| Tue 20 Sep 2011, 7:05 | | GND/GNDP/REM - Grindrod Limited/Remgro Limited - Joint announcement regarding a |
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GND REM GNDP
GND REM
GND/GNDP/REM - Grindrod Limited/Remgro Limited - Joint announcement regarding a
R2 Billion capital raising and withdrawal of cautionary announcement
Grindrod Limited Remgro Limited
(Incorporated in the Republic of (Incorporated in the Republic of
South Africa) South Africa)
(Registration number (Registration number
1966/009846/06) 1968/006415/06)
Ordinary share code: GND ISIN: Share code: REM
ZAE000072328 ISIN ZAE000026480
Preference share code: GNDP ISIN ("Remgro")
ZAE000071106
("Grindrod" or the "Company")
The distribution of this announcement and/or the offer to subscribe for
subscription shares in jurisdictions, other than South Africa, may be
restricted or prohibited by the laws of such jurisdictions and must be
deemed to be provided for information purposes only in those
jurisdictions. The subscription shares have not been and will not be
registered for the purposes of the Remgro offer under the securities
laws of any country outside South Africa and accordingly, are not being
offered, sold, taken up, re-sold or delivered directly or indirectly to
qualifying Grindrod shareholders in any jurisdiction where such offer
would constitute a violation of the laws of the relevant jurisdiction.
JOINT ANNOUNCEMENT REGARDING A R2 BILLION CAPITAL RAISING, THE INTRODUCTION OF
REMGRO AS A SHAREHOLDER IN GRINDROD, A NON-RENOUNCEABLE OFFER BY REMGRO TO
QUALIFYING GRINDROD SHAREHOLDERS TO PARTICIPATE IN THE CAPITAL RAISING AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Key features:
* R2 billion capital raising to reinforce Grindrod`s balance sheet
and support the Company`s future growth plans
* Introduction of Remgro as a shareholder in Grindrod through a
proposed specific issue of 133 333 334 new Grindrod ordinary shares
for cash, approximately 22% of the post-issue ordinary share
capital of Grindrod
* Subscription price of R15.00 per new Grindrod ordinary share, a
premium of 8.8% to the 30 trading day volume weighted average price
of Grindrod ordinary shares up to and including 19 August 2011, the
last trading day prior to the release of the cautionary
announcement
* Non-renounceable offer by Remgro to qualifying Grindrod
shareholders to subscribe for the 133 333 334 new Grindrod ordinary
shares in its stead, pro rata to their existing Grindrod ordinary
shareholding, at the subscription price of R15.00 per new Grindrod
ordinary share
* Transaction recommended by the board of directors of Grindrod
1.Introduction
Further to the cautionary announcement published by Grindrod on SENS on Monday,
22 August 2011, the boards of directors of Grindrod ("the board") and Remgro are
pleased to announce that Grindrod and Remgro have entered into a subscription
agreement ("subscription agreement") in terms of which Remgro will, subject to
the fulfilment or waiver of the conditions precedent set out in paragraph 4
below, subscribe for 133 333 334 new ordinary shares ("subscription shares") in
the share capital of Grindrod ("ordinary shares") at a subscription price of
R15.00 per subscription share ("subscription price") ("transaction"). The
subscription price equates to a premium of 8.8% to the 30 trading day volume
weighted average price of ordinary shares up to and including Friday, 19 August
2011, the last trading day prior to the release of the cautionary announcement.
The subscription shares equate to approximately 22% of the post-issue ordinary
share capital of the Company.
In terms of the subscription agreement, Remgro will make a non-renounceable
offer ("Remgro offer") to all holders of ordinary shares ("Grindrod
shareholders") registered as such on the record date ("Remgro offer record
date") to participate in the Remgro offer ("qualifying Grindrod shareholders").
In terms of the Remgro offer, qualifying Grindrod shareholders will, subject to
the fulfilment or waiver of the conditions precedent set out in paragraph 4, be
given the non-renounceable right to subscribe for the subscription shares in
Remgro`s stead. Further details of the Remgro offer are set out in paragraph 3.
Remgro will fund the transaction from its available cash resources.
2. Rationale for the transaction
2.1 Grindrod`s strategic positioning
Grindrod`s business principally involves the movement of cargo by road, rail,
sea and air through integrated logistics services utilising specialised assets
and infrastructure. Grindrod`s service offerings are provided by four operating
divisions, namely: Shipping, Freight Services, Trading and Financial Services.
