| Tue 14 Oct 2008, 16:57 | | MKX - Milkworx - Announcement Regarding A Specific Issue Of Shares For Cash, |
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MKX
MKX
MKX - Milkworx - Announcement Regarding A Specific Issue Of Shares For Cash,
The Capitalisation Of Loan Accounts, A Proposed Rights Offer To Shareholders, A
Specific Repurchase Of Shares, A Withdrawal Of Cautionary Announcement And A New
Cautionary Announcement
MILKWORX LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/011074/06)
("Milkworx" or "the Company")
ISIN Code: ZAE000058020 & Share code: MKX
ANNOUNCEMENT REGARDING A SPECIFIC ISSUE OF SHARES FOR CASH,
THE CAPITALISATION OF LOAN ACCOUNTS, A PROPOSED RIGHTS OFFER TO SHAREHOLDERS, A
SPECIFIC REPURCHASE OF SHARES, A WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND A NEW
CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcements dated 09 April 2008 and
21 May 2008, 3 July 2008, 15 August 2008 and 1 October 2008, the directors
of Milkworx are pleased to announce:
(1) the signing of an agreement with Dr Dirk Hertzog ("Dr Hertzog"),
Stephan Roux ("Roux") and Tomas Dajcar ("Dajcar"), which agreement,
dated 08 October 2008, provides for the recapitalisation of the
Company through:
(a) a R6 000 000 investment into the Company by Dr Hertzog or his
nominee ("the Strategic Investor"), who will subscribe for
266 666 667 ordinary shares in Milkworx at a subscription price
of 2.25 cents per share;
(b) the capitalisation of directors` loan accounts owing to Roux
(R4 000 000) and Dajcar (R700 000) at a price of 2 cents per
share; and
(c) a rights offer to shareholders, details of which are still to be
finalised, following which a separate terms announcement will be
released;
and
(2) the signing of a sale of shares and settlement of loan account
agreement ("the Repurchase Agreement") with Wergele Stafford McKenzie
NO., Enver Mohamed Motala NO. and Yves Mercia Seckle-Marupen NO. in
their capacities as liquidators of South African Horticulture
Technologies Limited (in liquidation) ("the liquidators of SA
Horticulture Technologies"), Trevor Philip Glaum NO., Corenelia
Carolina Mienie NO. and Jeffrey Siphiwe Hlatshwayo NO. in their
capacities as Trustees of the Insolvent Estate The Cruickshank
Industrial Trust ("the Trustees of the Insolvent Estate The
Cruickshank Industrial Trust"), and Paul Daneel Kruger NO., Elizabeth
Wilanda Prinsloo NO. and Stephen Malcolm Gore NO. in their capacities
as liquidators of Continental Brands Limited (in liquidation) ("the
liquidators of Continental Brands"), which agreement, dated
3 October 2008, together with the first and second addendum thereto,
dated 3 October and a revival and third addendum agreement dated
14 October 2008, provides for:
(a) the repurchase of 139 789 205 ordinary shares in the Company from
the liquidators of SA Horticulture Technologies;
(b) the repurchase of 68 888 994 ordinary shares in the Company from
the Trustees of the Insolvent Estate The Cruickshank Industrial
(together "the Repurchased Shares" and "the Liquidators");
(c) the repayment of a R1 000 000 loan to the liquidators of
Continental Brands; and
(d) the repayment of a R250 000 loan to the liquidators of SA
Horticulture Technologies, (together, "the Creditors" and "the
Creditors Loan Claims");
and collectively ("the Transaction"). The combined price in respect of the
purchase of the Repurchased Shares and the settlement of the Creditors Loan
Claims is R4 000 000 plus interest calculated at the prime rate from 14
October 2008 to the date of fulfilment of the conditions precedent ("the
Total Amount") as set out in paragraph 4 below. The Total Amount will be
disbursed and apportioned for payment between the Liquidators and the
Creditors as follows:
(i) to the Creditors for settlement of the Creditors Loan Claims, an
amount equal to R1 250 000 plus interest calculated thereon at the
prime rate from the date of advance of the Creditors Loan Claims to
the fulfilment of the conditions precedent to the Transaction ("the
Loan Claim Component"); and
(ii) to the Liquidators, the purchase price of the Repurchased Shares,
being the Total Amount less the Loan Claim Component.
2. Rationale for the Transaction
The Transaction represents the first steps in a planned strategy for future
growth and entails the repurchase by the Company of a substantial
shareholding block, which shares were indirectly controlled by Angus
Cruickshank ("Cruikshank"), the previous Chairman of Milkworx and are
currently held by the Liquidators who are involved in the liquidation of
the Fidentia group of companies. The repurchase removes a substantial
uncertainty with regard to control of the Company and, in the directors`
opinion, the cancellation of the Repurchased Shares will provide a benefit
to shareholders and addresses Cruickshank`s continued denial that he had
acquired a controlling interest in the Company and, accordingly, his
failure, prior to his death, to make an offer to minority shareholders.
The investment in the Company by the Strategic Investor enables the Company
to purchase the Repurchased Shares and to settle the Creditors Loan Claims,
whilst the capitalisation of directors` loan accounts strengthens the
Company`s balance sheet.
3. Financial effects of the Transaction
The table below sets out the pro forma financial effects of the
Transaction, excluding the proposed rights offer, which have been prepared
for illustrative purposes only in order to provide information about how
the Transaction might have affected the financial information presented in
Milkworx` audited results for the year ended 30 June 2008. Because of
their nature, the pro forma financial effects, which are the responsibility
of the directors, may not fairly present Milkworx` financial position,
changes in equity, results of operations or cash flows.
