| Thu 12 Jul 2012, 7:05 | | Pretoria Port Cement Ltd - Terms Announcement Relating to PPC's Proposed BEE Transaction and Specific Repurchase |
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PPC
Terms Announcement Relating to PPC's Proposed BEE Transaction and Specific Repurchase
Pretoria Portland Cement Company Limited
Incorporated in the Republic of South Africa
Registration number 1892/000667/06
JSE share code PPC
ZSE share code PPC
JSE ISIN ZAE000125886
ZSE ISIN ZWE000096475
(PPC or the Company)
TERMS ANNOUNCEMENT RELATING TO PPC?S PROPOSED 6.5 PERCENT BROAD-BASED
BLACK ECONOMIC EMPOWERMENT (BEE) TRANSACTION (BEE TRANSACTION) AND
THE CANCELLATION OF PPC ORDINARY SHARES HELD BY PPC CEMENT (PROPRIETARY)
LIMITED (SPECIFIC REPURCHASE), COLLECTIVELY, (THE TRANSACTION)
Highlights
R1.1 billion broad-based BEE ownership transaction, including employees, existing strategic
Black partners and broad-based Black womens groups;
Increases the Companys effective BEE ownership to 26 percent in accordance with the
ownership requirements of the Mining Charter;
Demonstrates the Companys on-going commitment to transformation and broad-based
Black economic empowerment;
Significant employee participation through a broad-based employee share trust for eligible
employees within the PPC group; and
Substantial notional vendor facilitation from PPC to ensure sustainability of the BEE
Transaction, with minimal dilution of dividends to existing PPC shareholders.
1. Introduction and rationale
In 2008 PPC concluded a 15.3 percent broad-based BEE ownership transaction in order to achieve
compliance with the Broad-Based Socio Economic Empowerment Charter for the South African Mining
Industry (the Mining Charter) 2009 equity ownership requirements (First BEE Transaction) and
registered ten applications to convert its old order mining rights to new order mining rights.
PPC is now seeking to secure the conversion to new order mining rights and in order to do so, needs
to increase the effective BEE ownership of its South African operations to 26 percent in accordance
with the Mining Charters 2014 equity ownership requirements. The board of directors of PPC (the
Board) is pleased to announce the salient terms of the proposed BEE Transaction, which will
facilitate the introduction of additional BEE equity participation in PPC. PPC has concluded transaction
agreements with the BEE Vehicles (defined below) that will facilitate the acquisition of an effective 6.5
percent of its issued share capital post the implementation of the Transaction by broad-based BEE
groups. PPC is proposing to implement the BEE Transaction at the listed company level that will result
in 20.8 percent direct broad-based BEE ownership, translating into an effective 26 percent broad-
based BEE ownership of PPCs South African operations, based on the current 80:20 revenue split
between PPCs South African and non-South African operations.
The BEE Transaction incorporates eligible PPC employees and its existing strategic Black partners
(SBPs) which PPC believes are the parties with the most influence on its operations as well as a
broad-based trust for the benefit of Black women in regions and areas where PPC operates in South
Africa, enhancing the broad-based nature of the BEE Transaction and further emphasising PPCs
commitment to empowerment and upliftment of previously disadvantaged South Africans.
PPC has been guided primarily by the following principles in structuring the BEE Transaction
achieve compliance with the Mining Charters 2014 equity ownership requirements;
ensure the sustainability of PPCs South African businesses, including having the necessary
continued license to operate;
support PPC's market position and growth strategies;
enhance PPC's commitment to broad-based empowerment and transformation;
ensure transaction sustainability, whilst optimising the cost of the BEE Transaction; and
allow subsequent corporate restructuring to enhance efficiencies and reduce risk
In order to ensure that PPC has sufficient authorised but unissued ordinary share capital to implement
the BEE Transaction, the Company proposes to increase its authorised share capital from 600 million
to 700 million ordinary shares (Share Increase). In terms of the regulations promulgated under the
Companies Act No 71 of 2008, as amended (Companies Act), a company is not permitted to create
any new par value shares, or shares having a nominal value, on or after 1 May 2011. Accordingly,
PPC proposes to convert its authorised (unissued and issued) ordinary par value shares into ordinary
no par value shares (Proposed Conversion) at the same time as creating new ordinary no par
value shares.