With a 100 year heritage, Grindrod is a global business represented in 24
countries.
Grindrod`s communicated strategy is to further diversify its portfolio of
businesses, with the focus being the development of the group`s strategically
positioned port and terminal assets. The group`s ability to offer end-to-end
supply chain services continues to be a key competitive advantage.
Grindrod`s timely investment in capacity expansion has resulted in a track
record of value creation. Grindrod`s investment focus continues to be in
strategic growth areas where demand is expected to exceed supply. In line with
the group`s communicated strategy, Grindrod is seeking to accelerate the group`s
pipeline of strategic capital projects in Southern Africa, in particular the
next planned phase (phase 4) of the Maputo Coal Terminal. This capital
expenditure programme will require in excess of R10 billion over the next five
years. Whilst Grindrod plans to make a substantial investment in the group`s
port, terminal and rail capacity, it will also continue to strategically invest
in its other businesses. Grindrod targets a minimum 15% return on ordinary
shareholders` funds for all new investments.
Grindrod`s strong balance sheet has historically afforded the group ample
flexibility to make identified capacity investments and respond to opportunities
as and when required. The execution of the group`s capital expenditure
programme will however require substantial debt funding over the five years. The
transaction will support Grindrod`s funding plans through to 2016 and allow the
group to commence authorising new capital projects and commitments from the
fourth quarter of the 2011 financial year. In the short-term, the proceeds from
the transaction will be used to reduce existing gearing resulting in interest
savings for the group. Importantly, Grindrod will retain adequate financial
flexibility and agility to respond to new opportunities as and when they arise.
2.2 Remgro as a strategic partner
Remgro is a South African investment holding company, listed on the JSE, with a
market capitalisation of approximately R60 billion. Its interests consist of
investments in financial services, health care, mining, petroleum products,
food, wine and spirits, media, technology and various other trade-mark products.
Remgro`s activities are concentrated mainly on the management of investments and
the provision of strategic support rather than on being involved in the day-to-
day management of the business units of investee companies. Operating
subsidiaries comprise listed and unlisted companies with independent boards of
directors on which Remgro has non-executive representation. Other investments
comprise both listed and unlisted companies not controlled by Remgro and which
are mostly associated companies due to significant influence and board
representation.
Remgro invests in businesses that can deliver superior earnings and dividend
growth over the long-term. This involves the acquisition of meaningful interests
in companies in order to have significant influence. Sound management and the
ability to generate strong cash returns and growth are important investment
criteria. Remgro forges strategic alliances on a partnership basis and
endeavours to add value where possible.
In addition to the transaction facilitating Grindrod`s ability to fund its
capital expenditure programme, the transaction will see the group introducing a
strong and supportive shareholder with strategic insights, global technical
competence, significant financial resources and the capacity to efficiently
raise capital. Remgro has a reputation of being a long-term, committed
shareholder.
2.3 Rationale for Remgro
Remgro believes that Grindrod is an attractive investment opportunity in the
shipping and infrastructure-related sectors. Grindrod will give Remgro exposure
to industries with strong growth prospects and good "through the cycle" returns.
Grindrod has a strong and highly experienced management team with a track record
of taking long-term investment decisions and delivering strong profitability.
3.Remgro offer
In terms of the subscription agreement, Remgro has irrevocably undertaken,
subject to the fulfilment or waiver of the conditions precedent set out in
paragraph 4, to offer qualifying Grindrod shareholders the non-renounceable
right to subscribe for the subscription shares in its stead, pro rata to their
existing holding of ordinary shares on the Remgro offer record date. Qualifying
Grindrod shareholders will be entitled to:
3.1 subscribe for 28.6657 subscription shares for every 100 ordinary
shares held on the Remgro offer record date in Remgro`s stead at
the subscription price, provided that any fractions of ordinary
shares that may result from such subscription will be rounded up
or down to the nearest whole number ("Remgro offer entitlement");
and
3.2 accept the Remgro offer in respect of all or part of their Remgro
offer entitlement. Qualifying Grindrod shareholders will not be
entitled to accept the Remgro offer in respect of more than their
Remgro offer entitlement.
Qualifying Grindrod shareholders who wish to accept the Remgro offer must do so
in the manner prescribed in the circular to be posted on or about Monday, 26
September 2011. Acceptance of the Remgro offer, including payment of the
relevant subscription price, not submitted and/or received in the prescribed
form and/or within the prescribed time shall not constitute a valid acceptance
of the Remgro offer.
