| Thu 20 May 2010, 7:48 | | OMN - Omnia Holdings - R1 Billion fully subscribed capital raising to fund |
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OMN
OMN
OMN - Omnia Holdings - R1 Billion fully subscribed capital raising to fund
the construction of Omnia`s second Nitric Acid and Ammonium Nitrate facility
and the group`s expansion programme
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1967/003680/06)
JSE code: OMN
ISIN: ZAE000005153
("Omnia" or "the Company" or "the Group")
R1 BILLION FULLY SUBSCRIBED CAPITAL RAISING TO FUND THE CONSTRUCTION OF
OMNIA`S SECOND NITRIC ACID AND AMMONIUM NITRATE FACILITY AND THE GROUP`S
EXPANSION PROGRAMME
Rod Humphris, Omnia Group Managing Director, says "Omnia is pleased to
announce that we will be increasing the Group`s nitric acid production
capacity substantially by constructing a second nitric acid plant, which is
estimated to produce 1 000 tonnes of nitric acid per day at full production,
compared to the 700 tonnes per day of our existing plant, which will remain in
production. Omnia has secured the full R1 billion equity injection to provide
certainty of construction and we are proud to provide our shareholders with
the opportunity to subscribe for their rights and thereby to participate in
and benefit from this significant step in Omnia`s growth strategy."
1. INTRODUCTION
Omnia ordinary shareholders ("Shareholders") are advised that the board of
directors of Omnia ("the Board") will be implementing a R1 billion capital
raising ("Capital Raising") by way of a specific issue of ordinary shares in
the share capital of Omnia ("Ordinary Shares") for cash, if specifically
approved by Shareholders ("the Specific Issue") and/or a claw back offer and
rights offer of a maximum of 20 million new Ordinary Shares ("Offer Shares")
at R50 (fifty Rand) ("Subscription Price") per Offer Share ("the Offer"). The
Offer Shares, once issued and listed, will rank pari passu in all respects
with existing issued Ordinary Shares.
Shareholders will be permitted to apply to subscribe for more Offer Shares
than their pro rata entitlement under the Offer on the record date ("Excess
Application Shares") in the event that other Shareholders do not follow all or
some of their rights, as more fully set out in paragraph 5 below.
In order to provide certainty regarding the outcome of the Capital Raising,
the Company has entered into commitment and underwriting agreements with
certain institutional investors in terms of which they have agreed to
subscribe for Offer Shares at the Subscription Price, and has furthermore
obtained irrevocable undertakings from certain Shareholders to follow their
rights in terms of the Offer and, if necessary, apply for Excess Application
Shares, at the Subscription Price (collectively, "the Offer Commitments").
The Offer Commitments were obtained following an institutional bookbuild
exercise ("the Bookbuild"). Omnia obtained and accepted total Offer
Commitments in an amount of R1 billion as a consequence of the Bookbuild,
thereby ensuring that the Capital Raising will be fully subscribed. Further
details pertaining to the Offer Commitments are set out in paragraph 4 below.
The Subscription Price represents a discount of approximately 18% to the
closing price of the Ordinary Shares on Monday, 17 May 2010, being the date
upon which the Bookbuild closed.
Pursuant to the Capital Raising, Omnia will issue approximately 42.5%
(compared to its current issued share capital) further new Ordinary Shares.
2. RATIONALE FOR THE CAPITAL RAISING AND APPLICATION OF THE CAPITAL RAISING
PROCEEDS
The Board has approved the construction of a world class nitric acid (HNO3)
and ammonium nitrate facility ("the Plant") adjacent to its existing nitric
acid plant in Sasolburg. The total estimated cost of the proposed project (in
nominal terms and excluding finance costs) is approximately R1.4 billion which
is to be funded through a combination of new equity capital, internally
generated funds and project finance over an estimated three year construction
period.
The Plant is estimated to have the capacity to produce an additional 1 000
tonnes of nitric acid per day which approximates a 40% higher capacity
compared to the current plant`s full capacity. The Plant will have co-
generation capacity and is expected to generate sufficient energy for its own
requirements while contributing approximately 50% of the current factory`s
energy needs.
Nitric acid is an important raw material for both fertilizer and explosives
manufacturing and its availability is critical to the sustainable growth of
both Omnia`s fertilizer division and mining explosives division ("BME").
Omnia`s current nitric acid plant in Sasolburg was commissioned in 1983 with
the foremost purpose of supplying the fertilizer market. BME has since
developed a strong presence in the explosives market demanding an ever-
increasing portion of the existing nitric acid plant capacity, while the
development of calcium nitrate and Porous Granular Ammonium Nitrate (PGAN)
technologies have also added to the nitric acid demand within the Group.
To deal with demand to date, Omnia`s strategy has been to use a number of
interim solutions, including purchasing ammonium nitrate from other producers
via local and international sources and importing other nitrogeneous products
for its fertilizer business. The growth in the explosives market has to a
great extent eroded the industry`s spare ammonium nitrate capacity, and is
expected to continue to do so in the foreseeable future. There are also
technical challenges inherent in importing nitrates which makes this an
increasingly unattractive raw material supply solution.
