| Wed 27 Oct 2004, 14:18 | | ASTRAPAK - ACQUISITION BY ROYAL BAFOKENG FINANCE ( |
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ASTRAPAK - ACQUISITION BY ROYAL BAFOKENG FINANCE (PROPRIETARY) LIMITED
ASTRAPAK LIMITED
(Registration number 1995/009169/06)
ISIN : ZAE000030938
Share Code : APK
(`Astrapak` or `the Company`)
ACQUISITION BY ROYAL BAFOKENG FINANCE (PROPRIETARY) LIMITED (`RBF`) OF A 20%
INTEREST IN ASTRAPAK AS PART OF A BLACK ECONOMIC EMPOWERMENT (`BEE`) TRANSACTION
1. Introduction
Further to the cautionary announcement released on SENS on 21 September
2004, shareholders are advised that Astrapak has reached an agreement in
principle with RBF that will result in RBF, a wholly owned subsidiary of
the Royal Bafokeng Nation (`RBN`), acquiring a 20% voting interest in
Astrapak (`the transaction`).
The transaction will be effected through a specific issue of 12 011 667
linked units for cash at R 7.65 per linked unit (`the initial issue`) and
the specific issue of 15 014 583 deferred shares for cash at a par value of
0.1 cents per deferred share (`the deferred issue`) to RBF. Each Deferred
Share will be linked to a Warrant. Collectively, the initial issue and the
deferred issue will constitute 20% of the total issued share capital of
Astrapak after implementation of the initial issue and the deferred issue.
This announcement provides linked unit holders of the Company (`Linked Unit
Holders`) with the details of the transaction and the business rationale
for the transaction.
2. Information on RBN and RBF
2.1 RBN
RBN is a community of approximately 300,000 people based in the
Rustenburg valley region in North West Province. During the 1860`s RBN
started a land buying programme funded by the young men of the
community that went to work in the Kimberley diamond fields. In the
1920`s substantial platinum group metal reserves were discovered on
RBN land. Over the years, royalties paid by mining companies operating
on RBN land have been spent by RBN on the development of substantial
physical infrastructure that has benefited all the inhabitants of the
region.
Notwithstanding the high degree of mining activity in the Rustenburg
valley, the region still faces substantial socio-economic
developmental challenges associated with unemployment, poor education
results, malnutrition, HIV/Aids, child led households, poor access to
medical services and informal settlements.
RBN`s Vision 2020 is a long term plan to address these challenges
through creating opportunities for the people of the region over the
next two decades to become economically self-sufficient participants
in the regional and national economy. RBN is working with all major
stakeholders on an ambitious, multi-level strategy for sustainable
economic development that focuses on the development of land, people
and business activity.
2.2 Investment philosophy - RBF
The fortunes of the region and RBN are closely linked to the mining
industry. In order to reduce its unduly high reliance on mining and
increase its participation in the national economy, RBN established
RBF as a wholly owned subsidiary earlier this year.
RBF is building a portfolio of high quality, non-mining assets that
will provide meaningful diversification benefits to RBN within ten
years. These benefits will comprise a mixture of lower investment
risk and enhanced financial and social returns.
RBF seeks to acquire equity stakes of at least 10% in high quality,
listed and unlisted companies, with the ability to increase
shareholdings over time. RBF`s focus is on fundamentally strong
businesses with competitive advantages and market positions that
provide room to grow, led by strong, ethical, passionate management
teams. Businesses with a poor track record of delivery, turnarounds
and start-ups are avoided.
The medium term portfolio is likely to comprise no more than 5-8 core
investments that are long term in nature - ideally RBF will purchase
investments that need never be sold and where RBF can add value as an
active and involved shareholder.
3. Rationale for the transaction
As a leading packaging group, it is Astrapak`s intention to be at the
forefront of embracing the changes with regard to BEE in its market
segment. Astrapak believes that BEE is a social and economic imperative in
ensuring that transformation is achieved in South Africa.