As part of and in order to mitigate the potential dilution of the First BEE Transaction to PPC ordinary
shareholders (PPC Shareholders), PPC repurchased 20,140,401 PPC ordinary shares on the open
market and has held them through a wholly-owned subsidiary PPC Cement (Proprietary) Limited
(PPC Cement), as treasury shares (the Treasury Shares). PPC proposes to cancel these
Treasury Shares, prior to implementing the BEE Transaction, which will reduce the effective net
issuance of new ordinary shares, as set out in paragraph 3 below. In order to effect the cancellation
PPC will repurchase these Treasury Shares.
Following the Transaction, PPC intends (subject to certain approvals and consents) to undertake a
corporate restructuring, after the conversion of its mining licences to new order mining rights, in order
to streamline and optimise its South African and non-South African business operations (Intended
Corporate Restructure). The Intended Corporate Restructure will result in the creation of separate
South African and non-South African operating businesses into which PPC will divisionalise its existing
South African subsidiaries thereby ensuring that PPC becomes a true listed holding company. This is
in order to align the corporate structure with the corporate growth strategy leading to enhanced
efficiencies and reduced risk. PPC also proposes to change its name to PPC Limited (Change of
Name). The Intended Corporate Restructure does not require approval by PPC Shareholders, save
for any financial assistance that may be required to be provided by the Company to the Companys
subsidiaries, in term of section 45 of the Companies Act, in the form of guarantees arising from the
divisionalisation of the South African assets in, and delegation of liabilities to, the new South African
operating company.
In order to give effect to the provisions above, the PPC Board proposes that the Company adopts a
new Memorandum of Incorporation (New MOI). The New MOI contains substantially similar
principles to those contained in the current articles of association and memorandum of association,
other than as required as a result of harmonising the MOI with the requirements of the Companies Act
and the Listings Requirements of the JSE Limited (JSE).
The purpose of this announcement is to provide PPC Shareholders with the salient terms of the
Transaction. A general meeting of PPC Shareholders will be held, at which meeting PPC
Shareholders will be requested to vote on the resolutions as set out in paragraph 5 (General
Meeting).
2. Details of the BEE Transaction
Pursuant to the BEE Transaction, PPC will issue 6.5 percent (post dilution) of its ordinary share capital
to the following beneficiaries
4.420 percent to an employee share trust established for the benefit of all PPCs permanent
South African employees, including white employees, employed by PPC and its South African
subsidiaries (the Employee Share Trust);
1.755 percent to the SBPs, who will hold their interest in PPC through a special purpose
vehicle (SBP Vehicle), which will be incorporated for the purpose of holding PPC ordinary
shares in PPC which will be issued to it; and
0.325 percent to a broad-based trust for the benefit of various Black women in the regions and
areas where PPC operates in South Africa (the Bafati Investment Trust).
The BEE Transaction will be implemented through a specific issue of approximately 39.3 million PPC
ordinary shares (Subscription Shares), at a nominal value of R0.01 (one cent) (Subscription
Price) for each PPC ordinary share (Specific Issue), to the Employee Share Trust, the SBP
Vehicle and the Bafati Investment Trust (collectively, the BEE Vehicles) facilitated through a
notional vendor facilitation (NVF) mechanism. The PPC ordinary shares to be issued to the BEE
Vehicles will represent 6.5 percent of PPCs increased share capital (post dilution).
For illustrative purposes, the BEE Transaction is valued at R1.1 billion, calculated with reference to the
number of Subscription Shares and the 30-day volume weighted average price of R27.39 per PPC
ordinary shares at Monday 9 July 2012, being the last practicable date prior to the finalisation of this
announcement (Last Practicable Date).
The BEE Transaction will be implemented immediately following the implementation of the Specific
Repurchase, subject to the fulfilment of the conditions precedent set out in paragraph 5 below
(Effective Date), and is intended to endure until soon after the seventh anniversary of the Effective
Date or such other date as may be specified by PPC in the acceleration notice (which may be issued
by the Company in the event of a corporate action) (End Date).
2.1 General terms of the BEE Transaction
2.1.1 Specific Issue of Subscription Shares
2.1.1.1 The Employee Share Trust and the Bafati Investment Trust (collectively, the
Participants) have been established for the purpose of, inter alia, subscribing
for, holding and administering the relevant Subscription Shares on behalf of the
relevant beneficiaries, subject to the rights and restrictions stipulated in the
relevant subscription agreements. The SBP Vehicle is a vehicle through which
the SBPs will hold their interest in PPC, also subject to the rights and restrictions
stipulated in its subscription agreement.
2.1.1.2 The BEE Transaction will be implemented through the Specific Issue. The
Subscription Shares to be issued to the BEE Vehicles will rank pari passu with
PPC ordinary shares, save that they will be subject to the rights and restrictions
contained in the relevant subscription agreements.
