PPC Limited - Firm Intention Offer By Fairfax To Make A Conditional Partial Offer To Acquire Ordinary Shares Of PPC


(Incorporated in South Africa)

(Company registration number: 1892/000667/06)

JSE and ZSE Code: PPC

ISIN: ZAE000170049

(“PPC” or the “Company”)



      1.1 Shareholders are referred to the announcement published on SENS on 25

          August 2017, in terms of which shareholders were notified of the

          termination of the heads of terms entered into between AfriSam Group

          Proprietary Limited (“AfriSam”) and PPC in respect of a potential merger

          between the two companies.   That announcement also noted that,

          notwithstanding such termination, AfriSam had indicated to PPC that it

          intended to submit a new proposal regarding a possible merger of the two


      1.2 Further to that announcement, shareholders are hereby advised that on 1

          September 2017, Fairfax Africa Investments Proprietary Limited

          (“Fairfax”), on behalf of a subsidiary to be nominated by Fairfax (the

          “Offeror”), delivered to the board of directors of PPC (“the Board”) a

          letter (“Firm Intention Letter”), indicating that the Offeror has a firm

          intention to make a partial offer to acquire ordinary shares representing

          a value of R2 billion of the issued ordinary stated capital of PPC, at an

          offer price of R5.75 per ordinary share of PPC (“the Partial Offer”).

          One of the conditions precedent to the Partial Offer becoming effective

          is that shareholders of PPC approve a proposal to give effect to a merger

          between PPC and AfriSam, further details of which are set out below.

          Fairfax has participated with AfriSam in the latest engagement with PPC.

      1.3 The purpose of this announcement is to:

      1.3.1 set out the background to the Partial Offer, and to advise PPC

            shareholders of the terms and conditions of the Partial Offer, in

            compliance with Regulation 101 of the Companies Regulations, 2011

            (“Companies Regulations”); and


      1.3.2 notify shareholders that that the Board has also received indicative

            proposals from two other trade bidders, each in respect of potential

            pan-African combination with PPC (“Indicative Proposals”).


   2.1 The Partial Offer constitutes an “affected transaction” for purposes of

       section 117(1)(c) of the Companies Act, 2008 (the “Companies Act”) and is

       accordingly regulated by the Companies Act and Companies Regulations, and

       the Takeover Regulation Panel (“the TRP”).

   2.2 Accordingly, in accordance with Regulation 108 of the Companies

       Regulations, PPC has constituted an independent board (the “Independent

       Board”) to consider the terms and conditions, and the merits, of the

       Partial Offer and the transactions contemplated by it as well as the

       Indicative Proposals.


     Fairfax has indicated in the Firm Intention Letter that the Offeror is a

     subsidiary of Fairfax Africa Holdings Corporation (“Fairfax Africa”), which

     is an investment holding company listed on the Toronto Stock Exchange

     (“TSX”) under the symbol "FAH.U", with a market capitalisation of over

     USD600 million and approximately USD400 million of investable cash. Fairfax

     Africa's controlling shareholder, Fairfax Financial Holdings Limited, is a

     holding company which, through its subsidiaries, is engaged in property and

     casualty insurance and reinsurance and investment management. Fairfax

     Financial Holdings Limited is listed on the TSX under the symbol "FFH".


     The Firm Intention Letter contemplates a Partial Offer on the terms and

     conditions set out below:


4.1  Nature of Offer and Mechanics

       Fairfax has indicated in the Firm Intention Letter that:

   4.1.1 the Offeror intends to offer to acquire ordinary shares representing a

         value of R2 billion of the issued and outstanding ordinary stated

         capital of PPC (the “Offer Shares”) held by all shareholders of PPC

         other than management and any shareholders who are not entitled to

         dispose of their shares (“Eligible PPC Shareholders”); and


   4.1.2 the Offeror proposes to acquire the Offer Shares on a proportionate

         basis from those Eligible PPC Shareholders who accept the Partial

         Offer, and Eligible PPC Shareholders will be entitled to sell

         additional shares to the Offeror in addition to their proportionate

         share if the other Eligible PPC Shareholders do not accept the Partial

         Offer or accept the Partial Offer for a lesser proportion than their

         full entitlement.

4.2  Consideration Offered

     Fairfax has indicated in the Firm Intention Letter that the acquisition

     consideration offered by the Offeror is R5.75 per ordinary share of PPC,

     payable in cash for a total offer consideration of R2 billion (“Offer


4.3  Conditions to the posting of the circular to PPC Shareholders

     Fairfax has indicated in the Firm Intention Letter that the posting of

     the Partial Offer circular (“Offer Circular”) to PPC Shareholders is

     subject to the fulfilment of the conditions that, by no later than 3

     October 2017:

4.3.1  the Board has retained an independent expert in terms of the Companies

       Act and the Companies Regulations, and such expert has prepared and

       issued a report concerning the Partial Offer confirming that the

       Partial Offer is fair and reasonable;

4.3.2  the Board recommends to Eligible PPC Shareholders that they accept the

       Partial Offer; and

4.3.3  to the extent applicable, the approval of the JSE and the TRP for the

       posting of the Offer Circular has been obtained.

