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Purple Capital Limited - Introduction Of Black Economic Empowerment Shareholders
General Issue Of Shares For Cash
Purple Capital Limited
(formerly AVASA Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE ISIN: ZAE000063897
(`Purple Capital` or `the company`)
INTRODUCTION OF BLACK ECONOMIC EMPOWERMENT SHAREHOLDERS
GENERAL ISSUE OF SHARES FOR CASH
1. INTRODUCTION
Shareholders are advised that the company:
- has entered into the following agreements with a number of BEE investors
(`the BEE investors`):
- an agreement dated 8 June 2005 with a consortium led and advised by
Umnombo Investment Holdings Limited (`Umnombo`) (`the BEE consortium`),
with the view to introducing a significant BEE shareholder into Purple
Capital. The BEE consortium will acquire an initial 10% interest in
Purple Capital. The majority of this interest will be held by DENOSA
Investment Holdings (Pty) Limited (`DIHOLD`), the investment vehicle
for the Democratic Nursing Organisation of South Africa (`DENOSA`), for
the benefit of the members of DENOSA;
- an agreement dated 8 June 2005 with existing black shareholders already
invested in Purple Capital, in terms of which these shareholders have
been offered a further 0,9% interest in Purple Capital on the same
basis as the BEE consortium, in recognition of their involvement and
support from the outset,
collectively, `the BEE transactions`; and
- has successfully raised R17,96 million of new equity capital through a
general issue of shares for cash (`the general issue of shares`).
The abovementioned transactions are further steps towards Purple Capital
implementing its strategic mandate to build an independent South African
financial services group in partnership with black business leaders.
2. The BEE TRANSACTIONS
2.1 Background to the BEE consortium
It was announced in the press on 9 April 2005 that Purple Capital and
Bridge Capital Group Limited (`Bridge Capital`), a company in which Purple
Capital has a 30% interest, had both invested in Umnombo to align their
economic interests and structure BEE deals together.
This relationship is working well for all parties, with encouraging deal
flow and a number of investment opportunities being brought to completion.
Umnombo has entered into a preferred advisory and co-investment contract
with DIHOLD, the investment vehicle for DENOSA.
DENOSA aims to safeguard and promote the dignity, rights and socio-
economic status of members in the nursing profession. DENOSA represents
approximately 80 000 nurses and healthcare workers in South Africa, of which
90% are women.
The executive directors of Umnombo are Bongani Caga (B.Law.LLM (Leiden,
Netherlands)), Khanyisa Gazi (CA(SA)), Mninawa Mketo (B.Com.Hons.Acc (Natal))
and Sivile Mzamo (Diploma in Financial Information Systems and in Project
Management) (`the Umnombo directors`) who, collectively, bring commercial
experience and relationships within the political arena.
2.2 Rationale for the BEE transactions
Purple Capital is offering the Umnombo directors and DIHOLD an
opportunity to acquire a significant interest in Purple Capital to further
cement already aligned business relationships and provide a basis for their
economic participation in the future. The investment is structured as an
option on the upside of Purple Capital and it is hoped that it will, in due
course, be a source of capital and income growth for the BEE investors and, in
particular, the broad-based membership of DENOSA.
In recognition of the established relationship with DIHOLD, Thembeka
Gwagwa, a director of DIHOLD and General Secretary of DENOSA, has agreed to
join the board of directors of Purple Capital as a non-executive director.
2.3 Terms of the BEE transactions
2.3.1 The `A` share subscription
The BEE investors will subscribe for 176 596 115 `A` shares of R0,00001
each (` `A` shares`) in Purple Capital for a total consideration of R1 765,96.
The `A` shares will entitle the holders thereof to one vote per `A` share held
at general meetings of Purple Capital`s ordinary shareholders. This
constitutes 10% of the total votes exercisable by all shareholders. The `A`
shares shall not confer any rights to receive any dividend or distribution and
will be redeemed at par immediately upon exercise of the options referred to
below or if the options are not exercised by 1 August 2008.
2.3.2 The options
The BEE investors will also be granted options, as an indivisible part of
the `A` shares, to subscribe for 176 596 115 Purple Capital ordinary shares at
the strike price. The strike price will be calculated as follows:
A + B - C, where:
A = 11 cents per share;
B = the ruling R153 yield from time to time plus 2,5% multiplied by A,
compounded annually from the effective date (being seven business days
after the last of the conditions precedent set out below is fulfilled) to
the date of payment for the options exercised;
C = any distribution not in the ordinary course of business between the
effective date and the date of payment for the options exercised.
The exercise dates for the options are:
- one-third, being 58 865 372, on or after 1 August 2006;
- a second third, being 58 865 372, on or after 1 August 2007; and
- the final third, being 58 865 372, on 1 August 2008.
Any options not exercised in a particular period can be carried forward
and exercised at any time during a subsequent period, provided that no options
shall be exercisable after 1 August 2008. The BEE investors will be precluded
from selling their interests in Purple Capital or any part thereof prior to 1
August 2009 and thereafter only to suitable BEE entities.
The net economic effect of this structured investment is that Purple
Capital will receive a subscription price of 11 cents per ordinary share (plus
interest as defined) as and when the options are exercised, and the BEE
investors will enjoy the capital growth and income distributions of the
ordinary shares beyond that.
