| Tue 13 Apr 2010, 17:26 | | CSP - Chemspec - Rights offer to raise R100 million of new equity & |
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CSP
CSP
CSP - Chemspec - Rights offer to raise R100 million of new equity &
potential issue of shares for cash
Chemical Specialities Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/039947/06)
Share code: CSP ISIN: ZAE000109427
("Chemspec" or "the Company")
RIGHTS OFFER TO RAISE R100 MILLION OF NEW EQUITY & POTENTIAL ISSUE OF SHARES
FOR CASH
1. Introduction, rationale and purpose of the rights offer
Chemspec is a specialist paint manufacturing company listed on the Alt-X of
the JSE Limited (the "JSE"). In 2008, Chemspec decided to undertake an
extensive capital expansion plan culminating in the consolidation of its
four separate production facilities into a single, higher capacity
production facility in Canelands (KZN) ("the Canelands Plant"). In February
2009, Chemspec experienced a fire that severely damaged its main automotive
paint production facility, Jaco Place ("the Jaco Place incident"). Against
growing demand, the fire not only resulted in a severe loss of production
(and hence revenue) but also required an acceleration of the Canelands Plant
consolidation to allow production to resume. Although management and their
advisors are virtually certain of its settlement, the insurance claim in
respect of the Jaco Place incident (of approximately R102 million) remains
unpaid - as a result, the completion of the Canelands Plant, which began
production in March 2010, was funded out of a reduction in working capital
and other short term, expensive debt funding.
In light of the above, the board of directors of Chemspec (the "Board") has
decided to raise approximately R100 million from its shareholders in the
form of a renounceable rights offer (the "proposed rights offer"). In terms
of the proposed rights offer, it is anticipated that a maximum of 111 111
111 ordinary shares ("rights offer shares") will be offered for subscription
to those Chemspec shareholders registered as such at an issue price of 90
cents per rights offer share as more fully set out in paragraph 4 below.
Proceeds of the proposed rights offer will mainly be applied to repay a
portion of Chemspec`s short term debt and restore adequate working capital,
hence enabling the Company to meet existing product demand and continue on
its international growth strategy (particularly in the USA).
2. Irrevocable undertakings
Chemspec shareholders (being Corvest 6 (Pty) Limited, Shalamuka Capital
(Pty) Limited (formerly Tandem Capital (Pty) Limited), Ivan Clark, Investec
Limited and certain members of Chemspec management) ("the transaction
shareholders") representing 78% of the shares in issue have irrevocably
undertaken to vote in favour of the shareholders` resolutions (required in
terms of the Companies Act 61 of 1973, as amended, and the JSE Listings
Requirements) necessary to give effect to the proposed rights offer and the
underwriting (as referred to hereunder). In addition to the aforementioned,
the transaction shareholders have irrevocably undertaken to either in part
or in full follow their rights, which, in aggregate represents 61% of the
rights offer shares available.
In addition, RMB Asset Management (Pty) Limited ("the transaction
underwriter") has agreed to underwrite R25 million of the proposed rights
offer (the details of which are set out in paragraph 3), subject to a formal
underwriting agreement (the "underwriting agreement") being entered into,
which will bring the minimum number of rights offer shares guaranteed to be
subscribed for to 86%.
It is recorded that if the proposed rights offer would result in an
obligation on Corvest to make a mandatory offer as required by Rule 8.1 of
the Securities Regulation Code on Takeovers and Mergers (the "Code"), and
the waiver, contemplated in paragraph 5 below, of the obligation to make
such mandatory offer is not obtained, then the Company will relieve Corvest
from subscribing for that number of shares as would result in such mandatory
offer being required to be made (so that the waiver is no longer required),
which will then decrease the 61% and 86% contemplated above.
3. Underwriting
In terms of the above mentioned agreement, the transaction underwriter has
committed up to R25 million (25% of the proposed rights offer) in respect of
underwriting the proposed rights offer.
The salient terms of such underwriting are to be as follows:
- to the extent that shareholders of the Company fail to follow their
rights under the proposed rights offer, the transaction underwriter is
to underwrite up to a maximum of 27 777 777 of the proposed rights
offer shares to the maximum value of R25 million;
- if the transaction underwriter, by virtue of its underwriting, is not
allotted at least 27 777 777 rights offer shares, the Company will
guarantee an allotment and issue of 10 000 000 new ordinary shares in
the capital of Chemspec at an issue price of 90 cents per share (as a
specific issue for cash) to the transaction underwriter (in addition to
any rights offer shares that might have been allotted) (the "specific
issue") such that the transaction underwriter will hold a minimum of 10
000 000 ordinary shares in the Company and a maximum of 27 777 777; and
- the transaction underwriter shall be entitled to an underwriting fee of
R500 000 in cash.
4. Particulars of the rights offer
Amount to be raised +/-R100 000 000
Total number of shares available 111 111 111
to shareholders registered on the
last day to trade*
Ratio of entitlement 35.84229 rights offer
shares for every 100
shares held on the
record date
Rights offer price 90 cents per rights
offer share (being a
14% discount to the 30
day VWAP)
Note: If, for example, the proposed rights offer is fully subscribed for by
shareholders and, as such, the transaction underwriter is not required to
underwrite, then the transaction underwriter will still be issued 10 000 000
shares in terms of the specific issue, resulting in an aggregate capital
raising of approximately R109 million.
The proposed rights offer is not subject to a minimum subscription amount to
be raised and rights offer shares will rank pari passu with the existing
issued Chemspec ordinary shares.
Excess applications will be allowed.
Conditions precedent
The proposed rights offer, the underwriting agreement and the specific issue
is conditional upon, inter alia:
- the approval by the JSE of the required documentation so as to
implement the proposed rights offer and the specific issue including
approval of the listing of the new shares;
- the passing of any necessary shareholder resolutions required to
implement the proposed rights offer, the specific issue and the
underwriting agreement;
- the registration by the Registrar of Companies of all documents and
resolutions (if any) required in respect of the proposed rights offer
and the specific issue;
- South African Reserve Bank approval and other regulatory approvals that
may be required; and
- obtaining all approvals required (if any) in terms of the Codeand
obtaining all waivers required (if any) to ensure that no mandatory
offers are required pursuant to the proposed rights offer or the
specific issue.
6. Cautionary announcement and further detailed announcement
The proposed rights offer and specific issue may have a material effect on
the price of Chemspec shares. Shareholders are accordingly advised to
exercise caution when dealing in their Chemspec shares until a further
detailed announcement setting out the salient dates and times as well as the
detailed pro forma financial effects of the proposed rights offer is made.
The further detailed announcement will be made in due course.
Bryanston
13 April 2010
Designated Advisor: QuestCo Sponsors (Pty) Limited
Fundraising Advisor: Purple Capital Limited
Attorneys to the proposed rights offer: Edward Nathan Sonnenbergs Inc.
Date: 13/04/2010 17:26:01 Produced by the JSE SENS Department.
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