| Wed 1 Jul 2009, 14:00 | | MET - Metropolitan - Terms of the proposed third phase of Metropolitan`S |
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MET
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MET - Metropolitan - Terms of the proposed third phase of Metropolitan`S
Black Economic Empowerment ("BEE") Transaction ("the proposed phase III
transaction")
METROPOLITAN HOLDINGS LTD
(Incorporated in the Republic of South Africa)
Registration number: 2000/031756/06
ISIN: ZAE000050456
JSE Share Code: MET
NSX Share Code: MTD
("Metropolitan" or "the Company")
TERMS OF THE PROPOSED THIRD PHASE OF METROPOLITAN`S BLACK ECONOMIC
EMPOWERMENT ("BEE") TRANSACTION ("the proposed phase III transaction")
1. INTRODUCTION
During 2004 Metropolitan and Kagiso Trust Investments (Proprietary) Limited
("KTI") entered into a relationship agreement whereby KTI acquired a 10.25%
equity stake in Metropolitan with effect from 1 October 2004. In 2005
Metropolitan and KTI extended this relationship to include the Metropolitan
Empowerment Trust ("the Trust") and KTI and the Trust increased their
combined shareholding in Metropolitan to 17.3% ("the BEE transactions").
The BEE transactions have been successful. To give effect to the stated
intentions of Metropolitan and KTI that their relationship should be long
term and for the further reasons set out in this announcement, Metropolitan
and KTI have entered into a phase III relationship agreement and will enter
into phase III financing agreements in order to facilitate the proposed
phase III transaction.
2. KAGISO TRUST AND KTI
KTI`s major shareholder is Kagiso Trust, which is a leading non-
governmental organisation devoted to the development of a large number of
disadvantaged communities in South Africa and which is generally recognised
as one of South Africa`s leading broad-based BEE groups.
3. RATIONALE AND BENEFITS OF THE PROPOSED PHASE III TRANSACTION
Metropolitan`s BEE ownership strategy involving KTI and the Trust was
implemented in order to facilitate meaningful participation by black South
Africans as envisaged by the Financial Sector Charter.
Over the past five years, KTI and the Trust have increased their strategic
interest in Metropolitan and at present their combined, direct and
indirect, beneficial shareholding in Metropolitan is approximately 24%.
KTI has proven to be a good and effective BEE partner to Metropolitan over
the years and both parties have received a number of benefits from this
association.
The A1 Metropolitan preference shares were issued with a five-year term,
while the A2 Metropolitan preference shares had a four-year term. In both
instances, failure to refinance the BEE transactions would result in the
dilution of BEE ownership of Metropolitan, to the detriment of
Metropolitan, its BEE ownership objectives and, in the case of KTI, KTI`s
long term investment objectives.
KTI and Metropolitan have explored alternatives to refinance the BEE
transactions and, subject to fulfilment of the suspensive conditions, have
agreed to enter into the proposed phase III transaction.
The benefits of the proposed phase III transaction would include the
following:
- KTI and the Trust would maintain a meaningful economic shareholding in
Metropolitan;
- the reduction of the coupon rate of the dividend payable on the A1
Metropolitan preference shares and A2 Metropolitan preference shares
would reduce the Company`s cost of capital;
- Metropolitan would continue to realise its BEE ownership strategy; and
- the impact on the Metropolitan share price caused by a substantial
Metropolitan share conversion or redemption of Metropolitan preference
shares in a volatile market would be mitigated.
4. SALIENT TERMS OF THE PROPOSED PHASE III TRANSACTION
4.1 Introduction
In order to refinance the BEE transactions KTI, Metropolitan and
a consortium of banks will enter into the phase III financing
agreements in order to extend the external funding. KTI and
Metropolitan have entered into the phase III relationship
agreement in order to regulate and implement the proposed phase
III transaction. The salient changes to this phase III
relationship agreement are to align it with the new financing
structure.
4.2 In order to facilitate the implementation of the proposed phase
III transaction, 22 842 650 of the A1 Metropolitan preference
shares will be converted while the terms of the remaining 53 000
000 A1 Metropolitan preference shares will be amended as set out
in paragraphs 4.2.1 and 4.2.2 below. Save for these amendments,
the material terms of the A1 Metropolitan preference shares will
remain unchanged.
4.2.1 Duration
The A1 Metropolitan preference shares are convertible into
Metropolitan ordinary shares on a one for one basis at any
time until the A1 extension date and if not converted, are
compulsorily redeemable at the issue price of the A1
Metropolitan preference shares, currently R5.12 per share.
