TIDMMIK
Meikles Limited
(FORMERLY KINGDOM MEIKLES LIMITED)
(FORMERLY Kingdom Meikles Africa Limited)
(FORMERLY Meikles Africa Limited)
(A public company incorporated in the Republic of Zimbabwe in 1937 under
company registration number 1/37)
Directors: F. Rwodzi (Non-executive Chairman), B. Beaumont (Chief Executive
Officer)*, O. Makamba (Finance and Administration)*, T. Cameron*, B. Chimhini*,
R. Meiring* A. Mills*, M. Wood*, R. Chidembo, K. Ncube.
*Executive
Address: 6th Floor Thomas Meikle Centre 99 Jason Moyo Avenue, Harare
ABRIDGED CIRCULAR TO SHAREHOLDERS
REGARDING THE DEMERGER OF KINGDOM FINANCIAL HOLDINGS LIMITED FROM MEIKLES
LIMITED BY WAY OF A DIVIDEND IN SPECIE TO MEIKLES LIMITED SHAREHOLDERS;
and an abridged Pre-Listing Statement
RELATING TO MEIKLES LIMITED AFTER THE PROPOSED DEMERGER OF
KINGDOM FINANCIAL HOLDINGS LIMITED
Group Financial Advisors
Imara Corporate Finance Zimbabwe
(Private) Limited
Sponsoring Broker Legal Advisors
Imara Edwards Securities Scanlen & Holderness
(Private) Limited Legal Practioners
Auditors and Independent Reporting Share Transfer Secretaries in Zimbabwe
Accountants
Deloitte & Touche ZB Transfer Secretaries
Chartered Accountants (Zimbabwe) (Private) Limited
PART1: Chairman's Letter to shareholders
1. Introduction
This Abridged Circular presents the salient information in relation to the
Proposed transaction or the demerger of Kingdom Financial Holdings Limited
("KFHL") from Meikles Limited ("Meikles" or "the Group"), the detailed terms
and conditions of which are more fully set out in the Circular to shareholders
("the Circular"). The Circular should accordingly be read in its entirety for a
full appreciation of the rationale for, and the implications of the Proposed
transaction, as well as with regard to determining the action required by
Meikles shareholders with respect to the corporate actions outlined in this
Abridged Circular to shareholders.
2. Details and rationale for the demerger
At the extraordinary general meeting ("EGM") of Meikles held on 22nd June 2009
shareholders passed certain resolutions authorising the Board of director of
Meikles to demerge KFHL from Meikles. To date the demerger has not been
implemented both due to the issues Meikles faced at the end of 2009 and early
2010 and due to the non-fulfilment of all of the demerger's conditions
precedent. These issues are largely resolved and the Board now proposes that
the demerger takes place. In order to give effect to the administrative
requirements of the demerger, it is necessary to rescind certain resolutions
passed at the 22nd June 2009 extraordinary general meeting and to pass the
Resolutions proposed by the Board.
Shareholders are however advised that in the event that an offer acceptable to
the Board for the purchase of the Meikles' shares in KFHL is received prior to
the date of the EGM being the 13th of October 2010, an amended EGM Notice
incorporating a resolution so that shareholders can vote on the offer, together
with details of such offer, a recommendation from the Board, and a new form of
proxy will be sent to shareholders. In the event that there is insufficient
time between the EGM date and the date the amended EGM Notice is sent, the
Chairman will propose the meeting be adjourned to enable shareholders to
consider the amended EGM Notice and in particular such offer.
The Proposed transaction will upon implementation result in the demerger of
KFHL from Meikles by way of a dividend in specie to Meikles shareholders of all
shares held by Meikles in KFHL. Post demerger, shareholders may resolve to list
KFHL on the Zimbabwe Stock Exchange. Meikles Shareholders registered as such on
the Record Date will receive KFHL shares in terms of the Distribution Ratio,
being two (2) shares in KFHL for every one (1) existing Meikles Share already
held as at the Record Date.
