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Omn - Omnia - Announcement Regarding An Executive Participation Transaction And

Release Date: 08/09/2009 17:00:05      Code(s): OMN
OMN - Omnia - Announcement Regarding An Executive Participation Transaction And 
Black Economic Empowerment ("BEE") Transaction                                  
Omnia Holdings Limited                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number 1967/003680/06)                                            
JSE code: OMN                                                                   
ISIN: ZAE000005153                                                              
("Omnia" or "the Group" or "the Company")                                       
ANNOUNCEMENT REGARDING AN EXECUTIVE PARTICIPATION TRANSACTION AND BLACK ECONOMIC
EMPOWERMENT ("BEE") TRANSACTION                                                 
1.   INTRODUCTION                                                               
Shareholders are aware that Omnia has implemented Executive Participation Plans 
titled "Partnership with Management" spanning 3 successive 5 financial year     
periods over the last 15 years.  Shareholders were advised by SENS on 28 July   
2009 of the successful conclusion to the "Third Partnership with Management     
Plan" which covered the 5 financial years to March 2009.  Omnia wishes to       
implement, subject to shareholders` approval, the "ExecCo Transaction"          
(described below) as the Executive Participation Plan to cover the next 5 years.
In line with Omnia`s stated commitment to BEE and employee ownership, Omnia     
wishes to also implement, subject to shareholders` approval, the "Sakhile II    
Transaction" (described below) as an incentive scheme to enable Omnia to retain 
current and recruit future talented black board members, executives and         
employees.                                                                      
Accordingly the Board of Directors of Omnia ("the Board") has provisionally     
approved the following Transactions:                                            
    -    the sale by Omnia Group Investments Limited ("OGI"), a subsidiary of   
         Omnia, of 5% of the equity and shareholder loan claims in Omnia Group  
(Pty) Ltd ("Omnia Group"), a subsidiary of OGI, (the "ExecCo Stake")   
         to Nanotron Investments (Pty) Limited ("ExecCo"), a company to be      
         owned by the executives of Omnia ("Executives") and Omnia (the "ExecCo 
         Transaction");                                                         
-    the sale by OGI of 2% of the equity and shareholder loan claims in     
         Omnia Group (the "Sakhile II 1st Tranche") to African Dune Investments 
         262 (Pty) Limited ("Sakhile II"), a company to be owned by black board 
         members, executives and employees of Omnia and Omnia; and              
-    the sale by OGI of a further 3% of the equity and shareholder loan     
         claims in Omnia Group ("the Sakhile II Future Tranches") (together     
         with the Sakhile II 1st Tranche referred to as the "Sakhile II         
         Transaction") to Sakhile II during a period of up to 3 years from the  
effective date of the Sakhile II Transaction,                          
(collectively, the "Transactions").                                             
2.   OMNIA GROUP                                                                
Omnia Group houses all the South African operating divisions of Omnia and is the
holding company for all other subsidiaries.  Omnia Group therefore represents   
the Omnia operations in their entirety.                                         
Omnia Group`s three divisions include:                                          
- Chemicals Division: distributor of speciality, functional and effect chemicals
and polymers in southern Africa.  The division operates from 21 sites and has a 
presence in every sector of the broader chemical distribution market.           
- Mining Division: the leading supplier of explosives, associated products,     
value added services and mining chemicals to the South African open-cast and    
underground mining and quarrying industries.  It has operations in southern and 
western Africa.  Trading as Bulk Mining Explosives (BME) and Protea Mining      
Chemicals, it has successfully developed a new generation of electronic         
detonator and is in the process of commercialising a new shocktube initiation   
system.                                                                         
- Agriculture Division: produces granular, liquid and speciality fertilisers and
distributes to individual farmers, co-operatives and wholesalers throughout     
southern Africa, Australia and New Zealand.  Exports, an area of growth for     
Omnia, are also made to Europe, South America and Asia                          
3.   DETAILS OF THE EXECCO TRANSACTION                                          
The Board has long recognised the need for significant management ownership     
participation within the Group and believe that the Group`s success is related  
to the excellence and long-term dedication of its key management personnel.  The
Board also believes that an effective partnership arrangement between the       
shareholders of Omnia and management enhances the wealth of the Group.  The     
"partnership with management" concept requires that key managers should be both 
financially at risk and should have their fortunes tied to those of the Group   
for a period of no less than 5 years.  The Board realises that the growth and   
success of the Group is greatly enhanced by virtue of this commitment by        
management.                                                                     
Accordingly, the Board proposes the ExecCo Transaction, whereby the Executives  
will effectively buy-in to Omnia Group at the fair value of Omnia Group.  The   
ExecCo Transaction effectively achieves the goal of creating a symbiotic        
partnership with the current management team for the 2010 to 2014 financial     
years, which will result in the Executives gaining financially based on the     
performance of the Group as detailed below.                                     
