| Mon 11 Jun 2012, 7:39 | | PGL - Pallinghurst - Pallinghurst launches ZAR800 million rights offer with |
|
PGL
PGL
PGL - Pallinghurst - Pallinghurst launches ZAR800 million rights offer with
ZAR420 million successfully pre-placed
Pallinghurst Resources Limited
(Previously Pallinghurst Resources (Guernsey) Limited)
(Incorporated in Guernsey)
(Guernsey registration number: 47656)
(South African external company registration number 2009/012636/10)
Share code on the BSX: PALLRES
ISIN: GG00B27Y8Z93
Share code on the JSE: PGL
"Pallinghurst" or the "Company")
Pallinghurst launches ZAR800 million rights offer with ZAR420 million
successfully pre-placed
Since the Company`s successful Initial Public Offering in September 2007,
the Investment Manager has targeted so-called "unloved assets"; those with
significant unrealised value and growth potential. Such investments are
typically overlooked and undervalued for a number of different reasons such
as the particular sector losing favour with investors, lack of strategic
direction, financial hardship or poor performance of the management team or
board of directors. Upon acquisition, the Investment Manager actively
manages the investment, setting a new vision, focus and strategic direction
for these investments, as well as providing managerial, financial and
operational support. Through this active and hands-on approach, the
Investment Manager aims to transform the investments into attractive and
valuable assets, with the aim of realising the assets at the appropriate
time to deliver superior returns.
Since the IPO, the Investment Manager has consistently underlined that it
allows for a ten year investment horizon for each investment, which provides
the necessary time to implement fundamental transformations of the
investments and to unlock their full value potential. Typically, the first
five years are used to establish and implement the revised strategic plans,
and the second five year period is used to optimise the exit value. In order
to maximise returns, it is important that sufficient flexibility be built
into the timing of the exit.
Although the Company`s four Investment Platforms are currently at different
stages of development, they are all well positioned and on track to achieve
the strategic objectives set by the Investment Manager at the time of the
initial investment. The Coloured Gemstones and Platinum Group Metals
("PGMs") are the two platforms most advanced in their development, with many
of their original strategic goals already met. Each has become increasingly
attractive as an investment proposition, evidenced by the more than ten-fold
increase in the Gemfields` share price over the past few years, as well as
the impending consolidation of the Platinum Group Metals interests and the
ZAR3.24 billion investment therein by the Industrial Development Corporation
of South Africa ("IDC"). Even as these two Investment Platforms are poised
to enter the "harvesting period", the Investment Manager believes that there
remains further valuation upside to be achieved and suitable market
conditions to be prevailing, before an exit should be contemplated. In the
interim, the next phase of development for these Investment Platforms will
likely be made from their existing cash reserves and accordingly it is not
expected that they will require further funding from the Company.
Faberge has built on its successful relaunch in September 2009, unveiling a
number of fine jewellery collections and expanding its retail presence
across the globe to include Geneva, London, New York and Hong Kong. In order
to fund this expansion phase and enable further implementation of its value-
creating strategy, Faberge is undertaking a capital raising, which may take
the form of equity or debt. The Company has allocated US$25-30 million
(ZAR202-243 million)1 of the Rights Offer proceeds as to the Company`s
participation in the Faberge capital raising.
The Company`s Steel Making Materials platform is also to be expanded
further, both within the existing Jupiter investment and potentially into a
coal opportunity. A further US$25-35 million (ZAR202-283 million)1 has been
allocated to the Company`s participation in the ongoing support of the Steel
Making Materials Investment Platform.
As the original portfolio enters the mature stage, the management time
commitment to those platforms is likely to be reduced. This will free up
management resources allowing focus on new areas of growth and shareholder
value creation. The Investment Manager therefore intends to actively pursue
a number of attractive new investment opportunities it has identified. This
is likely to include a copper investment, which if successfully completed
will form the base for a fifth Investment Platform. For this purpose, the
Company has allocated US$40-50 million (ZAR324-404 million)1 of the Rights
Offer proceeds.
