| Thu 28 Jun 2012, 16:11 | | BSR - Basil Read Holdings Limited - Announcement regarding The Broad Based Black |
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BSR
BSR
BSR - Basil Read Holdings Limited - Announcement regarding The Broad Based Black
Economic Empowerment Transaction for an effective holding of 25.1% of the total
issued share capital of basil read and further cautionary announcement
Basil Read Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1984/007758/06)
Share code: BSR ISIN: ZAE000029781
("Basil Read" or the "Company")
ANNOUNCEMENT REGARDING THE BROAD BASED BLACK ECONOMIC EMPOWERMENT ("BBBEE")
TRANSACTION FOR AN EFFECTIVE HOLDING OF 25.1% OF THE TOTAL ISSUED SHARE CAPITAL
OF BASIL READ AND FURTHER CAUTIONARY ANNOUNCEMENT
1.INTRODUCTION
Shareholders are referred to the cautionary announcement dated 12 March 2012 and
renewed on 30 April 2012 and 15 June 2012 respectively. Basil Read is pleased to
announce that it has concluded a subscription agreement ("Subscription
Agreement") dated 27 June 2012 with SIOC CDT Investments Holdings Proprietary
Limited ("SIOC").
SIOC is the investment vehicle for the Sishen Iron Ore Company Community
Development Trust (the "Trust"). In terms of the Subscription Agreement, SIOC
will subscribe for 7 883 243 ordinary shares ("Initial Ordinary Shares") and 33
607 507 "A" Ordinary Shares (""A" Ordinary Shares") (collectively referred to as
the "Subscription Shares") in Basil Read ("the BBBEE Transaction" or the
"Transaction"). The Transaction will result in SIOC holding an effective 25.1%
in Basil Read on the effective date. The effective date of the Transaction is
the 1st (first) Business Day following the last of the conditions precedent set
out in paragraph 5 below having been fulfilled or waived, as the case may be
(the "Effective Date").
The total value of the BBBEE Transaction is R521.1 million, of which R99.3
million will be paid by SIOC in cash and R421.8 million will be in the form of
vendor funding by way of a notional loan ("SIOC Notional Loan"). Post the
implementation of the BBBEE Transaction, it is expected that Basil Read will
have approximately 36% BBBEE equity ownership (11% of which is not subject to
any lock-in provisions), as determined in accordance with the Department of
Trade and Industry`s BBBEE Codes of Good Practice ("DTI Codes").
2.RATIONALE
Basil Read recognises the importance of transformation and the Basil Read board
("the Board") has taken a decision to initiate the BBBEE Transaction with
partners who will participate in the capital appreciation of the Basil Read
share price. Basil Read is currently a level three contributor in terms of the
DTI Codes. The Transaction will enhance its existing BBBEE ownership credentials
and complement its non-ownership elements of the DTI Codes. It is anticipated
that Basil Read will improve its BBBEE rating to a level two contributor in
terms of the DTI Codes on successful completion of the Transaction.
Basil Read and SIOC share a common vision for growth of the company in Southern
Africa and throughout the rest of the African continent. SIOC and Basil Read are
both active in the mining sector which remains a focus area for future growth.
The strategic partnership may benefit infrastructure development within the
various broad based communities and contribute towards bolstering Basil Read`s
order book. SIOC have demonstrated their commitment to Basil Read and a
sustainable BBBEE Transaction through contributing a meaningful portion of the
transaction value in cash. Furthermore, Basil Read has undertaken to vendor fund
the balance of the Transaction in the interest of complying with the spirit of
the DTI Codes on favourable terms with the aim of achieving a simple and tax
effective structure.
The Transaction has been structured based on a four year lock-in period, with an
option to extend for one additional year by agreement to that effect.
3. BACKGROUND INFORMATION ON SIOC AND ITS BENEFICIAL SHAREHOLDERS
SIOC is the investment vehicle for the Trust. The Trust was established in
August 2006 during the unbundling of Kumba Resources. The Trust is the sole
beneficiary of 3% of the ordinary shares in Sishen Iron Ore Company Proprietary
Limited.
The Trust represents five underlying trusts, namely the Gamagara Development
Forum, John Taolo Gaetsewe Developmental Trust, Maphalane Disabled Children`s
Trust, Tsantsabane Social and Development Forum and Thabazimbi Community
Development Forum. These trusts have been formed to benefit mostly previously
disadvantaged individuals living in the areas around the SIOC related mines and
comprise broad based communities. The host communities are mainly situated in
two provinces (Limpopo and Northern Cape) and four municipal areas, namely the
Thabazimbi Municipality, Tsantsabane Municipality, Gamagara Municipality and
John Taole District Municipality.
