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OMN - Omnia Holdings - R1 Billion fully subscribed capital raising to fund

Release Date: 20/05/2010 07:48:42      Code(s): OMN
OMN - Omnia Holdings  - R1 Billion fully subscribed capital raising to fund     
the construction of Omnia`s second Nitric Acid and Ammonium Nitrate facility    
and the group`s expansion programme                                             
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number 1967/003680/06)                                            
JSE code: OMN                                                                   
ISIN: ZAE000005153                                                              
("Omnia" or "the Company" or "the Group")                                       
EXPANSION PROGRAMME                                                             
Rod Humphris, Omnia Group Managing Director, says "Omnia is pleased to          
announce that we will be increasing the Group`s nitric acid production          
capacity substantially by constructing a second nitric acid plant, which is     
estimated to produce 1 000 tonnes of nitric acid per day at full production,    
compared to the 700 tonnes per day of our existing plant, which will remain in  
production.  Omnia has secured the full R1 billion equity injection to provide  
certainty of construction and we are proud to provide our shareholders with     
the opportunity to subscribe for their rights and thereby to participate in     
and benefit from this significant step in Omnia`s growth strategy."             
1.   INTRODUCTION                                                               
Omnia ordinary shareholders ("Shareholders") are advised that the board of      
directors of Omnia ("the Board") will be implementing a R1 billion capital      
raising ("Capital Raising") by way of a specific issue of ordinary shares in    
the share capital of Omnia ("Ordinary Shares") for cash, if specifically        
approved by Shareholders ("the Specific Issue") and/or a claw back offer and    
rights offer of a maximum of 20 million new Ordinary Shares ("Offer Shares")    
at R50 (fifty Rand) ("Subscription Price") per Offer Share ("the Offer"). The   
Offer Shares, once issued and listed, will rank pari passu in all respects      
with existing issued Ordinary Shares.                                           
Shareholders will be permitted to apply to subscribe for more Offer Shares      
than their pro rata entitlement under the Offer on the record date ("Excess     
Application Shares") in the event that other Shareholders do not follow all or  
some of their rights, as more fully set out in paragraph 5 below.               
In order to provide certainty regarding the outcome of the Capital Raising,     
the Company has entered into commitment and underwriting agreements with        
certain institutional investors in terms of which they have agreed to           
subscribe for Offer Shares at the Subscription Price, and has furthermore       
obtained irrevocable undertakings from certain Shareholders to follow their     
rights in terms of the Offer and, if necessary, apply for Excess Application    
Shares, at the Subscription Price (collectively, "the Offer Commitments").      
The Offer Commitments were obtained following an institutional bookbuild        
exercise ("the Bookbuild").  Omnia obtained and accepted total Offer            
Commitments in an amount of R1 billion as a consequence of the Bookbuild,       
thereby ensuring that the Capital Raising will be fully subscribed.  Further    
details pertaining to the Offer Commitments are set out in paragraph 4 below.   
The Subscription Price represents a discount of approximately 18% to the        
closing price of the Ordinary Shares on Monday, 17 May 2010, being the date     
upon which the Bookbuild closed.                                                
Pursuant to the Capital Raising, Omnia will issue approximately 42.5%           
(compared to its current issued share capital) further new Ordinary Shares.     
The Board has approved the construction of a world class nitric acid (HNO3)     
and ammonium nitrate facility ("the Plant") adjacent to its existing nitric     
acid plant in Sasolburg. The total estimated cost of the proposed project (in   
nominal terms and excluding finance costs) is approximately R1.4 billion which  
is to be funded through a combination of new equity capital, internally         
generated funds and project finance over an estimated three year construction   
The Plant is estimated to have the capacity to produce an additional 1 000      
tonnes of nitric acid per day which approximates a 40% higher capacity          
compared to the current plant`s full capacity.  The Plant will have co-         
generation capacity and is expected to generate sufficient energy for its own   
requirements while contributing approximately 50% of the current factory`s      
energy needs.                                                                   
Nitric acid is an important raw material for both fertilizer and explosives     
manufacturing and its availability is critical to the sustainable growth of     
both Omnia`s fertilizer division and mining explosives division ("BME").        