There are a number of reasons for the Proposed transaction, but the principal
ones are:
* To establish KFHL as a dedicated stand-alone business attractive to
investors and able to pursue business ventures within the banking and
financial services sector in Zimbabwe;
* To enable the two companies to raise funding with conditions suitable for
the type of businesses they are in;
* To enable Meikles and KFHL to report independently to the public and be
judged correctly when compared to similar businesses; and
* To unlock shareholder value and allow the two businesses to expand and grow
on their own merits.
2.1 Withholding Tax
According to the Income Tax Act (Chapter 23:06) withholding tax is payable on
dividends paid by listed companies. Meikles will withhold 10% of the number of
the shares of KFHL to pay withholding tax to ZIMRA, from the relevant
shareholders.
3. Meikles Extra ordinary General Meeting
To give effect to the Proposed transaction, Meikles shareholders are being
asked to attend the EGM, to be held at 9:00 hours on the 13th of October 2010
in the Mirabelle Room, Meikles Hotel, Corner of Third Street and Jason Moyo
Avenue, to approve the Resolutions, details of which are set out in the Notice
appearing in Part 3 of the Circular to shareholders which will be sent out
shortly.
The Resolutions are ordinary resolutions, requiring 51% of the vote for
approval by the Meikles shareholders present or represented by proxy at the
EGM.
4. Terms of the Proposed Transaction and its effect on Meikles Share Capital
Structure
Salient terms of the Proposed transaction are as follows:
Nominal value of Ordinary shares US$ 0,01
Current number of Meikles authorised Ordinary 400,000,000
Shares
Current number of Meikles Ordinary Shares under the 154,625,209
control of the Directors
Current number of Meikles Ordinary Shares in issue 245,374,791
and held by Shareholders before the Proposed
transaction
Distribution ratio 2 KFHL shares for every 1
Meikles share
Number of KFHL shares to be declared as a dividend 490,749,582
in specie by Meikles to Meikles shareholders
pursuant to the Proposed transaction
5. Conditions Precedent
The implementation of the demerger transaction is conditional upon KFHL (i)
meeting the requirements of both KFHL's Memorandum and Articles of Association
and the Companies Act (Chapter 24:03) for the reduction of KFHL's share capital
by the amount of US$22,500,000 and (ii) the successful implementation of the
aforementioned reduction of KFHL's share capital so as to regularize the
transfer from KFHL to Meikles of the KFHL debt. The demerger transaction shall
be of no force or effect unless such condition precedent is satisfied.
The demerger transaction is subject to all necessary regulatory approvals.
6. Summary Historical Financial Information on meikles Limited
Meikles Limited Financial Highlights 30 June 2010 30 June 2009
Unaudited Unaudited
Restated
US$ US$
Continuing Operations
Revenue 114,265,338 40,067,572
Operating loss (1,239,306) (720,782)
Loss before tax (2,879,362) (413,572)
Loss for the period from continuing operations (1,916,026) (432,223)
after tax
Disposal Group
Profit for the period from disposal group 2,240,798 1,012,413
(Loss)/Profit for the period 324,772 580,190
Other Comprehensive (loss)/income for the (1,315,036) 2,119,482
period net of tax
Total comprehensive (loss)/income for the (990,264) 2,699,672
period
Profit/(loss) attributable to:
Equity owners of the parent 574,969 658,616
Non-controlling interests (250,197) (78,426)
324,772 580,190
Total comprehensive (loss)/income attributable
to:
Equity owners of the parent (740,067) 2,778,098
Non-controlling interests (250,197) (78,426)
(990,264) 2,699,672
Earnings per share from continued and 0.23 0.27
discontinued operations (US cents)
Dividend per share - -
Dividend cover - -
7. Pro-Forma Financial Information
The information set out in this paragraph should be read in conjunction with
the report of the Independent Reporting Accountants on the Unaudited Pro forma
Financial Information of Meikles in APPENDIX 2 of the Circular. The pro forma
financial information presented below is for illustrative purposes only and due
to its nature, cannot give a complete picture of the financial position of the
Group after the Proposed transaction.