The Board has set a performance target for the Executives to achieve a real     
compound growth rate of 8% per annum for the financial years 2010 to 2014, off a
profit after tax base of R383 million for the 2009 financial year.  At the time 
of the release of the results for the 2009 financial year, the Board advised    
shareholders that the 2009 results were exceptional and not likely to be        
repeated in the 2010 financial year, but that Omnia was more likely to revert to
its long-term growth trend in the financial years 2010 to 2014.  On the basis   
that the 2009 results were exceptional and taking into account Omnia`s long-term
growth trend, the board decided upon a profit after tax base of R383 million for
the purposes of calculating the performance target for the financial years 2010 
to 2014.                                                                        
ExecCo will issue a class B ordinary share to Omnia (the "ExecCo B Class        
Share"), which will confer certain rights to Omnia, including a percentage of   
any ordinary dividends distributed by ExecCo, which is the mechanism through    
which the potential financial gain by the Executives as ordinary shareholders in
ExecCo is reduced or increased, dependant on whether the actual performance is  
less than or more than the targeted 8% real growth.  The ExecCo B Class Share`s 
dividend will be calculated with regard to the year-on-year cumulative real     
growth rate in Omnia`s consolidated after tax earnings for the financial years  
2010 to 2014 vis-a-vis the target as set by the Board and as outlined above.    
The ExecCo B Class Share`s dividend will amount to between 79% of any reserves  
distributed to ordinary shareholders, provided a real growth rate of at least 5%
is achieved, and 30% provided a real growth rate of at least 8% is achieved,    
reducing to 0% if a real growth rate of greater than 12% is achieved.           
Omnia has guaranteed the repayment by Omnia Group of the portion of the         
shareholders` loans acquired by ExecCo and will have the right to purchase the  
ExecCo Stake after an agreed period of time.  Should Omnia exercise its right to
acquire the ExecCo Stake, the requisite regulatory approvals will be obtained.  
4.   RATIONALE FOR THE EXECCO TRANSACTION                                       
The rationale for the ExecCo Transaction may be summarised as follows:          
-    The interests of the Executives are aligned with those of the          
         shareholders of Omnia:                                                 
         -    The ExecCo Transaction should increase the commitment of the      
              Executives to Omnia, whilst also focussing them on achieving      
Omnia`s stated five year growth targets; and                      
         -    The Executives are required to risk their own capital and will    
              not earn any dividends on the capital they contribute until at    
              least 30 June 2014;                                               
-    Omnia will receive fair value for the portion of Omnia Group disposed  
         of as part of the ExecCo Transaction;                                  
    -    Omnia`s consolidated capital structure will be improved with the term  
         debt raised replacing short term debt; and                             
-    The ExecCo Transaction is cash neutral to the Group other than for the 
         estimated transaction costs.                                           
5.   DETAILS OF THE SAKHILE II TRANSACTION                                      
In line with Omnia`s commitment to BEE and employee ownership, Omnia wishes to  
implement the Sakhile II Transaction that will result in the introduction of    
additional equity participation by black board members, executives and employees
in the Group`s businesses.                                                      
Omnia intends to sell a stake, comprising ordinary shares and a portion of the  
shareholders` loan claims, of up to 5% of the issued ordinary share capital in  
Omnia Group to Sakhile II in the manner described below.                        
