| Mon 12 Feb 2001, 0:00 | | Capitalisation Of Claims Against Kairos |
|
Kairos Industrial Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/002927/06)
("Kairos" or "the company")
- Capitalisation of claims against Kairos;
- the related issue of shares to a director;
- change of control and waiver of mandatory offer to minority shareholders
1 Introduction
Shareholders are advised that Kairos has entered into an agreement with Shefa
Equity Holdings (Proprietary) Limited ("Shefa"), in terms whereof 128 745 360
new Kairos shares will be issued to Shefa at an issue price of 10 cents per
Kairos share in full and final settlement of Shefa's outstanding claims against
Kairos ("the transaction").
2 Rationale for the transaction
On 1 April 1999 the High Court sanctioned a scheme of arrangement ("S311") in
terms of Article 311 of the Companies Act No. 61 of 1973 as amended ("the Act")
between Kairos Mining (Proprietary) Limited ("KM"), a subsidiary of Kairos, and
its creditors.
The major creditor of Kairos at the time of the scheme of arrangement was ABSA
Bank Limited ("ABSA") and amongst its claims was a R13,2 million facility on
which interest was charged and capitalised at 75% of the prime rate until 31
August 2000, whereafter the R13,2 million facility and accrued interest was
repayable on demand and interest charged at the prime rate plus 2%. The
outstanding balance of the R13,2 million facility plus capitalised interest
amounted to R15,7 million ("the R15,7 million facility") as at 31 August 2000.
In August 2000, ABSA informed Kairos that, with immediate effect, interest
would become payable on a monthly basis. This meant that Kairos would be liable
for payments of approximately R214 000 per month commencing in September 2000,
which would have placed it under severe cash flow pressure.
Kairos was not in a position to make any interest or capital repayments, and
this placed the continued existence of Kairos in doubt.
Mr W L van Deventer, the executive chairman of Kairos, undertook to commence
negotiations with ABSA in his personal capacity in order to maintain the
listing of Kairos.
These negotiations culminated in an agreement in terms of which Shefa acquired
ABSA's claims against Kairos, including of the R15,7 million facility.
Shefa advised Kairos in writing that it had concluded the agreement with ABSA
and that it would extend the facility on similar terms to those previously
agreed with ABSA, save that interest would not be payable on a monthly basis
but would be capitalised until February 2001. This arrangement enabled the
auditors to issue a going concern certificate. In addition Shefa indicated to
the board that it was amenable to negotiations regarding an extension of time
or other forms of settlement of the facility.
In an attempt to restructure the balance sheet of Kairos and to secure the
ongoing existence of Kairos, the directors of Kairos resolved to negotiate a
settlement with Shefa.
In terms of the settlement agreement, R3 714 713 was repaid in cash on the
R15,7 million facility. The balance of Shefa's claims will be settled through
the issue of 128 745 360 new Kairos shares to Shefa at an issue price of 10
cents per share in full and final settlement of Shefa's outstanding claims.
3 Change of control and waiver of mandatory offer to minority shareholders
Prior to the transaction, Shefa held 32 196 400 Kairos shares, or a 26,1%
interest in Kairos. Subsequent to the transaction and the related listing of
the 128 745 360 Kairos shares, Shefa will hold 160 941 760 Kairos shares, or a
63,8% interest in Kairos, constituting a change of control. Kairos obtained a
ruling from the Securities Regulations Panel ("SRP") on 19 December 2000 in
terms whereof the SRP has dispensed with the obligation for Shefa to extend a
mandatory offer to minority shareholders of Kairos, provided that the potential
mandatory offer is waived by a majority of independent votes at a general
meeting.
4 Related party
Mr WL van Deventer is the executive chairman of Kairos and a director of Shefa.
Shefa is a wholly-owned subsidiary of the Shefa Family Trust of which Mr WL van
Deventer is a trustee. As such, the issue of Kairos shares to Shefa constitutes
a related party transaction in terms of the Listings Requirements of the JSE
Securities Exchange South Africa and requires an opinion from the independent
adviser to the transaction, Bridge Capital, on the issue of Kairos shares,
which opinion will be incorporated in the circular to shareholders. As a
related party, Mr WL van Deventer will be precluded from voting at the general
meeting on the resolution relating to the issue of shares to Shefa and the
resolution relating to the waiver of a potential mandatory offer to minority
shareholders of Kairos at a price of 10 cents per share. Shefa will also not be
taken into account in determining the quorum at the general meeting.
5 Financial effects of the transaction
The table below sets out the financial effects of the transaction on the
unaudited published interim financial results of Kairos for the six months
ended 31 August 2000:
31 August Post Post
2000 S311 % transaction %
Notes (cents) (cents) Change (cents) Change
Headline
(loss)/earnings
per Kairos
share 1 & 2 (0,16) (0,13) 18,8 0,22 268,9
(Loss)/earnings
per Kairos
share 1 & 2 (0,16) (0,13) 18,8 0,22 268,9
Net asset
value per
Kairos share 3 2,81 9,58 241,1 9,79 2,25
Net tangible
asset value
per Kairos
share 3 2,81 9,58 241,1 9,79 2,25
Notes:
1. The effect on headline (loss)/earnings per Kairos share and (loss)/earnings
per Kairos share was calculated on the assumptions that:
- the transaction was effected on 1 March 2000;
- no interest was payable on the R15, 7 million facility, resulting in a saving
of R214 000 in interest per month; and
- interest was payable on the cash portion of the transaction with Shefa (R3
714 713) at the prime overdraft lending rate from 1 March 2000 to 31 August
2000.
2. The effect on headline (loss)/earnings per Kairos share and (loss)/earnings
per Kairos share is based on a weighted average number of
98 224 239 Kairos shares in issue during the period 1 March 2000 to 31 August
2000, 123 340 039 Kairos shares in issue during the period 1 March 2000 to 31
August 2000 (post S311) and 252 085 399 Kairos shares in issue during the
period 1 March 2000 to 31 August 2000 (post transaction).
3. The effect on net asset value per Kairos share and net tangible asset value
per Kairos share is based on 98 224 239 Kairos shares in issue at 31 August
2000, 123 340 039 Kairos shares in issue at 31 August 2000 (post S311) and 252
085 399 Kairos shares in issue at 31 August 2000 (post transaction), on the
assumption that the transaction was effected on 31 August 2000.
6 Suspensive condition
The issue of Kairos shares to Shefa is subject to the fulfilment of the
following suspensive condition:
- The approval of the issue of Kairos shares to Shefa by shareholders in a
general meeting in terms of Section 222 of the Act as read with item 5.68 (g)
of the JSE Listings Requirements.
7 Documentation
A circular containing details of the transaction, and incorporating revised
listing particulars, together with a notice convening a general meeting of
Kairos shareholders, will be sent to shareholders today.
Pretoria
13 February 2001
Legal advisors
Moss-Morris Inc.
(Registration No 1998/016301/07)
Sponsor
Bridge Capital Services (Pty) Limited
(Registration No 1998/016301/07)
Reporting accountants and auditors
BURN REYNOLDS & Co.
CHARTERED ACCOUNTANTS (SA)
REGISTERED ACCOUNTANTS AND AUDITORS
