| Fri 20 Aug 2010, 10:22 | | SBG - Simeka Business Group Limited - Black Economic Empowerment (Bee) |
|
SBG
SBG
SBG - Simeka Business Group Limited - Black Economic Empowerment ("Bee")
transactions withdrawal of cautionary
SIMEKA BUSINESS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: SBG ISIN code: ZAE000074878
("Simeka" or "the Company")
BLACK ECONOMIC EMPOWERMENT ("BEE") TRANSACTIONS WITHDRAWAL OF CAUTIONARY
1 Introduction
With reference to the cautionary announcement published on SENS on 30 July 2010
shareholders of Simeka are advised that the Company has entered into agreements
by which it is proposing to implement the BEE transactions in terms of which
certain key management, directors, and staff who are actively involved in the
management of Simeka will purchase a shareholding in Simeka at market value,
whilst providing personal securities including assets and cash guarantees.
2 Rationale
Simeka is a leading black empowered outsourcing, business support and technology
group with a geographic footprint spanning South Africa and Africa. A
significant portion of its BEE shareholders comprised vendors that had obtained
their Simeka shares during a number of acquisitions made by Simeka in the past.
These BEE shareholdings were subject to certain restrictions, including
restrictions on disposal periods, which have since expired and consequently
Simeka`s BEE shareholding has changed. As all listed companies, Simeka
experiences fluctuations in its shareholding and in order to stabilise and
enhance its BEE shareholding Simeka has entered into the BEE transactions.
The board have concluded that it is a strategic imperative for the Company to
address the current level of BEE as cost effectively and swiftly as possible.
The board is therefore proposing the BEE transactions. It is envisaged that the
implementation of the BEE transactions described below will significantly
improve the Company`s BEE credentials over the long-term and thereby ensure that
it will continue to benefit in both the private and public sector. Furthermore
the impact of legislative requirements, including the Preferential Procurement
Policy Framework Act of 2000, which recognizes BEE ownership only in relation to
management, employees and staff who are shareholders and actively involved in
the business of the Company, will be addressed.
The BEE transactions are designed to secure improved BEE credentials for Simeka
over an extended period, whilst ensuring that the interests of the "drivers" of
the business are aligned with those of the Company. The BEE transactions
further ensures the empowerment of key members of management and employees and
secures their ongoing long-term commitment to the Company.
3 The BEE transactions
3.1 BEECo acquisition and specific issue of shares for cash
Simeka has entered into agreements with Pavati Trading 63 (Proprietary) Limited
("BEECo"), the shareholders of which are key executive directors, non-executive
directors and key members of management of Simeka ("BEECo participants") and
Calaska Trading 143 (Proprietary) Limited ("MANCo"), the shareholders of which
are key members of Simeka`s management and employees ("MANCO participants") in
terms of which, subject to the fulfilment or waiver, as the case may be, of the
conditions precedent set out in paragraph 6 below, BEECo will subscribe for and
acquire 114 750 000 Simeka shares, representing 17% of the issued share capital
of Simeka, and MANCO will subscribe for 20 250 000 Simeka shares, representing
3% of the issued share capital of Simeka, as follows:
3.1.1 BEECo issue
BEECo will subscribe for 56 892 446 new Simeka ordinary shares ("BEECo
subscription shares") in terms of a specific issue of shares for cash at a
subscription price of R9 102 791.36 or 16 cents per share ("BEECo subscription
price") ("BEECO issue").
3.1.2 The BEECo acquisition
BEECo will acquire 57 857 554 Simeka ordinary shares ("acquisition shares")
currently held in treasury by MICT Solutions Limited, a wholly owned subsidiary
of Simeka, at a consideration of R9 257 208.64 or 16 cents per share
("acquisition consideration")("BEECo acquisition").
3.1.3 MANCo issue
MANCo will subscribe for 20 250 000 new Simeka ordinary shares ("MANCo
subscription shares"), in terms of a specific issue of shares for cash at a
subscription price of R3 240 000 or 16 cents per share (MANCo subscription
price")("MANCo issue").
3.2 The proposed financing of the BEE transactions
Simeka has agreed, subject to the necessary shareholder approval being granted
at a general meeting, to provide BEECo and MANCo with financial assistance to
implement the BEECo issue and acquisition and the MANCo issue in terms of the
BEE transactions by means of a subscription for class "A" preference shares in
BEECo and MANCo so that the obligation on Simeka to pay to BEECo and MANCo the
preference share subscription price on the subscription date shall be set off
against the obligation on BEECo and MANCo to pay to Simeka the subscription
consideration in terms of the BEECo issue and MANCo issue and the acquisition
consideration in terms of the BEECo acquisition.