4.4  Conditions to the Partial Offer

     Fairfax has indicated in the Firm Intention Letter that the Partial Offer

     must be subject to fulfilment of the following conditions precedent on or

     before 31 December 2017:

4.4.1     shareholders of PPC approving the proposal to give effect to a merger

          between PPC and AfriSam (and PPC and AfriSam passing all requisite

          resolutions to give effect to the merger, subject to the customary

          regulatory processes) in terms of which PPC will acquire all of the

          issued shares in AfriSam in exchange for an issue of PPC ordinary

          shares to the shareholders of AfriSam on the following basis:     the merger between AfriSam and PPC occurring based on a share

            exchange ratio of 58 (PPC) : 42 (AfriSam), which share exchange

            ratio is calculated based on the following factors:

            (i)    a share price of R5.75 per PPC ordinary share;

            (ii)   AfriSam's equity value calculated on an enterprise value of

                   R7.55 billion and net debt no greater than R866 million;    the recapitalisation of AfriSam by way of, amongst others, the

           subscription by Fairfax Africa (together with its affiliates and

           allied co-investors) (“Fairfax Consortium”) for such number of

           ordinary shares in AfriSam that will equate to an issue price of R4


4.4.2     Eligible PPC Shareholders holding a minimum value of R1 billion in

          Offer Shares accepting the Partial Offer; and

4.4.3     in respect of the implementation of the Partial Offer, and only to the

          extent that same may be applicable, the approval of the competition

          authorities, South African Reserve Bank, the JSE, the TRP and any

          other relevant regulatory authorities (either unconditionally or

          subject to conditions acceptable to the Offeror).


     Fairfax enclosed with the Firm Intention Letter a copy of a cash

     confirmation, delivered to the TRP, in the form of a bank guarantee issued

     by FirstRand Bank Limited (acting through its Rand Merchant Bank Division)

     in terms of Regulations 111(4) and 111(5) of the Companies Regulations, in

     the amount of R2 billion, which amount meets the maximum total

     consideration which may be payable in connection with the Partial Offer.


     Shareholders are advised that the Board has recently received, in addition

     to the Firm Intention Letter, credible Indicative Proposals from two other

     trade bidders, each in relation to a potential pan-African combination with

     PPC (one of which also includes a potential cash component), further

     details of which remain confidential at this stage.   The Independent Board

     is of the view that each of the Indicative Proposals is sufficiently

     credible and potentially value enhancing to shareholders to merit careful

     consideration and further engagement with the respective bidders.


7.1    Consistent with its fiduciary duties, the Companies Act and Companies

       Regulations, and in order to ensure that it is maximising possible

       returns for PPC’s shareholders, the Independent Board is considering the

       merits of the Partial Offer and each of the Indicative Proposals, and

       intends engaging further with each such bidder in order to determine what

       course of action is in the best interests of PPC’s shareholders. As part

       of the engagements with Fairfax, the Independent Board will, amongst

       other things, determine any additional obligations in terms of the rules

       governing partial offers in section 125 of the Companies Act, including

       whether the Partial Offer is required to be conditional on shareholder

       approval as contemplated in terms of section 125(3)(b).

7.2    In this regard, the Independent Board is mindful of avoiding any unduly

       protracted engagement with any of the bidders, and accordingly aims to be

       in a position to make a decision on the best way to proceed within a

       sensible time period.

7.3    The Independent Board will also appoint an independent expert

       ("Independent Expert"), as contemplated in Regulation 110 of the

       Companies Regulations, to provide a fair and reasonable opinion.

7.4    The Independent Board has not yet had an opportunity to fully consider

       the Partial Offer or the opinion of the Independent Expert.    However,

       based on the prior extensive engagement in respect of a possible merger

       with AfriSam, and the Independent Board’s own views regarding the

       underlying value of PPC, it notes, as a preliminary observation, that the

       offer price of R5.75 per ordinary share fundamentally undervalues PPC

       and, when considered in conjunction with the proposed exchange ratio,

       does not constitute sufficient compensation for PPC’s shareholders. This

       is particularly so given the partial nature of the offer and the

       effective control that would vest in the Fairfax Consortium.


     PPC shareholders are accordingly advised to continue exercising caution

     when dealing in securities of the Company until such time as a further

     announcement is made.


     The PPC Independent Board accepts responsibility for the information

     contained in this firm intention announcement to the extent that it relates

     to PPC or reflects or summarises the position set out in the Firm Intention

     Letter, accepts full responsibility for the accuracy of such and certifies

     that, to the best of its knowledge and belief, the information contained in

     this firm intention announcement is true and nothing has been omitted which

     is likely to affect the importance of the information.


4 September 2017

Investor contacts:


Anashrin Pillay

Tel: +27 (0) 11 386 9000


Joint Financial Advisor and Sponsor to PPC

Merrill Lynch South Africa (Pty) Ltd

Joint Financial Advisor to PPC

Identity Advisory (Pty) Ltd

Independent Advisor to the Board of PPC

The Standard Bank of South Africa Limited

Legal Advisor to PPC