The Remgro offer is being made directly by Remgro to qualifying Grindrod
shareholders.
4.Conditions precedent to the transaction
The transaction is subject to the fulfilment (or waiver, where applicable in
terms of the subscription agreement) of the following conditions precedent:
4.1 Grindrod shareholders passing an ordinary resolution in general
meeting giving general authority to the board to allot and issue
the subscription shares in accordance with the terms of the
subscription agreement;
4.2 Grindrod shareholders passing an ordinary resolution by a 75%
majority giving specific authority in terms of paragraph 5.51(g)
of the JSE Limited ("JSE") Listings Requirements to allot and
issue the subscription shares in accordance with the terms of the
subscription agreement;
4.3 the JSE confirming in writing that it has approved Grindrod`s
application for a listing of the subscription shares to be issued
by Grindrod in terms of the transaction; and
4.4 no material adverse change having occurred. A "material adverse
change" means a decline of more than 15% in the MSCI World Index,
during the period commencing on 19 September 2011 and ending on
the last business day immediately prior to the general meeting of
Grindrod shareholders. In order for the condition to be fulfilled,
the occurrence of a material adverse change must be notified by
Remgro to Grindrod prior to the general meeting referred to in
paragraph 9 below.
5.Board representation
The board will appoint one non-executive director, nominated in writing by
Remgro, to the Grindrod board with effect from the date on which the
subscription shares are allotted and issued ("settlement date"). In terms of
Grindrod`s Memorandum of Incorporation, such appointment will have to be
confirmed at Grindrod`s next annual general meeting.
6.Lock-up and disposal of subscription shares
If, pursuant to the transaction, Remgro holds 7.5% or more of the post-issue
ordinary shares of Grindrod, Remgro shall not, subject to certain conditions,
sell, transfer or otherwise dispose of all or any of the subscription shares
prior to the expiry of a period of 18 months following the settlement date
("lock-up period"), without the prior written consent of Grindrod. In the event
that Remgro proposes to sell, transfer or otherwise dispose of any or all of the
subscription shares after expiry of the lock-up period, Remgro will notify the
board in writing in advance of such transaction in order that Grindrod and
Remgro can cooperate to ensure the subscription shares that are the subject of
the transaction are disposed of in an orderly fashion.
7.Irrevocable undertakings
Grindrod Investments (Proprietary) Limited and Nailsea Investments (Proprietary)
Limited, investment holding companies controlled by the Grindrod family and
owning 83,952,682 ordinary shares, representing in aggregate 18.0% of the
existing total issued ordinary share capital of Grindrod, have irrevocably
undertaken to vote in favour of the requisite resolutions to be proposed at the
general meeting and to not accept the Remgro offer.
Assuming that no qualifying Grindrod shareholder accept the Remgro offer, Remgro
will acquire a shareholding equal to 22.3% of the total post-issue ordinary
share capital of Grindrod, immediately post implementation of the transaction.
Should, however, all qualifying Grindrod shareholders, with the exclusion of the
Grindrod family, accept the Remgro offer, Remgro will acquire a shareholding
equal to 4.5% of the total post-issue ordinary share capital of Grindrod,
immediately post implementation of the transaction.
8.Directors` shareholdings and treasury shares
All the directors of Grindrod who own ordinary shares in their own right intend
to vote in favour of the transaction.
Grindrod holds 9,179,348 ordinary shares, representing 2.0% of the existing
total issued ordinary share capital of Grindrod, through subsidiary companies as
treasury shares. The treasury shares do not carry any voting rights and
therefore will not be eligible to vote at the general meeting or to participate
in the Remgro offer.
9.Board recommendation
The board has considered the terms and conditions of the transaction and is of
the opinion that the transaction is in the best interests of all key
stakeholders and will be to the long-term benefit of Grindrod shareholders.
Accordingly, the board recommends that Grindrod shareholders vote in favour of
the resolutions relating to the transaction at the general meeting.
10.Unaudited pro forma financial effects of the transaction
The table below sets out the pro forma financial effects of the transaction on
the earnings, headline earnings, net asset value and net tangible asset value
per ordinary share of Grindrod based on the unaudited financial statements of
Grindrod for the 6 months ended 30 June 2011. The financial effects are the
responsibility of the directors of Grindrod and are prepared for illustrative
purposes only and, because of their nature, may not fairly present the financial
position of Grindrod, changes in its equity or the results of its operations or
cash flows after the transaction.