In addition to the direct black ownership of 20% provided by this
transaction, Astrapak`s aggregate indirect effective BEE shareholding, held
through a number of institutional shareholders who manage and administer
funds on behalf of HDI`s, is currently in excess of 20%.
The transaction has been designed to:
- ensure Astrapak takes a giant leap forward to becoming a `black
empowered` Company. The transaction will result in substantial
participation and control vesting in HDIs, as pursuant to the
transaction HDI`s will own a direct 20% stake in addition to the 20%
indirect stake currently owned, through, inter alia, insurance
companies, institutions and pension funds, in the equity of Astrapak;
- preserve and enhance Astrapak`s current business in the sectors of the
economy in which it operates;
- generate future business opportunities in sectors of the economy in
which Astrapak does not currently operate;
- share the wealth created as a result of the transaction with
historically disadvantaged communities;
- demonstrate Astrapak`s commitment to BEE; and
- provide RBF with 20% of the voting rights of Astrapak and entitle them
in due course to nominate 2 representatives to the Astrapak Board of
Directors in a Non-Executive capacity.
4. Salient terms of the transaction
4.1 Proposed structure
Upon the fulfillment or waiver of the conditions precedent set out in
section 6 below, Astrapak will undertake the following:
- a specific issue of 12 011 667 ordinary linked units in the
capital of Astrapak to RBF for cash (`the Initial Linked Units`)
at R 7.65 per ordinary linked unit, which constitutes 10% of the
issued ordinary linked units of Astrapak after this specific
issue. The Initial Linked Units shall comprise an unsecured
variable rate redeemable debenture of 50 cents and an ordinary
share with a par value of 0,1 cent (one tenth of a cent), plus a
premium, which together with the price of the debenture, amounts
to R7.65 per Initial Linked Unit. The issue price per Initial
Linked Unit represents a 6.9% premium to the 90 trading day
volume weighted average trading price (`90 day VWAP`) at 20
September 2004, the day prior to the publication of the
cautionary announcement, and a 0.8% discount to the 90 trading
day VWAP at close of business on 22 October 2004.
- a specific issue of 15 014 583 deferred shares for cash at a par
value of 0,1 cent (one tenth of a cent) to the RBF (`the
Deferred Shares`), which constitutes a further 10% of the issued
ordinary and deferred shares of Astrapak after the initial issue
and the deferred issue.
This deferred issue will include a specific issue of 15 014 583
share warrants (`the Warrants`) entitling RBF to receive 15 014
583 linked units of the Company (`the Warrant Linked Units`)
after exercise of the Warrants. The Warrants attaching to the
Deferred Shares shall confer on RBF the right (`the Warrant
Rights`) to subscribe (in whole but not in part) for 15 014 583
(fifteen million fourteen thousand five hundred and eighty three)
Linked Units (`the Warrant Linked Units`) in the capital of the
Company. One Warrant shall attach to each Deferred Share which
shall entitle RBF to acquire one Linked Unit for each Deferred
Share held by RBF. The Warrant Rights shall not be transferable,
detachable or assignable from the Deferred Shares. RBF shall not
be entitled to exercise the Warrant Rights unless at the time of
exercise it holds at least 95% (ninety-five per cent) of the
Initial Linked Units. The Warrant Linked Units shall comprise a
debenture priced at the rate prevailing when the Warrant Rights
are exercised and an ordinary share with a par value of 0,1
(nought comma one) cent, plus a premium equal to the subscription
price set out hereunder, less the par value thereof. The share
premium resulting from the issue of the Warrant Linked Units
shall be credited to the share premium account of the Company.
The net effect of the issue of the Initial Linked Units, and the
Deferred Shares constitutes 20% of the net issued ordinary linked
units and Deferred Shares of Astrapak after the initial and
deferred issues.
The Deferred Shares will be identical to Astrapak`s issued
ordinary linked units except that RBF will not be entitled to any
dividends, debenture interest, capital distributions or debenture
redemptions until certain predetermined conditions are met, as
described in section 4.2 below. The Deferred Shares will not be
listed on the JSE Securities Exchange South Africa (`JSE`).