The lack of sufficient quantities of internally produced nitric acid leaves
the Group vulnerable and dependent upon other producers or comparatively
expensive imports in order to sustain and grow its businesses. This could lead
to, inter alia, margin erosion, limited growth opportunities, reduced
operational flexibility and increased business risk due to reliance on third
parties and a single nitric acid manufacturing facility.
The Board has evaluated the operational, strategic and financial reasons for
the construction of the Plant and various alternatives and has decided that
the construction of the Plant is essential to meet the future growth and
performance objectives of the Group.
The new Plant is estimated to generate internal cost savings of approximately
R280 million per annum (calculated as earnings before interest and taxation,
after depreciation) upon the Plant being commissioned and utilised at
approximately 60% of its full capacity.
Omnia expects the Plant to satisfy its potential future growth requirements in
respect of nitric acid input products. Approximately 60% of the Plant`s
estimated maximum production capacity is projected to be utilised for internal
production requirements upon commissioning of the Plant. Ramp up to full
capacity will take place in line with expected growth in the explosives and
fertilizer markets.
3. PROPOSED INTRODUCTION OF INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH
AFRICA LIMITED ("IDC") AS A STRATEGIC OMNIA SHAREHOLDER AND DEBT PROVIDER
Omnia is desirous of introducing long-term project finance to maintain
appropriate and sustainable debt levels in its business.
Omnia supports the principle of having a key long-term debt provider which is,
simultaneously, a strategic shareholder, thereby ensuring a balanced approach
to debt and equity funding and leveraging from such a debt and equity
provider`s broader exposure to, and understanding of, the business.
Omnia supports the principle of having a key long-term debt provider which is,
simultaneously, a strategic shareholder, thereby ensuring a balanced approach
to debt and equity funding and leveraging from such a debt and equity
provider`s broader exposure to, and understanding of, the business.
3.1 IDC`s proposed equity participation
IDC has committed to invest R250 million in new Ordinary Shares in terms of
the Offer ("IDC Equity Commitment"). The IDC Equity Commitment is subject to
Shareholders exercising their rights in terms of the Offer and applying for
Excess Application Shares.
In view of the potential claw back by Shareholders in terms of the Offer and
the possibility that IDC may therefore subscribe for less than the IDC Equity
Commitment, IDC has requested and Omnia has agreed to seek Shareholder
approval for the Specific Issue in order to secure a minimum equity investment
by IDC in Omnia of R150 million ("IDC Minimum Investment"). The purpose of
seeking the IDC Minimum Investment is to secure IDC as a long-term equity
investor in Omnia, particularly if IDC`s debt participation, as set out in
paragraph 3.2 below, materialises.
Should Shareholders approve the Specific Issue and consequently the IDC
Minimum Investment, then an amount of R150 million of the R1 billion Capital
Raising will be reserved for IDC participation through an issue of 3 million
Ordinary Shares for cash to IDC, thereby reducing the quantum of the Offer to
R850 million. The IDC Equity Commitment has been secured at the Subscription
Price and, if approved by Shareholders, the IDC Minimum Investment will also
be introduced at the Subscription Price.
Further details pertaining to the proposed IDC Minimum Investment will be
provided in the circular to Shareholders.
3.2 IDC`s proposed debt participation
In consideration for Omnia receiving the IDC Equity Commitment, Omnia has
agreed, subject to certain terms and conditions, to invite IDC to participate
in the envisaged long-term project finance to be raised in respect of the
proposed Plant ("Plant Project Finance"), as more fully set out herein.
Omnia has granted IDC the right of first refusal to participate in the Plant
Project Finance, in an amount of up to the lower of 50% of the total amount of
actual Plant Project Finance raised by Omnia, or R300 million, subject to the
following terms and conditions:
- Omnia resolving to raise Plant Project Finance. There is no obligation
on Omnia to raise Plant Project Finance;
- IDC committing to the IDC Equity Commitment (which condition has been
fulfilled, as more fully set out in paragraph 3.1 above);
- Omnia obtaining written approvals from existing lenders, to the extent
that such approval is specifically required in terms of existing
contractual arrangements, permitting IDC to participate in the Plant
Project Finance;
- IDC agreeing to advance its portion of the total amount of Plant Project
Finance on the following terms:
- unless otherwise agreed between Omnia and IDC or Omnia so elects to
make a payment as envisaged below, no capital repayments will be
made by Omnia during the Plant`s construction period (which is
expected to be at least three years) so that the first capital
repayment will only be made by Omnia no earlier than twelve months
after commissioning of the Plant;
- Omnia shall be entitled to repay all or any part of the capital
amount at any time before the due date without incurring early
repayment penalties and following such early repayment, no
commitment or facility fees shall be payable by Omnia if it is not
entitled to re-draw such early repayment amounts;
- IDC`s security requirements in respect of IDC`s portion of the Plant
Project Finance shall:
- subject to negotiations between IDC and Omnia, not be in conflict
with Omnia`s existing security obligations in respect of existing
funding arrangements, facilities or debt instruments;
- be in proportion to IDC`s portion of the Plant Project Finance in
relation to the total amount of Plant Project Finance raised, so
that Omnia shall not be required to provide security to IDC in
excess of IDC`s pro rata portion of the security that is available
for purposes of the Plant Project Finance;
- such other terms and conditions as Omnia may in its sole and absolute
discretion determine, provided that such terms and conditions are not
more favourable to Omnia than those offered by other funders in respect
of Plant Project Finance at the time the Plant Project Finance is raised;
- the terms and conditions on which IDC is prepared to advance its portion
of the Plant Project Finance shall be acceptable to both IDC and Omnia at
the time that the Plant Project Finance is raised/negotiated; and
- IDC and Omnia concluding the requisite written funding agreements and
such agreements becoming unconditionally operative by no later than 31
October 2010, provided that Omnia shall not be obliged to make a first
draw down by this date.