2.3.3 Conditions precedent
The BEE transactions are subject to the fulfilment of the following
conditions precedent:
- finalisation of the necessary comprehensive agreements required to give
effect to the BEE transactions;
- JSE and any other regulatory approvals;
- the appointment of an independent professional expert acceptable to the
JSE to advise on the fairness and reasonableness of the terms and
conditions of the BEE transactions; and
- approval by the Purple Capital ordinary shareholders in general meeting.
2.3.4 The resultant shareholding
The principle shareholding groups in Purple Capital, before and after
the general issue of shares and the BEE transactions, are set out below
(assuming all the options are exercised):
After the general
issue of shares
Shareholder Current shareholding and the BEE transactions
Number of Percentage Number of Percentage
ordinary shares (%) ordinary shares (%)
Employees of
the Purple
Capital group 444 910 177 34,6 444 910 177 27,4
Black
investors 28 257 182 2,2 42 257 182 2,6
BEE
consortium - - 162 596 115 10,0
General
issue of
shares - - 163 301 256 10,0
Existing
shareholders 812 896 421 63,2 812 896 421 50,0
Total 1 286 063 780 100,0 1 625 961 151 100,0
The result is that, assuming all the options are exercised, employees
will hold 27,4%, and black shareholders 12,6%, of Purple Capital`s issued
ordinary share capital, with the remaining 60,0% being held by a broad range
of public investors.
3. GENERAL ISSUE OF SHARES
At the annual general meeting of shareholders held on 1 February 2005,
the requisite majority of shareholders approved an ordinary resolution
authorising the directors to issue an additional 15% of the company`s issued
share capital for cash in accordance with the JSE Listings Requirements.
The directors have resolved to issue 163 301 256 ordinary shares to
public shareholders at 11 cents per share, being a 10% discount to the
weighted average traded price of Purple Capital ordinary shares for the 30
business days preceding Thursday, 5 May 2005, being the date that the price of
the general issue of shares was agreed to by the directors. An application has
been made to the JSE to grant a listing of the new ordinary shares on Monday,
13 June 2005.
The purpose of the general issue of shares is to:
- strengthen the capital reserves of the company;
- provide cash as may be required to partially fund further specialist
financial acquisitions; and
- provide for the cash necessary to employ key private equity executives to
complete the establishment of Purple Capital`s BEE fund, Blackstar Equity
Fund 1.
Following the general issue of shares, the company has cash resources of
R21 million in addition to its holding of Sage Group Limited shares, which at
the current market price is worth approximately R9 million.
4. PRO FORMA FINANCIAL EFFECTS
The table below sets out the unaudited pro forma financial effects of
the general issue of shares and the BEE transactions on earnings, headline
earnings, net asset value and net tangible asset value per share. The
financial effects have been calculated on Purple Capital`s reviewed interim
results for the six months ended 28 February 2005, as adjusted for the
financial effects of the acquisitions of interests in Bridge Capital and acsis
Limited (`the acquisitions`). The unaudited pro forma financial effects are
provided for illustrative purposes only and because of their nature they may
not give a fair reflection of Purple Capital`s financial position after the
general issue of shares and the BEE transactions or the effect on future
earnings.
The directors are responsible for the pro forma financial effects.
Pro forma
After the
Pro forma general
Before the After the issue
acquisitions1 acquisitions2 of shares
Notes (cents) (cents) (cents)
Earnings per
share 3 0,02 0,24 0,25
Headline
earnings
per share 3 0,02 0,24 0,25
Weighted
average number
of shares in
issue 615 818 493 787 798 940 951 100 196
Net asset value
per share 4 1,38 2,53 3,48
Net tangible
asset value
per share 4 1,38 2,53 3,48
Number of shares
in issue 1 114 083 333 1 286 063 780 1 449 365 036
Pro forma
After the
general
issue of
shares and
Percentage the BEE Percentage
change transactions change
Notes (%) (cents) (%)
Earnings per share 3 4,2 0,25 4,2
Headline earnings
per share 3 4,2 0,25 4,2
Weighted average
number
of shares in issue 951 100 196
Net asset value per
share 4 37,9 3,49 37,9
Net tangible asset
value
per share 4 37,9 3,49 37,9
Number of shares
in issue 1 449 365 036
Notes:
1. Extracted from the published reviewed interim results of Purple Capital
for the six months ended 28 February 2005.
2. Extracted from the circular to Purple Capital shareholders dated, 4 May
2005, detailing the financial effects of the acquisitions.
3. Earnings and headline earnings per share in the `Pro forma After the general
issue of shares` and `Pro forma After the general issue of shares and the
BEE transactions` columns have been based on the following assumptions:
a. the general issue of shares and the BEE transactions were effective on 1
September 2004;
b. 176 596 115 `A` shares acquired by the BEE investors for R1 765,96; and
c. the cash received from the general issue of shares and the BEE
transactions earned interest at an after-tax rate of 5.5% per annum.
4. Net asset value and net tangible asset value per share in the `Pro forma
After the general issue of shares` and `Pro forma After the general issue of
shares and the BEE transactions` columns have been based on the following
assumptions:
a. the general issue of shares and the BEE transactions were effective on
28 February 2005; and
b. 176 596 115 `A` shares acquired by the BEE investors for R1 765,96.
5. DOCUMENTATION
A circular containing full details of the BEE transactions and including, inter
alia, a notice of general meeting of shareholders, will be posted in due course.
Johannesburg
10 June 2005
Corporate advisor and sponsor
BRIDGE CAPITAL
Reporting accountants and auditors
KPMG
Date: 10/06/2005 04:44:32 PM
Produced by the JSE SENS Department
