| Wed 24 Mar 2010, 7:50 | | SAP - Sappi Limited - Salient Transaction Highlights |
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SAP
SAVVI
SAP - Sappi Limited - Salient Transaction Highlights
Sappi Limited
(Incorporated in the Republic of South Africa)
Registration number: 1936/008963/06
Share code: SAP ISIN: ZAE000006284
("Sappi" or "the Company")
SALIENT TRANSACTION HIGHLIGHTS
- R814m BEE transaction over 4.5% of Sappi`s equity
- Transaction qualifies as 30% BEE ownership in Sappi`s South African
operations as required in terms of the Forest Sector Charter
- Characteristics of the "A" Ordinary Shares:
- Full voting rights;
- Entitlement to dividends equal to 50% of the Sappi Ordinary Share
dividend declared;
- A portion of the "A" Ordinary Shares to convert to Ordinary Shares at
the end of the Transaction term;
- Dilution to current Ordinary Shareholders at the end of the
Transaction term, as a result of the conversion to Ordinary Shares of
a portion of the "A" Ordinary Shares, occurs incrementally and to the
extent the Sappi Ordinary Share price exceeds circa ZAR74.47; and
- During the Transaction term "A" Ordinary Shares accounted for as
treasury shares and therefore no impact on the Company`s salient
financial ratios, e.g. EPS
- Prior Plantation BEE Deal restructured to achieve an efficient exit
mechanism and "see-through" value for Sappi`s South African employees and
Strategic Partners
- Broad base of participants:
- Sappi`s South African employees;
- Strategic Partners; and
- Communities where Sappi`s South African businesses have a mill and/or
plantations
- "A" Ordinary Shares issued to the Sappi Foundation for the benefit of
Communities where Sappi`s South African businesses have mills and/or
plantations and to Sappi`s South African employees
- Allows a broad base of Sappi`s South African employees to participate in
the Company`s strategic direction
- Creates an attraction and retention tool for core skills amongst Sappi`s
South African employees
- Elevates Sappi to a "Level Four Contributor" in terms of the DTI Codes with
100% preferential recognition level in terms of the DTI Codes and the
Forest Sector Charter
- No impact on current Sappi financing facilities
- Economic benefits of the Transaction exceed the Accounting IFRS 2 cost
This announcement does not constitute or form part of any offer or solicitation
to purchase or subscribe for securities in the United States. The offering of
the Ordinary Shares, "A" Ordinary Shares, "A" Units and "B" Units in connection
with the proposed transaction described in this announcement has not been and
will not be registered under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act"). Accordingly, such securities may only be offered and
sold in transactions that are exempt from, or not subject to, the registration
requirements of the U.S. Securities Act. The securities offered in the proposed
transaction described in this announcement may be acquired outside of the United
States in accordance with Regulation S under the U.S. Securities Act.
SAPPI`S PROPOSED BLACK ECONOMIC EMPOWERMENT ("BEE") TRANSACTION (THE
"TRANSACTION")
1. Introduction
In Sappi`s 2009 Annual Report, shareholders were advised of Sappi`s
intention to conclude a BEE equity transaction to broaden its shareholder
base. Sappi views BEE as a key requirement for sustainable growth and
social development in South Africa.
Shareholders are now advised that Sappi is proposing to implement a broad
based BEE ownership transaction to position it as a leading empowered
producer in South Africa. The Transaction, if approved by shareholders,
will include Lereko Investments (Proprietary) Limited ("Lereko
Investments"), Malibongwe Women Development Trust ("Malibongwe") and AMB
Capital Limited ("AMB Capital"), (collectively referred to as "the
Strategic Partners"), Sappi`s South African employees and communities
within areas where Sappi`s South African businesses have mills and/or
plantation business operations.
Sappi`s shareholder structure after the Transaction will be set out in the
announcement to be published in the press on 25 March 2010, and will also
be available on Sappi`s website www.sappi.com
2. Rationale for the Transaction
The South African government has through the years promulgated various
pieces of legislation to increase the participation of Historically
Disadvantaged South Africans ("HDSAs") in the South African economy
through, inter alia, Broad Based Black Economic Empowerment ("BBBEE")
Legislation.