When such conditions are met, the Deferred Shares will be bought
back by the Company at the par value thereof and the Company will
issue the Warrant Linked Units to RBF immediately, entitling RBF
to dividends, debenture interest, capital distributions or
debenture redemption ranking pari passu with Astrapak`s existing
ordinary linked units.
4.2 Warrants
4.2.1 Exercise Period
- the Warrants can be exercised at any time for a period
of 3 (three) years and one month after the initial
subscription for the Initial Linked Units (`the
Exercise Period`), provided that notice cannot be given
by RBF prior to 1 March 2005; and
- if by the end of the Exercise Period, the Warrants have
not been exercised the Deferred Shares will
automatically be bought back by Astrapak at their par
value and the Warrants shall be void and shall be of no
force or effect.
4.2.2 Exercise of Warrants
The Warrants can be exercised by RBF by giving written
notice to Astrapak within the Exercise Period and upon the
payment of the following amounts:
The higher of:
- R 7.65 (seven Rand sixty five cents) per linked unit;
or
- a 17.5% (seventeen comma five per cent) discount to the
90 (ninety) trading day volume weighted average traded
price of a linked unit of the Company quoted on the JSE
in respect of the 90 (ninety) day period terminating on
the date that RBF notifies the Company in writing that
it has exercised all of the Warrants provided that the
subscription price per Warrant Linked Unit shall not
exceed a 30% (thirty percent) discount to the 7 (seven)
day weighted average trading price of a linked unit of
the Company quoted on the JSE immediately before the
date of the exercise of the Warrant Rights;
- The stamp duty payable in respect of the issue of the
Initial Linked Units, the Deferred Shares and the
Warrant Linked Units shall be paid by RBF to the
Company on written demand.
4.2.3 Warrant Terms
Each Deferred Share shall entitle the holder to one Warrant.
The Warrant if exercised during the Exercise Period will
entitle the holder to receive one Warrant Linked Unit
consisting of:
- an ordinary share with a par value of 0.1 cent; and
- an unsecured variable rate redeemable debenture priced
at the rate prevailing when the Warrant Linked Units
are issued.
Each Warrant shall be non transferable or assigneable and
shall only entitle RBF to exercise the Warrant. The Warrants
may only be exercised in whole and not in part.
4.2.4 Issue of warrant linked units
Within 7 (seven) days of receipt of a written notice from
RBF delivered during the Exercise Period exercising the
Warrant Rights, the Company will procure that the Warrant
Linked Units are delivered to RBF, against simultaneous
settlement of the subscription price due for the Warrant
Linked Units.
4.3 Restriction on transfer
The transaction will be subject to the following sale restrictions:
- RBF will not be entitled to transfer ownership of any the Initial
Linked Units for a period of 3 (three) years and 1 (one) month
from the closing date of the transaction;
- RBF will not be entitled to transfer ownership of any of the
Deferred Shares at any time other than to the Company;
- RBF will not be entitled to transfer ownership of any of the
Warrant Linked Units for a period of 3 (three) years and 1 (one)
month from date of delivery of the Warrant Linked Units;
- after the applicable restriction periods, RBF will be entitled to
dispose of any of the Initial Linked Units or the Warrant Linked
Units; and
- in all instances Astrapak will have first right of refusal to any
linked units RBF wish to dispose once RBF are entitled to dispose
of any linked units of the Company .
4.4 Voting rights
Each Initial Linked Unit and Deferred Share will have one vote and
accordingly will rank pari passu with the existing issued ordinary
linked units of Astrapak with regard to voting rights.
4.5 No participation dividends or other distributions
A Deferred Share shall not participate in, or receive any dividends,
debenture interest or capital distributions distributed by the Company
and/or any other payments made by the Company in terms of Section 90
of the Companies Act.