2.1.1.3 The Company and its South African operating subsidiaries (Employer
Companies) will make a cash contribution to the Employee Share Trust
equating to the attributable aggregate Subscription Price of R267,577.80 (the
Employee Subscription Amount), payable by the Employee Share Trust to
enable the Employee Share Trust to subscribe for 26,757,780 Subscription
Shares (the Employee Shares).
2.1.1.4 PPC will make a cash capital contribution to the Bafati Investment Trust equal to
the attributable aggregate Subscription Price of R19,674.84 (the Bafati
Investment Subscription Amount) payable by the Bafati Investment Trust to
enable the Bafati Investment Trust to subscribe for 1,967,484 Subscription
Shares (the Bafati Investment Trust Shares).
2.1.1.5 The SBPs will make contributions to the SBP Vehicle equating to the attributable
aggregate Subscription Price of R106,244.13 (SBP Subscription Amount) to
enable the SBP Vehicle to subscribe for 10,624,413 Subscription Shares (the
SBP Vehicle Shares).
2.1.2 Implementation mechanism
2.1.2.1 The BEE Transaction will be facilitated by PPC through the provision of an NVF
mechanism over a period of seven years (the NVF Period).
2.1.2.2 In terms of the NVF mechanism, the Company will issue the Subscription Shares
at a nominal value of R0.01 (one cent) per Subscription Share and will be
obliged at the End Date, to repurchase a certain number of Subscription Shares
held by the BEE Vehicles in order to reduce the NVF balance at that time, as
calculated in accordance with the repurchase formula set out in the relevant
subscription agreements (Repurchase Shares).
2.1.3 Vesting and lock-in
2.1.3.1 The BEE Vehicles may not dispose of or encumber the Subscription Shares
during the NVF Period and, only in the case of the Participants, for a period of
seven days thereafter.
2.1.4 Equity allocation to the BEE Vehicles
Post the issuance of the Subscription Shares, the effective participation of the BEE
Vehicles in PPCs issued ordinary share capital will be as follows
Number of Percent Percent of PPC held
Subscription Shares allocation post the Transaction
Employee Share Trust 26,757,780 68.0 percent 4.420 percent
Bafati Investment Trust 1,967,484 5.0 percent 0.325 percent
SBP Vehicle 10,624,413 27.0 percent 1.755 percent
Total 39 349 677 100.0 percent 6.500 percent
2.1.5 Dividends and other distributions
2.1.5.1 During the NVF Period, an amount equal to 20 percent of any dividends and
distributions made by PPC to its ordinary shareholders, other than the BEE
Vehicles, will flow to the BEE Vehicles (Unrestricted Dividend), and in turn
be distributed to the Employee Share Trust and Bafati Investment Trust
beneficiaries (collectively, the Beneficiaries) and the SBPs in proportion to their
respective interests in the BEE Vehicles, net of any administration costs and any
dividends tax.
2.1.5.2 During the NVF Period, the balance of 80 percent of any dividends and
distributions made by PPC to its ordinary shareholders, which would ordinarily
have accrued to the BEE Vehicles had the restrictions and limitations under the
relevant subscription agreements not been imposed on the Subscription Shares,
will be suspended and taken into account in the repurchase formula when
determining the number of Repurchase Shares.
2.1.5.3 Immediately following the repurchase pursuant to the Repurchase Right (as
defined below), the BEE Vehicles will be entitled to 100 percent of any dividend
or distribution attributable to the shares that remain subsequent to PPC
repurchasing the Repurchase Shares (Remaining Shares).
2.1.6 Voting
The BEE Vehicles shall be entitled to exercise all voting rights attached to the
Subscription Shares of which they are the registered owner until the Subscription Shares
are either repurchased by PPC or transferred to the Beneficiaries or the SBPs (where
applicable), at which point the new holders of the PPC ordinary shares shall be entitled to
exercise all voting rights attached to those shares.
2.1.7 Corporate Actions
2.1.7.1 The Subscription Shares will rank pari passu with the other ordinary shares in
respect of any possible subdivision or consolidation of PPC ordinary shares
and the Subscription Shares shall be deemed to include such shares as
subdivided or consolidated.
