| Wed 27 Sep 2006, 14:00 | | AVI - Staff Black Economic Empowerment Transaction |
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AVI
AVI
AVI - Staff Black Economic Empowerment Transaction
AVI Limited
(Incorporated in the Republic of South Africa)
(Registration number 1944/017201/06)
Share code: AVI
ISIN: ZAE000049433
("AVI" or "the AVI Group")
THE AVI STAFF BLACK ECONOMIC EMPOWERMENT TRANSACTION
Introduction
The board of directors of AVI ("the board") is pleased to announce its
intention to introduce black ownership into AVI, subject to the
shareholders" approval. The board is proposing a transaction whereby
approximately 7.7% of AVI"s issued share capital (8.5% of the issued share
capital before the issue) will be subscribed for by a broad base of the AVI
Group"s current and future black employees ("the Empowerment Scheme" or
"the Transaction"). It is proposed that the ownership of the AVI shares by
the employees ("the scheme shares") will be facilitated through the
creation of a Black Staff Empowerment Trust ("the Trust").
Rationale for Transaction
AVI is committed to the principles contained in the Broad-Based Black
Economic Empowerment Act and has made meaningful progress towards achieving
targets in respect of, inter alia, procurement and employment equity. The
board considers the introduction of black ownership into AVI as a further
demonstration of its commitment to BEE generally.
The Transaction will ensure a wide distribution of benefits to the AVI
Group"s black employees and enhance AVI"s ability and commitment to
attract, retain and incentivise talented black employees.
Mechanics and structure of the Transaction
1. Funding of the Trust and structuring of the Empowerment Scheme
The Trust will subscribe for 26.5 million scheme shares pursuant to a
specific issue by AVI of shares. The subscription for the scheme
shares by the Trust will be funded by way of a loan of approximately
R411 million from companies within the AVI Group ("the AVI loan").
The price at which the Trust will subscribe for the scheme shares is
the 30 day volume weighted average price ("market value") for the
period ending Wednesday, 20 September 2006 ("the inception price"),
being 1 551 cents per share.
The term of the AVI loan will correlate with the anticipated duration
of the Empowerment Scheme, envisaged to be a period of 12 years. The
AVI loan will accrue interest at the greater of a rate determined by
the board (which will not be greater than the prime rate) or the
official rate of interest as defined in Section 1 of the Seventh
Schedule of the Income Tax Act 1962, as amended (which is currently 9%
per annum).
2. Allocations and exercise of Rights to Purchase
The Trust will grant permanent black employees a right to purchase
shares ("Right to Purchase") in terms of which they will be entitled
to acquire from the Trust their relevant allocation of scheme shares.
Allocations to participants will be made at the commencement of the
Empowerment Scheme (which is expected to be no later than 1 January
2007), and semi-annually in April and October each year thereafter for
new black employees and for participants who have been promoted. All
allocations will be made by the trustees of the Trust in conjunction
with the board.
Participants will be entitled to exercise their Right to Purchase in 3
equal tranches at the end of years 5, 6 and 7. These tranches may be
accumulated by participants until the end of year 7. Upon such
exercise, legal ownership of (and all risk and benefit in) such scheme
shares will pass to the participants.
Approximately 78% of the total number of scheme shares will be
allocated at the commencement of the Empowerment Scheme, with the
balance being allocated thereafter to new entrants and promoted
participants. Final allocations of scheme shares will be made at the
end of year 5 of the Empowerment Scheme.
The AVI Group will carry the funding risk should the Rights to
Purchase not be exercised because the purchase price payable in terms
of the exercise of a Right to Purchase is higher than the market value
of the scheme shares over the exercise period.
3. Purchase price
The price at which the scheme shares will be purchased by the participants
pursuant to the exercise of a Right to Purchase will be:
* for a Right to Purchase granted as at the commencement date: the
inception price of the shares which are the subject of the Right to
Purchase plus an amount equal to a portion of the interest on the AVI
loan attributable to such shares calculated to the date of exercise of
the Right to Purchase in respect thereof, less an amount equal to any
dividends received by the Trust in respect of such shares, up to the
date on which the Right to Purchase in respect thereof is exercised.