Whilst the Board contemplates the eventual sale of up to a maximum of 5% of the 
value in Omnia Group to Sakhile II over a period of up to 3 years from the      
effective date of the Transactions, the Sakhile II 1st Tranche only contemplates
the sale of a 2% stake in Omnia Group from OGI to Sakhile II.  Sales of the     
remaining 3% of Omnia Group from OGI to Sakhile II will be treated in accordance
with the Listings Requirements of the JSE Limited ("Listings Requirements") and 
the Companies Act.                                                              
Omnia has guaranteed the repayment by Omnia Group of the portion of the         
shareholders` loans acquired by Sakhile II and will have the right to purchase  
the Sakhile II 1st Tranche and/or the Sakhile II Future Tranches for an agreed  
period of time.  Should Omnia exercise its right to acquire the Sakhile II 1st  
Tranche and/or the Sakhile II Future Tranches, the requisite regulatory         
approvals will be obtained.                                                     
6.   RATIONALE FOR THE SAKHILE II TRANSACTION                                   
The rationale for the Sakhile II Transaction may be summarised as follows:      
-    The purpose of the Sakhile II Transaction is to establish a share buy-in   
    platform that will enable Omnia to retain current and recruit future        
    talented black board members, executives and employees which is considered  
to be critical, given the shortage of available black talent and skills at  
    senior management and board levels;                                         
-    The Sakhile II Transaction will result in an improvement of Omnia`s BEE    
    scorecard, in respect of black ownership and black representation at senior 
management and board levels;                                                
-    The interests of the employees/executives will be aligned with those of the
    shareholders of Omnia, which should result in an increase in the commitment 
    of the employees/executives to Omnia whilst also focusing them on achieving 
Omnia`s stated five year growth targets;                                    
-    Omnia will receive fair value for the portion of Omnia Group disposed of as
    part of the Sakhile II Transaction;                                         
-    Omnia`s consolidated capital structure will be improved with the term debt 
raised replacing short term debt; and                                       
-    The Sakhile II Transaction is cash neutral to the Group other than for the 
    estimated transaction costs.                                                
7.   DETAILS OF THE SAKHILE II FUTURE TRANCHES                                  
Shareholders will be requested to approve the sale of a stake of up to a maximum
of 5% in Omnia Group, comprising ordinary shares and a portion of the interest  
bearing shareholders` loan claims, to Sakhile II over a period of up to 3 years.
Any further sales to Sakhile II after the Sakhile II 1st Tranche will be        
communicated to shareholders by means of an announcement as and when the tranche
sales occur.                                                                    
Every future tranche sale by Omnia to Sakhile II shall be subject to:           
-    Sakhile II obtaining finance from a bank on such terms and conditions as   
the directors of Sakhile II may deem appropriate;                           
-    OGI approving the terms and conditions of the above finance to be obtained;
-    the necessary regulatory approvals; and                                    
-    the payment of the purchase price in respect of the applicable tranche     
sale.                                                                       
The purchase consideration at which the future tranche sales will occur will    
also be calculated in accordance with a fixed formula as at the date of that    
particular sale.                                                                
8.   PURCHASE CONSIDERATION                                                     
The purchase consideration for the ExecCo Stake comprises a total consideration 
of R133 541 673 to be settled in cash by ExecCo.  The ExecCo Transaction        
purchase consideration will be funded through a combination of the Executives`  
personal funds and a loan provided by a bank.                                   
The purchase consideration for the Sakhile II 1st Tranche comprises a total     
consideration of R53 416 669 to be settled in cash by Sakhile II.  The Sakhile  
II 1st Tranche purchase consideration will be funded entirely by a loan provided
by a bank.                                                                      
The proceeds received by Omnia from the ExecCo Transaction and Sakhile II 1st   
Tranche will be utilised to reduce the short term debt facilities of the Group. 
9.   SUSPENSIVE CONDITIONS                                                      
The ExecCo Transaction remains subject to the following suspensive conditions:  
-    ExecCo obtaining the required finance from a bank;                         
-    OGI approving the terms and conditions of the above finance to be obtained;
-    ExecCo shareholders resolving to replace the memorandum and articles of    
association of ExecCo;                                                      
-    Omnia subscribing for the ExecCo B Class Share;                            
-    Executives subscribing for preference shares in ExecCo and ExecCo receiving
    payment of the aggregate subscription price of R10 million;                 
-    ABSA Bank Limited approving the sale of a portion of the OGI subordinated  
    shareholders` loans as part of the ExecCo Transaction; and                  
-    Omnia shareholders approving the ExecCo Transaction in a general meeting of
    shareholders.                                                               
If the suspensive conditions, as set out above, are not fulfilled by 31 October 
2009 (or such a later time and date as the parties may agree to in writing), the
relevant ExecCo Transaction agreements shall be of no force or effect and       
neither party shall have any claim against the other arising there from.        