Omnia`s current nitric acid plant in Sasolburg was commissioned in 1983 with    
the foremost purpose of supplying the fertilizer market. BME has since          
developed a strong presence in the explosives market demanding an ever-         
increasing portion of the existing nitric acid plant capacity, while the        
development of calcium nitrate and Porous Granular Ammonium Nitrate (PGAN)      
technologies have also added to the nitric acid demand within the Group.        
To deal with demand to date, Omnia`s strategy has been to use a number of       
interim solutions, including purchasing ammonium nitrate from other producers   
via local and international sources and importing other nitrogeneous products   
for its fertilizer business. The growth in the explosives market has to a       
great extent eroded the industry`s spare ammonium nitrate capacity, and is      
expected to continue to do so in the foreseeable future. There are also         
technical challenges inherent in importing nitrates which makes this an         
increasingly unattractive raw material supply solution.                         
The lack of sufficient quantities of internally produced nitric acid leaves     
the Group vulnerable and dependent upon other producers or comparatively        
expensive imports in order to sustain and grow its businesses. This could lead  
to, inter alia, margin erosion, limited growth opportunities, reduced           
operational flexibility and increased business risk due to reliance on third    
parties and a single nitric acid manufacturing facility.                        
The Board has evaluated the operational, strategic and financial reasons for    
the construction of the Plant and various alternatives and has decided that     
the construction of the Plant is essential to meet the future growth and        
performance objectives of the Group.                                            
The new Plant is estimated to generate internal cost savings of approximately   
R280 million per annum (calculated as earnings before interest and taxation,    
after depreciation) upon the Plant being commissioned and utilised at           
approximately 60% of its full capacity.                                         
Omnia expects the Plant to satisfy its potential future growth requirements in  
respect of nitric acid input products. Approximately 60% of the Plant`s         
estimated maximum production capacity is projected to be utilised for internal  
production requirements upon commissioning of the Plant. Ramp up to full        
capacity will take place in line with expected growth in the explosives and     
fertilizer markets.                                                             
Omnia is desirous of introducing long-term project finance to maintain          
appropriate and sustainable debt levels in its business.                        
Omnia supports the principle of having a key long-term debt provider which is,  
simultaneously, a strategic shareholder, thereby ensuring a balanced approach   
to debt and equity funding and leveraging from such a debt and equity           
provider`s broader exposure to, and understanding of, the business.             
Omnia supports the principle of having a key long-term debt provider which is,  
simultaneously, a strategic shareholder, thereby ensuring a balanced approach   
to debt and equity funding and leveraging from such a debt and equity           
provider`s broader exposure to, and understanding of, the business.             
3.1  IDC`s proposed equity participation                                        
IDC has committed to invest R250 million in new Ordinary Shares in terms of     
the Offer ("IDC Equity Commitment").  The IDC Equity Commitment is subject to   
Shareholders exercising their rights in terms of the Offer and applying for     
Excess Application Shares.                                                      
In view of the potential claw back by Shareholders in terms of the Offer and    
the possibility that IDC may therefore subscribe for less than the IDC Equity   
Commitment, IDC has requested and Omnia has agreed to seek Shareholder          
approval for the Specific Issue in order to secure a minimum equity investment  
by IDC in Omnia of R150 million ("IDC Minimum Investment").  The purpose of     
seeking the IDC Minimum Investment is to secure IDC as a long-term equity       
investor in Omnia, particularly if IDC`s debt participation, as set out in      
paragraph 3.2 below, materialises.                                              
Should Shareholders approve the Specific Issue and consequently the IDC         
Minimum Investment, then an amount of R150 million of the R1 billion Capital    
Raising will be reserved for IDC participation through an issue of 3 million    
Ordinary Shares for cash to IDC, thereby reducing the quantum of the Offer to   
R850 million.  The IDC Equity Commitment has been secured at the Subscription   
Price and, if approved by Shareholders, the IDC Minimum Investment will also    
be introduced at the Subscription Price.                                        
Further details pertaining to the proposed IDC Minimum Investment will be       
provided in the circular to Shareholders.                                       
3.2  IDC`s proposed debt participation                                          
In consideration for Omnia receiving the IDC Equity Commitment, Omnia has       
agreed, subject to certain terms and conditions, to invite IDC to participate   
in the envisaged long-term project finance to be raised in respect of the       
proposed Plant ("Plant Project Finance"), as more fully set out herein.         