As a principle, the Company only raises capital when there is specific use
for the funds, such as participating in identified new investment
opportunities, or in order to support its existing Investment Platforms,
such as Faberge and Steel Making Materials. It is of particular importance
that the Company continue to follow its rights in its four existing
Investment Platforms in order to protect its investment value, avoid value
destructive dilution and support the development of its strategic plan.
Accordingly, the Directors believe that it is the right time, and in the
best interests of the Company and its shareholders, to raise additional
funds for the Company.
Whilst the merits of debt and equity funding have been evaluated, given the
current volatile market conditions as well as the developing nature of the
Company`s Investment Portfolio, the Directors do not consider the
introduction of debt funding a viable or appropriate option for the Company
at this time. Accordingly, the Directors believe that the best course of
action to meet the Company`s current needs and strategic objectives is to
raise incremental equity capital, and therefore have approved the Rights
Offer.
The Rights Offer seeks to raise ZAR800 million through the issue of up to
357,142,857 Rights Offer Shares at the Rights Offer Price of ZAR2.24 per
Rights Offer Share in the Rights Offer Ratio of 75.06094 Rights Offer Shares
for every 100 Shares held on the Record Date.
1 The ZAR amounts indicated may fluctuate as a result of the exchange rate
used. The ZAR amounts above have been calculated using an exchange rate of
US$1:ZAR8.09, the rate at 31 December 2011.
Successfully completed Pre-placement
In order to ensure the success of the Rights Offer and to enable
participation in the current Faberge capital raising, the Company has
concluded the Pre-placement with existing shareholders in advance of the
Rights Offer, whereby the Pre-placement Participants, under the terms of the
Subscription Agreements subscribed for 187,647,650 Rights Offer Shares at
the Rights Offer Price, for an aggregate consideration of approximately
ZAR420.33 million, representing 52.54% of the total Rights Offer Shares
available in the Rights Offer. The proceeds of the Pre-placement have been
received by the Company and the Firm Placed Rights Offer Shares shall be
issued to Pre-placement Participants on Monday, 23 July 2012. In
consideration for the Pre-placement Participants subscribing for the Firm
Rights Offer Shares, each Pre-placement Participant was paid a Pre-placement
fee, amounting to 3% of the amounts payable by each Pre-placement
Participant for their Rights Offer Shares.
Accordingly, over half of the ZAR800 million sought to be raised in the
Rights Offer has already been received by the Company from existing
shareholders, indicating a firm support for the strategic direction of the
Company as well as the Rights Issue. The Pre-placement will enable the
Group to participate in the Faberge capital raising. In addition, the
Directors of the Company and Partners of the Investment Manager have
indicated that they will subscribe for their collective 4.71% pro rata
entitlement of the Rights Issue, increasing the firm commitments to the
Rights Issue to 57.25%.
Rights Offer
In accordance with the Articles of Incorporation, the Company will implement
the Rights Offer to each Shareholder, on the same terms and conditions.
Furthermore, whilst no rights of pre-emption exist, the Company will
implement the Rights Offer by providing each Shareholder with a Rights Offer
Entitlement.
The Rights Offer will be implemented on the JSE and in Rand only and will be
made to all Shareholders who, for the avoidance of doubt, will include BSX
Shareholders who will be able to participate in the Rights Offer in the same
manner as JSE Shareholders.
Shareholders are entitled to take up such number of Rights Offer Shares
equal to their Rights Offer Entitlement. Accordingly, all Shareholders will
be afforded the opportunity to participate in the Rights Offer and all
Rights Offer Shares issued pursuant to the Rights Offer will be listed on
the JSE.
Shareholders will be given the opportunity to receive the Rights Offer
Shares in certificated or dematerialised form.
Terms of the Rights Offer
The Company is seeking to raise ZAR800 million through the issue of up to
357,142,857 Rights Offer Shares at the Rights Offer Price of ZAR2.24 per
Rights Offer Share. The Rights Offer Price represents a 25% discount to the
10-day VWAP of a Share listed on the JSE on 29 March 2012, the day on which
the Rights Offer Price was determined.
Shareholders will have the right to subscribe for 75.06094 Rights Offer
Shares for every 100 Shares held by them on the Record Date.
