| Mon 20 Dec 2010, 8:35 | | RAR - Rare Holdings Limited - Specific issue of shares for cash to raise R40 |
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RAR
RAR
RAR - Rare Holdings Limited - Specific issue of shares for cash to raise R40
Million & conclusion of loan agreement
RARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 2002/025247/06
Share Code: RAR ISIN: ZAE000092714
("the Company" or "RARE")
SPECIFIC ISSUE OF SHARES FOR CASH TO RAISE R40 MILLION & CONCLUSION OF LOAN
AGREEMENT
1 Introduction, rationale and purpose of the specific issue
1.1 RARE is an AltX listed company specialising in piping and related
activities.
1.2 RARE is need of further working capital funding which have exerted
pressure on its day to day business activities.
1.3 In addition thereto, RARE has elected to raise equity capital due to
the lack of immediate long-term debt funding alternatives.
1.4 Due to the urgency of the matter, the board of directors of RARE (the
"Board") resolved to enter into a subscription agreement ("the Stafric
Subscription Agreement") with Stafric Investments and Management
Services (Pty) Limited ("Stafric") to raise equity capital through a
specific issue of shares for cash to Stafric ("the Specific Issue" or
"the Subscription").
1.5 In terms of the Specific Issue, RARE will raise R40 million through
the issue of 100 000 000 (one hundred million) ordinary shares with a
par value of 1 cent each in the Company to Stafric at an issue price
of 40 (forty) cents per share.
1.6 The Board further resolved to enter into a loan agreement ("the
Mayfair Loan Agreement") with Mayfair Speculators (Pty) Limited as
interim relief until the Specific Issue has been duly implemented
("the Mayfair loan").
2 Waiver of mandatory offer & irrevocable undertakings
2.1 The Securities Regulation Panel (the "Panel") deems the Subscription
as an affected transaction in terms of the Securities Regulation Code
on Takeovers and Mergers (the "Code"), as Stafric will, after the
Subscription, control 35% or more of the votes attaching to the issued
shares of the Company.
2.2 Accordingly, the Subscription will trigger a mandatory offer to
shareholders in terms of Rule 8 of the Code to be made by Stafric (the
"Mandatory Offer").
2.3 The Mandatory Offer would therefore ordinarily be extended to the
shareholders of the Company at the offer price of 40 cents per share
(the "Offer Price"), which offer price is the same price at which the
Specific Issue is being made.
2.4 Shareholders are advised that the Company will obtain an opinion from
an independent expert as to whether the Offer Price is fair and
reasonable ("the Fairness Opinion").
2.5 However, in terms of Rule 8.7 of the Code, the requirement for such a
Mandatory Offer will normally be dispensed with by the Panel ("the
Rule 8.7 Exemption") provided that a majority of independent votes at
a properly constituted meeting of the holders of relevant securities
of the Company are cast in favour of a resolution waiving the
requirement for such a Mandatory Offer (the "Whitewash Resolution").
2.6 RARE shareholders representing 75.18% of the shares in issue ("the
Transaction Shareholders") have irrevocably undertaken to vote in
favour of the shareholders` resolutions (required in terms of the
Companies Act 61 of 1973, as amended ("the Companies Act"), and the
Listings Requirements of the JSE Limited) necessary to give effect to
the Specific Issue and the Whitewash Resolution (thus waiving the
requirement to make a Mandatory Offer) ("the Irrevocable
Undertakings").
3 Salient terms of the Stafric Subscription Agreement
3.1 In terms of the Subscription, 100 000 000 (one hundred million)
ordinary shares of 40 (forty) cents each in the capital of the
Company, constituting 52.98% (fifty two comma nine eight percent) of
the total issued share capital of the Company, is to be allotted and
issued to Stafric.
3.2 The conditions precedent of the Subscription are:
3.2.1 the procurement of the Irrevocable Undertakings by the
Transaction Shareholders;
3.2.2 the conclusion of the Mayfair Loan Agreement;
3.2.3 obtaining the Rule 8.7 Exemption in respect of the Mandatory
Offer from the SRP and approval of the subsequent Whitewash
Resolution; and
3.2.4 the adoption of the ordinary resolution prescribed by section 22
of the Companies Act in respect of the approval of the
Subscription.