4.6 Rights on winding up
Upon a winding up of the Company, the Deferred Shares shall rank after
the existing linked units of the Company and shall only participate in
a return of capital in such circumstances to the extent of their par
value, namely 0,1 (nought comma one) cent per Deferred Share. If RBF
exercises the Warrants or if RBF fails to exercise the Warrants within
the Exercise Period, the Company shall immediately buy back the
Deferred Shares from RBF at the par value of the Deferred Shares. Once
bought back by the Company, the Deferred Shares shall be cancelled and
the Warrants shall be void and of no force and effect.
4.7 Funding of the transaction
RBF will settle the consideration for the 20% equity in Astrapak in
cash.
4.8 Undertakings
4.8.1 Undertakings by RBF
As the proposed BEE shareholder of reference, RBF has the
resources and credentials to provide Astrapak with a
holistic and sustainable transformation solution,
underpinned by the following:
- RBF is 100% owned by 300,000 rurally based HDI`s. It is
thus broad based;
- RBF has transparent and effective ownership and
governance structures;
- RBF`s sole shareholder, the RBN, has a track record of
benefit delivery within the region over an extended
period. In excess of R2bn has been invested by the RBN
in regional infrastructure and development;
- experienced and successful RBN executives are available
to participate in senior governance structures of
Astrapak;
- RBF and RBN`s existing status as employers of choice
will facilitate the attraction and retention of top
quality black employees into Astrapak;
- through the RBN`s educational infrastructure, RBF and
Astrapak can identify and nurture appropriate talent
for further training and development within the
company;
- RBN has existing structures to support and develop
affirmative procurement SMME`s;
- RBF`s status as a substantive BEE strategic shareholder
will help Astrapak to capitalise on its `first mover`
status within the packaging industry in securing new
business and further acquisitions;
- RBF will assist in the development of specific business
opportunities for Astrapak with RBN`s other key
relationships in both the private and public sectors;
- RBF`s robust financial base will allow it to fund its
share of any future equity calls by Astrapak, thereby
avoiding any risk of dilution of Astrapak`s BEE
credentials;
- RBF has no individual shareholders, thereby allowing
the Company to take a long term investment perspective
that is in the interests of all shareholders; and
- RBF undertakes not to make any investment or acquire
any equity in any company or other entity in the
plastic packaging industry that competes directly or
indirectly with the businesses of the Company for so
long as it holds any linked units in the Company.
4.8.2 Undertakings by Astrapak
- on the closing of the subscription for the Initial
Linked Units, RBF shall be entitled to nominate one
nominee (plus an alternate) to the board of directors
of the Company for so long as RBF is the owner of at
least 95% of the Initial Linked Units. Upon exercise of
the Warrant Rights and provided RBF is still the owner
of at least 95% of the Initial Linked Units, it shall
be entitled to nominate a second nominee (plus an
alternate) to the board of directors of the Company;
- the Company will institute a bursary scheme for up to
20 deserving members of RBN to fund studies towards a
tertiary qualification that is relevant to a career in
the plastics packaging industry.
- the Company and RBF intend to jointly fund the
provision of specialised educator training and teaching
materials for up to 80 schools in the Rustenburg
region. The training and materials will be to support
the teaching in all grades, in accordance with the
requirements of the national curriculum of the
Department of Education, of the subject `Economic and
Management Sciences`.
- the Company and RBF will work together to identify,
facilitate and develop investment, or job creation
opportunities for HDI`s within the Company`s supplier
base; and
- the Company and RBF will work together in strengthening
and deepening existing employment equity programmes
within the Company`s businesses.
5. Financial effects of the transaction
The pro-forma financial effects of the transaction set out below are based
on the following assumptions:
- the earnings, net asset value (`NAV`), headline earnings and tangible
NAV per linked unit reflected in the `Before` column were extracted
from the Company`s reported results for the six months ended 31 August
2004;
- the effect on NAV and tangible NAV per linked unit reflected in the
`After` column assumes that the transaction was effective 31 August
2004; and
- the effect on earnings and headline earnings per linked unit reflected
in the `After` column assumes that the transaction was effected on 1
March 2004.