Fractional entitlements to Rights Offer Shares resulting from the Rights
Offer will be rounded down to the nearest whole number if they are less than
0.5 and will be rounded up to the nearest whole number if they are equal to
or greater than 0.5.
Rationale for the Rights Offer
The Directors believe that it is the right time to raise additional equity
capital for the Company. This will enable the Company to support its
investments in the existing Investment Platforms, but also to potentially
create significant shareholder value by participating in new investment
opportunities.
Faberge has made significant progress since the Company made its first
investment in 2007. Despite the short period since Faberge`s relaunch in
September 2009, it has already achieved a number of key milestones. Faberge
continued its introduction of high quality collections with a number of
critically acclaimed launches during 2011, with more planned for the second
half of 2012. Faberge`s retail presence has expanded to include Geneva,
London, New York and Hong Kong. Faberge has been successfully repositioned
in the upper echelon of the luxury sector and now has an expanded product
offering and retail footprint. Faberge is seeking a further capital
injection which will enable further development of its value-creating
strategy. The Directors have allocated US$25-30 million to participate in
Faberge`s capital raising, which may take the form of equity or debt, to
protect its investment and support the next phase of development of its
strategic plan.
The Company`s Steel Making Materials platform has also been in a capital
intensive phase, building South Africa`s newest open pit manganese mine at
Tshipi Borwa and this is expected to continue as Jupiter progresses its
feasibility studies on Mount Mason and Mount Ida. The Steel Making Materials
strategy is about developing a platform to supply the key raw materials
required for the production of steel, in particular manganese, iron ore and
coking coal. A further US$25-35 million has been allocated as the Company`s
participation to the ongoing support of the Steel Making Materials
Investment Platform, which may include a new investment in one or more coal
assets.
The Investment Manager has also identified a new copper investment
opportunity in southern Africa, comprising both producing assets and others
close to production. It is anticipated that this investment would be made in
conjunction with the Pallinghurst Co-Investors, and the Group`s share is
likely to be approximately US$40-50 million.
Gemfields is now a market leader in the emerald sector and is well advanced
in its strategy to become the world`s leading coloured gemstone producer. It
is about to apply its successful business model to rubies, having recently
acquired a world class deposit in Mozambique. Gemfields also delivered
record breaking auction results during 2011, with net profit after tax for
the six months to 31 December 2011 of US$22 million, higher than the record
profits of the prior full year. Gemfields is unlikely to require any further
capital expenditure and the Company does not plan to allocate any of the
Rights Offer proceeds to Gemfields. It is possible that Gemfields may begin
to return funds to its shareholders, including the Group, in the next few
years.
When making the first investment into the PGM sector, the Company did so
with the aim of facilitating the consolidation of three contiguous
properties, creating an attractive and valuable major new industry player.
Such combined entity would benefit from a long life and low cost of
production. On 29 March 2012, an important announcement confirmed the
planned consolidation of the four PGM assets in which Pallinghurst has
invested. It also reported the acquisition of a 16.2% stake in the
consolidated vehicle (NewCo) for an investment of ZAR3.24 billion by the
Industrial Development Corporation, the prominent South African sovereign
investor. This is a tangible validation of our PGM vision and confirmation
of the significant progress of our PGM strategy. Post the investment by the
IDC, the consolidated vehicle should not require any further investment by
the Company and no Rights Offer funds are planned to be allocated to the PGM
strategy.
Financial effects of the Rights Offer
A summary of the unaudited pro forma financial effects of implementing the
Rights Offer is set out in the table below. In this context, it has been
assumed that the Rights Offer was implemented with effect from 1 January
2011 and 31 December 2011 for income statement and balance sheet purposes
respectively. The Directors are responsible for the preparation of the
unaudited pro forma financial effects. The pro forma financial effects set
out below have been presented for illustrative purposes only and may,
because of their nature, not give a fair reflection of the Company`s
results, financial position and changes in equity following the
implementation of the Rights Offer.