8. Pro forma statement of Financial Position as at 30 June 2010
MEIKLES LIMITED INTERIM PRO-FORMA
CONSOLIDATED STATEMENT OF FINANCIAL BEFORE THE AFTER THE
PROPOSED PROPOSED
POSITION TRANSACTION TRANSACTION
AT 30 JUNE 2010 US$ US$
ASSETS
Non-current assets
Property, plant and equipment 80,715,469 80,715,469
Investment property 71,434 71,434
Biological assets 4,322,780 4,322,780
Other financial assets and investments 4,553,468 4,553,468
Intangible assets - trademarks 309,157 309,157
Deferred tax 796,329 796,329
Balances with the Reserve Bank of 12,861,885 35,361,885
Zimbabwe
Total non-current assets 103,630,522 126,130,522
Current assets
Inventories 26,856,910 26,856,910
Trade and other receivables 8,775,124 9,187,687
Other financial assets 770,755 770,755
Cash and cash equivalents 5,618,099 5,618,099
Assets classified as held for sale or 171,557,722 38,834,902
distribution
Total current assets 213,578,610 81,268,353
Total assets 317,209,132 207,398,875
EQUITY AND LIAIBLITIES
Capital and reserves
Share capital 1 1
Non-distributable reserves 106,315,270 57,815,270
(Accumulated loss)/Retained earnings (21,993,037) 49,006,963
Capital and reserves relating to assets
classified as held for
sale or distribution 51,338,124 15,833,867
Equity attributable to equity holders of 135,660,358 122,656,101
parent
Non-controlling interests 1,075,585 1,075,585
Total equity 136,735,943 123,731,686
Non-current liabilities
Borrowings 845,173 845,173
Deferred tax 13,769,769 13,769,769
Total non-current liabilities 14,614,942 14,614,942
Current liabilities
Trade and other payables 22,603,323 24,750,807
Other financial liabilities 432,171 432,171
Short term borrowings 27,021,302 27,021,302
Liabilities relating to assets
classified as held for sale or
distribution 115,801,451 16,847,967
Total current liabilities 165,858,247 69,052,247
Total liabilities 180,473,189 83,667,189
Total equity and liabilities 317,209,132 207,398,875
Net asset value per share 0.56 0.50
NOTES TO THE PRO-FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE
2010
1. Assumptions for preparation of pro-forma accounts
The pro-forma statement of financial position was prepared on the basis of
unaudited financial information for Meikles and for KFHL at 30 June 2010
assuming that the entities demerged at that date.
The demerger process is based on the declaration of a distribution-in-specie of
Meikles total shareholding in KFHL. This would result in Meikles shareholders
owning KFHL shares directly.
2. KFHL consolidated statement of financial position
The summarised statement of financial position for KFHL is as follows:
BEFORE THE AFTER THE
TRANSFER TRANSFER
OF THE $22,5M OF THE $22,5M
US$ US$
Total assets before Group eliminations 134,891,568 112,391,568
Group eliminations (2,168,748) (2,168,748)
Total assets 132,722,820 110,222,820
Total liabilities before Group 99,366,047 99,366,047
eliminations
Group eliminations (412,563) (412,563)
Total liabilities 98,953,484 98,953,484
Net assets 33,769,336 11,269,336
Equity before Group eliminations 35,525,521 13,025,321
Group eliminations (21,265) (21,265)
Total equity 35,504,256 13,004,256
2.1 The US$22,500,000 currently vests in KFHL. The statement of financial
position after the demerger transaction assumes the condition precedent in
paragraph 5 has been fulfilled and that all the processes and procedures
required to effect the return of the US$22,500,000 that was invested by Meikles
to recapitalise KFHL in 2008 are satisfied.
2.2 The statement also assumes that ordinary resolution number 4 as set out in
the Circular in respect of the transfer of US$71,000,000 from the Group's non
distributable reserves to the Group's distributable reserves is passed.
9. FUTURE PROSPECTS for the group
Post demerger, Meikles will comprise of its remaining subsidiaries comprising
TM Supermarkets (Private) Limited, Meikles Africa Hotels, Tanganda Tea Company
and Thomas Meikle Stores (Private) Limited. Meikles continues to recover from
the negative effects of the past two years and is optimistic with regards to
trading for the remainder of the year 2010, where it hopes that all companies
and divisions will return to profitability.
