| Thu 20 Mar 2008, 14:43 | | BCX - Business Connexion Group - Announcement To Shareholders Of BCX Regarding |
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BCX
BCX
BCX - Business Connexion Group - Announcement To Shareholders Of BCX Regarding
The Black Economic Empowerment ("BEE") Restructuring
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/005285/06)
Share Code: BCX & ISIN: ZAE000054631
("BCX")
ANNOUNCEMENT TO SHAREHOLDERS OF BCX REGARDING THE BLACK ECONOMIC EMPOWERMENT
("BEE") RESTRUCTURING
1. Introduction
Investec Bank Limited is authorised to announce that BCX has entered into an
agreement with its BEE partners, namely Gadlex Holdings (Proprietary) Limited
("Gadlex Holdings") who are currently 25.01% shareholders in Business Connexion
(Proprietary) Limited ("Business Connexion"), through their subsidiary company
Gadlex (Proprietary) Limited ("Gadlex"), in terms of which BCX will implement
the following transactions:
1.1 replace the existing 3rd party BEE debt funding of R77 million in Gadlex
Holdings previously guaranteed by BCX to the 3rd party funder, by
subscribing for preference shares in Gadlex Holdings ("the Funding
Replacement"); as a separate transaction
1.2 acquire Business Connexion shares from Gadlex to allow Gadlex to realise
cash of R70 million, which is equivalent to a 5% shareholding in Business
Connexion ("the Acquisition"); and
1.3 amend the existing shareholders agreement with Gadlex in order to ensure
continuing BEE shareholding in Business Connexion for between three to five
years,
("collectively the BEE Restructuring")
The effective date of the Acquisition will be 7 December 2007 and the
Acquisition will result in a reduced BEE shareholding of 20.01% in Business
Connexion. This will not affect the BEE ownership scorecard rating in terms of
the Department of Trade and Industry Codes of Good Practice.
2. Rationale
BCX shareholders are referred to the announcement made by BCX on 19 October 2005
in terms of which BCX indicated they had provided a payment guarantee to a 3rd
party funder for the enhancement of the BCX BEE status. The payment guarantee
referred to in that announcement has currently rolled up to an amount of R77
million. BCX has agreed to replace this 3rd party debt with preference share
funding with a market related coupon rate as part of the BEE Restructuring.
The Funding Replacement provides benefit to the BCX shareholders by way of the
positive income differential between the preference share rate at 80% of the
prime interest rate and the after tax return on cash of 8% that BCX currently
earns.
In terms of the Business Connexion shareholders agreement, and after being
committed shareholders for five years, Gadlex had a right to switch its 25.01%
shareholding in Business Connexion to shares in the listed company, BCX ("the
Switch Right"), since November 2006. Gadlex has agreed that they will not
exercise this Switch Right. Accordingly, Business Connexion and Gadlex wish to
re-formulate the BEE strategy based on BCX`s selected strategic objectives which
will comply with the applicable legislative and regulatory requirements e.g.
Department of Trade and Industry Codes of Good Practice, legal, and tax
requirements. Accordingly, the Acquisition will form part of the BEE
Restructuring, which in its entire form will assist in providing more efficient
funding for Gadlex and enable Gadlex to realise some value as they are not
exercising their Switch Right. The BEE Restructuring also ensures that Business
Connexion BEE credentials are secured at 20.01% as opposed to a likely higher
dilution if the existing Switch Right were to be exercised.
3. Related Party Transaction
In terms of the Listing Requirements of the JSE Limited ("JSE"), Gadlex and
Gadlex Holdings are related parties to BCX and Business Connexion, (collectively
"the related parties") because, Gadlex Holdings shareholders comprise of
individuals who are also executive and non-executive directors of BCX and
Business Connexion. Consequently, the Acquisition will be regarded as a small
related party transaction for BCX. In terms of the JSE Listing Requirements, BCX
is required to provide a fairness opinion in respect of the Acquisition. The
fairness opinion has been provided by Deloitte and will be open for inspection
for a period of 28 days from 27 March 2008, from the Company Secretary at the
BCX registered office, Block E, 789 16th Road, Randjiespark, Midrand, 1685.
4. Financial Effects
The unaudited pro forma financial effects are based on BCX`s unaudited interim
results for the six months ended 30 November 2007 as published by BCX on 27
February 2008. The unaudited pro forma financial effects of the Acquisition are
the responsibility of the directors of BCX and are presented for illustrative
purposes only to provide information about how the Acquisition might have
impacted on the financial position and results of BCX had the Acquisition
occurred with effect from 1 June 2007, and due to the nature thereof, may not
give a fair reflection of BCX`s results and financial position, changes in
equity, results of operations or cashflows
SIX MONTHS ENDED 30 NOVEMBER Before After (cents) change %
2007 (cents)
Per BCX share
Earnings 14.47 13.99 -3.3
Headline earnings (3) 14.78 14.30 -3.2
Net asset value 557.03 535.62 -3.8
Tangible net asset value 471.64 445.55 -5.5
Number of shares in issue (`000) 262,637 262,637 -
Weighted issue number of shares 253,733 253,733 -
(`000)
Assumptions:
1. The accounting policies employed by BCX for the unaudited six month interim
period ended 30 November 2007 have been applied in making these
calculations
2. For purposes of calculating the earnings and headline earnings figures, it
was assumed that the Acquisition was carried out with effect from 1 June
2007
3. The Acquisition was financed by excess cash on hand on which interest was
received at an average after tax rate of 6.75% per annum for the six months
ended 30 November 2007.
5. Purchase Consideration
The Business Connexion shares will be acquired in terms of the Acquisition for a
total purchase consideration of R70,000,000 (seventy million rand) and the
purchase consideration will be settled in cash.
6. Suspensive Conditions
There are no suspensive conditions outstanding in terms of the BEE
Restructuring.
Midrand
20 March 2008
Corporate advisor and Sponsor to BCX Attorneys to Legal Advisors to
transaction sponsor BCX Gadlex
(Investec Corporate (Rand Merchant bank (Cliffe (Peter Dawe &
Finance Logo) (A division of Dekker Logo) Associates Logo)
FirstRand Bank
Limited))
Independent Expert
Deloitte
Date: 20/03/2008 14:43:48 Produced by the JSE SENS Department.
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