| Tue 20 Jul 2010, 12:00 | | CDZ - Acquisition by Makana of an Additional 5% of the Issued Share Capital of |
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CDZ
CDZ
CDZ - Acquisition by Makana of an Additional 5% of the Issued Share Capital of
Cadiz
Cadiz Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/007258/06)
Share code: CDZ ISIN: ZAE000017661
("Cadiz" or "the Company")
ACQUISITION BY MAKANA OF AN ADDITIONAL 5% OF THE ISSUED SHARE CAPITAL OF CADIZ
1. INTRODUCTION
Cadiz hereby announces that an agreement has been reached in terms of which
Makana Financial Services (Proprietary) Limited ("Makana") will enhance its
strategic investment in Cadiz through the acquisition of a further 5% of
the issued shares in the capital of Cadiz (after taking into account
treasury shares and shares held by employee share trusts). In terms of the
agreement Makana will purchase an additional 10 907 753 Cadiz shares from
the Cadiz Holdings Limited Employee Share Trust ("CHEST") at a price per
share equal to the 30 day volume weighted average price ("VWAP") of Cadiz
shares on 31 August 2010, less a discount of 10%.
In order to facilitate the purchase Cadiz will provide preference share
funding to Makana.
The terms of the Original BEE Transaction agreements referred to below will
be amended to extend the "lock-in" and funding provisions to 28 February
2017.
The sale of the Cadiz shares, the provision of preference share funding and
the amendment to the Original BEE Transaction agreements are collectively
referred to as "the Transaction".
As a result of the Transaction Makana`s effective holding in Cadiz will
increase from 10.8% to a total of 15% of the issued share capital of Cadiz
(after taking into account treasury shares and shares held by employee
share trusts).
2. RATIONALE FOR THE TRANSACTION
On 28 May 2004 Makana became a strategic black economic empowerment ("BEE")
partner of Cadiz with its acquisition of 23 508 749 Cadiz shares at a cost
of 175 cents per share, thereby making it an effective holder of 10% of the
shareholding in Cadiz ("Original BEE Transaction").
The relationship between Cadiz and Makana has been mutually beneficial.
Makana represents a significant broad base of beneficiaries and
participants and is linked to South Africa`s heritage in a meaningful way.
The rationale for the Transaction is therefore to extend the relationship
with Makana as Cadiz`s strategic BEE partner by increasing Makana`s
shareholding, by assisting Makana in funding the Transaction and by
extending the terms of the Original BEE Transaction in line with the broad-
based black economic empowerment principles.
The net benefit of the Original BEE Transaction to Makana is approximately
R50 million based on the current Cadiz share price less funding liabilities
of R29.1 million. Makana has committed strategically to its relationship
with Cadiz and will extend the "lock-in" period for the Original BEE
Transaction for a further 6 years as part of the Transaction.
The Cadiz board views the benefits which Makana is likely to bring to Cadiz
as significantly outweighing any dilution that may arise as a result of the
Cadiz shares being sold to Makana.
CHEST currently holds surplus shares as a result of the expiry of options
issued to participants. These shares are being used to facilitate the
Transaction. No further options will be issued by CHEST.
3. BACKGROUND TO MAKANA
Makana is a 100% held subsidiary of Makana Investment Corporation
(Proprietary) Limited ("MIC"), a wholly black owned enterprise, and was
established with the purpose of being a Cadiz BEE partner.
MIC is controlled by the Makana Trust, an organisation established to
address the financial plight of former political prisoners and their
dependents. MIC is mandated to procure investment opportunities with a view
"to promote Value Creation rather than Value Consumption". As a broad-based
empowerment investment vehicle, MIC strives to be challenging and effective
in meeting the needs and expectations of its partners, whilst reflecting
and pursuing the goals of social and economic transformation of South
African society. It is MIC`s strategy that its directors take an active
interest in the management of companies in which it invests.
4. TERMS OF THE TRANSACTION
The 10 907 753 Cadiz shares will be purchased by Makana from CHEST at a 10%
discount to the 30 day VWAP on 31 August 2010.