Sappi is committed to the spirit and principles contained in the BBBEE
Legislation as well as the South African Forest Sector Charter (the
"Forestry Charter") to which the Company is a signatory via its membership
of both Forestry South Africa and the Paper Making Association of South
Africa. With effect from calendar year 2010, Sappi`s South African business
will be evaluated against the Forestry Charter`s scorecard and not the
generic BBBEE scorecard set out in the Department of Trade and Industry`s
Code of Good Practice for BBBEE ("DTI Codes").
Currently, Sappi`s South African business holds a score of 54 points on the
BBBEE scorecard which classifies it as a "Level Six Contributor" with a
preferential procurement recognition level of 60%. This means that 60% of
the value of all purchases from Sappi`s South African business qualifies as
preferential procurement spend in a customer`s BBBEE scorecard.
As a result of the Transaction and in terms of the BBBEE Legislation, the
Employee Share Ownership Plan Trust ("ESOP"), Management Share Ownership
Plan Trust ("MSOP") and Sappi Foundation Trust ("Sappi Foundation")
(collectively the "BEE Trusts") as well as the Strategic Partners will hold
Ordinary and "A" Ordinary Shares equivalent to 4.5% in Sappi post the
Transaction. This will result in Sappi meeting the requirements of the
Forestry Charter regarding ownership that require empowered parties to hold
a combined effective 30% interest in Sappi`s South African business.
Sappi`s empowerment rating agency Empowerdex (Proprietary) Limited
("Empowerdex") has also determined that at inception of the Transaction,
Sappi`s South African business will be eligible for 15 points out of a
maximum 25 points in terms of the ownership scorecard of the Forestry
Charter. This will elevate Sappi to a "Level Four Contributor" and a 100%
procurement recognition level. Sappi`s South African customers have similar
BEE requirements and consider Sappi`s level of empowerment when transacting
with the Company - thus making this Transaction a commercial imperative.
The inclusion of the BEE Trusts and Strategic Partners in the Transaction
broadens the Company`s HDSA shareholder base. This creates wealth across a
large number of new shareholders and attracts as well as retains core
skills amongst the Company`s HDSA managers and South African employees (as
defined in clause 3.1.2 and 3.1.3 of this announcement).
Overall, Sappi believes that the implementation of the Transaction will
create sustainable growth in its South African business operations, improve
its BEE profile with local authorities responsible for the issue of
licences and permits, benefit the South African communities in which its
operations are situated and most importantly offer the majority of its
South African employees the opportunity to hold a direct stake in the
Company whilst attracting and retaining the relevant skills.
3. Terms of the Transaction
3.1 Transaction participants
3.1.1 Strategic Partners
As previously discussed, the Strategic Partners for the Transaction is
a consortium led by Lereko Investments and includes AMB Capital and
Malibongwe who will collectively exchange their participation in the
Plantation BEE Deal for Sappi ordinary shares.
3.1.2 ESOP
An ESOP Trust will be created to hold an interest in Sappi for the
benefit of Sappi`s permanent South African employees who are either:
- HDSA in Peromnes employment grade 8 to 18 or Sappi wage level A to F,
both inclusive; or
- non-HDSA in Peromnes employment grade 6 to 18 or Sappi wage level A to
F, both inclusive;
- employed by Sappi`s South African business;
- excluding any person/s who renders services to Sappi at any time
through the involvement of:
- a labour brokerage;
- by temporary contract other than as an employee of any member of
the Sappi group; or
- who is a member of any other share option or share incentive plan
implemented by any member of Sappi (excluding HDSA employees)
3.1.3 MSOP
A MSOP Trust will be created to hold an interest in Sappi for the
benefit of Sappi`s permanent managers who are exclusively HDSAs and
employed by Sappi`s South African business with employment grades 1 to
7 according to Sappi`s Peromnes grading system.
3.1.4 Sappi Foundation
The Sappi Foundation Trust will be created and its beneficiaries in
South Africa will include, inter alia, growers and communities in
geographical areas where Sappi`s South African business has milling
and/or plantation operations.
