| Fri 23 Jun 2006, 12:02 | | Afrocentric Investment Corporation Limited - Compa |
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ACT
ACT
Afrocentric Investment Corporation Limited - Company Announcement
AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Formerly WB Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1988/000570/06)
JSE code: ACT & ISIN: ZAE000078416
("AfroCentric" or "the company")
PROPOSED FULLY UNDERWRITTEN RIGHTS OFFERS
INTRODUCTION OF A BLACK ECONOMIC EMPOWERMENT ("BEE") CONTROL STRUCTURE
MANDATORY OFFER TO MINORITY SHAREHOLDERS
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcements, the most recent of which was released
on SENS on 26 May 2006, the directors of AfroCentric wish to announce that they
have finalised the terms of the rights offers referred to therein.
BACKGROUND
On 20 December 2005 control of AfroCentric changed when Messrs Meyer Kahn
(Chairman of SABMiller plc) and Michael (Motty) Sacks (Chairman of Netcare
Limited) purchased 80% of the issued share capital. Their purpose was to
reconstitute AfroCentric which was then a cash shell as a broad-based black
empowered diversified investment holding company that would actively participate
in the economic transformation presently occurring in South Africa. Pursuant to
this objective a leading group of fellow directors was appointed, namely Ms
Brigalia Bam (Chair of the Independent Electoral Commission), Ms Nomhle Canca
(CEO of Blue IQ Investment Holdings), Mr Mandla Gantsho (CEO of the Development
Bank of South Africa), Mr Brian Joffe (CEO of the Bidvest Group) and Prof
Derrick Swartz (Vice-Chancellor of The University of Fort Hare).
The board of AfroCentric has resolved to recapitalise the company to enable it
to achieve its investment objectives by means of the rights offers detailed
below. As part of the recapitalisation process, a trust established for the
purpose will acquire 50.1% of the issued ordinary share capital of AfroCentric.
This trust, described below, will have leading black institutions as its
beneficiaries.
THE RIGHTS OFFERS
There will be two renounceable rights offers made to ordinary shareholders in
AfroCentric, namely an offer of new ordinary shares ("the ordinary shares rights
offer") and an offer of redeemable participating preference shares ("the
redeemable preference shares rights offer"), which will raise a total amount of
R99 740 580 before expenses. The offers are not linked and the rights contained
therein may be accepted, sold or renounced independently of each other.
Reference to the "rights offers" is to both the ordinary share rights offer and
the redeemable preference share rights offer.
Messrs Kahn and Sacks, who control 80% of the issued share capital of
AfroCentric, have agreed to procure subscriptions for or to underwrite the
rights offers for no consideration.
SALIENT FEATURES OF THE ORDINARY SHARES RIGHTS OFFER
Number of new ordinary shares to be issued 84 600 000
Subscription price per new ordinary share (cents) 100
Number of new ordinary shares offered per 100 ordinary
shares held at the record date 900
Total amount to be raised in terms of the ordinary shares
rights offer (before expenses) R84 600 000
Number of ordinary shares in issue before the rights offers 9 400 000
Number of ordinary shares in issue after the rights offers 94 000 000
SALIENT FEATURES OF THE REDEEMABLE PREFERENCE SHARES RIGHTS OFFER
Number of new redeemable preference shares to be issued 16 638 000
Subscription price per new redeemable preference share (cents) 91
Number of new redeemable preference shares offered
per 100 ordinary shares (or part thereof) held at the record date 177
Total amount to be raised in terms of the redeemable preference
shares rights offer (before expenses) R15 140 580
Number of redeemable preference shares in issue before
the rights offers 0
Number of redeemable preference shares in issue after the
rights offers 16 638 000
The redeemable preference shares were created at a general meeting of
shareholders held on 31 March 2006. The detailed terms of the redeemable
preference shares are set out in the company"s Articles of Association, which
are available for inspection at the company"s registered office. In summary,
they are entitled to participate in dividends and distributions declared by the
company to the extent of 15%. They also carry an option, exerciseable on
specified dates, whereby preference shareholders may, collectively, purchase a
maximum of 15% of the ordinary shares then in issue and thereafter have their
preference shares redeemed by the company (the redemption value of the
redeemable preference shares being equal to the aggregate subscription price of
the ordinary shares to be issued under the option). Assuming all preference
shareholders exercise their options simultaneously and the preference shares are
redeemed, the preference shareholders will thereafter own 15% of the ordinary
share capital of AfroCentric.
