| Fri 14 May 2010, 7:05 | | RACP - RECM & Calibre Limited - Abridged Prospectus |
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JSE
REC
RACP - RECM & Calibre Limited - Abridged Prospectus
RECM & CALIBRE LIMITED
(Formerly Velvospec Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
("RAC" or "the Company")
ABRIDGED PROSPECTUS
Relating to:
- a private placement with selected placees of up to a maximum
of 40 000 000 preference shares of 1 cent each in the share
capital of RAC, at an issue price of R10 per share in the share
capital of RAC;
- a public offer for subscription of 5 000 000 preference shares
of 1 cent each in the share capital of RAC, plus any preference
shares that are not taken up pursuant to the private placement,
at an issue price of R10 per share in the share capital of RAC
("the offers"); and
- the subsequent listing of RAC`s entire issued preference share
capital on the JSE.
1 Introduction and rationale
The Company`s ordinary shareholders are Regarding Capital
Management (Pty) Limited ("RCM") and Calibre Capital (Pty)
Limited ("CAL"). RCM and CAL have conceptualised the
establishment of a long term investment fund, in the form of a
closed-end vehicle, which can access permanent capital, not
subject to in or outflows over the short term, whilst investors
will still be afforded liquidity. RCM and CAL believe that such
a structure will enhance the ability of the fund to generate
superior returns over the long term.
RAC has been set up as such an investment vehicle and investors
are offered the opportunity to subscribe for preference shares
therein, in order that they may participate in the long term
growth prospects of the underlying investment fund.
Subject to the spread of public shareholders as required in
terms of the Listings Requirements being achieved pursuant to
the offers, the JSE has granted RAC a listing of 45 000 000
preference shares, on the "Debt - Preference Share" sector of
the JSE lists with the abbreviated name "RAC Prefs", JSE
preference share code RACP and ISIN ZAE000145041. It is
anticipated that the listing will be effective as from the
commencement of business on Tuesday, 8 June 2010.
The offers are not underwritten and are accordingly subject to
a total minimum subscription amount of R200 000 000 being
raised. Should such amount not be raised, the offers will be
deemed to have been withdrawn and no applicant will have any
claims against the Company resulting from such withdrawal.
Preference shares, as debt securities, will be regulated by the
JSE in terms of Section 20 of the Listings Requirements.
However, the Listings Requirements do not have specific
application to RAC directors in terms of Section 20 of the
Listings Requirements. Only preference shares are to be listed.
Therefore ordinary shares will remain unlisted.
RAC has, in terms of the portfolio management agreement,
appointed the financial services provider, RCM, to administer
and manage the portfolio. RCM is one of the leading independent
fund management houses in South Africa and has a superior track
record in both domestic and global funds management. RCM, as
the manager, carries on business as a financial service
provider and, in doing so, is obliged to comply, inter alia,
with the provisions of the Financial Advisory and Intermediary
Services Act, 2002 (Act 37 of (2002), as amended, the
Securities Services Act, 2004 (Act 36 of 2004), as amended, and
with the Financial Institutions (Protection of Funds) Act, 2001
(Act 28 of 2001), as amended.
Preference shares will only be traded on the JSE trading system
in electronic form and as such all preference shareholders who
elect to receive certificated preference shares will have to
dematerialise their certificated preference shares should they
wish to so trade therein.
The purpose of this abridged prospectus is to provide investors
and the market with information relating to RAC, its business,
directors and management.
2 History, nature of business and management
RAC was initially incorporated in South Africa under the name
Velvospec Limited on 24 June 2009. The Company changed its name
to Recm & Calibre Limited on 8 September 2009. It has been a
shelf company from its incorporation.
The history of the ordinary shareholders of the Company is as
follows:
Regarding Capital Management (Pty) Limited ("RCM")
RCM was founded in early 2003 by Piet Viljoen, Werner Stals and
Theunis de Bruyn, who remain the controlling shareholders
thereof. The driving force behind the start up was an
identified need for a fund management house that was truly
independent and would be able to manage clients` funds on a
sensible basis. Over the past seven years, RCM has firmly
entrenched itself as one of the leading independent fund
management houses in South Africa, as a result of a superior
track record in both domestic and global funds management.
Assets under management have grown to over R10 billion in this
period, consisting of a healthy mix of retail and institutional
clients. Staff employed by RCM has also grown from three at
inception to 25 at present. RCM appeals to the more
sophisticated investor, who understands that superior
investment returns are likely to be generated by acquiring
interests in good quality businesses at attractive prices, and
then holding on to these interests for the long term.
RCM`s investment activity is grounded in the value philosophy,
with an emphasis on consistently applying a sensible investment
process. The investment process is a bottom up process, based
on proprietary research. In addition, the investment process is
risk-conscious, where risk is defined as losing money, rather
than volatility around a benchmark. The focus is on protecting
capital, and growing it where possible and sensible.
Ultimately, such an investment process relies on avoiding, as
far as possible, deep draw downs of capital. It does this by
only accepting investment risk where the investor is clearly
being paid handsomely to do so - in other words, by only buying
assets when the price is significantly below a reasonable
estimation of fair value. Sources of return are thus two-fold:
the movement from cheap to fair value, as well as the intrinsic
growth that most good quality businesses exhibit over time. RCM
believes that these are the only two sources of return that
investors can access on a consistent basis.
RCM`s competitive advantage lies in four areas:
- Size. Small scale confers a significant competitive advantage
to a fund manager, as the universe of possible investments is
as wide as possible. RCM is determined to remain a small fund
manager as it feels this is very strongly in its clients`
best interests.
