| Tue 28 Feb 2006, 14:43 | | Sallies Limited - BEE Transaction By Sallies |
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SAL
SAL
Sallies Limited - BEE Transaction By Sallies
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
Share code: SAL
ISIN: ZAE000022588
("Sallies" or "the Company")
BEE TRANSACTION BY SALLIES
1. Introduction
Further to the cautionary announcement dated 24
January 2006, Sallies shareholders are advised that
the Company and its subsidiaries (Witkop Fluorspar
Mine (Pty) Ltd, Marico Fluorspar (Pty) Ltd, Pypklip
Mining Holdings (Pty) Ltd and Mosega Fluorspar Works
(Pty) Ltd) (collectively "the Sellers") have entered
into an agreement ("the agreement") with African
Renaissance Investments (Proprietary) Limited
("ARI"), a company 100% owned by African Renaissance
Holdings Limited ("African Renaissance"), and
African Renaissance in terms of which the Sellers
will sell an undivided 30% share of their assets and
liabilities ("ARI share") to ARI as a going concern.
In terms of the agreement, which will become
effective on the first business day of the calendar
month immediately following the fulfillment or
waiver of the conditions precedent outlined in
paragraph 4.6, Sallies has also entered into an
unincorporated joint venture agreement ("the JV
agreement") and a Management and Skills Transfer
Agreement as referred to in paragraph 3 below with
ARI. The agreement and the other contracts are
collectively referred to as the "transaction".
2. Rationale for the transaction
The purpose of the transaction is to provide Sallies
with a Black Economic Empowerment partner in
compliance with the requirements of the Broad-Based
Black Economic Empowerment Act, 2003, the Codes of
Good Practice published in terms thereof and the
Broad-Based Socio-Economic Empowerment Charter for
the South African Mining Industry, developed in
terms of Section 100(2)(a) of the Mineral and
Petroleum Resources Development Act, 2002 ("the MPRD
Act").
3. Background to African Renaissance Holdings Limited
African Renaissance is a first generation, public,
black economic empowerment company registered in
1994 and complies with the requirements of the MPRD
Act as it is owned and managed by black
shareholders.
African Renaissance has investments not only in
mining, but also in gaming, leisure and the ICT
industry with investments in Deutsche Telecom and
Marconi/Ericsson. ARH is also the lead investor in
the Metro Cash & Carry management buy-out which, to
date, is the biggest of its kind in South Africa.
With the Sallies transaction African Renaissance is
signaling its intention to expand its investment
portfolio in the resources sector.
4. Details and terms of the transaction
4.1. Formation of an unincorporated Joint Venture
The Sellers and ARI have entered into the JV
agreement in terms of which both Sallies and ARI
will contribute their shares in the assets and
liabilities of the Sellers to the JV. In
consideration of the contributions of the Sellers
and ARI to the JV, their participation in the JV
will be 70% and 30%, respectively ("Participation
interests").
The JV will enter into a Management and Skills
Transfer Agreement with Sallies in terms of which
Sallies will undertake the management of the
business of the JV, market and distribute the
product produced by the JV as well as assist in the
transfer of skills to historically disadvantaged
South Africans ("HDSA"s"). The management committee
of the JV (comprising of five representatives of
Sallies and two representatives of ARI) will oversee
the management of the affairs and operations of the
JV.
4.2. Purchase price and payment
The purchase price payable by ARI for the ARI share
shall be a cash amount equal to 30% of the Sallies
market capitalisation (calculated by using the 60-
day weighted average traded price of the shares in
Sallies as at the time of the payment multiplied by
the number of Sallies shares outstanding at the time
("the Purchase price")). The Purchase price will be
payable within three years of the date on which the
JV distributes profits to its participants for the
first time ("the Payment date").