3.2 Restructure of the Plantation BEE Deal and specific issue of Ordinary
Shares
In April 2006 Sappi announced the Plantation BEE Deal, which was effected
at a Sappi South African subsidiary level, with the Strategic Partners. In
terms of the Plantation BEE Deal, Lereko Property Company (Proprietary)
Limited ("LPC") acquired a 25% undivided share in Sappi`s South African
plantation land, excluding the value of the plantations, coupled with the
right to develop the Sappi land not utilised for forestry operations. The
right of use over all the land in terms of the underlying arrangements
remained with Sappi. The Strategic Partners through their shareholding in
LPC and Sappi`s South African employees hold respectively 70% and 30% of
the entitlement to the value of the aforementioned 25% stake.
After considering the efficacy of the Plantation BEE Deal, the Company and
the Strategic Partners have concluded that the Plantation BEE Deal should
be unwound and an alternative and sustainable transaction be implemented at
the Sappi level to ensure, inter alia, "see-through" value and an efficient
exit mechanism for its Strategic Partners and Sappi`s South African
employees.
The existing rights held by the Strategic Partners and Sappi`s South
African employees to participate in the development land not utilised for
forestry operations will be retained by these parties in a new separate
vehicle.
The Strategic Partners have agreed to exchange their shareholding in LPC
for 3,047,762 new listed Sappi ordinary shares with a par value of R1 each
("Ordinary Shares") at a price of R33.50 each, being the 30 day volume
weighted average price ("VWAP") of Sappi`s Ordinary Share as at Friday 5
February 2010 (the "Transaction price") for a total consideration of R102.1
million. The Strategic Partners will therefore hold approximately 0.57% of
the post dilution Ordinary Shares in issue.
Restrictions applying to the disposal of the Ordinary Shares by the
Strategic Partners are detailed in the Transaction Agreements, which are
available for inspection at Sappi`s registered office.
Similarly, the 30% entitlement to shares in LPC held by Sappi`s South
African employees will be exchanged for 1,280,597 Ordinary Shares at the
Transaction price for a total consideration of R42.9 million. These
Ordinary Shares will be housed within the ESOP Trust and will be subject to
various restrictions detailed in the Transaction Agreements. Sappi will
contribute approximately R1.3 million to the ESOP to enable it to acquire
the Ordinary Shares at their par value of R1 per Ordinary Share.
The abovementioned Ordinary Shares will rank pari passu with all other
Ordinary Shares and will be entitled to receive dividends on the same basis
as all other Ordinary Shares.
3.3 Creation and specific issue of "A" Ordinary Shares
Sappi is proposing the creation of a new class of equity shares with a par
value of R1 each (""A" Ordinary Shares") to facilitate the Transaction for
the BEE Trusts. The "A" Ordinary Shares will be issued as follows:
- 13,889,195 "A" Ordinary Shares at par value of R1 to the ESOP
comprising approximately 2.57% of the post dilution issued share
capital of Sappi;
- 3,642,969 "A" Ordinary Shares at par value of R1 to the MSOP
comprising approximately 0.67% of the post dilution issued share
capital of Sappi; and
- 2,429,312 "A" Ordinary Shares at par value of R1 to the Sappi
Foundation comprising approximately 0.45% of the post dilution issued
share capital of Sappi.
The salient characteristics of the "A" Ordinary Shares are:
- the "A" Ordinary Shares will rank pari passu with the Ordinary Shares
in all respects, save they will qualify for 50% of the dividend
payable on the Ordinary Shares;
- the "A" Ordinary Shares will have full voting rights;
- the "A" Ordinary Shares will not be listed on the JSE. Accordingly,
Sappi has received dispensation from the JSE to ensure that the "A"
Ordinary Shares will be included in determining a quorum and be
entitled to vote on any or all resolutions proposed at meetings of
Ordinary Shareholders;
- the "A" Ordinary Shares will be treated as treasury shares until the
end of the Transaction term, which date is expected to be 2 September
2019, and therefore shall not be included in the calculation of the
Company`s salient financial ratios such as basic earnings per share;
and
- post the Transaction term, the Company will have the option to
implement the Repurchase Formula in paragraph 3.3.1, resulting in a
portion of the "A" Ordinary Shares converting to Ordinary Shares. This
will cause some dilution to current Ordinary Shareholders
incrementally to the extent the Sappi Ordinary Share price exceeds
approximately ZAR74.47
Sappi will advance a loan of approximately R20 million to the BEE Trusts to
acquire the "A" Ordinary Shares at their par value of R1 each. At the end
of the Transaction Sappi will have the option to purchase a number of "A"
Ordinary Shares at their par value of R1 as calculated in terms of the
Repurchase Formula, defined in paragraph 3.3.1 (the "Sappi Call Option").
