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OMN - Omnia Holdings Limited - Introduction Of BEE Shareholding

Release Date: 18/06/2007 15:00:03      Code(s): OMN
OMN - Omnia Holdings Limited - Introduction Of BEE Shareholding                 
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1967/003680/06)                                           
JSE Code: OMN                                                                   
ISIN: ZAE000005153                                                              
1.  Introduction                                                                
In line with Omnia`s commitment to BEE and employee ownership, the Group        
has implemented a transaction that will result in the introduction of a 10%     
equity participation by employees in the Group`s businesses. In order to        
facilitate the BEE Transaction, Omnia has undertaken an internal                
restructuring, which has effectively resulted in the sale of the Group`s        
assets, essentially on loan account, to a new 100% owned company ("NewCo")      
("the restructuring"). NewCo thus holds all the assets of the previous          
operating subsidiaries of Omnia.                                                
Following the restructuring, Sakhile Limited ("Sakhile"), the intended          
black empowered company, acquired a 10% stake in NewCo. Sakhile funded the      
purchase of 10% of the resulting loan accounts in NewCo through debt raised     
externally and guaranteed by Omnia and through a preference share issued to     
Omnia. Sakhile received a grant from Omnia for the purchase of 10% of the       
NewCo`s equity. Sakhile will be 100% owned by Omnia`s employees.                
The BEE transaction is an important step forward in Omnia`s transformation      
strategy and will result in an improvement in Omnia`s empowerment               
2.  Rationale                                                                   
Omnia is a South African based diversified, specialist chemical services        
company providing customised solutions to the chemicals, mining and             
agriculture markets. The BEE Transaction has been carefully and                 
meaningfully structured to not only meet Omnia`s empowerment objectives but     
also to encourage employees to share in the Group`s growth.                     
Recognising that BEE is a business imperative in South Africa, Omnia wishes     
-    demonstrate its commitment to empowerment;                                 
-    offer shares to employees in line with its philosophy of extending         
share ownership to all employees;                                               
-    make progress towards complying with the ownership requirements of the     
Codes of Good Practice contained in the Broad-Based Black Economic              
Empowerment Act;                                                                
-    contribute towards social upliftment in South Africa; and                  
-    ensure a sustainable business model that aligns the interests of           
employees with those of its shareholders and in so doing retain the             
employee base and preserve the current business.                                
3.  The BEE Transaction                                                         
To facilitate the BEE Transaction, Omnia has implemented an internal            
restructuring ("the restructuring").  In terms of the restructuring, all        
the businesses and shares owned and companies held directly and indirectly      
by Omnia ("collectively, the Businesses") have been sold to NewCo on loan       
account at their current market value. These shareholder loan accounts will     
bear interest at a market related rate.                                         
Following the restructuring Omnia effectively sold 10% of its shares and        
claims in Newco to Sakhile for R278 million. Sakhile will be entitled to        
10% of the economic interest and full voting rights in NewCo.                   
Sakhile funded the BEE transaction by:                                          
 1.   borrowing R218 million from the bank to pay for interest bearing loan     
    accounts in NewCo, and;                                                     
2.   issuing a Preference Share of R60 million to Omnia to pay for interest     
free loan accounts in NewCo.                                                    
The bank term loan raised by Sakhile will be guaranteed by Omnia, and is        
secured by Sakhile`s 10% holding in NewCo.  The shareholder loan from           
Sakhile to NewCo will enjoy certain repayment preferences.                      
The introduction of an intended BEE partner has resulted in Omnia raising       
R218 million in cash from the sale of 10% ownership in NewCo which in time      
will be used to fund the Group`s future growth.                                 
Omnia will also hold a call option, the terms of which will permit Omnia to     
call the shares that the employees hold in Sakhile at market value, with        
the exercise price being settled by an issue of shares in Omnia.                
4.  Introducing a BEE partner and creating employee ownership                   
The BEE transaction has been carefully structured to enable Omnia to            
introduce a broad based BEE partner and create ownership in its businesses      
for employees over the next 12 years.                                           
Omnia believes in the value of employee ownership and therefore chose to        
partner with the employees of Omnia in a genuine broad based empowerment        
transaction. All full time black employees (including Indian and coloured       
employees) working for Omnia in South Africa, and all other full time           
employees working for Omnia in South Africa who do not participate in the       
Partnership with Management 3 Incentive Scheme will own shares in Sakhile.      