The A1 extension date is being extended from 30 September
2009 to 30 October 2012.
4.2.2 Dividends
- the dividend rate per annum payable by Metropolitan on
the A1 Metropolitan preference shares will be amended
to 85% of the prime rate as charged by First National
Bank, a division of FirstRand Bank Limited (currently
the dividend rate is approximately 120%); and
- an initial dividend of approximately R2 713 600 will be
paid.
4.3 In order to facilitate the implementation of the proposed phase
III transaction, the terms of the A2 Metropolitan preference
shares will be amended as set out in paragraphs 4.3.1 and 4.3.2
below. Save for these amendments, the material terms of the A2
Metropolitan preference shares will remain unchanged.
4.3.1 Duration
The A2 Metropolitan preference shares are convertible
into Metropolitan ordinary shares on a one for one
basis at any time until the A2 extension date and if
not converted, are compulsorily redeemable at the issue
price of the A2 Metropolitan preference shares,
currently being R9.18 per share. The A2 extension date
is being extended from 5 December 2009 to 5 December
2012.
4.3.2 Dividends
- the dividend rate per annum payable by
Metropolitan on the A2 Metropolitan preference
shares will be amended to 85% of the prime rate as
charged by First National Bank a division of
FirstRand Bank Limited. The dividend rate
currently is equal to the dividends declared and
paid by Metropolitan on its ordinary shares; and
- an initial dividend of approximately R1 165 900
will be paid.
5. SUSPENSIVE CONDITIONS
The proposed phase III transaction is subject to, inter alia, the
fulfilment of the following suspensive conditions:
5.1 the necessary approval of the boards of KTI and Metropolitan;
5.2 the signing of the phase III financing agreements and those agreements
becoming unconditional;
5.3 the necessary regulatory approvals, including that of the JSE Limited
("JSE") and the Namibian Stock Exchange, being granted;
5.4 the passing of all necessary resolutions by the requisite majority of
shareholders at a general meeting of shareholders; and
5.5 the registration of such resolutions by the Registrar where
applicable,
by 30 September 2009.
6. AMENDMENT TO THE ARTICLES OF ASSOCIATION
The terms governing the A1 Metropolitan preference shares and A2
Metropolitan preference shares are contained in articles 135 and 136 of the
articles of association of the Company. In order to give effect to the
amendments as envisaged in terms of the proposed phase III transaction,
these articles of association have to be amended and such amendments
approved by shareholders.
7. FINANCIAL EFFECTS
The directors have considered the pro-forma financial effects of the
proposed phase III transaction and are of the view that they are not
material.
8. RELATED PARTY INFORMATION
The proposed phase III transaction constitutes a related party transaction
in terms of the JSE Listings Requirements by virtue of the fact that KTI is
a material shareholder of Metropolitan.
9. OPINIONS AND RECOMMENDATIONS
Given that the proposed phase III transaction is a related party
transaction, a fairness opinion by an independent professional expert is
required. Ernst & Young has been appointed by the board to advise whether
the terms and conditions of the proposed phase III transaction are fair to
shareholders.
The board of Metropolitan has formed a separate independent committee made
up of independent directors to ensure appropriate governance throughout
this process.
The opinion of Ernst & Young and the Metropolitan board`s recommendation to
Metropolitan shareholders regarding the proposed phase III transaction will
be contained in the circular to Metropolitan shareholders referred to in
paragraph 10 below.
10. GENERAL MEETING AND CIRCULAR TO SHAREHOLDERS
A general meeting of Metropolitan shareholders will be held for the purpose
of considering and, if deemed fit, passing with or without modification,
the resolutions required to implement the proposed phase III transaction.
A circular containing the full details of the proposed phase III
transaction as well as the notice of general meeting will be posted to
Metropolitan shareholders in due course.
Cape Town
1 July 2009
Sponsor in South Africa to Metropolitan
Merrill Lynch South Africa (Pty) Limited
Sponsor in Namibia to Metropolitan
Simonis Storm Securities (Pty) Limited
Attorneys to Metropolitan
Edward Nathan Sonnenbergs
Independent Professional Expert to Metropolitan
Ernst & Young
BEE partner to Metropolitan
Kagiso Trust Investments (Pty) Limited
Attorneys to Kagiso Trust Investments (Pty) Limited
Webber Wentzel
Date: 01/07/2009 14:00:03 Produced by the JSE SENS Department.
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