3.3.1 Worked example
The ESOP example below is illustrative of the Transaction structure set out
above.
At Effective Date
- The beneficiaries of the ESOP will be allocated "A" Units and "B"
Units. The "A" and "B" Units represent the respective interests of the
beneficiaries in the "A" Ordinary Shares and Ordinary Shares held by
the ESOP.
- The ESOP Trust will be extended an interest free loan of R13.9 million
by Sappi to acquire the 13,889,195 "A" Ordinary Shares at a par value
of R1.
Dividends
The "A" Ordinary Shares will receive "A" Ordinary Share dividends equal to
50% of the Ordinary Share dividends. The South African employees who are
beneficiaries of the ESOP will receive "A" Ordinary Share dividends based
on the number of "A" Units and Ordinary Share dividends based on the number
of "B" Units they have been allocated by the Company in the ESOP.
At the end of the Transaction term
The number of "A" Ordinary Shares that Sappi has the right to repurchase in
terms of the Sappi Call Option will be determined with reference to the
following formula ("Repurchase Formula"):
N = (A X (1+r )^t) / B
where:
N is the number of "A" Ordinary Shares which may be repurchased by Sappi
A Outstanding balance at the effective date of the Transaction (13.9
million "A" Ordinary Shares at a price of R32.50 (being the R33.50
price per ordinary share less the R1 par value which was actually paid
by the ESOP Trust) = R451.4 million)
r is the hurdle rate of 9.1%
t is the Transaction term
B is the 30 day VWAP per Ordinary Share on the JSE on the business day
prior to the implementation of the Repurchase Formula
Assuming the price at the end of the period is R180 ("B" in the above
formula) and the outstanding balance is R1,003 million (R451.4 x
((1+9.1%)^9.5)) at the end of the Transaction, Sappi has the option to
acquire approximately 5.6 million "A" Ordinary Shares (R1,003 million /
R180). The residual 8,3 million (13,9 - 5,6 million) "A" Ordinary Shares
not repurchased by the Company will be distributed to the South African
employees (as defined in clause 3.1.2 and 3.1.3) in proportion to their "A"
Units post settlement of all costs and obligations of the ESOP. Subsequent
to the distribution, the "A" Ordinary Shares will automatically convert
into Ordinary Shares.
The Ordinary Shares in the ESOP will also be distributed to the South
African employees in proportion to their "B" Units and are not subject to
the Repurchase Formula as they are intended to represent an exchange of the
value of 30% of the shares in LPC for Ordinary Shares at fair value.
A portion of the "A" Ordinary Shares (which shall be retained in the ESOP
Trust and converted to Ordinary Shares in the ESOP Trust), will be sold by
the ESOP Trust. The proceeds of the sale will be utilised towards the
settlement of the loan advanced for purposes of acquiring the "A" Ordinary
Shares at par value and any other expenses which may have been incurred by
the ESOP Trust during the course of the Transaction.
The above illustrative example would be applicable to the MSOP and Sappi
Foundation these examples will be included in the detailed circular to be
posted to shareholders. However, the Sappi Foundation will retain the
Ordinary Shares resulting from the conversion from the "A" Ordinary Shares
to further its aims and will not distribute them to its respective
beneficiaries.
4. Vesting and Allocation of the "A" Units and "B" Units
4.1 Vesting and Allocation of the "A" Units for the ESOP and MSOP
Allocation of "A" Units
The initial allocation of the "A" Units will be determined by the Board of
Directors of Sappi (the "Board") through the Sappi Remuneration Committee,
whilst the vesting process will be managed by the Trustees of the MSOP and
ESOP in accordance with the provisions of the Trust Deeds. The ESOP
Trustees will seek to ensure that, in terms of the ESOP Trust Deed, the "A"
Units issued by the ESOP Trust remain majority held by HDSA participants.