Mr ACG Molusi is the Chairman of both SIOC and the Trust and the Board welcomes
the opportunity to work with him and his team. Any discretionary funds are
allocated at the sole discretion of the Trust`s board of trustees, depending on
whether the request by the community meets the developmental goals of the Trust.
4.TERMS, CONDITIONS AND MECHANICS OF THE BBBEE TRANSACTION
4.1 Subscription for the Subscription Shares
On the Effective Date (or so soon thereafter as may be reasonably possible) SIOC
shall subscribe for the Subscription Shares as follow ("Subscription Date"):
4.1.1 the Initial Ordinary Shares each at R12.56 (twelve Rand and fifty six
cents) ("the Initial Subscription Price"), for cash in the amount of R99
013 532.08 (ninety nine million, thirteen thousand five hundred and thirty
two Rand and eight cents); and
4.1.2 the "A" Ordinary Shares, each at R0.01 (one cent) ("the "A"
Subscription Price"), for cash in the amount of R336 075.07 (three hundred and
thirty six thousand and seventy five Rand and seven cents).
It is a condition of the issuing of the Subscription Shares that, (in addition
to SIOC paying the amounts referred to in 4.1.1 and 4.1.2 ("SIOC Subscription
Consideration")) both the Initial Ordinary Shares and the "A" Ordinary Shares
above are subscribed for and paid for simultaneously as one indivisible
transaction.
Basil Read will issue the Subscription Shares to SIOC on receipt of the
Subscription Consideration.
Upon the issuing of the Subscription Shares, the Subscription Shares shall
represent not less than 25.1% (twenty five point one per centum) of the total
number of the issued ordinary share capital of Basil Read as at such date.
Save as specifically contemplated in the Subscription Agreement, SIOC shall not
be entitled to, in any way, sell, alienate or encumber any of the Subscription
Shares without the prior written consent of the Board for a period of 48
calendar months.
SIOC shall be entitled to nominate 1 director to the Board provided that the
director nominated by SIOC is approved by the Board and such approval is not
unreasonably withheld or delayed.
4.2 Mechanics of the BBBEE Transaction
The Transaction will be effected through the following mechanisms:
4.2.1 Increase in the authorised ordinary share capital
Basil Read shall increase its authorised ordinary share capital from 150
000 000 authorised no par value ordinary shares to 300 000 000 authorised
no par value ordinary shares.
4.2.2 Creation of "A" Ordinary Shares
The "A" Ordinary Shares shall be created. The salient details and the
rights attaching to the "A" Ordinary Shares are set out in paragraph 4.3
below. Basil Read`s memorandum of incorporation will be amended to include
the "A" Ordinary Shares and the rights attaching thereto.
4.2.3 Issue
The specific issue of the Subscription Shares to SIOC, which in terms of the JSE
Listings Requirements, requires a resolution to be passed by 75% of shareholders
present at the general meeting.
4.2.4 Future Repurchase of the "A" Ordinary Shares
On the Termination Date (as defined below), Basil Read (or its nominee) shall,
subject to the provisions of the Companies Act 71 of 2008 ("Act"), repurchase
or purchase (as applicable) at the "A" Subscription Price, so many of the "A"
Ordinary Shares from SIOC ("Repurchased Shares") as is equal that number of
shares determined in accordance with clause 4.4 below. The Termination Date is
the earlier of (1) the fourth anniversary of the Subscription Date or should
this date fall over a weekend or a public holiday the first business day
following the fourth anniversary of the Subscription Date but subject to the
extension of one year as per paragraph 2 above and (2) an offer for the entire
issued share capital of Basil Read being implemented and (3) the date on which a
final award for the winding up of Basil Read is granted for whatsoever reason
which is not otherwise challenged by Basil Read (the "Termination Date").