Actual Pro-forma Increase / Increase /
Before After (decrease) (decrease)
(%)
Earnings per linked unit 52.2 50.9 (1.3) (2.6%)
(cents)
Headline earnings per linked 50.0 49.2 (0.9) (1.7%)
unit (cents)
Fully diluted earnings per 46.0 46.1 0 0.1%
linked unit (cents)
Fully diluted headline 44.1 44.5 0.4 0.9%
earnings per linked unit
(cents)
NAV per linked unit (cents) 375.7 471.6 95.9 25.5%
Tangible NAV per linked unit 339.0 443.1 104.1 30.7%
(cents)
Number of linked units in 108 105 135 131 27 026 25.0%
issue (`000)
Weighted average number of 94 217 121 243 27 026 28.7%
linked units in issue (`000)
Weighted average number of 106 882 133 908 27 026 25.3%
fully diluted linked units in
issue (`000)
Notes to the financial effects:
1. The initial issue, the deferred issue and the exercise of the Warrant
Rights is assumed to have occurred on the 1st of March 2004 at a price
of R 7.65.
2. No potential financial benefits from obtaining BEE credentials through
this transaction have been accounted for in the financial effects.
3. Proceeds from the initial issue, the deferred issue and the exercise
of the Warrant Rights is offset against the fixed and floating debt of
the Company. The effective interest rate applicable to fixed and
floating debt over the period was 13.82%.
4. The transaction enables the Company to utilise certain existing
assessed tax losses. To the extent that existing tax losses could not
be utilised against the income from the proceeds, tax has been
provided for at the Company`s effective tax rate of 19.95%.
5. All professional fees and costs relating to bursaries and training
programs have been taken into account.
6. The accounting policies as set out in the 2004 Annual Report have been
consistently applied to produce these pro-forma results.
6. Conditions precedent
The transaction is subject to the fulfillment, or waiver where appropriate,
of the following conditions precedent:
- the conclusion and signing of all relevant agreements necessary to
give effect to the transaction;
- approval by the JSE and the Securities Regulation Panel (`SRP`), to
the extent required;
- amendment of the Company`s memorandum and articles of association to
create the Deffered Shares and to record the terms and conditions of
the Deferred Shares and the Warrants;
- approval of the resolutions required to implement the transaction by a
requisite majority of shareholders present or represented by proxy at
a special meeting; and
- the registration with the registrar of Companies of the special
resolution passed to give effect to the transaction.
7. Opinions and recommendations
The board of directors of the Company has considered the terms of the
specific issue of linked units for cash, the issue of the deferred shares
and their rights and the issue of the Warrants and their rights and is of
the opinion that their terms are fair and reasonable to the Linked Unit
Holders. They recommend that Linked Unit Holders vote in favour of the
resolutions necessary to enable the Company to implement the initial issue
and the deferred issue.
In terms of the Listings Requirements of the JSE, a fair and reasonable
opinion from an independent professional expert acceptable to the JSE is
required in order to proceed with the specific issue of shares for cash,
the deferred issue and the terms and conditions of the Warrants. An
independent professional expert will be appointed to provide this opinion.
8. Documentation
A circular, which is subject to the approval of the JSE, giving details of
the specific issue of the Initial Linked Units, the issue of the Deferred
Shares and the Warrants, the specific repurchase of the Deferred Sharesand
containing a notice of a special general meeting of Linked Unit Holders, is
being prepared and will be posted to Linked Unit Holders as soon as
possible. A further announcement will be published on SENS and in the press
at that time.
Sandton
27 October 2004
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Corporate Finance
Legal Adviser to Astrapak
Paul Botha & Asoociates
Corporate Adviser to Astrapak
Metier
Legal Adviser to RBF
Bell Dewar Hall
Accountants and Auditors
Deloitte
Date: 27/10/2004 01:15:34 PM
Produced by the JSE SENS Department