Over time, new Sappi South African employees who satisfy the criteria in
clause 3.1.2. and 3.1.3 will also be beneficiaries in each of the ESOP and
MSOP Trusts and therefore receive "A" Units in accordance with the
following formula ("Allocation Formula"):
A = ((C-B)/C)*O
where
A: Allocation of "A" Units
B: Months lapsed from effective date to date of issue
C: Months between effective date and the end of the Transaction
term
O: Original number of "A" Units issued to South African
employees, based on the allocation formulae present at the
effective date.
Vesting schedule
An employee must remain employed by Sappi for a minimum period of 36 months
prior to such employee receiving an entitlement to their allocated "A"
Units ("minimum service period"). 40% (forty percent) of the allocated "A"
Units will vest immediately after the minimum service period.
The "A" Units will vest in accordance with the following schedule:
Completed months of Incremental Cumulative
service after effective vesting of vesting of
date entitlements (%) entitlements (%)
0-35 0 0
36-48 40 40
49-60 10 50
61-72 10 60
73-84 10 70
85-96 10 80
97-108 10 90
109-Termination Date 10 100
South African employees subsequently employed by Sappi after the effective
date ("subsequent permanent employees") will be allocated "A" Units in
accordance with the Allocation Formula. These "A" Units will also vest in
accordance with the allocation schedule. However, to the extent that such
subsequent permanent employees remain in the employment of the Company
beyond the minimum service period and have been allocated "A" Units which
have not yet vested at the end of the Transaction term, all such unvested
"A" Units will vest in his or her name on such date.
To the extent that an employee leaves the employ of the Company after the
minimum service period but before the end of the Transaction term, he or
she will forfeit their unvested "A" Units ("exiting beneficiary"). He or
she will retain such "A" Units which have vested, but the converted
Ordinary Shares, if any, arising from the "A" Units will only be received
at the end of the Transaction.
An employee beneficiary of the ESOP and MSOP Trusts who is dismissed by the
Company will lose his or her vested and unvested "A" Units and/or "B"
Units.
For illustrative purposes, an exiting beneficiary who received an
allocation of 100 "A" Units at inception and who resigns in month 83 will
retain 70 "A" Units which represents his or her entitlement to receive 70
"A" Ordinary Shares at the end of the term of the Transaction, subject to
the implementation of the Repurchase Formula. The same exiting beneficiary
will forfeit his or her entitlement to 30 "A" Units which represent his or
her entitlement to receive 30 "A" Ordinary Shares at the end of the
Transaction term, subject to the implementation of the Repurchase Formula.
In the case of an existing beneficiary who received an allocation of 100
"A" Units at inception and who dies in month 83, such deceased beneficiary
will have the equivalent value of their 70 "A" Ordinary Shares transferred
to the deceased`s estate. The deceased beneficiary will forfeit his or her
entitlement to 30 "A" Ordinary Shares which represent his or her
entitlement to receive 30 "A" Ordinary Shares at the end of the Transaction
term subject to the implementation of the Repurchase Formula.
"A" Ordinary Shares in respect of unallocated or forfeited "A" Units which
remain in the ESOP and MSOP Trust at the end of the Transaction term will
be re-allocated to the remaining beneficiaries on a pro-rata basis.
4.2 Vesting and Allocation of the "B" Units for the ESOP
All South African employees who are beneficiaries of the ESOP on the
Effective Date will receive an equal number of "B" Units. In addition,
South African employees joining the Company after the effective date will
be allocated "B" Units over the term of the Transaction, on a time
apportioned basis, in accordance with the allocation formula.
The Ordinary Shares represented by the "B" Units will vest on the basis of
the same vesting schedule as the "A" Ordinary Shares and the same minimum
qualification criteria will be enforced. The "B" Units are not subject in
any way to the Repurchase Formula.
4.3 Vesting and Allocation of the "A" Units for the Sappi Foundation
The "A" Ordinary Shares will vest immediately at the effective date of the
Transaction. However the Sappi Foundation may not dispose of the "A"
Ordinary or resulting Ordinary Shares until the Trustees of the Sappi
Foundation take the decision to wind-up the Sappi Foundation and distribute
the proceeds to its beneficiaries, which shall not be before the end of the
Transaction term.
