| Thu 23 Jun 2011, 12:44 | | IVT - Invicta Holdings Limited - Announcement regarding loan transaction |
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IVT
IVT
IVT - Invicta Holdings Limited - Announcement regarding loan transaction
Invicta Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1966/002182/06
Share code: IVT ISIN code: ZAE000029773
("Invicta" or "the Company" or "the Group")
PROVISION OF LOANS BY HUMULANI MARKETING (PTY) LIMITED ("HUMULANI"), A
SUBSIDIARY OF INVICTA, TO EXECUTIVE DIRECTORS OF THE INVICTA GROUP IN TERMS OF
SECTION 44 OF THE COMPANIES ACT 2008 ("THE ACT") AND SPECIFIC ISSUE OF INVICTA
SHARES FOR CASH TO EXECUTIVE DIRECTORS OF THE INVICTA GROUP
1 INTRODUCTION
Shareholders are advised that Invicta and Humulani have established a long
term loan scheme for Invicta executive directors of the Invicta group of
companies ("executives").
In terms of the scheme, Humulani will make the loans ("loans") to the
executives to acquire shares in Invicta within 90 days of the loan being
approved, through a specific issue of Invicta shares for cash using
treasury shares or the participant acquiring Invicta shares on the open
market.
2 RATIONALE FOR THE LOANS
The purpose of the loans is to incentivise executives over the long-term by
providing them with a mechanism to acquire a meaningful stake in Invicta,
thereby aligning their interests with those of Invicta shareholders.
3 SALIENT TERMS AND CONDITIONS OF THE LOANS AND PUTS
The collective loan facility in total to executives is R85 million and is
limited to R40 million per participant.
The period of the loan is 7 years with an interest rate at the Income Tax
official rate of interest for low interest loans to employees published by
SARS from time to time (currently 6.5% per annum), calculated daily and
capitalised annually.
Servicing of the loan:
a Capital shall be repayable at the end of the loan period;
b Interest shall be serviced annually using dividends received on the c
Invicta shares which have been acquired with the loan;
c If the dividends received are less than the interest payable, the
shortfall shall be capitalized. The executive may, at his election,
pay off all or part of the accumulated interest at any time, but shall
not be obliged to do so until the end of the loan period; and
d If the dividends exceed any interest due/accumulated interest ("excess
dividends"), such excess dividends may, at the election of the
executive, be used to reduce the capital balance of the loan.
Security for the loan: The loan will be secured by:
a A cession and pledge of the Invicta shares acquired with the loan,
plus
b Cession and pledge of additional Invicta shares which may be provided
by the executive, plus
c Any additional security that the Invicta Remuneration Committee may
require from time to time such that the value of the security : loan
ratio will be at least 1.5:1
The loan will be limited to a multiple of each executive`s cost to company.
The multiple will vary depending on the executive`s position and responsibility,
as well as the security he is able to provide for the loan. The limit will be
determined by the Invicta Remuneration Committee.
If an executive leaves the employ of Company, the loan shall be repayable
immediately, unless the Invicta Remuneration Committee agrees otherwise.
If the termination of employment is a "no fault" termination (e.g. retrenchment,
ill-health/disability, death etc), the executive loan shall be repayable within
6 months or such reasonable longer period as the Invicta Remuneration Committee,
in its discretion, decides is fair and reasonable under the circumstances.
In the event of a reconstruction, liquidation or takeover of the Company during
the period of the loan, the Invicta Remuneration Committee shall, prior to the
reconstruction, liquidation or takeover review the terms of the loan and
determine what steps, if any, need to be taken to ensure that the executives are
not prejudiced by the event.
Humulani will, as part of the loan, grant the executive a put of the Invicta
shares, acquired with the loan, at 75% of the price paid by him for the Invicta
shares, which shall be used to offset any capital loan balance at the time
("put"). The put shall only be exercisable when the loan falls due for
repayment at the end of the loan period.
The total capital value of the loans and the puts shall not exceed 5% of the
market capitalisation of Invicta at inception of the loans, which, at the date
of this announcement equals R160.1 million.
4 SPECIFIC ISSUE OF INVICTA SHARES FOR CASH
It is a condition of the loan arrangement that the executive use the loan
exclusively to subscribe for Invicta shares at a price per share which is
equal to the volume weighted average price per share for the 30 trading
days up to the day when the loan is granted ("the specific issue") should
treasury shares be acquired, or to acquire Invicta shares on the open
market.
The first tranche of the loans and specific issue is to executives on the
board of directors of Invicta, of whom there are currently four viz. A
Goldstone (Group CEO) ("Goldstone") R38 million, C Barnard (Group CFO)
("Barnard") R11.5 million, CE Walters (CEO of Industrial Consumables
Division (BMG) ("Walters") R25.8 million and AM Sinclair (CEO of the
Capital Equipment Division) (CEG) ("Sinclair") R8.6 million for R83.9
million collectively ("the First Transaction"). Based on the loan values
approved per executive and the 30 day VWAP being R42.42 at 22 June 2011,
being the date the pro forma financial effects have been calculated at and
being the day before this announcement, should the loans be granted and
taken up today, the number of Invicta shares to be issued or acquired on
the open market are: Goldstone 895,804, Barnard 271,098, Walters 608,204
and Sinclair 202,734, totalling 1,977,840.