2.1.7.2 In the event of PPC making any distribution to shareholders, the BEE
Vehicles right to receive 80 percent of such distribution will be suspended
and the BEE Vehicles will only be entitled to receive 20 percent of such
distribution. In the event of an elective capitalisation award where PPC
permits PPC Shareholders to receive a cash payment instead of an award of
capitalisation shares, the BEE Vehicles will not have the right to receive cash
and must always elect to receive shares. In relation to all capitalisation
awards (elective or non-elective) the right of the BEE Vehicles to receive 80
percent of that award of capitalisation shares will be suspended and the BEE
Vehicles will only be entitled to be issued 20 percent of the award of
capitalisation PPC shares, which 20 percent will be subject to the restrictions
under the relevant subscription agreements, and in the case of the SBP
Vehicle, will also be subject to the restrictions under the Relationship
Agreement (defined below).
2.1.7.3 PPCs right to repurchase some of the Subscription Shares in terms of the
repurchase formula (Repurchase Right) can be accelerated by the
Company in the event of (i) a delisting of PPC ordinary shares; (ii) change in
control resulting in 100 percent acquisition of PPC ordinary shares; (iii)
change in control not resulting in a delisting or 100 percent acquisition of PPC
ordinary shares. If PPC in its sole discretion determines that the BEE Vehicles
will be in a worse-off position than they would have been had the Repurchase
Right been exercised at the end of the NVF Period, as a result of the
corporate action, then PPC will propose adjustments to the formula used to
calculate the number of Repurchase Shares to ensure that the BEE Vehicles
will enjoy a net economic benefit which is substantially not less than what
would have accrued had the Repurchase Right been exercised at the End
Date absent the corporate action.
2.1.7.4 The BEE Vehicles will not be entitled to participate in any rights offers. The
value of the rights will be taken into account when determining the
Repurchase Shares in accordance with the repurchase formula.
2.2 Details of the Employee Share Trust scheme
2.2.1 Establishment of the Employee Share Trust
The Company has established the Employee Share Trust for the purpose of holding the
Employee Shares for the benefit of permanent employees of the Company employed by
a South African PPC Group company, including most of its executive directors (Eligible
Employees). The Eligible Employees will become vested beneficiaries to the capital
and income (the Employee Beneficiaries) thereof by formally accepting an offer for
an award of vested rights in the Employee Shares held by the Employee Share Trust
(Employee Units) as contained in an allocation notice.
2.2.2 Appointment of Employee Share Trustees
PPC will appoint three trustees for purposes of signature of legal agreements and
implementing the BEE Transaction (the Initial Employee Share Trustees). Such
Trustees will be members of PPCs management team as approved by the PPC Board
and will facilitate the election of trustees appointed by the Employee Beneficiaries, which
is expected to be no later than 31 March 2013.
In future, the board of Trustees will comprise a majority of Black persons, at least one of
whom must be a woman and shall be constituted as follows
Three Trustees appointed by PPC; and
Four Trustees who shall at all times constitute the majority, and are elected by
the Employee Beneficiaries as stipulated in the Employee Share Trust Deed.
2.2.3 Acquisition of the Employee Share Trust Shares
PPC will issue the Employee Shares to the Employee Share Trust, at the Employee
Subscription Amount, on the Effective Date.
The Employee Shares will be held in the Employee Share Trust for the duration of the
NVF Period for the beneficial interest of the Employee Beneficiaries, and may not be
disposed of (except to the extent PPC exercise is Repurchase right) before the expiry of
a period of seven days after the End Date, unless specifically provided for in terms of the
Employee Share Trust Deed.
2.2.4 Creation and allocation of Employee Units
In terms of the Employee Share Trust, Employee Units will be created for allocation to
Eligible Employees. The Employee Units will in principle represent a vested right of each
Employee Beneficiary from inception in the Employee Shares pursuant to acceptance
thereof by each such Employee Beneficiary.
The majority of the Employee Units will be vested in the Employee Beneficiaries upon
inception of the Employee Share Trust and a portion of the Employee Units will be used
for future allocations.
Employee Units shall be allocated to Employee Beneficiaries by their relevant Employer
Companies in accordance with the provisions of the allocation criteria approved by the
Board. Employee Units will provide Employee Beneficiaries with a vested right to a
number of Employee Shares held by the Employee Share Trust, as well as a vested right
to a proportional number of the Employee Shares that are not specifically attributable to
Employee Units (Pool Employee Shares), provided that the Employee Beneficiary is
still in the employ of PPC on the End Date.
The Employee Units will represent a vested right of each Employee Beneficiary to the
underlying Employee Shares in the Employee Share Trust and will confer the vested right
to delivery of a number of underlying Remaining Employee Shares on the End Date as
stipulated in the Employee Share Trust Deed.