As at 30 Before Issue After % Capital After "A"
June 2008 of "A" change isation & "B"
shares of Loan
for cash Accounts
("A") ("B")
Loss per
share (cents)
(1.26) (0.87) 31.03% (0.68)
Headline loss
per share
(cents)
(1.14) (0.79) 31.03% (0.62)
Net asset
value per
share (cents)
1.97 2.06 4.34% 2.05
Net tangible
asset value
per share
(cents) 1.95 2.05 4.67% 2.04
Weighted
average
number of
shares in
issue (000`s)
592,782 266,667 859,448 44.99% 235,000 1,094,448
Ordinary
shares in
issue (000`s)
595,248 266,667 861,914 44.80% 235,000 1,096,914
As at 30 % Repurchase After % change after
June 2008 change of Shares "A", "B" "A", "B" & "C"
from "A" &"C"
to "B"
Loss per
share
(cents) 45.84% (0.85) 33.08%
Headline
loss per
share
(cents) 45.84% (0.76) 33.08%
Net asset
value per 3.69% 2.26 14.57%
share
(cents)
Net tangible
asset value
per share
(cents) 4.16% 2.25 15.02%
Weighted
average
number of
shares in
issue
(000`s) 84.63% (208,678) 885,770 49.43%
Ordinary
shares in
issue
(000`s) 84.28% (208,678) 888,236 49.22%
Assumptions:
1. The `Before` column contains the Milkworx published audited results for the
year ended 30 June 2008.
2. The pro forma information assumes that the issue and payment of shares took
place on 01 July 2007 and had been in place for the full 12 month period
ended 30 June 2008.
3. The `After` `A` column figures are based on the following assumptions:
(i) 266 666 667 shares were issued to the Strategic Investor at a price of
2.25 cents per share;
(ii) The excess received above the par value of 1 cent per share was
deducted from the share premium account; and
(iii)The full amount of R6 000 000 received for the shares was paid in
cash, but did not earn interest income for the 12 month period ended
30 June 2008.
4. The pro forma information in respect of the capitalisation of loan accounts
assumes that the issue of shares and extinguishment of the liabilities took
place on 01 July 2007 and had been in place for the full 12 month period
ended 30 June 2008 for income statement purposes, and at 30 June 2008 for
balance sheet purposes.
5. The `After A & B` column figures are based on the following assumptions:
(i) 200 000 000 shares were issued to Roux at a price of 2.00 cents per
share;
(ii) 35 000 000 shares were issued to Dajcar at a price of 2.00 cents per
share;
(iii)The excess received above the par value of 1 cent per share was
allocated to the share premium account; and
(iv) The total amount of shareholders loans which were extinguished,
amounting to R4 700 000, has been offset against the shareholders`
loan account in the balance sheet.
6. The `After A, B & C` column figures are based on the following assumptions:
(i) The company settled long term liabilities and made a share repurchase
for a total amount of R 4 000 000 ;
(ii) 208 678 199 shares were bought back at a price of 1.1331 cents per
share;
(iii)The excess paid above the par value of 1 cent per share was deducted
from the share premium account; and
(iv) The total amount of long term liabilities which were settled at 30
June 2008, amounted to R1 635 526.
4. Options to Key Management
The board has decided to grant options to subscribe for 4 000 000 shares
each at 2 (two) cents per share to P Geyser, E Modisakeng and S van der
Berg. The rationale for the granting of these options is to retain these
senior staff members who are key to the day-to-day operations of Milkworx
and to incentivise them through the aligning of their interests with those
of shareholders. The full terms and conditions of the options will be
included in the circular to shareholders detailed in paragraph 6 below.
The granting of these options has, however, not been included in the pro
forma financial effects set out in paragraph 5 above as they will not have
a material effect on the Company going forward.
5. Conditions Precedent
The Transaction is subject to, inter alia, the following conditions
precedent:
- the approval of the Transaction by the requisite regulatory
authorities;
- the approval by the requisite majority of Milkworx shareholders, at a
general meeting convened for the purpose, of all such resolutions as
may be required to approve and implement the Transaction;
- the Company delivering to each of the Liquidators, care of Webber
Wentzel, an indemnity signed by Milkworx in a form acceptable to the
Liquidators, indemnifying each of the Liquidators from any
liabilities, debts and claims of whatsoever nature arising from or
related to any claims of whatsoever nature made by the shareholders of
the Company against either or both of the Liquidators arising from or
relating to the original acquisition by the Liquidators of the
Repurchased Shares.
6. Documentation
In terms of the Listings Requirements of the JSE Limited, the specific
issue of shares to the Strategic Investor, the capitalisation of the loan
accounts (which is regarded as a specific issue of shares for cash to a
related party), the specific repurchase of shares and the granting of the
options to key management, are required to be approved by shareholders. A
circular containing full details of the Transaction and incorporating a
fairness opinion on the capitalisation of directors` loan accounts will be
posted to shareholders in due course.
7. Withdrawal of Cautionary Announcement
Following the publication of this announcement, the cautionary announcement
has been withdrawn and shareholders need no longer exercise caution when
dealing in the company`s securities on the JSE.
8. New Cautionary Announcement
Shareholders are advised that the Company has entered into further
negotiations which, if successfully concluded, may have a material effect
on the price of the company`s securities. Shareholders are accordingly
advised to exercise caution when dealing in the Company`s securities until
a full announcement is made.
Johannesburg
14 October 2008
Designated Advisor Corporate Advisor
Arcay Moela Sponsors (Pty) Ltd Arcay Corporate Finance (Pty) Ltd
Date: 14/10/2008 16:57:25 Produced by the JSE SENS Department.
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