4.3 Creation of the "A" Ordinary Shares and the rights attaching to the "A"
Ordinary Shares
The salient rights attaching to the "A" Ordinary Shares are as follows:
4.3.1 the voting rights in respect of the "A" Ordinary Shares shall vest in the
holder thereof with effect from the Subscription Date;
4.3.2 the holder of the "A" Ordinary Shares shall be entitled, with effect
from the Subscription Date, to exercise any voting rights attaching to the
"A" Ordinary Shares, subject to the provisions set out in paragraphs 4.3.3
and 4.3.4 below respectively, in such manner as the holder thereof
determines in its sole and absolute discretion;
4.3.3 subject to the provisions set out in paragraph 4.3.4 below, the
holders of the "A" Ordinary Shares shall be entitled to exercise 1 vote per
"A" Ordinary Share, in respect of any resolution taken at a meeting of the
shareholders of Basil Read;
4.3.4 notwithstanding the provisions of paragraph 4.3.3 above, should any
special resolution proposed at any meeting of the shareholders of Basil
Read fail but which would have been passed had the votes of the holders of
the "A" Ordinary Shares not been taken into account, then (notwithstanding
the aforegoing) the holders of the "A" Ordinary Shares may only exercise
that proportion of the total votes in Basil Read which the aggregate amount
of the "A" Subscription Price bears to the aggregate consideration, being
the aggregate of (a) the "A" Subscription Price for all of the "A" Ordinary
Shares plus (b) the Initial Subscription Price for all of the Initial
Ordinary Shares plus (c) the stated capital of the issued ordinary shares
(including treasury shares) of Basil Read at the Effective Date plus (d)
any equity capital raised by the issue of ordinary shares in Basil Read
subsequent to the Effective Date;
4.3.5 the holders of the "A" Ordinary Shares shall not be entitled to any
distributions before the "A" Ordinary Shares are converted into Ordinary
Shares in the share capital of Basil Read;
4.3.6 the "A" Ordinary Shares shall be converted into Ordinary Shares on the
earlier of:
4.3.7.1 the 5th (fifth) business day after the SIOC Notional Loan was reduced to
nil in accordance with the provision of paragraph 4.4.1 or 4.4.3 below; or
4.3.7.2 the 5th (fifth) business day after the Termination Date;
4.3.7 after the conversion of the "A" Ordinary Shares into Ordinary Shares, the
converted "A" Ordinary Shares shall participate in any distributions
accruing to ordinary shareholders have the same voting rights as all other
Ordinary Shares and shall be listed on the JSE as soon as practicably
possible.
4.4 Repurchase of the "A" Ordinary Shares
4.4.1 The SIOC Notional Loan shall be equal to:
4.4.1.1 the number of "A" Ordinary Shares issued to SIOC in terms of paragraph
4.1.2, above multiplied by the excess of the Initial Subscription Price over the
"A" Subscription Price (SIOC Notional Principal), plus
4.4.1.2 notional interest in respect of the SIOC Notional Loan, which shall be
deemed to have been incurred from the Subscription Date to the Termination
Date, calculated at 72% (seventy two per centum) of the prime overdraft
rate ("Prime Rate"), less
4.4.1.3 any notional dividends which are deemed to have been earned in respect
of the "A" Ordinary Shares issued to SIOC.
4.4.2 On the business day after the Termination Date ("Repurchase Date"),
Basil Read (or its nominee) shall, subject to the provisions of the Act,
repurchase or purchase (as applicable) at the "A" Subscription Price, so
many of the "A" Ordinary Shares from SIOC as is equal to the SIOC Notional
Loan on the Termination Date, divided by the excess of the exit market
price per share, being the 60 day Volume Weighted Average Price ("VWAP") 5
(five) business days prior to the Termination Date less 12.5% ("Exit Market
Price") or the offer price per share, being the price offered, per ordinary
share (excluding the "A" Ordinary Shares), for the purchase of the entire
issued ordinary share capital of Basil Read (excluding treasury shares and
excluding the "A" Ordinary Shares) on an arm`s length bona fide outside
offer, less 12.5% (twelve point five per centum) ("Offer Price") (as the
case may be), over the "A" Subscription Price per share (fractional number
of shares shall be ignored), provided that the number of "A" Ordinary
Shares Basil Read shall repurchase in terms of this clause shall not exceed
the number of the "A" Ordinary Shares issued to SIOC in terms of the
Subscription Agreement.
4.4.3 On the Repurchase Date, Basil Read shall pay to SIOC, against transfer
of unencumbered ownership in and to the Repurchased Shares, an amount equal
to the number of "A" Ordinary Shares determined in terms of paragraph 4.4.2
above multiplied by the "A" Subscription Price ("Repurchase Price"). Once
the repurchase or purchase (as applicable) has taken place in accordance
with the provisions of paragraph 4.4.2 above, the SIOC Notional Loan shall
be deemed to be nil.
4.4.4 Basil Read has granted a call option in favour of SIOC (the "SIOC Call
Option"), in terms of which SIOC shall be entitled, but not be obliged, to
subscribe for that number of Ordinary Shares ("Basil Read Ordinary Shares")
as is equal to the number of Repurchased Shares (and not in terms of any
other provision hereof), at a subscription price per share that is equal to
the Exit Market Price per share or the Offer Price per share, as the case
may be, ("Call Price") provided that the Call Price is not less than the
price per share which is equal to the SIOC Notional Loan on the Termination
Date, divided by the number of Repurchased Shares. SIOC shall, should it
elect to exercise the SIOC Call Option, be obliged to exercise the SIOC
Call Option by giving written notice to Basil Read within 15 (fifteen)
business days from the Termination Date.