- Costs. At RCM the costs of managing funds is kept as low as
possible. Fees are reasonable and at the low end of the
scale. RCM is incentivised to keep fees low, as a significant
proportion of its assets under management are those of
management and staff of RCM itself - at the same fee level as
are applicable to its outside clients. Trading costs are
minimised by being long term holders of securities.
- Independence. RCM does not have a controlling shareholder
with a different agenda to that of its clients. Indeed, its
controlling shareholders are significant clients of RCM.
- Process. The firm structure is such that it fully supports
the consistent application of a sound investment philosophy
and process.
All four of these significant competitive advantages are not
easily replicated by RCM`s competitors and assist in the
generation of superior returns.
Calibre Capital (Pty) Limited ("CAL")
The same shareholders who founded RCM, founded CAL, a private
equity business, in late 2002. Since its inception CAL has
invested in five private businesses. Over this time CAL avoided
the debt funded business model of most private equity
businesses, which became unstuck during the financial crisis.
As a result of its very conservative pricing and financing of
deals, CAL has emerged from the crisis in a very strong
position. Its underlying businesses do not need to be
refinanced, and are in fact in a strong cash position.
Investors in CAL`s fund have enjoyed very strong returns since
inception. It is envisaged that CAL will be appointed by RCM to
manage unlisted equity in accordance with their philosophy and
process.
The Company will be engaged in investments as principal and
will operate principally in South Arica.
3 Prospects of the Company
Permanent capital will provide RAC with the opportunity of
applying the following value-adding investment strategies:
- taking large positions in high quality businesses, and
holding on to them for the long term;
- accessing investments which are not subject to price
competition due to, amongst others, regulatory restrictions.
For instance, most unit trusts (open-end funds) are not
allowed to make significant investments in unlisted
companies, they generally do not invest in smaller companies
due to liquidity issues and they cannot commit to long term
financing arrangements due to their open-end nature. The fact
that there is less price competition in its chosen areas of
operation, means that RAC can access these investments on
generally more favourable terms than those available to most
open-end funds; and
- over time, if an investor can provide an anchor shareholder
role, it will build a reputation as an investor of choice.
This, in turn, leads to a mutually reinforcing cycle where
the management of good companies seeks out such investors. It
is RAC`s aim to build and reinforce such a reputation,
something which access to permanent capital will allow it to
do.
In the short term, the investment results of such a vehicle
should be significantly more volatile - especially against the
index - than those of highly regulated, open-end investment
vehicles such as unit trusts. It is believed that investors
with a tolerance for such short term price volatility will be
rewarded with higher longer term returns.
4 Directors
The names, ages, business addresses, qualifications,
occupations, nationalities and brief curricula vitae of the
Directors are set out below:
Name, age, qualification Business address Occupation
and nationality and function
Pieter Gerhardt Viljoen (47) 7th Floor, Executive
B Com (Hons), CFA Claremont Central chairman
South African 8 Vineyard Road,
Claremont
Cape Town
Theunis de Bruyn (42) 4B, Atterbury Financial
CA(SA) Estates Director
South African 19 Frikkie de
Beer Street
Pretoria
Werner Stals (48) Level 15, Non-executive
CA(SA) 37 York Street director
Australian Sydney NSW 2000
Australia
Gerrit Pretorius (61) Lincoln Wood Non-executive
BSc, BEng, LLB, PMD Office Park director
South African 6 Woodlands Drive
Woodmead, 2128
5 Share Capital
Following the offers and listing of the Company, the share
capital will be as follows:
R`
Authorised
5 000 000 ordinary shares of 1 cent each 50 000
100 000 000 preference shares of 1 cent each 1 000 000
Issued
5 000 000 ordinary shares of 1 cent each 50 000
Share premium on issue of 4 993 000 new
ordinary shares 49 950 000
45 000 000 preference shares of 1 cent each 450 000
Share premium on issue of 45 000 000
preference shares 449 550 000
Total 500 000 000
6 Salient times and dates
2010
Prospectus posted and made available
on RCM website Friday, 14 May
Offers open at 09:00 and abridged
prospectus announcement published on SENS Friday, 14 May
Publication of abridged prospectus in the press Monday, 17 May
Offers close at 12:00 Thursday, 3 June
Accounts at CSDP or broker credited with the
preference shares and debited with the
monies in respect of dematerialised
preference shareholders Tuesday, 8 June
Posting of certificates to certificated
Shareholders Tuesday, 8 June
Listing of the preference shares commences
at 09:00 on Tuesday, 8 June
Note: The abovementioned times and dates are South African
times and dates and are subject to amendment. Any such
amendment will be released on SENS and published in the press.
7 Copies of the prospectus
The prospectus was registered by the Registrar of Companies on
Tuesday, 11 May 2010 in terms of section 155(1) of the
Companies Act.
Copies of the prospectus are available in English from the
registered office of the Company and the offices of the Sponsor
during normal business hours at the addresses below:
Recm & Calibre Limited
7th Floor, Claremont Central
8 Vineyard Road
Claremont
Cape Town, 7700
(PO Box 45040, Claremont, 7735)
Deloitte & Touche Sponsor Services (Pty) Limited
(Registration number 1996/000034/07)
Building 6, The Woodlands
20 Woodlands Drive
Woodmead, Sandton, 2196
(Private Bag X6, Gallo Manor, 2052)
An electronic copy of the prospectus is available on the following website:
www.recm.co.za.
14 May 2010
Corporate Advisor and Sponsor
Deloitte & Touche Sponsor Services (Pty) Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Attorneys
Edward Nathan Sonnenbergs Inc.
Independent Reporting Accountants and Auditors
Grant Thornton
Financial Service Provider or Manager
Regarding Capital Management (Pty) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/007733/07)
Date: 14/05/2010 07:05:02 Produced by the JSE SENS Department.
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