5. Pro forma financial information
The unaudited pro forma financial effects for the Transaction related to
the Specific Issue, which are the responsibility of the Sappi Directors,
have been prepared for illustrative purposes only and due to the nature
thereof, may not fairly represent Sappi`s financial position. The unaudited
pro forma financial effects assume that the Transaction related to the
Specific Issue has been fully implemented on 29 September 2008 for income
statement purposes and 27 September 2009 for balance sheet purposes. They
do not purport to be indicative of what the financial results would have
been, had the Transaction related to the Specific Issue been implemented on
a different date. The unaudited pro forma financial effects for the
Transaction related to the Specific Issue are based on the assumptions set
out in the notes and assumptions below and include assumptions based on the
Transaction subscription price.
The unaudited pro forma financial effects for the Transaction related to
the Specific Issue are set out in the table below in a manner consistent in
all respects with IFRS and Sappi`s accounting policies. They should also be
read in conjunction with the notes thereto and the report of the Reporting
Accountants which will be contained in the circular to be posted to
shareholders.
Unaudited pro forma per Ordinary Share information for the financial year
ended 27 September 2009
The pro forma financial information for the Specific Issue is as follows:
For the year ended September Before the After Change
2009 Specific the (%)
Issue Specific
Issue
Net asset value per Ordinary US$ 3.48 3.45 (0.9)
Share
Tangible net asset value per US$ 3.42 3.39 (0.9)
Ordinary Share
Basic loss per Ordinary US cents (37) (41) (10.8)
Share
Diluted loss per Ordinary US cents (37) (41) (10.8)
Share
Headline loss per Ordinary US cents (21) (25) (19.0)
Share
Diluted headline loss per US cents (21) (25) (19.0)
Ordinary Share
Weighted average number of millions 482.6 486.9 0.9
Ordinary Shares in issue
Weighted average diluted millions 482.6 486.9 0.9
number of Ordinary Shares in
issue
Notes and assumptions
1. The unaudited pro forma financial effects before the implementation of
the Specific Issue are based on the audited group income statement and
group balance sheet for the financial year ended 27 September 2009.
2. The unaudited pro forma financial effects per Ordinary Share after the
Specific Issue are based on the assumptions that:
(a) the Specific Issue was implemented with effect from 29 September
2008 for calculation of the income statement effects and as at 27
September 2009 for calculation of the balance sheet effects;
(b) the income statement effects have been converted from Rands into
US Dollars at the average rate of exchange for the year being
US$1: ZAR 9.0135 and the balance sheet at the year end rate of
exchange as at September 2009 being US$1: ZAR 7.4112;
(c) 4,328,359 new Ordinary Shares at Par Value were issued at a price
of R33.50 to the Strategic Partners and the ESOP Trust;
(d) 19,961,476 new "A" Ordinary Shares were issued to the BEE Trusts
of which 2,429,312 were issued to the Sappi Foundation, 3,642,969
were issued to the MSOP Trust and 13,889,195 were issued to the
ESOP Trust at Par Value. The number of "A" Ordinary Shares above
has been calculated on the net Ordinary Shares in issue as at 27
December 2009 of 515.5 million instead of 27 September 2009 of
515.7 million to reflect the actual number of "A" Ordinary Shares
that will be issued. See reconciliation below:
Net Ordinary Shares as at 27 September 2009 515,733,305
Employee Share Scheme shares forfeited, (249,040)
released and other
Net Ordinary Shares as at 27 December 2009 515,484,265
(e) the BEE Trusts are consolidated for accounting purposes and the
Shares issued to these entities are regarded as treasury shares
and excluded from the above calculations. At Conversion Date,
should the Sappi Ordinary Share price exceed approximately
ZAR74.47, certain of the "A" Ordinary Shares will convert to
Ordinary Shares which will result in some dilution to current
Ordinary Shareholders.