2.2.5 Future Allocations
Eligible Employees classified under grade 1 to 7 in terms of the Peromnes grading
system (Management Employees) who join the Employer Companies after the
Effective Date up to the third anniversary of the Effective Date will also qualify for
Employee Units and will receive an allocation of Employee Units that are attributable to
Pool Employee Shares provided that there are Pool Employee Shares available.
Similarly, persons who become permanent PPC employees in South Africa following
completion of current learnerships shall also qualify to be allocated Employee Units
during this period.
To accommodate the above, it is intended that not all of the Employee Units will be
specifically allocated at inception of the Employee Share Trust. In addition, Employee
Units cancelled due to early termination of employment of Bad Leavers (defined below)
and Employee Units cancelled in cases of death, may also be utilised by the Employee
Share Trust for allocation to new Eligible Employees. All dividends and distributions
received by the Employee Share Trust in relation to any Pool Employee Shares shall be
utilised by the Employee Share Trust to make the payments in cases of death as set out
in paragraph 2.2.6 below, as well as any other costs incidental to the administration of
the Employee Share Trust.
To the extent that there are Pool Employee Shares at the End Date, they will be
distributed to the Employee Beneficiaries who are still employed within the Employer
Companies, in accordance with their vested rights at the End Date as set out in
paragraph 2.2.7 below.
2.2.6 Events influencing benefits to be received
The Employee Share Trust Deed makes a distinction between Employee Beneficiaries
whose employment with the Employer Companies is terminated due to retrenchment,
mandatory retirement (including retirement mutually agreed with the relevant Employer
Company), death, and disability or incapacity which results in the employee being unable
to perform the inherent job requirements of their occupation (collectively Good leavers)
and Employee Beneficiaries whose participation in the Employee Share Trust is
terminated due to dismissal, early retirement (unless mutually agreed with the relevant
Employer Company) and resignation (collectively Bad Leavers).
Good Leavers shall receive the benefits in relation to 100 percent of the Employee Units
vested in the Employee Beneficiary at inception (i.e. their benefits will not be pro-rated).
In the case of death however, the Employee Beneficiarys Employee Units will be
cancelled and the estate of the Employee Beneficiary shall receive a payment in relation
to the Employee Units previously held by that Employee Beneficiary within one year of
his/her death all benefits, the amount which will be calculated by PPC annually, taking
into account the market value of the Employee Units held by the deceased.
Employee Units will be cancelled for no consideration in the case of Bad Leavers and
such individuals cease to participate in the Employee Share Trust.
2.2.7 End Date
On the End Date, the Employee Share Trustees shall transfer the Remaining Employee
Shares underlying each Employee Unit to the Employee Beneficiaries in accordance with
their vested rights and subject to paragraph 2.2.6 above. The distribution of the
Remaining Employee Shares will be made to the Employee Beneficiaries in proportion to
the Employee Units.
The vested rights of each Employee Beneficiary that is still in the employ of PPC as at
the End Date will entitle them to a further number of Remaining Shares determined as
their proportional shares, with reference to the number of years that they have been a
Beneficiary of the Employee Share Trust.
2.3 Bafati Investment Trust scheme
2.3.1 Establishment of the Bafati Investment Trust
The Company has established the Bafati Investment Trust for the purpose of holding the
Bafati Investment Trust Shares for the benefit of various Black women in the regions and
areas where PPC operates in South Africa (Bafati Investment Trust Beneficiaries).
The Bafati Investment Trust Beneficiaries will be appointed as thereof by formally
accepting an offer to become Bafati Investment Trust Beneficiaries as contained in an
allocation notice.
2.3.2 Appointment of Trustees
PPC will appoint three trustees for purposes of signature of legal agreements and
implementing the BEE Transaction (Initial Bafati Investment Trust Trustees). Such
Trustees will be members of the PPC executive management as approved by the Board.
The board of Trustees which is expected to be finalised by no later than 31 March 2013
will comprise a majority of Black persons, with 50 percent of the trustees being women
and shall be appointed as follows
Three Trustees appointed by PPC; and
Three independent Trustees.
2.3.3 Acquisition of Bafati Investment Trust Shares
PPC will issue the Bafati Investment Trust Shares to the Bafati Investment Trust, at the
Bafati Investment Subscription Amount on the Effective Date.
2.4 Details of the SBPs participation
2.4.1 Acquisition of SBP Vehicle Shares
PPC will issue the SBP Vehicle Shares to the SBP Vehicle, at the SBP Subscription
Amount, on the Effective Date. The SBP Vehicle Shares will be held in the SBP Vehicle
for the duration of the NVF Period, and may not be disposed of, pledged or encumbered
before the End Date.