4. SUMMARY OF OFFER COMMITMENTS
Omnia has received the following Offer Commitments from institutions and
Shareholders:
OFFER COMMITMENTS PROVIDED BY: ZAR COMMITTED
Sanlam Investment Management (Pty) Limited R400 million
and Sanlam Investment Management, a division
of Sanlam Life Insurance Limited
Coronation Asset Management (Pty) Limited R300 million
Industrial Development Corporation of South R250 million
Africa Limited
Cadiz Asset Management (Pty) Limited R50 million
Total R1 billion
The Offer Commitments will attract a fixed commitment fee of 1.5% of the
amount of such subscription/underwriting commitments provided by the above
institutions and Shareholders. Further details of the Offer Commitments will
be provided in a circular to Shareholders.
The Offer Commitments remain subject to, inter alia, the condition that the
finalisation announcement in respect of the Offer, as contemplated in the JSE
Limited ("JSE") Listings Requirements ("Listings Requirements"), is made
within 3 months of the date of this announcement.
5. EXCESS APPLICATIONS
Shareholders will be permitted to apply for additional Offer Shares over and
above their pro rata entitlement as Shareholders on the record date. Should
there be excess Offer Shares available for allocation, these will be allocated
to applicants in a manner viewed as equitable in terms of the Listings
Requirements.
The right to apply for excess Offer Shares is transferable upon renunciation
of Shareholders` rights in favour of a third party.
6. GENERAL MEETING
Shareholders will be requested to resolve to place 20 million Ordinary Shares
in the existing authorised but unissued share capital of the Company under the
Board`s control in terms of a general authority as contemplated by the
Companies Act (No 61 of 1973), as amended. Shareholders holding a total of
approximately 47% of the Company`s issued share capital have undertaken to
vote in favour of the requisite resolutions in order to implement the Capital
Raising. In order to implement the Specific Issue, Shareholders will also be
requested to authorise the specific issue of 3 million of the aforesaid 20
million Ordinary Shares to IDC for the purposes of securing the IDC Minimum
Investment, as set out more fully in paragraph 3 above. The full terms and
conditions pertaining to the Specific Issue will be disclosed in the circular
to Shareholders.
A general meeting of Shareholders is expected to be held at the Company`s
registered office at 13 Sloane Street, Epsom Downs, Bryanston ("General
Meeting") to consider and if deemed fit, pass, inter alia, the resolutions
necessary to place the authorised but unissued share capital of Omnia under
the control of the Board and to implement the Capital Raising. A notice of
general meeting in this regard will be published on SENS in due course.
7. CIRCULARS
Circulars to Shareholders containing details of the General Meeting, the
Specific Issue and the Offer (and incorporating revised listing particulars),
respectively, will be posted to Shareholders.
An announcement providing the detailed Offer timetable will be published on
SENS and in the press by the Company.
8. SUSPENSIVE CONDITIONS
The Offer remains subject to, inter alia, the following suspensive conditions:
- the Offer Commitments becoming unconditional;
- a sufficient number of authorised but unissued Ordinary Shares being
placed under the control of the Board;
- the circulars being approved by the JSE and CIPRO, to the extent
required; and
- the JSE approving the listing of the Offer Shares and the related letters
of allocation.
An announcement confirming that the Offer has become unconditional will be
released on SENS and published in the press as soon as the suspensive
conditions have been fulfilled.
9. CHANGE IN SPONSOR
Omnia has appointed One Capital as its JSE Sponsor, as well as Transaction
Sponsor in terms of the Capital Raising.
10. CAUTIONARY ANNOUNCEMENT
As a result of the pro forma financial effects of the Capital Raising not
being disclosed in this announcement, Shareholders are advised to exercise
caution when dealing in the Company`s securities until a further announcement
is made.
Johannesburg
20 May 2010
Corporate Advisor, Sole Bookrunner and Sponsor
One Capital
Attorneys
Cliffe Dekker Hofmeyr Incorporated
Date: 20/05/2010 07:48:41 Produced by the JSE SENS Department.
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