Cadiz will fund the Transaction by subscribing for preference shares to be
issued by Makana in an amount equal to the purchase price including costs.
The preference shares shall attract a dividend at a rate of 72% of the
prime lending rate of First National Bank, a division of FirstRand Bank
Limited, compounded monthly in arrears, and shall be redeemable on 28
February 2017.
The Transaction is further subject to the Original BEE Transaction
documents being amended to extend the "lock-in" and funding provisions to
28 February 2017.
5. FINANCIAL EFFECTS OF THE TRANSACTION
The table below sets out the pro forma financial effects of the Transaction
on a Cadiz shareholder based on the assumptions set out below. The pro
forma financial effects, which are the responsibility of the directors of
Cadiz, are presented for illustrative purposes only and may not give a fair
reflection of the financial position and results post the implementation of
the transaction.
Actual Pro
forma
"Before" Transaction "After"
Earnings per share (cents)
- Basic 41.4 (0.8) 40.6
- Diluted 41.2 (0.9) 40.3
Headline earnings per share
(cents)
- Basic 45.6 (1.1) 44.5
- Diluted 45.3 (1.0) 44.3
Net asset value per share 293.6 0.4 294.0
(cents)
Net tangible asset value per 163.9 6.6 170.5
share (cents)
Weighted average number of 218 155 10 908 229 063
shares in issue at 31 March
2010 (`000)
Diluted weighted average 219 471 10 908 230 379
number of shares in issue at
31 March 2010 (`000)
Notes:
1. The "before" financial information has been extracted, without
adjustment, from the audited financial results of Cadiz for the year
ended 31 March 2010.
2. The basic and headline earnings per share calculations have been based
on the assumption that the Transaction was implemented on 1 April
2009.
3. The net asset value and net tangible asset value per share
calculations have been based on the assumption that the Transaction
was implemented on 31 March 2010.
4. In terms of the basic and headline earnings calculations, it has been
assumed that the proceeds of the sale of the Cadiz shares by CHEST
amounted to R33 181 385 based on the closing Cadiz share price of 338
cents as at 13 July 2010, after taking into account a discount of 10%.
It was furthermore assumed that R33 281 385 was invested on 1 April
2009 in preference shares yielding a rate of 7.9% (72% of the daily
average prime lending rate).
5. Transaction costs of R750 000 have been assumed for the calculation of
the pro forma financial effects.
6. CONDITIONS PRECEDENT
The Transaction is subject to, inter alia, the passing of the requisite
resolutions by Cadiz shareholders in general meeting in accordance with the
requirements of the JSE and in compliance with the Companies Act, 1973.
7. OPINIONS AND RECOMMENDATIONS
The various portions of the Transaction are or have been deemed to be
related party transactions in terms of the Listing Requirements of the JSE
("the Listing Requirements") and accordingly, require an Independent
Professional Expert ("the IPE") to issue a fairness opinion on the terms
and conditions thereof. The board has appointed Ernst & Young Corporate
Finance as the IPE, subject to JSE approval. Their fairness opinion will be
included in the circular referred to in paragraph 8 below.
Mr R Barkai and Mr SP Ngwenya serve on both the Cadiz and MIC boards and
will recuse themselves from the decision and recommendation of the Cadiz
board relating to the Transaction due to their possible conflict of
interest. All members of the board who beneficially own and/or control
Cadiz shares intend to vote in favour of the resolutions required to
implement the Transaction.
8. GENERAL MEETING
A circular to shareholders setting out details of the Transaction,
including a notice of general meeting and form of proxy, will be posted to
shareholders in due course.
Newlands
20 July 2010
Sponsor
Investec Bank Limited
Attorneys
Cliff Dekker Hofmeyer
Adviser
Cadiz Corporate Solutions
Independent Professional Expert
Ernst & Young
Reporting Accountants
PriceWaterhouseCoopers
Date: 20/07/2010 12:00:03 Produced by the JSE SENS Department.
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