| Fri 27 Oct 2006, 11:53 | | Cape Empowerment Trust - Broad-based Black Economi |
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CAE
CAE
Cape Empowerment Trust - Broad-based Black Economic Empowerment Transaction
Cape Empowerment Trust Limited
(Incorporated in the Republic of South Africa)
Registration number 1998/014606/06
JSE share code: CAE ISIN: ZAE000016952
("Cape Empowerment Trust" or `the company `)
BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION ("BBBEE TRANSACTION") AND
ACQUISITION OF A FURTHER INTEREST IN THE AFRICAN ALLIANCE PROPERTIES
PARTNERSHIP ("AFRICAN ALLIANCE")
SETTLEMENT OF DISPUTES IN RELATION TO SANCINO PROJECTS LIMITED ("SANCINO") AND
ACQUISITION OF A FURTHER INTEREST IN SANCINO ("SANCINO SETTLEMENT")
INTRODUCTION
Cape Empowerment Trust is pleased to announce a broad-based black economic
empowerment transaction that improves and secures the company"s status as a
broad-based black economic empowerment investment company, and increases the
company"s interest in African Alliance, one of its core investments.
Shareholders are referred to previous announcements regarding legal disputes
between Cape Empowerment Trust, Sancino and Sanlam Life Insurance Limited
("Sanlam") regarding the company"s interests in Sancino. Cape Empowerment
Trust and Sanlam Private Equity, a division of Sanlam, are pleased to announce
that these disputes have now been resolved and that the Cape Empowerment Trust
has increased its interest in Sancino from 23.13% to 27.72%.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION AND ACQUISITION OF A
FURTHER INTEREST IN AFRICAN ALLIANCE
Background and rationale
Cape Empowerment Trust was founded as black-owned, black-controlled and black-
managed investment company, with a significant community-based shareholding.
The company has a proven track record of delivering benefits to its community-
based shareholders. Although the company has to date not participated in the
mainstream of black economic empowerment ("BEE") dealmaking activity, this is
changing and it remains of strategic importance to improve and secure the
company"s broad-based BEE status into the future.
In recent months, mainly as a result of corporate activity and an improved
share price, there has some been some dilution of the company"s BEE status.
The board has been monitoring the situation closely and has considered various
countermeasures.
Cape Empowerment Trust currently has an interest of 20% in African Alliance, a
property investment fund. Certain of Cape Empowerment Trust"s existing
community-based shareholders, as well as other community-based organisations,
hold a collective interest of 5% in African Alliance. Cape Empowerment Trust
has long been desirous of increasing its interest in African Alliance, which
has been one of its better performing investments.
This situation presented the company with an opportunity to increase its stake
in African Alliance and at the same time improve and strengthen its BEE
shareholder base, and it has accordingly been agreed with these community-
based organisations ("the Broad-Based Shareholders") that the company will
acquire their collective interest of 5% in African Alliance ("the Additional
African Alliance Interest") for a consideration to be settled by the issue of
new shares of 0.1 cent each in the capital of the company ("Cape Empowerment
Trust Shares").
The BBBEE Transaction results in Cape Empowerment Trust increasing its
interest in African Alliance from 20% to 25%, and creates a block of 20
million new Cape Empowerment Trust Shares, representing 9.3 % of the enlarged
shares in issue of 214 967 573, in broad-based black hands. Cape Empowerment
Trust"s status as a black owned, controlled and managed company, with a
significant broad-based black shareholding, is now firmly entrenched.
Salient terms of the BBBEE Transaction
The Broad-Based Shareholders are -
The Mustadafin Foundation;
Western Cape Womens Investment Forum Limited;
St John"s Primary School Trust;
The Maart Education Trust;
Goniwe Cradock Four Trust;
Nonduna Vasi Education Trust; and
MEG Trust.
The total purchase consideration payable for the Additional African Alliance
Interest is an amount of R 15 million. Such total purchase consideration will
be paid by way of the allotment and issue of 20 million new Cape Empowerment
Trust Shares at a price of R0.75 per share. The effective date of the
transaction is 16 October 2006 and it is not subject to any outstanding
conditions precedent.
Formalities
The formal agreements pertaining to the BBBEE Transaction have been concluded
and the BBBEE Transaction is being implemented.
In terms of the Listings Requirements of the JSE Limited, the BBBEE
Transaction is categorised as a category 3 transaction, and is accordingly not
subject to shareholders approval.
