| Thu 9 Dec 2004, 15:24 | | CAUTIONARY ANNOUNCEMENT RELATING TO BEE TRANSACT |
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PRISM - CAUTIONARY ANNOUNCEMENT RELATING TO A 16.89% BLACK ECONOMIC
EMPOWERMENT TRANSACTION
Prism Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1998/018949/06
Share code: PIM
ISIN: ZAE000022257 (`Prism`)
PRISM HOLDINGS LIMITED - CAUTIONARY ANNOUNCEMENT RELATING TO A 16.89% BLACK
ECONOMIC EMPOWERMENT (`BEE`) TRANSACTION
INTRODUCTION
Prism intends concluding a BEE transaction in respect of which approximately
16.89% of its issued ordinary share capital shall be sold to a BEE Party (`the
BEE transaction`). The transaction shall be funded through a combination of
vendor finance, funds injected by the BEE party itself and third party funding.
In this regard a heads of agreement has been entered into with the Mineworkers
Investment Company (Proprietary) Limited (`MIC`) and discussions with a third
party funder are at an advanced stage.
To give effect to the BEE transaction, approximately 100 000 000 (16.89%) of
Prism`s issued ordinary shares will need to be procured from existing
shareholders (`the scheme shares`). This will be implemented by proposing a
scheme of arrangement in terms of section 311 of the Companies Act (Act 61 of
1973), as amended, between Prism and its ordinary shareholders (`the scheme`).
The scheme shares will be procured on a pro rata basis from existing ordinary
shareholders in terms of the scheme.
DETAILS OF THE BEE TRANSACTION
Rationale and principles for the BEE transaction
Prism is committed to broad-based BEE and embraces the principles embodied in
the Information Communication Technology Sector Charter (`the ICT Charter`).
The BEE transaction demonstrates Prism`s commitment to broad-based BEE and is
designed to result in long-term benefits accruing to the widest possible
community of black South Africans.
Prism was guided by the following principles in structuring the BEE transaction:
- transfer of full economic and voting rights in respect of 16.89% of the
issued ordinary shares in Prism to MIC on implementation of the BEE transaction;
- a focus on a broad-based BEE group;
- representation by MIC on the Prism Board of Directors;
- active participation by MIC in the business of Prism and its transformation
programme;
- MIC retaining its interest in Prism for a meaningful time period;
- achieving a realistic economic cost (inclusive of any dilution) to Prism
shareholders; and
- ensuring compliance with the letter and spirit of the ICT Charter.
MIC
MIC was founded by the National Union of Mineworkers (`NUM`) in July 1995 to
make a direct contribution to the economic development and social upliftment of
mineworkers, ex-mineworkers, construction and energy sector workers and their
dependents. MIC is a truly broad based BEE grouping that has, since 1997,
disbursed R62 million to fund its social development projects and programmes
that focus on poverty alleviation, local economic development, enterprise
development, job creation and education. MIC`s investment strategy is a hands on
approach to actively work with management in further developing strategic
direction with regards to business challenges, workplace transformation and the
development of previously disadvantaged individuals.
THE SCHEME
Rationale for the scheme
The financial position of Prism as at 30 June 2004 together with ongoing
positive trading, has resulted in Prism having cash holdings surplus to its
requirements. Accordingly, Prism is able to apply some of these monies towards
participating in and ensuring the success of the BEE transaction. Given the
surplus cash that presently exists on the Prism balance sheet, the issue of
additional shares at market price to MIC would not be value enhancing to
existing shareholders.
Considering the number of shares involved, the success of the BEE transaction
requires that such shares be acquired as a `block` at an appropriate price. The
scheme represents the only practical and equitable method of procuring such
shares as it applies equally to all shareholders.
The scheme
In terms of the scheme, 16.89 Prism shares will be acquired for every 100 Prism
shares held by each Prism shareholder. The acquisition price per share will be
36 cents, which represents the volume weighted average share price of Prism on
the JSE Securities Exchange South Africa from the date of the release of Prism`s
2004 financial results on 19 August 2004 to the close of business on the
Wednesday, 8 December 2004 and is a discount of 7.7% to the Prism closing share
price on Wednesday, 8 December 2004, being 39 cents. The Prism board considers
such a discount important for the sustainability of the black ownership
initiative and Prism`s ability to meet the requirements of the ICT Charter. The
total consideration payable to existing Prism shareholders in terms of the
scheme will be approximately R36 million. In terms of the BEE transaction, it is
proposed that Prism would assume a funding obligation of R18 million, with a
third party financier providing R12.5 million, while MIC would provide R5.5
million in cash. Funding by Prism would be facilitated through fixed rate
redeemable preference shares with a 9-year term. The redemption profile of such
preference shares is dependent on the future dividend stream of Prism, thus
further enhancing the sustainability of the black ownership initiative as it is
not linked to the performance of the Prism share price.
The implementation date of the scheme is envisaged to be March 2005 and the
scheme will be subject to, inter alia, the approval of not less than 75% of the
ordinary shareholders of Prism present and voting at the scheme meeting and the
sanction of the scheme by the High Court of South Africa.
FURTHER ANNOUNCEMENT
A further announcement will be published once third party funding arrangements
are finalised and agreements have been concluded. This announcement will provide
full details of the BEE transaction, including the financial effects.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised to exercise caution when dealing in their Prism shares
until publication of the announcement referred to above.
Johannesburg
9 December 2004
Corporate advisor and legal advisor to Prism
Java Capital (Pty) Limited
Attorneys to MIC
MJ King Inc. Attorneys
Sponsor to Prism
Standard Bank
Date: 09/12/2004 03:21:08 PM
Produced by the JSE SENS Department