INTRODUCTION OF THE BEE CONTROL STRUCTURE
The AfroCentric Empowerment Trust ("ACET") has been formed for the purpose of
acquiring 50.1% of the ordinary share capital of AfroCentric and therefore
becoming the controlling shareholder of AfroCentric. The initial trustees of
ACET are Themba Dennis Faku, Yolisa Soul and Muditambi Ravele.
Messrs Kahn and Sacks will for no consideration renounce in favour of ACET their
rights to 47 100 000 new ordinary shares, constituting 50.1% of the issued
ordinary share capital of AfroCentric post the rights offers.
The initially nominated beneficiaries of ACET are The Fort Hare University
Foundation, The Barangoa Trust (a trust established for the benefit of The South
African Council of Churches) and The Leadership Foundation Trust. All of these
beneficiaries are associated with a significant number of South Africa"s black
and historically disadvantaged citizens. The broad based support for, the
endorsement of and the work and aspirations of these beneficiaries are well
known, and their credibility and significance within the communities they serve
are broadly acknowledged.
The purpose of the inclusion of these entities as beneficiaries of ACET is to
advance the broadest feasible social, economic and educational interests of
South Africa"s population. Through ACET"s investment in AfroCentric, returns
will, on distribution by way of dividends or dividends in specie, be available
to the beneficiaries, membership, students and patrons for the purposes, inter
alia, of advancing education, healthcare, community outreach and support,
poverty alleviation and leadership, jobs and skills training. In addition to the
beneficiaries above, further beneficiaries will be nominated. All of the
beneficiaries will be either black people or institutions, organisations or
entities that represent the interests of or that were constituted and are
managed for the benefit of black people.
INVESTMENT APPROACH AND MANAGEMENT OF AFROCENTRIC
AfroCentric intends to invest in enterprises that could materially benefit from
its principal BEE status and the entrepreneurial and intellectual capital which
resides in the company. The investment philosophy of AfroCentric will be
strictly commercial and will embody the active participation in or management of
the selected investments, depending on the circumstances in each case.
Individual skill, institutional experience and business acumen are
characteristics for which all AfroCentric"s board members are already well
known. This collective proficiency is likely to add significant value for the
benefit of AfroCentric"s investment interests and its stakeholders.
The company intends to appoint a permanent executive management team and is in
the process of reviewing appropriate candidates. Until such time as the
executive team is appointed and established, Messrs Kahn and Sacks have agreed
to assume the roles of acting management (in consultation with Mr Joffe) through
a presently informal management agreement. Following the appointment of the
executive, Messrs Joffe, Kahn and Sacks will continue to provide advice and
guidance under the auspices and mandate of the board investment committee.
The company believes that the economic transformation currently occurring in
South Africa presents a fertile landscape for the successful participation of a
BEE company with the financial, commercial and stakeholder profile of
AfroCentric. In particular, and among other things, the company will seek to:
* position itself for transactions whereby it would be able to purchase
meaningful minority stakes in established public and private South African
companies and enterprises;
* partner with established international companies seeking to pursue new or
expanded business opportunities in South Africa;
* acquire control of enterprises that could materially benefit from the
introduction of a controlling BEE shareholder, that have the potential for
growth, and could accelerate progress with skillful mentoring and strategic
management guidance and instruction.
Application will be made to the JSE Limited ("JSE") for the transfer of sector
of AfroCentric from the "Farming and Fishing" sector of the JSE lists to a more
appropriate sector. Should the company make an acquisition or acquisitions
justifying listing on another sector, application will be made for a move to the
appropriate sector.
