| Mon 18 Jun 2007, 15:00 | | OMN - Omnia Holdings Limited - Introduction Of BEE |
|
OMN
OMN
OMN - Omnia Holdings Limited - Introduction Of BEE Shareholding
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/003680/06)
JSE Code: OMN
ISIN: ZAE000005153
("Omnia")
OMNIA HOLDINGS LIMITED GROUP OF COMPANIES ("the Group") - INTRODUCTION OF
BLACK ECONOMIC EMPOWERMENT ("BEE") SHAREHOLDING ("the BEE Transaction")
1. Introduction
In line with Omnia`s commitment to BEE and employee ownership, the Group
has implemented a transaction that will result in the introduction of a 10%
equity participation by employees in the Group`s businesses. In order to
facilitate the BEE Transaction, Omnia has undertaken an internal
restructuring, which has effectively resulted in the sale of the Group`s
assets, essentially on loan account, to a new 100% owned company ("NewCo")
("the restructuring"). NewCo thus holds all the assets of the previous
operating subsidiaries of Omnia.
Following the restructuring, Sakhile Limited ("Sakhile"), the intended
black empowered company, acquired a 10% stake in NewCo. Sakhile funded the
purchase of 10% of the resulting loan accounts in NewCo through debt raised
externally and guaranteed by Omnia and through a preference share issued to
Omnia. Sakhile received a grant from Omnia for the purchase of 10% of the
NewCo`s equity. Sakhile will be 100% owned by Omnia`s employees.
The BEE transaction is an important step forward in Omnia`s transformation
strategy and will result in an improvement in Omnia`s empowerment
credentials.
2. Rationale
Omnia is a South African based diversified, specialist chemical services
company providing customised solutions to the chemicals, mining and
agriculture markets. The BEE Transaction has been carefully and
meaningfully structured to not only meet Omnia`s empowerment objectives but
also to encourage employees to share in the Group`s growth.
Recognising that BEE is a business imperative in South Africa, Omnia wishes
to:
- demonstrate its commitment to empowerment;
- offer shares to employees in line with its philosophy of extending
share ownership to all employees;
- make progress towards complying with the ownership requirements of the
Codes of Good Practice contained in the Broad-Based Black Economic
Empowerment Act;
- contribute towards social upliftment in South Africa; and
- ensure a sustainable business model that aligns the interests of
employees with those of its shareholders and in so doing retain the
employee base and preserve the current business.
3. The BEE Transaction
To facilitate the BEE Transaction, Omnia has implemented an internal
restructuring ("the restructuring"). In terms of the restructuring, all
the businesses and shares owned and companies held directly and indirectly
by Omnia ("collectively, the Businesses") have been sold to NewCo on loan
account at their current market value. These shareholder loan accounts will
bear interest at a market related rate.
Following the restructuring Omnia effectively sold 10% of its shares and
claims in Newco to Sakhile for R278 million. Sakhile will be entitled to
10% of the economic interest and full voting rights in NewCo.
Sakhile funded the BEE transaction by:
1. borrowing R218 million from the bank to pay for interest bearing loan
accounts in NewCo, and;
2. issuing a Preference Share of R60 million to Omnia to pay for interest
free loan accounts in NewCo.
The bank term loan raised by Sakhile will be guaranteed by Omnia, and is
secured by Sakhile`s 10% holding in NewCo. The shareholder loan from
Sakhile to NewCo will enjoy certain repayment preferences.
The introduction of an intended BEE partner has resulted in Omnia raising
R218 million in cash from the sale of 10% ownership in NewCo which in time
will be used to fund the Group`s future growth.
Omnia will also hold a call option, the terms of which will permit Omnia to
call the shares that the employees hold in Sakhile at market value, with
the exercise price being settled by an issue of shares in Omnia.
4. Introducing a BEE partner and creating employee ownership
The BEE transaction has been carefully structured to enable Omnia to
introduce a broad based BEE partner and create ownership in its businesses
for employees over the next 12 years.