3. The total share-based non-cash payment charge for the Specific Issue
amounts to US$46 million (R417) million. This is made up as follows:
(a) a once-off share-based non-cash payment charge of US$16 million
(R141 million) and a US$1 million (R4 million) settlement of an
embedded derivative liability. Both relate to payments to the
Strategic Partners and ESOP in respect of partially collapsing
the existing Plantation BEE Deal with regard to repurchasing the
shareholding in LPC from the Strategic Partners and the ESOP
Trust by issuing 4.3 million Ordinary Shares; and
(b) a share-based non-cash payment charge associated with the BEE
Trusts amounting to US$30 million (R272 million) which will be
expensed in the income statement over the Lock-Up Period. The
charge for the financial year ended 27 September 2009 amounts to
US$8 million (R72 million) of which US$4 million (R33 million) is
a once-off cost.
4. The once-off transaction cash costs incurred in establishing this
Transaction amount to US$2 million (R15 million) which is debited
against the share premium account.
5. The weighted average number of shares in issue includes the Ordinary
Shares issued to the Strategic Partners and the ESOP Trust.
6. The share-based payment relating to the BEE Trusts was calculated with
reference to the requirements of International Financial Reporting
Standards ("IFRS"), including IFRS 2 - Share Based Payments and AC 503
- Accounting for Black Economic Empowerment Transactions ("AC503") and
represents approximately 1.6% of the market capitalisation of Sappi.
It should be noted that AC503 does not allow for the recognition of
the benefits of BEE which are believed to outweigh the costs of the
Transaction (refer to independent opinion from Nedbank Capital, a
division of Nedbank Limited ("Nedbank Capital"), set out in paragraph
6).
6. Opinions and recommendations
In terms of the JSE Listings Requirements, Nedbank Capital has been
appointed by the Board as the independent professional expert to determine
if the terms and conditions of the "A" Ordinary Shares are fair to the
Ordinary Shareholders.
Nedbank Capital has considered the terms and conditions of the "A" Ordinary
Shares and is of the opinion that such terms and conditions are fair to
Ordinary Shareholders.
The Board has considered the terms and conditions of the Transaction and
the opinion of the independent professional expert and is of the opinion
that the Transaction is fair and in the best interests of Sappi and its
Ordinary Shareholders.
The Board therefore recommends that Ordinary Shareholders vote in favour of
the Transaction and the ordinary and special resolutions to be proposed at
the General Meeting. In respect of their personal holdings in Sappi, the
relevant Board members intend to vote their Ordinary Shares in favour of
the Transaction and the resolutions to be proposed at the General Meeting.
7. Conditions precedent
The implementation of the Transaction is subject to the fulfilment of the
following conditions precedent:
- the approval and passing of all necessary resolutions by Ordinary
Shareholders at the General Meeting; and
- the registration of the special resolutions with CIPRO.
8. Salient dates and times
2010
Circular posted to Ordinary Shareholders on or Wednesday 31 March
about
Form of proxy for the General Meeting to be
received by 03:00pm on Tuesday 27 April
General meeting to be held at 03:00pm on Thursday 29 April
Results of General Meeting released on SENS on Thursday 29 April
Results of General Meeting published in the Friday 30 April
press on
Special resolutions lodged with CIPRO on or Friday 30 April
about
Notes:
1. These dates and times are subject to amendment. Any material amendment
will be released on SENS and published in the press.
2. All times given in this announcement are local times in South Africa.
9. Circular
A circular to Ordinary Shareholders containing details of all resolutions
and the notice of general meeting will be posted to all Ordinary
Shareholders registered on the record date for the Transaction on or about
Wednesday 31 March 2010.
Braamfontein
24 March 2010
Merchant bank and transaction sponsor
Rand Merchant Bank, a division of FirstRand Bank Limited
Sponsor
UBS South Africa (Proprietary) Limited
Reporting accountants and auditors
Deloitte & Touche, Registered Auditors
Legal advisors to Sappi Limited
Deneys Reitz Incorporated
Independent professional expert
Nedbank Capital, a division of Nedbank Limited
Transaction communications advisors to Sappi Limited
Brunswick Group LLP
Financial advisor to the BEE Strategic Partners
AMB Capital
Legal advisors to the BEE Strategic Partners
DLA Cliffe Dekker Hofmeyr Inc.
Date: 24/03/2010 07:50:01 Produced by the JSE SENS Department.
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