The Invicta shares to be issued to the executives in terms of the specific
issue will be listed on the JSE once they have been issued, if applicable.
The specific issue, the loans and the put are subject to approval by
Invicta shareholders in general meeting. The loans, put and specific issue
are collectively referred to as "the transactions".
The transactions are subject to the fulfillment (or waiver if permitted) of
the following suspensive conditions by not later than 90 days from granting
of loan:
* Humulani approves the grant of the loans following its credit assessment of
the executives;
* the conclusion of the security documentation;
* the conclusion of an agreement between Invicta and the executives, in a
form acceptable to such parties, in terms whereof the executive shall be
entitled in his sole discretion to put a specific number of the Invicta
shares (determined in accordance with the provisions of such agreement)
purchased with the loans to Humulani for a consideration per Invicta share
equal to 75% (seventy five percent) of the original purchase price per
Invicta share ("original purchase price") which original purchase price per
Invicta share shall be equal to the Principal Debt divided by the total
number of Invicta shares purchased with the proceeds; and
* Humulani procuring that Invicta passes all resolutions (including any
special resolutions) and does all such things and signs all such documents
as may be necessary to give effect to the transaction contemplated herein
and the security documentation as required by and in accordance with the
Act and the JSE Listings Requirements.
5 PRO FORMA FINANCIAL EFFECTS OF THE FIRST TRANSACTION
The table below sets out the unaudited pro-forma financial effects of the
First Transaction. These pro forma financial effects are the
responsibility of the Company`s directors and are presented for
illustrative purposes only to provide information regarding how the First
Transaction may have impacted on Invicta`s financial position had the First
Transaction been implemented on 31 March 2011 and impacted on Invicta`s
financial results had the First Transaction been implemented on 1 April
2010.
The unaudited pro forma financial effects are based on the audited
financial information of Invicta for the twelve months ended 31 March 2011
as announced on SENS on 1 June 2011 and has been prepared in accordance
with the accounting policies of Invicta at that date. Due to the nature of
the pro forma financial information, it may not fairly present the Group`s
financial position or financial results after the First Transaction.
UNAUDITED PRO FORMA FINANCIAL EFFECTS
Before the After the %
First Transaction First Transaction Change
Earnings per share (cents) 504 495 -2%
Headline earnings per share 496 487 -2%
(cents)
Diluted headline earnings per 473 464 -2%
share (cents)
Net asset value per share 2 303 2 356 2%
(cents)
Tangible net asset value per 1 785 1 852 4%
share (cents)
Number of shares in issue net 69 954 71 932 3%
of treasury shares (`000)
Weighted average shares in 70 211 72 183 3%
issue (`000)
Notes and assumptions:
a The "Before the First Transaction" column has been extracted from the
published audited financial statements of Invicta for the year ended 31
March 2011 as released on SENS on 1 June 2011;
b For the purpose of calculating earnings per share, headline earnings per
share and diluted headline earnings per share in the "After the First
Transaction" column, it was assumed that the First Transaction was
implemented on 1 April 2010;
c For the purpose of calculating net asset value per share and net tangible
asset value per share in the "After the First Transaction" column, it was
assumed that the First Transaction was implemented on 31 March 2011;
d For purposes of calculating the impact on the financial position and
financial results, the number of treasury shares issued is based on the
volume weighted average share price of R42.42 for the previous 30 days as
at 22 June 2011, being the date the pro forma financial effects have been
calculated at and being the day before this announcement and a total loan
value of R83.9 million and issue of 1,977,840 treasury shares.
e Interest on the loans to directors are based on the Income Tax official
rate of interest for low interest loans to employees, currently 6.5%;
f Estimated once off transaction costs amount to R1.1 million; and
g The value of the put has been estimated to be Rnil at the start of the
transaction.
6 FAIRNESS OPINION
In terms of the JSE Listings Requirements, a fairness opinion is required
on the transactions. The fairness opinion on the transactions, by an
independent expert, will be included in the circular to be posted to
shareholders as per paragraph 7 below.
7 CIRCULAR
A circular, providing further information on the transactions and
containing a notice of general meeting and a form of proxy will be posted
to shareholders in due course.
Cape Town
23 June 2011
Sponsor
Deloitte & Touche Sponsor Services (Pty) Limited
Attorneys
Bernadt Vukic Potash & Getz
Independent Reporting Accountants
Deloitte & Touche
Date: 23/06/2011 12:44:01 Produced by the JSE SENS Department.
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