Before Rights After Change (%)
Offer 1 Rights
Offer 2,3
US$ US$
Loss per share (0.15) (0.09) 40.00
Headline loss per (0.15) (0.09) 40.00
share
NAV per share 0.77 0.55 (28.57)
Tangible NAV per 0.77 0.55 (28.57)
share
Number of Shares in 475,803,860 832,946,7 75.06
issue 174
Notes:
1. The figures in the "Before Rights Offer" column have been extracted
without adjustment from the audited financial statements for the year ended
31 December 2011.
2. Transaction costs of approximately US$2,265,343 have been taken into
account against share premium as costs directly attributable to the issue of
Shares.
3.Assuming the Company raises ZAR800 million before expenses (approximately
US$98.89 million based on US$1:ZAR8.09, the exchange rate at 31 December
2011).
4. Assuming all 357,142,857 Rights Offer Shares are issued.
Salient dates and times
2012
Last date to trade in Shares on the JSE (cum Friday, 22 June
Rights Offer Entitlement) in order to
participate in the Rights Offer
Last date to trade in Shares on the JSE for Friday, 22 June
settlement by the Record Date and to be
recorded as a Shareholder
Shares trade ex-Rights Offer Entitlement on the Monday, 25 June
JSE
Listing and trading of Letters of Allocation on Monday, 25 June
the JSE from the commencement of trade on
Record Date for participation in the Rights Friday, 29 June
Offer
Rights Offer opens at 09h00 on Monday, 2 July
Circular including a Form of Instruction, where Monday, 2 July
applicable, Mailed to Shareholders
Dematerialised JSE Shareholders` accounts at Monday, 2 July
their broker or CSDP credited with their Rights
Offer Entitlement
Certificated JSE Shareholders and BSX Monday, 2 July
Shareholders have their Rights Offer
Entitlement created in electronic form and held
at Computershare Nominees (Proprietary) Limited
Last date to trade in the Letters of Allocation Friday, 13 July
on the JSE for settlement by 12h00 on Friday,
20 July 2012
Listing of Rights Offer Shares on the JSE at Monday, 16 July
09h00 on
Payment and Forms of Instruction to be received Friday, 20 July
by the South African Transfer Secretaries by
12h00 on
Rights Offer closes at 12h00 on Friday, 20 July
Results of Rights Offer and basis of Monday, 23 July
allocations of Excess Rights Offer Shares
released on SENS
Expected date on which the relevant brokers or Monday, 23 July
CSDPs are updated with their Rights Offer
Shares and debited with the costs of the
purchase in respect of Dematerialised JSE
Shareholders
Expected date on which Share certificates are Wednesday, 25 July
Mailed to Certificated Shareholders
Dematerialised shareholders will have their Wednesday, 25 July
accounts at their broker or CSDP updated with
any excess shares allocated and debited with
the costs
Refunds/cheques posted to Certificated JSE Wednesday, 25 July
Shareholders in respect of unsuccessful
applications of Excess Rights Offer Shares
Notes:
1. Dematerialised JSE Shareholders are required to notify their duly
appointed broker or CSDP of their participation in the Rights Offer
in the manner and time stipulated in the custody agreement governing
the relationship between the Dematerialised JSE Shareholder and
his/her broker or CSDP.
2. BSX Shareholders and Certificated JSE Shareholders must complete
the relevant Form of Instruction, which Form of Instruction, must
reach the South African Transfer Secretaries in accordance with the
instructions contained therein.
3. No Shares may be Dematerialised or rematerialised from the
commencement of trade on Monday 25 June 2012 to Friday 29 June 2012,
both days inclusive. 4. No transfers of Shares between the JSE and
the BSX may take place from the commencement of trade on Monday 25
June 2012 to Friday 29 June 2012, both days inclusive.
5. CSDPs effect payment on a delivery of scrip versus payment method
in respect of Dematerialised Shareholders.
6. Above times are South African times.
Guernsey
11 June 2012
Investment Bank
Investec Bank Limited
JSE Sponsor
Investec Bank Limited
Investment Manager
Pallinghurst
Legal advisors in South Africa
ens.co.za
Independent reporting accountant
Nexia SAB&T
Date: 11/06/2012 07:39:21 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.