4 Salient terms of the Mayfair Loan Agreement
4.1 In terms of the Mayfair Loan:
4.1.1 a capital sum of R40 million ("the Loan Amount") will be advanced
to RARE in two tranches of R20 million each payable no later than
31 December 2010 and 31 January 2011, respectively. Both tranches
will serve as drawdown facilities ("the drawdown facilities") and
could be advanced in more than one payment upon the request of
RARE. This will ensure that RARE has access to a drawdown
facility in the amount of R20 million up to 31 December 2010 and
a further drawdown facility in the amount of R20 million up to 31
January 2011;
4.1.2 the costs associated in securing the Mayfair Loan will be
subtracted from the Loan Amount and reflected in the drawdown
facilities;
4.1.3 the Mayfair Loan will be applied to fund the cash flow
requirements of the Company;
4.1.4 the Loan Amount shall be repaid on the earlier of 31 March 2011
or upon such date when the Company receives payment from Stafric
under the Subscription;
4.1.5 repayment thereof is secured by the cession and/or pledge of
certain unencumbered assets of the Company; and
4.1.6 the interest rate payable on the Mayfair Loan shall be 20% per
annum until repayment in terms of clause 4.1.4 above.
5 General Meeting
5.1 The Board intends convening a general meeting of the shareholders of
the Company in order to vote on certain proposed resolutions,
including the Whitewash Resolution and the ordinary resolution in
approval of the Specific Issue ("the General Meeting").
5.2 The general meeting will be held on 30 April 2011, alternatively on
such earlier date as the directors of the Company will announce.
6 Pro forma financial effects
6.1 The table below sets out the unaudited pro forma financial effects on
RARE before and after the Specific Issue, and are the responsibility
of the company`s directors.
6.2 The pro forma financial effects have been prepared for illustrative
purposes only to illustrate how the specific issue may have affected
RARE`s results for the year ended 30 June 2010, based on the
assumptions that:
6.2.1 for purposes of the earnings and headline earnings per share
calculations, the specific issue was effective from 1 July
2009; and
6.2.2 for purposes of the net asset value and net tangible asset
value per share calculations, the specific issue was
effected on 30 June 2010.
6.3 It should be noted that the unaudited pro forma financial effects have
been prepared on RARE`s latest published results for the year ended 30
June 2010 taking into consideration the Specific Issue, and because of
their nature, may not fairly reflect RARE`s financial position,
changes in equity, results of operations or cash flows after the
Specific Issue.
Before After % Change
Audited Pro forma
30 June 2010 30 June 2010
R R
Headline earnings / (65.43) (29.10) 55.52%
(loss) per share
(cents)
Earnings / (loss) per (65.43) (29.10) 55.52%
share (cents)
Net asset value per 141.85 87.89 (38.04%)
share (cents)
Net tangible asset 121.64 78.39 (35.55%)
value per share (cents)
Notes to the pro forma financial information:
1. Extracted from the audited consolidated results of RARE for the year
ended 30 June 2010.
2. Basic earnings per share and diluted earnings per share are based on
the following assumptions:
- The interest charged was reduced by the cash raised at prime
lending rates.
- A tax rate of 28 % was applied.
3. Weighted average number of shares was computed as if the issue was
effected on 1 July 2009.
4. No transaction costs have been taken into account in the calculation
of the financial effect as it will not have a material impact.
5. Net asset value per share and net tangible asset value per share based
on the assumption that the proceeds of R40 million was received.
6. For purpose of calculating the net tangible asset value per share,
intangible assets were excluded.
7 Withdrawal of cautionary
The cautionary announcement released on SENS on 19 November 2010 is
accordingly withdrawn and shareholders are advised that they no longer need
to exercise caution when trading their securities in the Company.
Johannesburg
20 December 2010
Designated Adviser: PSG Capital (Proprietary) Limited
Date: 20/12/2010 08:35:05 Produced by the JSE SENS Department.
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