Omnia believes in the value of employee ownership and therefore chose to
partner with the employees of Omnia in a genuine broad based empowerment
transaction. All full time black employees (including Indian and coloured
employees) working for Omnia in South Africa, and all other full time
employees working for Omnia in South Africa who do not participate in the
Partnership with Management 3 Incentive Scheme will own shares in Sakhile.
NewCo will benefit from improved empowerment credentials while employees of
Omnia will over the next 12 years share in the future growth of the company
for which they work.
5. Effective date
The effective date of the BEE Transaction will be the 1st April 2007.
6. Pro forma financial effects of the BEE Transaction
The unaudited pro forma financial effects of the BEE Transaction are the
responsibility of the directors of Omnia and have been prepared for
illustrative purposes only and, because of their nature, may not fairly
present Omnia`s financial position for the six months ended 30 September
2006.
Based on the Group`s unaudited results for the six months ended 30
September 2006 and presented in a manner consistent with the format and
accounting policies adopted by Omnia, the effect of the BEE Transaction on
the headline and basic earnings, net asset value and tangible net asset
value per share would have been as follows:
Notes Unaudited Pro forma %
results for the results at change
six months ended 30.09.06 after
30.09.06 before the BEE
the BEE Transaction
Transaction R`000
R`000
Net asset value per 1, 2, 3 2,587 2,587 -
share (cents)
Tangible net asset 1, 2, 3 1,569 1,569 -
value per share
(cents)
Basic earnings per 5 182 166 (8,8%)
share (cents)
Headline earnings 5 182 166 (8,8%)
per share (cents)
Actual number of 43,725 43,725 -
shares in issue
(000`s)
Weighted average 43,648 43,648 -
number of shares in
issue (000`s)
Notes:
The pro forma financial effects in the "After" column are based on the
following:
1. There is no effect on net asset value and tangible net asset value per
share as it is assumed that the BEE Transaction had been concluded on the
balance sheet date of 30 September 2006, based on the actual number of
shares in issue.
2. In terms of Standards Interpretation Committee Interpretation 12 "SIC
12", Consolidations - Special Purpose Entities, Sakhile, NewCo and all its
subsidiaries will be consolidated in the accounts of Omnia. This will
effectively result in the de-recognition of the sale and therefore Omnia
would not allocate 10% of its earnings to outside shareholders.
3. In April 2006, the South African Institute of Chartered Accountants
issued AC503 - Accounting for Black Economic Empowerment Transactions.
Based on this, the International Financial Reporting Standards 2 ("IFRS 2")
will be applied to the BEE Transaction. As a result, an expense as well as
an increase in equity (a separate reserve) will be recognised on the date
that the equity instrument is granted. This expense will be recognised over
the period that the instrument becomes fully vested. Upon settlement, a
transfer between components of equity would be made in the statement of
changes in equity.
4. The indicative value of the IFRS 2 expense in the first year of
implementation is estimated to be R12,8 million, with a cumulative expense
of approximately R69m being recognised over a period of 8 years.
5. The calculation of the basic earnings and headline earnings per share
assumes that the BEE Transaction was effected on 2 April 2006 and is based
on the actual number of shares in issue.
6. The term debt raised will be used to repay the existing facilities.
7. Categorisation of transaction
The BEE Transaction is a category 3 transaction and has been confirmed by
the JSE Limited as such. In the event that the call option described above
is exercised, a related party transaction will arise and shareholder
approval will be required at that time. In terms of the Securities
Regulation Code on Takeovers and Mergers, the restructuring is deemed an
"affected transaction". Application has been made to the Securities
Regulation Panel for exemption for the requirements of an "affected
transaction". Shareholders will be advised accordingly.
Bryanston
18 June 2007
Sponsor:
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Joint Transaction Advisors:
Nodus Investment Holdings (Pty) Ltd
Sevillano Hausmann & Associates (Pty) Ltd
Legal Advisors:
Tugendhaft Wapnick Banchetti & Partners
Date: 18/06/2007 15:00:03 Produced by the JSE SENS Department.