NewCo will benefit from improved empowerment credentials while employees of     
Omnia will over the next 12 years share in the future growth of the company     
for which they work.                                                            
5.  Effective date                                                              
The effective date of the BEE Transaction will be the 1st April 2007.           
6.  Pro forma financial effects of the BEE Transaction                          
The unaudited pro forma financial effects of the BEE Transaction are the        
responsibility of the directors of Omnia and have been prepared for             
illustrative purposes only and, because of their nature, may not fairly         
present Omnia`s financial position for the six months ended 30 September        
Based on the Group`s unaudited results for the six months ended 30              
September 2006 and presented in a manner consistent with the format and         
accounting policies adopted by Omnia, the effect of the BEE Transaction on      
the headline and basic earnings, net asset value and tangible net asset         
value per share would have been as follows:                                     
                     Notes   Unaudited         Pro forma       %                
                             results for the   results at      change           
                             six months ended  30.09.06 after                   
30.09.06 before   the BEE                          
                             the BEE           Transaction                      
                             Transaction       R`000                            
Net asset value per   1, 2, 3 2,587             2,587           -               
share (cents)                                                                   
Tangible net asset    1, 2, 3 1,569             1,569           -               
value per share                                                                 
Basic earnings per    5       182               166             (8,8%)          
share (cents)                                                                   
Headline earnings     5       182               166             (8,8%)          
per share (cents)                                                               
Actual number of              43,725            43,725          -               
shares in issue                                                                 
Weighted average              43,648            43,648          -               
number of shares in                                                             
issue (000`s)                                                                   
The pro forma financial effects in the "After" column are based on the          
1.   There is no effect on net asset value and tangible net asset value per     
 share as it is assumed that the BEE Transaction had been concluded on the      
balance sheet date of 30 September 2006, based on the actual number of         
 shares in issue.                                                               
2.   In terms of Standards Interpretation Committee Interpretation 12 "SIC      
  12", Consolidations - Special Purpose Entities, Sakhile, NewCo and all its    
subsidiaries will be consolidated in the accounts of Omnia.  This will        
  effectively result in the de-recognition of the sale and therefore Omnia      
  would not allocate 10% of its earnings to outside shareholders.               
3.   In April 2006, the South African Institute of Chartered Accountants        
issued AC503 - Accounting for Black Economic Empowerment Transactions.          
Based on this, the International Financial Reporting Standards 2 ("IFRS 2")     
will be applied to the BEE Transaction. As a result, an expense as well as      
an increase in equity (a separate reserve) will be recognised on the date       
that the equity instrument is granted. This expense will be recognised over     
the period that the instrument becomes fully vested. Upon settlement, a         
transfer between components of equity would be made in the statement of         
changes in equity.                                                              
4.   The indicative value of the IFRS 2 expense in the first year of            
implementation is estimated to be R12,8 million, with a cumulative expense      
of approximately R69m being recognised over a period of 8 years.                
5.   The calculation of the basic earnings and headline earnings per share      
assumes that the BEE Transaction was effected on 2 April 2006 and is based      
on the actual number of shares in issue.                                        
6.   The term debt raised will be used to repay the existing facilities.        
7.  Categorisation of transaction                                               
The BEE Transaction is a category 3 transaction and has been confirmed by       
the JSE Limited as such. In the event that the call option described above      
is exercised, a related party transaction will arise and shareholder            
approval will be required at that time.  In terms of the Securities             
Regulation Code on Takeovers and Mergers, the restructuring is deemed an        
"affected transaction".  Application has been made to the Securities            
Regulation Panel for exemption for the requirements of an "affected             
transaction".  Shareholders will be advised accordingly.                        
18 June 2007                                                                    
Barnard Jacobs Mellet Corporate Finance (Pty) Limited                           
Joint Transaction Advisors:                                                     
Nodus Investment Holdings (Pty) Ltd                                             
Sevillano Hausmann & Associates (Pty) Ltd                                       
Legal Advisors:                                                                 
Tugendhaft Wapnick Banchetti & Partners                                         
Date: 18/06/2007 15:00:03 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  

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