The pro forma financial effect of the transaction is reflected as a reduction of
23% in earnings per share and headline earnings per share. The only effect on
earnings per share and headline earnings per share in these calculations arises
as a consequence of the increased number of ordinary shares in issue. The
calculation does not take into account the potential benefits arising from the
transaction, including the potential increase in earnings from the Company`s
capital expenditure plans or potential interest savings from reduced borrowings.
Per ordinary share Notes Before the After the Change
transaction transaction (%)
(cents) (cents)
Earnings 1,4 60.8 47.1 (23)%
Headline earnings 1,4 55.7 43.1 (23)%
Net asset value 2 13.6 13.9 2%
Net tangible asset value 2 11.4 12.2 7%
Number of shares (`000) 3 455 953 589 286
Notes:
1. The amounts in the "Before the transaction" column represent the
headline earnings per share as disclosed in the published unaudited
interim financial results for the 6 months ended 30 June 2011. The
amounts in the "After the transaction" column represent the
headline earnings and earnings per share after the transaction
based on the assumption that the transaction was effective 1
January 2011.
2. The amounts in the "Before the transaction" column represent the
net asset value and net tangible asset value per share as disclosed
in the published unaudited interim financial results for the 6
months ended 30 June 2011. The amounts in the "After the
transaction" column represent the net asset value and net tangible
asset value per share based on the unaudited financial results for
the 6 months ended 30 June 2011 adjusted for the transaction had it
been effected on 30 June 2011.
3. The adjustments are based on 455 952 632 (net of treasury shares)
ordinary shares in issue before the transaction and 589 285 966
(net of treasury shares) ordinary shares in issue after the
transaction.
4. No adjustments have been made for interest earned on the proceeds
of the transaction, as per the "Guide on pro forma financial
information" issued by the South African Institute of Chartered
Accountants. Accordingly, the only effect on earnings per share and
headline earnings per share is as a consequence of the increased
number of ordinary shares used in the calculation thereof as no
account is taken of the benefits arising from the increased capital
available for the group as a result of the transaction.
5. Transaction costs of R17 500 000 (exclusive of VAT) have been
debited against the share premium account.
6. There is no material post-balance sheet or subsequent events which
require adjustment in terms of International Financial Reporting
Standard or in respect of previously published financial effects or
in respect of any post-balance sheet corporate action and
accordingly no adjustment has been made to the financial effects.
11.Documentation
A circular to Grindrod shareholders relating to the transaction, including a
notice of general meeting, together with a table of entitlements and a form of
acceptance and payment instruction regarding the Remgro offer will be posted to
Grindrod shareholders on or about Monday, 26 September 2011.
12.Withdrawal of cautionary
Having regard to the information disclosed in this joint announcement, Grindrod
shareholders and preference shareholders are advised that caution is no longer
required when dealing in the Company`s securities.
13.Conference call and webcast link details
A conference call will be held at 11:00 (South African time) on Tuesday, 20
September 2011. Access to an internet webcast will also be available. The
details for the link to the webcast and the dial in details for the conference
call are set out below.
Webcast:
http://themediaframe.eu/links/grindrod110920.html
Live Call Access Numbers
Country Access Number
South Africa - Johannesburg 011 535 3600
UK (Toll-Free) 0 800 917 7042
South Africa - Johannesburg Alternate 010 201 6616
South Africa - Cape Town 021 819 0900
South Africa - Durban 031 812 7600
South Africa (Toll-Free) 0 800 200 648
Other Countries (Intl Toll) +27 11 535 3600
USA (Toll-Free) 1 866 752 6302 - * 0 for Operator
Playback Access Numbers Playback
Code: 18711#
Country Access Number
South Africa (Telkom) 011 305 2030
USA and Canada (Toll) +1 412 317 0088
Other Countries (Intl Toll) +27 11 305 2030
UK (Toll-Free) 0 808 234 6771
Durban
20 September 2011
Lead Financial Adviser and Joint Financial Adviser and
Independent Sponsor to Grindrod Sponsor to Grindrod
Deutsche Bank Grindrod Bank
Legal Adviser to Grindrod Reporting Accountants to Grindrod
Garlicke & Bousfield Inc. Deloitte
Financial Adviser and Sponsor to Legal Adviser to Remgro
Remgro Webber Wentzel
RMB, a division of FirstRand Bank
Limited
Date: 20/09/2011 07:05:01 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.