Repayment of the class "A" preference shares shall be funded by BEECo and MANCo
out of dividends and other distributions received on the Simeka shares.
The BEECo issue and acquisition and the MANCo issue and the preference share
issues are conditional upon each another.
4. Security for performance in terms of the proposed finance transactions
BEECo and MANCo have entered into agreements in terms of which they will:-
4.1 issue a class "B" preference share to Simeka affording the Company, inter
alia, the following rights:
4.1.1 the right to appoint 2 of the 5 directors of BEECo and MANCo
respectively;
4.1.2 the right to veto changes to the articles of association of BEECo and
MANCo respectively; and
4.1.3 the right to a share of the capital profits of BEECo and MANCo
respectively, such right to reduce on a sliding scale over a five year
period in the case of BEECo and over a seven year period in the case of
MANCo.
4.2 enter into guarantee, cession and pledge agreements in terms whereof:
4.2.1 BEECo participants furnish Simeka with limited pro rata guarantees for
the liabilities of BEECo, which guarantees are secured by the pledge of
certain Simeka shares and all of the BEECo shares held by them and a
personal financial guarantee; and
4.2.2 MANCo participants furnish Simeka with a pledge of the MANCo
shares held by them.
5. JSE Limited ("JSE") Listings Requirements and shareholder approval
In terms of the JSE Listings Requirements the BEECo issue is an issue of shares
for cash to related parties at no discount, however in terms of Section 10 of
the Listings Requirements the proposed financing of the transaction is deemed to
be a related party transaction with material and/or non public shareholders, and
a fairness opinion on the BEE transaction is therefore required. Simeka has
appointed Moore Stephens (Jhb) Corporate Finance (Proprietary) Limited as an
Independent Professional Expert who have concluded that the BEE Transaction is
fair to Simeka shareholders. A copy of the fairness opinion will be included in
the circular convening a general meeting of shareholders to approve the BEE
Transaction which will be posted to Simeka shareholders in due course.
In terms of the JSE Listings Requirements the acquisition of the Simeka treasury
shares from MICT Solutions by BEECo has to comply with all provisions relating
to a fresh issue of Simeka shares.
In terms of the JSE Listings Requirements, the specific issues of shares for
cash to BEECo and MANCo and the BEECo acquisition requires approval of ordinary
resolutions passed by a 75% majority of the votes cast by all ordinary
shareholders, excluding shareholders who are related parties by virtue of their
shareholding in BEECo and MANCo respectively and their associates, present or
represented by proxy, at the general meeting.
In terms of section 38(2A) and 226 of the Companies Act 61 of 1973, as amended
("the Act") special resolutions authorising Simeka to provide financial
assistance to BEECo, the BEECo participants and MANCo to acquire Simeka shares
is required. These special resolutions will be proposed at the general meeting.
6 Conditions precedent
The BEE transactions are subject to the fulfilment or waiver, as the case may
be, of the conditions precedent by 31 October 2010, or such later date as may be
agreed between the parties in writing.
The conditions precedent include, inter alia, that:-
6.1 the requisite consent of the shareholders of the Company is obtained at the
general meeting, in respect of the BEECo issue and BEECo acquisition and
the MANCo issue as contemplated in the Listings Requirements of the JSE;
6.2 special resolutions as required in terms of section 38 (2A) and 226 of the
Act authorising the financial assistance to be provided by Simeka to BEECo
and MANCo is approved at the general meeting;
6.3 class "A" preference shares in BEECo and MANCo are issued to Simeka as
detailed above;
6.4 class "B" preference shares in BEECo and MANCo are issued to Simeka as
detailed above; and
6.4 in the case of the BEECo issue and acquisition, limited pro rata guarantees
are furnished to Simeka by BEECo participants.
7 Financial information
7.1 Pro forma financial effects
The table below illustrates the unaudited pro forma financial effects of the BEE
transactions based on the published results for the year ended 31 May 2010. The
preparation of the unaudited pro forma financial effects is the responsibility
of the directors of Simeka. The unaudited pro forma financial effects have been
prepared for illustrative purposes only to provide information on how the
transaction may have impacted on Simeka`s results and financial position and,
due to the nature thereof, may not give a fair reflection of Simeka`s results
and financial position.