Omnia has granted IDC the right of first refusal to participate in the Plant    
Project Finance, in an amount of up to the lower of 50% of the total amount of  
actual Plant Project Finance raised by Omnia, or R300 million, subject to the   
following terms and conditions:                                                 
-    Omnia resolving to raise Plant Project Finance.  There is no obligation    
    on Omnia to raise Plant Project Finance;                                    
-    IDC committing to the IDC Equity Commitment (which condition has been      
    fulfilled, as more fully set out in paragraph 3.1 above);                   
-    Omnia obtaining written approvals from existing lenders, to the extent     
    that such approval is specifically required in terms of existing            
    contractual arrangements, permitting IDC to participate in the Plant        
    Project Finance;                                                            
-    IDC agreeing to advance its portion of the total amount of Plant Project   
    Finance on the following terms:                                             
    -    unless otherwise agreed between Omnia and IDC or Omnia so elects to    
         make a payment as envisaged below, no capital repayments will be       
made by Omnia during the Plant`s construction period (which is         
         expected to be at least three years) so that the first capital         
         repayment will only be made by Omnia no earlier than twelve months     
         after commissioning of the Plant;                                      
-    Omnia shall be entitled to repay all or any part of the capital        
         amount at any time before the due date without incurring early         
         repayment penalties and following such early repayment, no             
         commitment or facility fees shall be payable by Omnia if it is not     
entitled to re-draw such early repayment amounts;                      
-    IDC`s security requirements in respect of IDC`s portion of the Plant       
    Project Finance shall:                                                      
    -    subject to negotiations between IDC and Omnia, not be in conflict      
with Omnia`s existing security obligations in respect of existing      
         funding arrangements, facilities or debt instruments;                  
    -    be in proportion to IDC`s portion of the Plant Project Finance in      
         relation to the total amount of Plant Project Finance raised, so       
that Omnia shall not be required to provide security to IDC in         
         excess of IDC`s pro rata portion of the security that is available     
         for purposes of the Plant Project Finance;                             
-    such other terms and conditions as Omnia may in its sole and absolute      
discretion determine, provided that such terms and conditions are not       
    more favourable to Omnia than those offered by other funders in respect     
    of Plant Project Finance at the time the Plant Project Finance is raised;   
-    the terms and conditions on which IDC is prepared to advance its portion   
of the Plant Project Finance shall be acceptable to both IDC and Omnia at   
    the time that the Plant Project Finance is raised/negotiated; and           
-    IDC and Omnia concluding the requisite written funding agreements and      
    such agreements becoming unconditionally operative by no later than 31      
October 2010, provided that Omnia shall not be obliged to make a first      
    draw down by this date.                                                     
4.   SUMMARY OF OFFER COMMITMENTS                                               
Omnia has received the following Offer Commitments from institutions and        
    OFFER COMMITMENTS PROVIDED BY:                ZAR COMMITTED                 
    Sanlam Investment Management (Pty) Limited    R400 million                  
    and Sanlam Investment Management, a division                                
of Sanlam Life Insurance Limited                                            
    Coronation Asset Management (Pty) Limited     R300 million                  
    Industrial Development Corporation of South   R250 million                  
    Africa Limited                                                              
Cadiz Asset Management (Pty) Limited          R50 million                   
    Total                                         R1 billion                    
The Offer Commitments will attract a fixed commitment fee of 1.5% of the        
amount of such subscription/underwriting commitments provided by the above      
institutions and Shareholders. Further details of the Offer Commitments will    
be provided in a circular to Shareholders.                                      
