant territories. The International Financial Services and Investment Solutions businesses remain core to the groups strategy.
2. Rationale for the transaction
The transaction concludes an extensive review undertaken by the Company and its advisers of the strategic options for AFRSH. Following receipt of a number of expressions of interest during the course of this process, the Board of Alexander Forbes has concluded that the transaction is in the best interests of Alexander Forbes shareholders.
3. Details of the Purchase Consideration
After adjusting for outstanding liabilities, including the AFRSH defined benefit pension scheme deficit and the deferred consideration still payable in respect of a number of previous acquisitions concluded by AFRSH and its subsidiaries, the net consideration payable in relation to the transaction will be approximately 67.6 million. The net consideration will be payable as follows:
- 64.5 million in cash on completion; and
- 3.1 million in loan notes to be issued by the Purchaser. These loan notes will bear interest at 8% per annum and will be redeemable on 31 March 2010 but will be subject to certain set-off rights in respect of potential warranty claims that the Purchaser may have.
It is expected that the cash proceeds from the transaction will be used to repay existing interest-bearing debt both in the United Kingdom and South Africa.
4. Pro-forma financial effects of the transaction
The table below sets out the illustrative financial effects of the transaction on Alexander Forbes. The unaudited pro-forma financial effects have been prepared for illustrative purposes only. Due to the nature of the unaudited pro-forma financial effects, they may not give a fair reflection of the financial position and results of operations of Alexander Forbes after completion of the transaction. The un-audited pro-forma financial effects are the responsibility of the Directors of Alexander Forbes.
