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JCI and R&E agree to merge
Allan Seccombe
Posted: Fri, 05 Dec 2008

[miningmx.com] -- TWO suspended mining companies JCI and Randgold & Exploration (R&E) that were led by fraudster Brett Kebble have agreed to merge, despite a dramatic drop in the net asset value of JCI.

Shares in the two companies were suspended in 2005 after they did not produce annual results. Subsequent forensic investigations have uncovered massive fraudulent share transactions and theft totalling billions of rands. Kebble was killed in mysterious circumstances in September 2005.

R&E has claims against JCI ranging from R1.77bn to R14bn. The options were to go to arbitration or merge the companies, but the negotiations have been fraught and there have been a number of false dawns.

"The present board of R&E is of the opinion that protracted and expensive litigation is not in the best interests of shareholders and regards the merger as a pragmatic means to restore shareholder value, representing a sensible resolution to the impasse with JCI," it said.

A heavily conditional agreement has emerged whereby JCI shareholders will receive one R&E share for every 95 of their JCI shares.

JCI's primary asset is its holding of Gold Fields shares, but these have depreciated in value, knocking the NAV of JCI down by nearly half. Gold Fields represents about 80% of the NAV of JCI and 73% of the merged group.

Gold Fields shares, along with its peers, have fallen 43% between March and October, reducing the NAV to R1bn to R2bn.

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"The board of R&E is of the opinion that the proposed merger ratio, after considering the above reduction still remains a commercially acceptable proposition, especially in the light of the alternative to a merger, namely immediate arbitration," the companies said in a statement.

The mediators who approved the scheme in April reiterated their support for it in October despite the changes in NAV.

R&E shareholders will meet in Johannesburg on 19 January to vote on the transaction, which includes the issuing of 30 million more shares in the company to accomodate the offer to JCI. At least 75% of JCI shareolders have to approve the transaction.

Amongst the conditions are the the Registrar of Companies agree to the transaction and that the High Court sanction the scheme by 31 March or up to 90 days later if both companies agree to the extension. Competition authorities must also approve the scheme.

"The merger alternative affords the shareholders of both R&E and JCI, a mechanism whereby although the R&E claims remain unresolved, the new board of the combined R&E and JCI will be appointed for the benefit of all shareholders in R&E, and will be vested with the opportunity to determine how best to deal therewith," the companies said.

"Management intends focussing on increasing value within the group (to the extent possible), and taking advantage of corporate opportunities which may arise for the benefit of R&E and its shareholders, including the JCI scheme participants."