* for a Right to Purchase granted after the commencement date: the
greater of the market value (determined on the date of the offer of
the Right to Purchase) or the inception price in respect of the shares
which are the subject of the Right to Purchase plus an amount equal to
a portion of the interest on the AVI loan attributable to such shares
calculated to the date of exercise of the Right to Purchase in respect
thereof, less an amount equal to any dividends received by the Trust
in respect of such shares, up to the date on which the Right to
Purchase in respect thereof is exercised.
4. Dividends
All dividends that accrue to the Trust in respect of scheme shares
will, in terms of the trust deed, be applied to fund the costs of the
Trust and the payment of interest due on the AVI loan.
5. Transfer of ownership of scheme shares
Participants will be entitled to take ownership of their scheme shares
upon exercise of the Right to Purchase in respect thereof and against
payment of the purchase price.
Participants will be liable for payment of all costs associated with
the transfer of the scheme shares and of any taxes due relating to
taxable gains in their own hands, the amount of which may be withheld
by the Trust.
6. Estimated economic cost of the Transaction
AVI has estimated the economic cost of the Transaction to be
approximately 1.68% of AVI"s market capitalisation. The value of the
Transaction is based on the indicative market capitalisation of AVI,
using the market value for the 30 day period ending Wednesday, 20
September 2006 of 1 551 cents per share.
7. Accounting treatment of the Transaction
In accordance with the JSE Limited ("JSE") Listings Requirements, the
underlying accounting treatment is in accordance with AVI"s accounting
policies as set out in the last published audited financial
information. In presenting the consolidated impact for AVI,
information is to be presented in accordance with International
Financial Reporting Standards, as it existed as at 30 June 2006.
8. Restrictions on scheme shares
In terms of the JSE Listings Requirements, the trustees may not vote
the scheme shares held by the Trust on a JSE resolution.
Financial effects of the Transaction
The board is responsible for the preparation of the pro forma effects of
the Transaction. Based on the published audited results for the year ended
30 June 2006, the unaudited pro forma financial effects of the Transaction
on the assumption that the specific issue is successfully concluded, on
AVI"s earnings per share ("EPS"), headline earnings per share ("HEPS"), net
asset value ("NAV") and net tangible asset value ("NTAV") are set out
below. This unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature may not fairly present
AVI"s financial position and results of operations, nor the effect and
impact of the specific issue going forward.
Per share (cents) Before the After the Change
Transaction Transaction (%)
(1)
EPS from continuing operations 103.4 99.9 (2) (3.4)
HEPS from continuing 107.2 103.8 (2) (3.2)
operations
NAV 744.7 743.5(3) (0.2)
NTAV 411.9 410.8 (3) (0.3)
Number of shares for EPS and 312 373 484 312 373 484 0.0
HEPS purposes ("000)
Number of shares for NAV and 313 073 058 313 073 058 0.0
NTAV purposes ("000)
Notes:
1. The "Before the Transaction" financial information has been based on
the income statement and balance sheet included in the AVI audited
results for the year ended 30 June 2006, as published on SENS on
Monday, 11 September 2006 and in the press on Tuesday, 12 September
2006.
2. EPS and HEPS from continuing operations have been adjusted to include
the IFRS 2 Share Based Payment expense relating to the estimated
initial grant of 78% of the available share purchase rights by the
Trust.
3. NAV and NTAV have been adjusted for the estimated transaction costs
relating to the transaction. These costs have been written off against
share premium.
Conditions precedent to the Transaction
The implementation of the Transaction is subject to:
* approval by the requisite majority of AVI shareholders in general
meeting of the terms of the Transaction and the issue of new AVI
shares to the Trust; and
* the lodging of the trust deed with the Master of the High Court of
South Africa and issue by the Master of the High Court of South Africa
of Letters of Authority to the trustees.
Timetable and documentation
The circular setting out the full details of the proposed Transaction and
the notice convening the general meeting required to implement it will be
posted to shareholders on or about 28 September 2006.
Sandton
27 September 2006
Enquiries:
Simon Crutchley Tel: +(27) 11 779 2706
Chief executive officer
Owen Cressey Tel: +(27) 11 779 2704
Chief financial officer
Investment Bank Tax adviser Corporate law
and Transactional KPMG adviser
Sponsor Tabacks
Nedbank Capital
Sponsor Reporting
Standard Bank Accountants and
Auditors
KPMG
Date: 27/09/2006 02:00:26 PM Produced by the JSE SENS Department