Per Simeka share (cents) Before After BeeCo Change After ManCo
Transaction % Transaction
Basic earnings -46.3 -37.5 19.0 -43.70
Fully diluted earnings -46.3 -37.5 19.0 -43.70
Headline earnings 5.6 5.3 -4.2 6.28
Fully diluted Headline 5.6 5.3 -4.2 6.28
earnings
Net asset value 38.8 34.6 -10.7 37.90
Net tangible asset value 4.7 6.5 38.3 5.04
Weighted average shares 543,414,099 658,164,099 563,664,099
Diluted weighted average 543,414,099 658,164,099 563,664,099
shares
Number of shares 543,414,099 658,164,099 563,664,099
Per Simeka share Change Pro forma Change Pro forma Change
(cents) % After the % After the %
Transactions Transactions
and
Consolidation
Basic earnings 5.5 -37.09 19.8 -46.62 -0.8
Fully diluted earnings 5.5 -37.09 19.8 -46.62 -0.8
Headline earnings 12.5 4.43 -20.6 5.22 -6.5
Fully diluted Headline 12.5 4.43 -20.6 5.22 -6.5
earnings
Net asset value -2.2 34.02 -12.2 38.49 -0.7
Net tangible asset 7.9 6.71 43.7 4.41 -5.7
value
Weighted average shares 678,414,099 543,414,099
Diluted weighted 678,414,099 543,414,099
average shares
Number of shares 678,414,099 543,414,099
Assumptions:
1. The pro forma Income Statement figures illustrate the possible financial
effects if the BEE transaction had taken place on 1 June 2009.
2. The pro forma Balance Sheet figures have been based on the assumption that
the BEE transaction had taken place on 31 May 2010.
3. The pro forma Income Statement and Balance Sheet ("Before column") are
based on the published reviewed financial information of Simeka for the
year ended 31 May 2010, as released on SENS on 4 August 2010.
4. The "BeeCo Transaction" column relates to the following:
- The subscription of 56 892 446 shares in Simeka by BEECo.
- The purchase of 57 857 554 shares in Simeka, which were previously held by
MICT Solutions, by BEECo.
- The creation of intra-group loan between Simeka and MICT Solutions.
- The total purchase price for the above mentioned shares amounts to R 18 360
000.
- The subscription for 10 000 000 preference shares in BEECo by Simeka
amounting to R 18 360 000.
5. The "After BEECo Transaction" column indicates the pro-forma financial
information of Simeka after the BEECo transaction only.
6. The "After ManCo Transaction" column relates to:
- The subscription of 20 250 000 shares in Simeka by ManCo.
- The total purchase price for the above mentioned shares amounts to R 3 240
000.
- The subscription for 20 250 000 preference shares in ManCo by Simeka
amounting to R 3 240 000.
7. The "After ManCo Transaction" column indicates the pro-forma financial
information of Simeka after the ManCo transaction only.
8. The "Pro forma After the Transactions" column indicates the pro-forma
financial information after both the BEECo and ManCo transactions.
9. The "Consolidation" column relates to the consolidation of Simeka, BEECo,
ManCo and MICT Solutions:
- The elimination of intra-group loan between Simeka and MICT Solutions.
- The elimination of treasury shares held within Simeka, BEECo and ManCo.
- The elimination of preference shares held between Simeka, BEECo and ManCo.
- The elimination of accrued Preference dividends between Simeka, BEECo and
ManCo.
10. The "Pro forma After the Transactions and Consolidation" column indicates
the pro-forma financial information after the BEECo and ManCo transactions
and the Consolidation entries.
11. Transaction costs of R 1 224 000 and R 216 000 have been expensed on the
BEECo and ManCo transactions respectively. These have been assumed to be
non tax deductible.
12. Interest lost on the reduction in cash balances as a result of the
transaction costs will be calculated at 6%.
13. IFRS 2 costs amounting to R 1 000 600 and R 191 857 have been expensed in
respect of the BEECo and ManCo transactions respectively.
14. The weighted average number of shares for EPS and Diluted EPS calculations
are based on 543 414 099 shares after eliminating the 135 000 000 shares on
consolidation as they are treated as treasury shares for accounting
purposes.
15. Preference dividends have been accrued as follows:
- ManCo and BEECo preference dividends will accrue at 80% and 75% of prime
per annum on the outstanding capital balances respectively.
- All preference dividends will accrue but will not be paid out during the
pro-forma period.
8 Withdrawal of Cautionary announcement
Simeka shareholders are advised that, as a result of the publication of
this announcement, the relevant cautionary announcement is now withdrawn.
By order of the Board
Dr PS Molefe
Chairman
Johannesburg
20 August 2010
Designated Advisor
Sasfin Capital
(A division of Sasfin Bank Limited)
Corporate Advisor
Nodus Capital (Pty) Ltd
Legal Advisor
Cliffe Dekker Hofmeyr Inc.
Reporting Accountants
Mazars
Independent Expert
Moores Stephens (Jhb) Corporate Finance (Pty) Ltd
Date: 20/08/2010 10:22:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