2.4.2 Allocation of participation interest
The participation interest of each of the SBPs in the SBP Vehicle has been determined in
proportion to its participation under the First BEE Transaction save for Capital Edge,
which will be replaced by the Palama Consortium, which has the exact same
shareholders as Capital Edge. Based on this criteria, the SBPs will have the following
interests in the SBP Vehicle
Number of Percent held in Percent of PPC held
Subscription the SBP through the SBP
Shares held Vehicle Vehicle post the BEE
indirectly Transaction
Peu Group (Proprietary) Limited 2,884,529 27.15 percent 0.476 percent
Nozala Investments (Proprietary) 2,731,536 25.71 percent 0.451 percent
Limited
Portland Consortium (Proprietary) 2,731,536 25.71 percent 0.451 percent
Limited
Palama Cement Consortium 2,276,812 21.43 percent 0.376 percent
Proprietary Limited (formerly
Capital Edge (Proprietary) Limited)
Total 10,624,413 100.00 percent 1.755 percent
2.4.3 Salient terms of the Relationship Agreement
2.4.3.1 Empowerment obligations
Each of the SBPs has undertaken that it will be controlled by Black Persons on
the Effective Date, on the End Date and for the period between those dates.
Each of the SBPs has undertaken to PPC, among other things, that until the
End Date, it will meet its specified minimum requirement in relation to
contributing towards the ownership scorecard points of PPC (Minimum
Requirement) as set out in the agreement governing the relationship between
PPC and the SBPs (Relationship Agreement).
2.4.3.2 Restrictions on sale and encumbrances
Subject to the paragraph below, prior to the expiry of the NVF Period, the SBPs
will not be permitted to encumber or sell the shares they hold in the SBP
Vehicle and the SBP Vehicle will not be able to encumber or sell the shares it
holds in PPC, save for any sale or encumbrances which are permitted in the
transaction agreements.
Each SBP will, subject to (i) the terms and conditions of the SBP shareholders
agreement governing the relationship between the SBPs (ii) obtaining written
consent from PPC and (iii) receipt of other regulatory approvals, be entitled to
sell its shares in the SBP Vehicle to another SBP (and any other person), from
the fifth anniversary of the Effective Date provided that the purchaser of those
shares is able to meet the same Minimum Requirement as that applicable to
the selling SBP in terms of the Relationship Agreement.
2.4.3.3 PPC call option
PPC has a call option to acquire an SBPs shares in and/or claims against the
SBP Vehicle, where that SBP is a defaulting party or, where the defaulting
party is the SBP Vehicle, the SBP Vehicle Shares or all of the shares in and/or
claims against the SBP Vehicle upon the occurrence of a material breach by an
SBP or the SBP Vehicle of certain provisions of the Relationship Agreement
(i.e. (i) the provisions governing restrictions on the sale and encumbrance of
equity; (ii) non-compete restrictions; or (iii) a failure by a SBP to contribute its
Minimum Requirement (Rating Failure) caused by the actions or omissions
of an SBP or their respective direct or indirect shareholders (Penalty Event))
and failing to remedy such breach within a reasonable grace period; or in the
event of an insolvency event and a Rating Failure not attributable to the actions
or omissions of the SBPs or their respective direct or indirect shareholders
(Non-Penalty Event).
PPCs call option will, depending on the nature of the call option event, be at
market value or at a 50 percent discount to market value.
Each SBP has pledged its shares in the SBP Vehicle to PPC, in terms of an
agreement of pledge and cession, as security for the performance of its
obligations to sell its shares in the SBP Vehicle to PPC under the call option.
Similarly, the SBP Vehicle has pledged the SBP Vehicle Shares to PPC, as
security for the performance of its obligations to sell the SBP Vehicle Shares to
PPC under the call option and on the exercise by PPC of the SBP Repurchase
Right.
2.5 Estimated economic cost
The economic cost of implementing the BEE Transaction for PPC and its shareholders is
estimated to be approximately R325 million as at the Last Practicable Date. This was calculated
with reference to the requirements of the International Financial Reporting Standards (IFRS),
including IFRS 2 Share Based Payments. This represents approximately 2.05 percent of the
market capitalisation of PPC as at the Last Practicable Date.