10. Recent Acquisitions and Disposals
Apart from its intention to dispose of the Cape Grace Hotel, Meikles has not
made any recent disposal or acquisitions.
11. Material Changes
Other than the effect to the financial performance of the Group resulting from
the disposals outlined in paragraph 10 of this document, there have been no
material changes in the trading and financial position of Meikles and its
subsidiaries since the end of the first half of the financial year, ended 30
June 2010.
12. Facts and events which may have a Material Adverse Effect on Meikles
As an investment holding company operating in the current economic climate in
Zimbabwe, Meikles is exposed to the particular set of challenges that prevail.
These include, but are not limited to:
Adjustment to dollarisation and the associated cost increments resulting from
this;
Foreign exchange rate movements with regard to the South African Rand;
Changes in the levels of disposable incomes and spending patterns in Zimbabwe;
and
The level of business and tourist arrivals into Zimbabwe.
13. Directors Interests
As at 20 September 2010, (being the Last Practicable Date before the
publication of this document), the Directors, directly and/or indirectly, held
beneficial interests aggregating approximately 6,941,248 Meikles shares
representing approximately 2.83% of the issued share capital of the Group.
Details of the direct and indirect interests held by the Meikles Directors in
Meikles shares are set out below:
Director Number of shares held Share options held under
directly and indirectly Meikles Share Purchase
as at Scheme at 20 September
2010
20 September 2010
F. Rwodzi - -
B. Beaumont - -
O. Makamba 278,353 -
B. Chimhini 10,703 -
T. Cameron 468,614 -
R. Meiring 600,601 -
A. Mills 129,149 -
M. Wood 840,782 -
K. Ncube - -
R. Chidembo 4,613,046 -
Total 6,941,248 -
14. DIVIDENDS
Meikles historic dividend policy has been 3 to 3½ times cover of operating cash
flows. However such policy is reviewed from time to time to take into account
various economic and operating factors. Dividends are payable when the
directors of the Group deem it fit to do so.
15. Authorisation and approvals for the Proposed Transaction
Authorisation for the Proposed demerger will be sought from Shareholders at the
EGM scheduled for 13 October 2010. Any regulatory approvals required for the
demerger will be sought by the Board. Naturally, the Proposed transaction can
only be implemented once those approvals have been obtained.
16. Other Listings
Meikles has a secondary listing on the LSE where 4,556,899 shares are listed on
the main board. The suspension of trading in Meikles shares on the bourse was
still in effect as at the Last Practicable Date.
17. Adequacy of Capital
The Directors are of the opinion that the Group's share capital and working
capital are adequate for the foreseeable future.
18. Working Capital and Cash Flow
The Directors are of the opinion that the available working capital is
sufficient to cover the cash flow requirements of the Group.
19. Major Shareholders
According to the information received by the Directors, the following table
details the shareholders beneficially holding directly or indirectly at 20
September 2010 being the Last Practicable Date in excess of 5% of the share
capital of the Group:
Shareholder Shares At % of Total
20 September 2010
EW Capital Holdings (Private) Limited 25,899,448 10.56
JRTM Investments (Private) Limited 21,337,915 8.70
ASH Investments (Private) Limited 21,115,769 8.60
FPS Investments (Private) Limited 20,980,949 8.55
ACM Investments (Private) Limited 20,958,030 8.54
APWM Investments (Private) Limited 20,958,030 8.54
Old Mutual Assurance Company Zimbabwe 16,929,486 6.90
Limited
Total 148,179,627 60.39
EW Capital Holdings (Private) Limited entered into an option agreement to sell
its shareholding to a consortium chaired by R. Chidembo with an effective date
of 1 October 2009. Mr. R. Chidembo is a Non-executive Director of the Group.
20. Litigation Statement
During the past twelve months the Group has settled litigation proceedings
against a representative of the Group's major shareholders, Mr. John Moxon, and
a related entity, Coolboy Investments (Proprietary) Limited and against Mentor
Holdings Limited
There has been interaction with the RBZ on the purported exchange control
violations raised by the RBZ from its investigation of the Group in 2008. Going
forward it is anticipated that these purported issues will be resolved.