4.3. Funding of the JV
The parties to the JV will contribute to the funding
of the JV in proportion to their respective
Participation interests. Until such stage as ARI
shall have paid in full for the ARI share, Sallies
shall lend to ARI its proportionate share of the
funding required by the JV. The following
provisions shall apply to such loan:
* the loan shall attract interest at the same rate
as Sallies is able to borrow in debt markets;
* the loan plus accrued interest shall be repayable
by ARI to Sallies as a first charge against the
profits and/or other distributions to which ARI
shall be entitled out of the JV;
* ARI shall, on the Payment date, in addition to the
Purchase price, pay to Sallies the full
outstanding amount owed to Sallies in terms of
the JV agreement, together with the interest
accrued thereon; and
* as security for ARI"s repayment obligations, ARI
will cede to Sallies its rights, interest and
title relating to the JV.
Subsequent to ARI having made payment in full for
the ARI share, both Sallies and ARI shall contribute
towards capital and operating expenditure (including
the costs of concluding feasibility studies) in
proportion to their respective Participation
interests in the JV.
4.4. ARI shareholding
Certain conditions and restrictions on the ownership
structure of ARI are provided for in the JV
agreement which will ensure that HDSAs remain the
beneficial owners of ARI or alternatively Sallies
will be entitled to purchase ARI"s Participation
interests in the JV at the value of the outstanding
loan at the relevant time.
4.5. New rights
In the event that Sallies at any time during the
duration of the JV agreement, acquire any entity
which has any entitlement in or to any mining,
prospecting and/or mineral right in respect of
and/or relating to fluorspar, or which carries on
such business; or any asset, including any right in
respect of and/or relating to fluorspar
(collectively "the New right"), Sallies shall
contribute the New right to the JV on the basis
that:
* Sallies shall sell a 30% undivided portion of
the New right to ARI on the same basis as
Sallies shall have acquired or shall have been
offered the New right; and
* subsequently to the acquisition by ARI of a 30%
undivided portion of the New right, Sallies and
ARI shall respectively contribute their undivided
portions of the New right to the JV.
4.6. Conditions precedent
The agreement is subject to the fulfilment of the
following conditions precedent, which should have
been fulfilled or waived by not later than 30 June
2006 or such later date as the parties may agree in
writing:
* the receipt by the parties of all necessary
written approvals from the South African Revenue
Services, including the written confirmation that
the transaction shall be zero rated for Value Added
Tax;
* the granting by the Minister of Minerals and
Energy ("the Minister") of mining rights in terms of
the MPRD Act ("New order rights") to Witkop
Fluorspar Mine (Pty) Ltd in substitution of the old
order rights currently held;
* the grant by the Minister of consent in terms of
Section 11 of the MPRD Act in respect of:
* the transfer of an undivided 30% share of the
New order rights to ARI in terms of the
agreement; and
* the contribution by Witkop Fluorspar Mine
(Pty) Ltd and ARI of their respective undivided
shares of the New order rights to the JV (if
required);
* to the extent necessary, the obtaining by the
parties of all regulatory approvals required to
conclude and implement the agreement, including the
approvals in terms of the Competition Act 1988 and
the JSE; and
* the obtaining of the approval of the transaction
by the boards of directors of ARI and Sallies and by
the shareholders of Sallies.
4.7. Other terms
The remaining terms and conditions (including
warranties) in respect of the transaction are
standard for a transaction of this nature.
5. Financial effects
The pro forma financial effects in respect of the
transaction will be published as soon as practicably
possible.
6. Circular to Sallies shareholders
A circular containing full details of the
transaction, which will also include full details of
the fully underwritten rights offer as announced on
16 February 2006, will be posted to Sallies
shareholders in due course.
7. Further cautionary announcement
Sallies shareholders are advised to continue to
exercise caution when dealing in Sallies"s shares
because of the cautionary announcement dated 9
February 2006 dealing with the possible acquisition
of Buffalo Fluorspar.
Johannesburg
28 February 2006
Corporate advisor and sponsor
Ernst & Young Sponsors (Pty) Ltd
Attorneys
Tabacks & Associates
Date: 28/02/2006 02:43:44 PM Produced by the JSE SENS Department