OFFER TO MINORITY SHAREHOLDERS
In view of the change in control to ACET through the renunciation of their
rights to 47 100 000 ordinary shares by Messrs Kahn and Sacks, ACET will,
simultaneously with the rights offers, make a mandatory offer to AfroCentric
minority shareholders in terms of the Securities Regulation Code on Takeovers
and Mergers to acquire their shares at 100 cents per share, being the highest
price paid by ACET for the shares it will have acquired.
FINANCIAL EFFECTS OF THE RIGHTS OFFERS
Set out in the table below are the pro forma financial effects of the rights
offers based on AfroCentric"s reviewed company results for the six months ended
31 December 2005. The pro forma financial effects have been prepared for
illustrative purposes only to provide information of how the rights offers may
have impacted on the results and financial position of AfroCentric. Preparation
of the pro forma financial effects is the responsibility of the directors. The
directors are of the opinion that the reviewed company results present a more
accurate reflection of the performance and financial position of AfroCentric
taking into account the company"s proposed future direction. Because of their
nature, the pro forma financial effects may not fairly present AfroCentric"s
financial position after the rights offers or the effect on future earnings.
Before the After the
rights rights Percen-
offers offers tage
Notes (cents) (cents) change
Loss per ordinary share -
diluted and undiluted 1, 2 (56.97) (2.48) N/A
Headline (loss) earnings per ordinary
share - diluted and undiluted 1, 2 (5.07) 1.92 N/A
Net asset value per ordinary
share - diluted and undiluted 3 10.15 89.34 780
Tangible net asset value per ordinary
share - diluted and undiluted 3 10.15 89.34 780
Notes:
1. Extracted from the reviewed company interim results of AfroCentric for the
six months ended 31 December 2005.
2. Earnings and headline earnings per ordinary share are based on the following
assumptions:
* the rights offers were effective on 1 July 2005;
* the capital raised (net of estimated costs) earned interest at 7.5% before
taxation at 29.0%;
* rights offer costs of R1 275 000;
* the weighted average number of ordinary shares in issue during the year was
9 400 000 and 110 638 000 before and after the rights offers respectively;
* the diluted earnings and headline earnings attributable to the ordinary
shares take into account that, upon exercise of the call option in full in
relation to the redeemable preference shares, an additional 16 638 000 ordinary
shares will be in issue for the period; and
* diluted and undiluted earnings and headline earnings per ordinary share are
the same because the redeemable preference shares participate in 15% of
dividends and other distributions out of the company and have a 15% option
exercise entitlement.
3. Net asset value and tangible net asset value per ordinary share are based on
the following assumptions:
* the rights offers were effective on 31 December 2005;
* the number of ordinary shares in issue at 31 December 2005 was 9 400 000
and 94 000 000 before and after the rights offers respectively, and 110 638 000
after dilution arising from the exercise of the call option;
* undiluted and diluted net asset value and net tangible asset value per
share are the same because the redeemable preference shares participate in a
winding up on the basis that their options had been exercised;
* diluted net asset value and tangible net asset value are given assuming
full conversion of the redeemable preference shares; and
* the number of redeemable preference shares in issue at 31 December 2005
(assumed to have been converted into ordinary shares in terms of the call
option) was 16 638 000 after the rights offers.
FURTHER ANNOUNCEMENTS
A further announcement will be made in due course giving the salient dates of
the rights offers and the mandatory offer to minorities once approval has been
received from the JSE and the Securities Regulation Panel. A circular relating
to the rights offers and the mandatory offer to minorities is presently being
prepared and will be distributed to AfroCentric shareholders on completion.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
In the light of the above, the cautionary announcement dated 26 May 2006 is
hereby withdrawn.
Johannesburg
23 June 2006
Corporate adviser and sponsor
Sasfin Capital
Attorneys
HR Levin
Adviser to AfroCentric
Centric Capital Ventures LLC
Reporting accountants
Sizwe Ntsaluba VSP
Date: 23/06/2006 12:02:17 PM Produced by the JSE SENS Department