The JSE Limited have granted a listing of the 20 million new Cape Empowerment
Trust shares with effect from Monday, 30 October 2006.
SETTLEMENT OF DISPUTES in RELATION TO SANCINO AND ACQUISITION OF A FURTHER
INTEREST IN SANCINO
Background and rationale
During 2005 Cape Empowerment Trust acquired a majority shareholding in
Sancino, a company whose only assets comprise the shares in a wholly-owned
subsidiary which carries on a printing business, and an interest in Grand
Parade Investments Limited ("GPI"). Cape Empowerment Trust also maintained
that it had acquired from Sanlam a further 10% of the ordinary shares in
Sancino and instituted litigation against Sanlam in this regard. Sanlam held
preference shares in the capital of Sancino since 1997, which preference
shares Sancino failed to redeem and failed to pay the preference dividends in
accordance with the terms of the preference shares. In settlement of
Sancino"s liability to Sanlam with respect to the preference shares, Sacino
converted the preference shares into ordinary shares, resulting in the
shareholding of Cape Empowerment Trust being diluted to 23.13%. Cape
Empowerment Trust objected to this transaction and instituted litigation in
various courts.
Cape Empowerment Trust, Sanlam Private Equity and Sancino have for some time
been involved in discussions aimed at resolving their differences. Cape
Empowerment Trust has taken an in principle decision that its strategy of
acquiring a meaningful interest in GPI can be more effectively pursued in the
absence of litigation, and Cape Empowerment Trust and Sanlam have now reached
an agreement, the result of which is that all litigation has been withdrawn
and that Cape Empowerment Trust has acquired from Sanlam an additional 4.59%
shareholding in Sancino.
Salient terms of the Sancino settlement
In terms of the settlement agreement concluded between Cape Empowerment Trust
and Sanlam Private Equity:
- all litigation instituted by Cape Empowerment Trust against Sanlam,
Sancino and the directors of Sancino, shall be withdrawn;
- Sanlam has sold to Cape Empowerment Trust an additional 4.59%
shareholding in Sancino, for a consideration of R 3 123 955.52, which has
been paid in cash;
- Sanlam has granted pre-emptive rights in respect of its shares in Sancino
to Cape Empowerment Trust and a company held by the current Sancino
directors ("Dirco");
- Cape Empowerment Trust and Sanlam have agreed that their relationship in
relation to Sancino shall be governed by a shareholders agreement in
terms whereof, inter alia, Sancino shall have five directors, of which
Sanlam shall appoint two, Cape Empowerment Trust shall appoint two, and
Dirco shall appoint one.
CET has paid the consideration payable for the additional 4.59% shareholding
in Sancino from existing cash resources.
Formalities
In terms of the Listings Requirements of the JSE Limited, the BBBEE
Transaction is categorised as being smaller than a category 3 transaction, and
is accordingly not subject to shareholders approval.
UNAUDITED PRO FORMA FINANCIAL EFFECTS
The table below illustrates the unaudited pro forma financial effects of the
BBBEE Transaction, based on the published reviewed financial results of Cape
Empowerment Trust for the half year ended 30 June 2006. The preparation of the
unaudited pro forma financial effects is the responsibility of the directors
of the company. The unaudited pro forma financial effects have been prepared
for illustrative purposes only to provide information on how the acquisitions
may have impacted on the company"s results, financial position and changes in
equity. Due to the nature of the unaudited pro forma financial effects, they
may not give a fair reflection of the company"s financial position and changes
in equity. The financial effects of the Sancino settlement agreement are
insignificant and are not included in the table below.
Before After % change
Fully diluted earnings 11.22 10.18 -9.27%
per share (cents)
Fully diluted headline 11.22 10.18 -9.27%
earnings per share
(cents)
Net asset value 63.99 58.04 -9.30%
per share
Tangible net asset value 48.76 44.22 -9.31%
per share
Number of shares in 194,968 214,968 10.26%
issue (`000)
Notes
- The figures in the before column are extracted from the reviewed
financial results of Cape Empowerment Trust Limited for the half
year ended 30 June 2006.
- The figures in the after column take into account the dilutive
effect of the new shares issued for the increased shareholding in
African Alliance.
Cape Town
27 October 2006
Corporate advisor and sponsor
Sasfin Capital
(A Division of Sasfin Bank Limited)
Legal Advisor
Hofmeyr Herbstein & Gihwala Inc
Date: 27/10/2006 11:53:54 AM Produced by the JSE SENS Department