3. Details relating to the Specific Repurchase
Following the fulfilment of the conditions precedent referred to in paragraph 5 below, PPC will
acquire from PPC Cement, all of the Treasury Shares for a consideration equal to the closing
price of a PPC ordinary share on the JSE on the business day prior to effecting the Specific
Repurchase. The consideration payable to PPC Cement will be funded out of return of stated
capital and the balance (if any) out of the reserves of PPC and will not require any external
funding.
The total number of ordinary shares in issue pursuant to the Transaction will be as set out below
Number of
shares (millions)
Total ordinary shares in issue before the Transaction 586.2
Net new issuance 19.2
New issuance of Subscription Shares by PPC 39.3
Repurchase and cancellation of existing Treasury Shares (20.1)
Total ordinary shares in issue after the Transaction 605.4
The Treasury Shares will pursuant to the Specific Repurchase be delisted from the JSE on or
about 31 August 2012; however, the PPC Board will not implement the Specific Repurchase
unless it is compliant with the Companies Act and the MOI.
Whilst certain PPC ordinary shares may continue to be treated as treasury shares from an IFRS
perspective, PPC will hold no treasury shares post the implementation of the Transaction.
4. Unaudited pro forma financial effects of the Transaction
The unaudited pro forma financial effects of PPC presented below is the responsibility of PPCs
directors and are based on both the most recently published reviewed interim results of PPC for
the six month period ended 31 March 2012 and the audited results for the year ended 30
September 2011.
The accounting policies of PPC for the six month period ended 31 March 2012 have been used in
preparing the unaudited pro forma financial effects.
The unaudited pro forma financial effects were prepared for illustrative purposes only and may
due to the nature thereof not fairly present PPCs financial position, changes in equity, and results
of its operations or cash flows as at the relevant reporting date. It does not purport to be indicative
of what the financial results would have been or will be, had the Transaction been implemented on
a different date.
The Company wishes to highlight that the earnings and headline earnings per share impacts
shown below are magnified as the SBP Vehicle and Bafati Investment Trust related economic cost
will be expensed in full on day one of the Transaction. In accordance with IFRS 2 requirements
the economic cost relating to the Employee Share Trust will be amortised over the NVF Period.
Thus the IFRS 2 charge will reduce in years 2 to 7. Furthermore, the impact on the six month
period is more severe as the SBP Vehicle and the Bafati Investment Trust economic costs are not
pro-rated.
For the year ended 30 September 2011 Before the After the Percent After the Percent
Transaction BEE change Transaction change
Transaction
(note 1) before the (year 1) (year 1)
Specific
Repurchase
Net asset value (NAV) per share (cents) 182 178 (2) 178 (2)
Tangible net asset value (TNAV) per share
(cents) 164 160 (2) 160 (2)
Earnings per share (cents) 164 136 (17) 136 (17)
Earnings per share before BEE IFRS 2
charge (cents) 164 160 (2) 160 (2)
Diluted earnings per share (cents) 163 135 (17) 135 (17)
Headline earnings per share (cents) 165 137 (17) 137 (17)
Weighted average number of shares in issue
(million) 527 527 - 527 -
Diluted weighted average number of shares
in issue (million) 530 530 - 530 -
Number of shares in issue (net of shares
subject to repurchase) (million) 566 566 - 605 7
For the six month period ended 31 March Before the After the Percent After the Percent
2012 Transaction BEE change Transaction change
Transaction
(note 1) before the
Specific
Repurchase
Net asset value (NAV) per share (cents) 144 141 (2) 141 (2)
Tangible net asset value (TNAV) per share
(cents) 122 119 (2) 119 (2)
Earnings per share (cents) 78 52 (33) 52 (33)
Earnings per share before BEE IFRS 2
charge (cents) 78 75 (4) 75 (4)
Diluted earnings per share (cents) 77 51 (34) 51 (34)
Headline earnings per share (cents) 78 52 (33) 52 (33)
Weighted average number of shares in issue
(million) 525 525 - 525 -
Diluted weighted average number of shares
in issue (million) 531 531 - 531 -
Number of shares in issue (net of shares
subject to repurchase) (million) 566 566 - 605 7
Notes and assumptions to the unaudited pro forma financial effects
1. The EPS, diluted EPS, HEPS, NAV and TNAV per PPC ordinary share Before the Transaction are based on the
audited annual results for the year ended 30 September 2011 and the reviewed interim results for the six month
period ended 31 March 2012.
2. The Subscription Shares are treated as treasury shares in terms IFRS SIC Interpretation 12 (Consolidation
Special-purpose Entities), and as a result the shares issued to the BEE Vehicles do not increase the weighted
average number of PPC ordinary shares.