4.5. BASIL READ CALL OPTION
4.5.1 SIOC irrevocably grants a call option to Basil Read (the "Basil Read
Option") to purchase the Initial Ordinary Shares and the "A" Ordinary
Shares registered in its favour in the following events:
4.5.1.1 SIOC breaches its obligations in terms of paragraph 4.1; or
4.5.1.2 SIOC loses its BBBEE status which, for the purposes hereof, shall mean
a black ownership of not less than 51% (fifty one per centum); or
4.5.1.3 there is a change in control in SIOC within 24 months of the
Subscription Date, without the prior written consent of Basil Read; or
4.5.1.4 there is a change in control in SIOC after 24 months of the
Subscription Date, other than as provided for in the Subscription
Agreement.
4.5.2 Should Basil Read exercise the Basil Read Option, SIOC shall sell, at
Basil Read`s election, all its Initial Ordinary Shares and/or all its "A"
Ordinary Shares to Basil Read at the following purchase price ("the
Purchase Price"):
4.5.2.1 in respect of the Initial Ordinary Shares, each at a price based on
the 60 day VWAP less 12.5 % (twelve point five per centum) discount on the
date of written notice referred to in paragraph 4.5.2 ("the Basil Read Call
Effective Date"); and/or
4.5.2.2 in respect of the "A" Ordinary Shares each at a Purchase Price equal
to the "A" Subscription Price.
4.6. THIRD PARTY OFFER AND CHANGE IN CONTROL
Detailed terms of any third party offer or change of control received by
SIOC is set out in the Subscription Agreement and will be included in the
circular containing full details of the Transaction.
5. CONDITIONS PRECEDENT
The Transaction is subject to the fulfillment or waiver, as the case may be, by
no later than 28 September 2012 or within such extended period as Basil Read and
SIOC may agree in writing, of the following conditions precedent -
5.1 the approval by the shareholders of Basil Read of all necessary resolutions
to give effect to the Transaction;
5.2 the registration (where necessary) of the aforesaid resolutions with the
Companies and Intellectual Property Commission; and
5.3 the approval of the JSE in respect of the listing of the Initial Ordinary
Shares and the circular to Basil Read shareholders.
6. PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects for the proposed Transaction are due to be
finalised and released on SENS and published in the press in due course.
7. OPINIONS AND RECOMMENDATIONS
In terms of the JSE Listings Requirements, an independent professional expert is
required to determine if the terms and conditions of the Transaction are fair to
the Basil Read shareholders.
Accordingly, BDO Corporate Finance (Proprietary) Limited ("BDO") has been
appointed by the Board as the independent professional expert to determine if
the terms and conditions of the Transaction are fair to the Basil Read
shareholders. BDO`s opinion on the fairness of the Transaction will be included
in the circular to be posted to Basil Read shareholders.
The Board`s opinion and recommendation after taking into account inter alia the
opinion of BDO will also be included in the circular to Basil Read shareholders.
8. POSTING OF CIRCULAR
A circular containing full details of the Transaction and incorporating a notice
of general meeting of shareholders will be posted to Basil Read shareholders in
due course.
9. FURTHER CAUTIONARY ANNOUNCEMENT
Basil Read shareholders are referred to the renewal of cautionary announcement
dated 15 June 2012 and are advised that the pro forma financial effects of the
proposed Transaction will be released on SENS and in the press as set out in
paragraph 6 above. Accordingly, Basil Read shareholders are advised to continue
exercising caution when trading in their respective securities until such time
as a further announcement is made and the pro forma financial effects are
published.
Johannesburg
28 June 2012
Corporate Advisor to Lead and Transaction Attorneys to Basil Read
Basil Read Sponsor to Basil Read Werksmans & Ramsay Webber
(Deloitte & Touche (Deloitte & Touche Inc. logos
Corporate Finance Sponsor Services
logo) (Pty) Limited logo)
Independent expert Reporting accountants Sponsor to Basil Read
(BDO logo) and auditors (Macquarie First South
(PwC logo) Capital (Pty) Limited logo)
Investment Bank and Corporate Advisor and Attorneys to SIOC
Corporate Advisor to Fund Manager to SIOC (Schindlers logo)
SIOC (Arkein Capital logo)
(Nedbank logo)
Date: 28/06/2012 16:11:01 Produced by the JSE SENS Department.
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