The Offer Commitments remain subject to, inter alia, the condition that the     
finalisation announcement in respect of the Offer, as contemplated in the JSE   
Limited ("JSE") Listings Requirements ("Listings Requirements"), is made        
within 3 months of the date of this announcement.                               
5.   EXCESS APPLICATIONS                                                        
Shareholders will be permitted to apply for additional Offer Shares over and    
above their pro rata entitlement as Shareholders on the record date. Should     
there be excess Offer Shares available for allocation, these will be allocated  
to applicants in a manner viewed as equitable in terms of the Listings          
The right to apply for excess Offer Shares is transferable upon renunciation    
of Shareholders` rights in favour of a third party.                             
6.   GENERAL MEETING                                                            
Shareholders will be requested to resolve to place 20 million Ordinary Shares   
in the existing authorised but unissued share capital of the Company under the  
Board`s control in terms of a general authority as contemplated by the          
Companies Act (No 61 of 1973), as amended. Shareholders holding a total of      
approximately 47% of the Company`s issued share capital have undertaken to      
vote in favour of the requisite resolutions in order to implement the Capital   
Raising. In order to implement the Specific Issue, Shareholders will also be    
requested to authorise the specific issue of 3 million of the aforesaid 20      
million Ordinary Shares to IDC for the purposes of securing the IDC Minimum     
Investment, as set out more fully in paragraph 3 above.  The full terms and     
conditions pertaining to the Specific Issue will be disclosed in the circular   
to Shareholders.                                                                
A general meeting of Shareholders is expected to be held at the Company`s       
registered office at 13 Sloane Street, Epsom Downs, Bryanston ("General         
Meeting") to consider and if deemed fit, pass, inter alia, the resolutions      
necessary to place the authorised but unissued share capital of Omnia under     
the control of the Board and to implement the Capital Raising. A notice of      
general meeting in this regard will be published on SENS in due course.         
7.   CIRCULARS                                                                  
Circulars to Shareholders containing details of the General Meeting, the        
Specific Issue and the Offer (and incorporating revised listing particulars),   
respectively, will be posted to Shareholders.                                   
An announcement providing the detailed Offer timetable will be published on     
SENS and in the press by the Company.                                           
8.   SUSPENSIVE CONDITIONS                                                      
The Offer remains subject to, inter alia, the following suspensive conditions:  
-    the Offer Commitments becoming unconditional;                              
-    a sufficient number of authorised but unissued Ordinary Shares being       
    placed under the control of the Board;                                      
-    the circulars being approved by the JSE and CIPRO, to the extent           
    required; and                                                               
-    the JSE approving the listing of the Offer Shares and the related letters  
    of allocation.                                                              
An announcement confirming that the Offer has become unconditional will be      
released on SENS and published in the press as soon as the suspensive           
conditions have been fulfilled.                                                 
9.   CHANGE IN SPONSOR                                                          
Omnia has appointed One Capital as its JSE Sponsor, as well as Transaction      
Sponsor in terms of the Capital Raising.                                        
10.  CAUTIONARY ANNOUNCEMENT                                                    
As a result of the pro forma financial effects of the Capital Raising not       
being disclosed in this announcement, Shareholders are advised to exercise      
caution when dealing in the Company`s securities until a further announcement   
is made.                                                                        
20 May 2010                                                                     
Corporate Advisor, Sole Bookrunner and Sponsor                                  
One Capital                                                                     
Cliffe Dekker Hofmeyr Incorporated                                              
Date: 20/05/2010 07:48:41 Supplied by www.sharenet.co.za                     
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