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JCI to submit R3bn merger plan in days Posted: Wed, 26 Sep 2007 [miningmx.com] -- WHATEVER HAPPENED to plans to merge JCI with Randgold & Exploration (R&E)? According to Brian Gibson, spokesman for both companies, that’s back on track. “A joint circular is being prepared that will be submitted to the JSE’s Securities Regulation Panel (SRP) in seven to 10 days,” he says. How long the SRP will dwell over the draft circular is anyone’s guess, but Gibson hopes it will approve the merger going ahead without publication of audited statement for both companies. However, distractions in the form of two separate court cases – one involving JCI shareholders and the other involving R&E shareholders, both against Investec – continue to bubble along. JCI and R&E were mining investment firms used by the late mining entrepreneur Brett Kebble to finance a raft of allegedly fraudulent transactions. By the time the dust settled, R&E was claiming that JCI owed it R6bn, of which R1.32bn was tentatively acknowledged. Those were monies shifted between the two companies by Kebble. Seasoned banker Peter Gray was drafted in to help calm the waters, initiate forensic audits on both firms and eventually have them relist. When that appeared impossible, he and his board members on JCI and R&E – which Gray simultaneously leads as CEO – hit upon merging the companies and thereby neutralising the claims between the two. The value of the claims would be captured in the merger ratio. That roughly summarises the events between August 2005 – the month of Kebble’s murder – and now. Over that time ongoing forensic auditing continues to uncover fresh instances of fraud perpetrated by Kebble. Says Gibson: “We’re still finding evidence of deals involving not insubstantial sums of money.” It’s been an expensive business: forensic investigations into the accounts of JCI and R&E have cost R50m to date. So far, the preliminary unaudited accounts of R&E and JCI have been published but not the audited versions, which are said to be deeply complicated. The proposed merger circular due before the SRP by October will still be sans the final accounts but will include detailed net asset values, opinions from the mediators attempting to settle the inter-company dispute and the long-awaited JCI forensic report – details that will make the document more than 300 pages long, says Gibson. In addition to the merger circular, JCI and R&E will shortly submit a second draft circular to the JSE to relinquish the mineral rights owned by JCI and R&E that are contiguous with South Deep. Gold Fields hopes to persuade JCI and R&E to give up their rights for a gross figure of around R400m. If completed, the contiguous rights transaction will contribute towards a combined JCI/R&E with an NAV of around R3bn, compared with R800m at the time when Kebble was deposed in August 2005. The combined unit will also own 13 million shares in Gold Fields worth R1.56bn at Gold Fields’ price of R120/share; a notional R150m stake in the Boschendal wine estate; R500m worth of preference shares in Jaganda, the black empowerment vehicle in Simmer & Jack Mines (Simmers); and a few other bits and bobs. Whether a combined JCI/R&E will have the legs to live a shrivelled, independent life post-merger is quite another question. First, there are a number of other regulatory hoops shareholders in JCI and R&E will have to negotiate. Assuming the SRP approves the circular, the merger proposal will have to pass muster via a shareholders’ vote. Gibson says a strong majority of shareholders in both companies have given the scheme their support, so the merger should go ahead. Says Quinton George, CEO of Trinity Asset Management, a shareholder in R&E: “I think we need to get the merger done for commercial reasons. It’s the best outcome, because we’ve been at this thing for two years now.” Ironically, it’s Trinity that’s played a lead role in both cases, although it has dropped its initial opposition to the merger. “JCI shareholders should be glad they’re getting what they’re getting,” says George. In terms of the merger, the share swap ratio is one R&E share for every 95 JCI shares. Gibson anticipates that the legal challenges against the Investec loan agreement – which kept JCI afloat when it was most distressed – will rattle on for some time but won’t necessarily affect the merger. Click Here to subscribe to our daily newsletter
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