3. The EPS, diluted EPS and HEPS After the Transaction for September 2011 and March 2012 are based on the
assumption that the transaction was implemented on 1 October 2010 and 1 October 2011 respectively and includes
the following
3.1. An IFRS 2 charge of R131 million for the year ended 30 September 2011 and R118 million for the six month
period ended 31 March 2012, respectively estimated based on the 30-trading day VWAP as at the Last
Practicable Date of R27.39.
3.2. Transaction costs associated with the implementation of the Transaction amounting to R11 million.
3.3. Amounts equal to the 20 percent trickle dividend (unrestricted dividends) of R12 million and R7 million for the
year ended 30 September 2011 and the six months ended 31 March 2012 respectively.
3.4. For accounting purposes, the PPC ordinary shares issued to the BEE Vehicles are treated in a manner similar
to that of an option. Consequently, these PPC ordinary shares are being treated as potential PPC ordinary
shares for the purpose of calculating diluted EPS.
4. For a full understanding of PPCs share capital and weighted average number of shares before the Transaction,
refer to PPCs 2011 Integrated Annual Report and the Interim results for the six months ended 31 March 2012.
5. There are no material post balance sheet events which require adjustment to the unaudited pro forma financial
effects.
5. Conditions precedent
5.1 The Transaction is conditional upon the following conditions precedent
5.1.1 The Company obtaining, the special resolution of its shareholders at the General
Meeting, for
(i) the repurchase of the Treasury Shares;
(ii)the Proposed Conversion;
(iii) the Share Increase;
(iv) the Change of Name;
(v) the adoption of the New MOI;
(vi) the provision of financial assistance to the BEE Vehicles in terms of section 44 and,
where applicable, section 45 of the Companies Act;
(vii) the provision of financial assistance to the subsidiaries of PPC in terms of section
45 of the Companies Act; and
(viii) the repurchase of the Repurchase Shares;
the resolutions stipulated in paragraphs 5(ii), 5(iii) and 5(v) being filed with the
Companies and Intellectual Property Commission (CIPC);
5.1.2 The Board of directors of PPC obtaining a fairness opinion from an independent expert in
accordance with the JSE Listings Requirements;
5.1.3 The Company obtaining the approval, by ordinary resolutions of its shareholders (at the
General Meeting) with a 75 percent majority of the votes cast in favour thereof, to give
effect to the Specific Issues; and
5.1.4 The BEE Transaction is also conditional upon the CSG Funding SPV (Proprietary)
Limited, the SBP Funding SPV (Proprietary) Limited (participants under the First BEE
Transaction) and the Funders under the First BEE Transaction providing consents for the
issuance of shares to the BEE Vehicles in terms of the BEE Transaction and the Specific
Repurchase being implemented.
5.2 The Change of Name is conditional upon the Company obtaining, the special resolution of its
shareholders at the General Meeting, for the Change of Name and such resolution being filed
with the CIPC and the CIPC issuing a registration certificate in relation to the Change of Name.
6. Documentation
PPC Shareholders are advised that in accordance with the JSE Listings Requirements, a circular
to PPC Shareholders containing further details of the Transaction, including inter alia the pro
forma financial effects and more detailed assumptions used to arrive at the pro forma financial
effects and a directors recommendation based on a fairness opinion as issued by an independent
expert, together with a notice of a general meeting to PPC Shareholders, will be issued in due
course. An announcement will be released on SENS to notify PPC Shareholders of the posting
date, including the details of the General Meeting.
A presentation regarding the Transaction will be available on the Companys website
(www.ppc.co.za) and a shareholder webcast presentation will be broadcast from the website
today at 11h30. The webcast can be accessed through www.ppc.co.za or
www.corpcam.com/PPC09072012. Alternatively a telephone conference call facility will be
available in SA at 0 800 200 648 or UK on 0 800 917 7042.
Sandton
12 July 2012
For enquiries
Jaco Snyman (Group Company Secretary)
Pretoria Portland Cement Company Limited
Telephone +27 11 386 9000
Email jaco.snyman@ppc.co.za
Joint financial adviser and transaction sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Joint financial adviser
Quartile Capital (Proprietary) Limited
Sponsor
Merrill Lynch South Africa (Proprietary) Limited
Financial communication adviser
College Hill
Tax adviser
Cliffe Dekker Hofmeyr Incorporated
Corporate law adviser
Bowman Gilfillan Inc.
Legal advisers to the SBPs
Werksmans Inc.
Reporting accountants and auditors
Deloitte & Touche
Date: 12/07/2012 07:05:00 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.