The Sakhile II Transaction remains subject to the following suspensive          
conditions:                                                                     
-    Sakhile II obtaining the required finance from a bank for the settlement of
    the Sakhile II 1st Tranche purchase consideration;                          
-    OGI approving the terms and conditions of the above finance to be obtained;
-    Sakhile II shareholders resolving to replace the memorandum and articles of
    association of Sakhile II;                                                  
-    Omnia subscribing for a B class ordinary share in Sakhile II, which will   
afford Omnia certain voting rights;                                         
-    ABSA Bank Limited approving the sale of a portion of the OGI subordinated  
    shareholders` loans as part of the Sakhile II Transaction; and              
-    Omnia shareholders approving the Sakhile II Transaction in a general       
meeting of shareholders.                                                    
If the suspensive conditions, as set out above, are not fulfilled by 31 October 
2009 (or such a later time and date as the parties may agree to in writing), the
relevant Sakhile II Transaction agreements shall be of no force or effect and   
neither party shall have any claim against the other arising there from.        
10.  EFFECTIVE DATE                                                             
The effective date of the ExecCo Transaction and the Sakhile II Transaction in  
terms of the relevant agreements entered into is the third business day         
following the day that the ExecCo Transaction and the Sakhile II 1st Tranche    
become unconditional, which is expected to be before Friday, 30 October 2009.   
11.  PRO FORMA FINANCIAL EFFECTS                                                
The unaudited pro forma financial effects set out in this paragraph have been   
prepared to assist shareholders to assess the impact of the Transactions on the 
earnings per share, diluted earnings per share, headline earnings per share,    
diluted headline earnings per share, net asset value per share and tangible net 
asset value per share and are based on the audited results for the year ended 31
March 2009.                                                                     
The unaudited pro forma financial effects are the responsibility of the Omnia   
directors and have been prepared for illustrative purposes only.  Due to their  
nature, the pro forma financial effects may not fairly present Omnia`s financial
position, changes in equity and results of operations or cash flows after the   
Transactions.                                                                   
Per Omnia     Before  After   Change   After    After    Change  Pro     Change 
share         1       ExecCo  %        Sakhile  Sakhile  %       forma   %      
(cents)               Transac          II       II               after          
                     tion 2           Transac  Transac          the             
                                      tion     tion             Transa          
                                      (2%) 3   (5%) 4           ctions          
5               
                                                                                
Basic          1,107   1,045  (5.6%)   1,103     1,097   (0.9%)   1,033  (6.7%) 
earnings                                                                        
Fully          1,062  988     (7.0%)   1,058     1,050   (1.1%)  975     (8.2%) 
diluted                                                                         
earnings                                                                        
Headline       1,114   1,052  (5.6%)   1,103     1,103   (1.0%)   1,040  (6.6%) 
earnings                                                                        
Fully          1,069  994     (7.0%)   1,058     1,056   (1.2%)  981     (8.2%) 
diluted                                                                         
headline                                                                        
earnings                                                                        
Net asset      4,821   4,837  0.3%     4,817     4,814   (0.1%)   4,830  0.2%   
value                                                                           
Tangible net   3,656   3,672  0.4%     3,651     3,649   (0.2%)   3,665  0.2%   
asset value                                                                     
Weighted      44,316  44,316           44,316   44,316           44,316         
average                                                                         
shares                                                                          
(`000)                                                                          
Diluted       46,204  46,882           46,238   46,300           46,977         
weighted                                                                        
average                                                                         
shares                                                                          
(`000)                                                                          
Number of     44,370  44,370           44,370   44,370           44,370         
shares                                                                          
(`000)                                                                          
    Notes:                                                                      
    1.   Based on the published audited annual financial statements of Omnia    
         for the year ended 31 March 2009.                                      
2.   Represents the unaudited pro forma financial effects of the ExecCo     
         Transaction.                                                           
    3.   Represents the unaudited pro forma financial effects of the Sakhile II 
         Transaction assuming the issue of the first tranche, being 2% of the   
issued share capital in Omnia Group.                                   