Save for the cases mentioned above, the Group is not involved in any litigation
or arbitration proceedings which may have, or which have had, during the 12
months preceding the date of the Circular to shareholders, a significant effect
on the financial position of the Group, nor is the Group aware that any such
proceedings are pending or threatening
21. Action to be taken by Meikles Limited Shareholders
Attend the EGM to approve the Resolutions.
Meikles Limited Shareholders who are unable to attend the EGM, but who wish to
be represented thereat, should complete and sign the Proxy Form included with
this Document and ensure it is either returned or posted to ZB Transfer
Secretaries, Central Scrip Administration, 1st Floor ZB Centre, 1st Street,
Harare, or Computershare Services Plc P.O. Box 82, The Pavilions, Bridgewater,
Bristol BS99 7NH, Bristol, or the registered offices of the Group being, 6th
Floor 99 Jason Moyo Avenue Harare so that it is received by the Share Transfer
Secretaries no later than 9:00 hours on 11 October 2010.
Meikles Limited Shareholders may attend the meeting in person, notwithstanding
the completion and return of a Proxy Form. In order to attend the EGM, persons
who have recently acquired Meikles shares which have not been registered in
their names should ensure that such registration is effected on or before the
close of business being 16:30 hours on 11 October 2010.
22. Important dates
Important Dates
2010
Notice of EGM published 6 September
Salient features of the Proposed Demerger published 23 September
Document posted 24 September
Last day for registering for voting at the EGM 11 October
Last day for lodging Proxy Forms for the EGM (by 9:00 hours) 11 October
Meikles EGM (at 9:00 hours) 13 October
Announcement and publication of the results of the EGM and Record 15 October
Date
Record Date (Meikles share register closed at 16:30 hours) 29 October
Meikles share register re-opens, shares trade ex-dividend 1 November
Notes:
The above dates are subject to change and any amendments will be published in
the press.
23. Experts Consents
The Group Financial Advisers, Sponsoring Brokers, Legal Advisers, Auditors and
Independent Reporting Accountants and Transfer Secretaries have submitted their
written consents to act in the capacities stated and to their names being
stated in the Circular, and these consents have not been withdrawn as at 20
September 2010.
24. DOCUMENTS AVAILABLE FOR INSPECTION
Between 27 September 2010 and 11 October 2010, copies of the following
documents will be available for inspection, during normal working hours, at the
Zimbabwean office of the Group, as well as ZB Transfer Secretaries (Private)
Limited, at their respective company addresses set out in the Circular to
shareholders.
The Memorandum and Articles of Association of Meikles;
The written consents detailed in paragraph 23 of this press announcement;
Significant contracts of the company;
Latest valuations of immovable property of the group;
The audited financial statements of Meikles referred to in the Independent
Reporting Accountants Report, for the year ended 31 December 2009;
The Independent Accountants Report on the financial information of Meikles for
the six month period ending 30 June 2010; and
The Independent Reporting Accountants Reports on the interim and pro forma
financial information on Meikles.
25. Delivery/Collection of Circular to Shareholders
Shareholders are advised that the Circular to Shareholders will be posted from
Friday 24 September 2010. Shareholders may also contact the transfer
secretaries, ZB Transfer Secretaries (Private) Limited regarding the Circular.
26. Queries
If you have any questions on any aspects of this Document, please contact your
stockbroker, accountant, banker, legal practitioner or other professional
advisor, or Nicholas Ralph at Imara, Block Two, Tendeseka Office Park, Samora
Machel Avenue, Harare, Zimbabwe; Telephone number +263 4 701320; Fax +263 4
701319; E-mail: nickr@imaracapital.com
27. Opinions and Voting Recommendations
The Directors consider the transaction to be fair and reasonable so far as the
Shareholders of Meikles are concerned and to be the best interests of the
Group. Accordingly the Directors unanimously recommend that Shareholders vote
in favour of the proposed transaction
Yours faithfully,
Farai Rwodzi
Non-executive Chairman of the Board
END
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