    4.   Represents the unaudited pro forma financial effects of the Sakhile II 
         Transaction assuming the issue of the maximum 5% of the issued share   
         capital in Omnia Group.                                                
5.   Represents the cumulative unaudited pro forma financial effects of the 
         Transactions, assuming the issue of the maximum 5% of the issued share 
         capital in Omnia Group within the Sakhile II Transaction.              
    6.   The effects on basic, fully diluted, headline and fully diluted        
headline earnings per share are based on the following assumptions:    
         a.   The Transactions were effective 1 April 2008;                     
         b.   The proceeds from the Transactions are utilised to reduce short-  
              term debt facilities which incurred interest at an average rate   
of 12.4% p.a.;                                                    
         c.   Interest incurred on external borrowings of R257 million (ExecCo  
              Transaction R123.5 million, Sakhile II Transaction R133.5 million 
              (first tranche of 2% R53.4 million and additional maximum 3%      
tranche R80.1 million)) at an average rate of 9.7% p.a.;          
         d.   IFRS 2 charge totalling R28 million, reflecting the fair value of 
              the equity instruments granted to ExecCo. This charge is of a     
              once-off nature and does not recur in subsequent financial years; 
and                                                               
         e.   IFRS 2 charge totalling R5 million, reflecting the annual         
              amortisation of the fair value of the equity instruments granted  
              to Sakhile II based on a vesting period of 7 years.               
f.   Estimated transaction costs of R5.8 million;                      
                                                                                
    7.   The effects on net asset and tangible net asset value per share are    
         based on the following assumptions:                                    
a.   The Transactions were effective 31 March 2009;                    
         b.   The proceeds from the Transactions are utilised to reduce short-  
              term debt facilities;                                             
         c.   The Transactions are financed by external borrowings of R257      
million (ExecCo Transaction R123.5 million, Sakhile II            
              Transaction R133.5 million (first tranche of 2% R53.4 million and 
              additional maximum 3% tranche R80.1 million)); and                
         d.   Estimated total transaction costs of R5.8 million.                
12.  RELATED PARTIES                                                            
The shareholders of both ExecCo and Sakhile II will include Executive Directors 
of Omnia and its subsidiaries. The nature and extent of each participants       
interest in ExecCo or Sakhile II is currently being determined and will be      
detailed in a circular to be sent to shareholders.                              
Accordingly, in terms of the Listings Requirements the ExecCo Transaction and   
the Sakhile II 1st Tranche are required to be aggregated therefore deeming them 
to be a related party transaction in terms of the Listings Requirements.        
The resolutions approving the Transactions will be subject to a simple majority 
of the votes of Omnia shareholders, other than the related parties and their    
associates, being cast in favour of the resolution during a general meeting of  
shareholders.                                                                   
13.  FAIRNESS OPINIONS                                                          
In accordance with the Listings Requirements, fairness opinions are required as 
to the fairness of the ExecCo Transaction and the Sakhile II 1st Tranche to     
Omnia shareholders.  In this regard, the Board has appointed Barnard Jacobs     
Mellet Corporate Finance (Pty) Limited ("BJM Corporate Finance") as Independent 
Expert to provide an independent fairness opinion.  Details of BJM Corporate    
Finance`s opinions will be included in the circular to be posted to shareholders
detailing the Transactions.                                                     
14.  CIRCULAR AND GENERAL MEETING                                               
A circular setting out the full details of the Transactions and including the   
notice of the general meeting of shareholders is in the process of being        
finalised.                                                                      
The salient dates and times applicable to the Transactions will be announced in 
due course.                                                                     
Bryanston                                                                       
8 September 2009                                                                
Corporate Advisor       Sponsor and             Independent Reporting           
Nodus Capital           Independent Expert      Accountants                     
(Proprietary) Limited   BJM Corporate Finance   PricewaterhouseCoopers          
                       (Proprietary) Limited   Incorporated                     
Attorneys                           Independent Valuation Expert                
Tugendhaft Wapnick Banchetti and    Deloitte & Touche                           
Partners                                                                        
Date: 08/09/2009 17:00:05 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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howsoever arising, from the use of SENS or the use of, or reliance on,          
information disseminated through SENS.                                          



                                        
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