Go Back Email this Link to a friend

Afe/afep - Aeci Limited - Announcement Relating To The Terms Of The

Release Date: 13/10/2011 10:00:02      Code(s): AFE AFEP
AFE/AFEP - AECI Limited - Announcement relating to the terms of the             
proposed B-BBEE transaction and withdrawal of cautionary announcement           
AECI LIMITED                                                                    
(Incorporated in the Republic of South Africa)                                  
(Registration number 1924/002590/06)                                            
JSE ordinary share code: AFE                                                    
JSE preference share code: AFEP                                                 
JSE ordinary share ISIN: ZAE000000220                                           
JSE preference share ISIN: ZAE000000238                                         
("AECI" or "the Group")                                                         
ANNOUNCEMENT RELATING TO THE TERMS OF THE PROPOSED B-BBEE TRANSACTION AND       
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT                                           
1.   Introduction                                                               
    AECI shareholders ("Shareholders") are referred to the detailed             
    cautionary announcement released on the Securities Exchange News            
Service ("SENS") on Tuesday, 26 July 2011, and published in the             
    press on Wednesday, 27 July 2011, which referred to the proposed            
    Broad-based Black Economic Empowerment ("B-BBEE") Transaction ("the         
    proposed B-BBEE Transaction") and the further cautionary                    
announcement released on SENS on Tuesday, 6 September 2011, and             
    published in the press on Wednesday, 7 September 2011.                      
    AECI concluded the relevant trust deeds on Thursday, 6 October 2011         
    and subscription agreements on Wednesday, 12 October 2011                   
(collectively, "the Transaction Agreements") between AECI and               
    respectively the trustees for the time being of the AECI Employees          
    Share Trust ("the EST") and the trustees for the time being of the          
    AECI Community Education and Development Trust ("the CST").                 
Post the implementation of the proposed B-BBEE Transaction and the          
    small related party transaction between AECI and an empowerment             
    consortium led by Kagiso Tiso Holdings Proprietary Limited, of which        
    details were released on SENS on Tuesday, 26 July 2011 and published        
in the press on Wednesday, 27 July 2011 ("the proposed KTH                  
    Transaction"), 11,5% of AECI`s issued share capital (including the          
    AECI B Ordinary Shares but excluding treasury shares) ("Net Enlarged        
    Issued Share Capital") will be held by a broad base of black people         
("Black"), as defined in the Department of Trade and Industry`s             
    Broad-Based Black Economic Empowerment Codes of Good Practice               
    ("Codes").                                                                  
    The total value of the proposed B-BBEE Transaction is R1,1 billion,         
based on R75,82 per AECI ordinary share ("the Notional Issue                
    Price"), being the volume weighted average price per AECI ordinary          
    share on the JSE Limited ("JSE") for the 60 days up to and including        
    Friday, 7 October 2011.                                                     
Post the implementation of the proposed B-BBEE Transaction and the          
    proposed                       KTH Transaction, it is expected that         
    AECI will have an effective 27,4% B-BBEE equity ownership when              
    applying the principles as defined in the Codes.                            
2.   Strategic rationale                                                        
    AECI supports the South African government`s B-BBEE initiatives and         
    recognises the importance of these in achieving a sustainable               
    economic and political environment in South Africa through                  
meaningful participation by Black people in the mainstream economy.         
    AECI is committed to the implementation and success of broad-based          
    empowerment throughout the Group and has already implemented a              
    number of initiatives relating to Employment Equity, skills                 
development, preferential procurement, enterprise development and           
    corporate social investment, including the initial empowerment of           
    AEL Mining Services Limited which introduced a Black strategic              
    equity partner in 2004.                                                     

    AECI`s customers in the mining sector are increasingly making it a          
    condition of their procurement from the Group that it has at least a        
    26% effective B-BBEE equity ownership. The proposed B-BBEE                  
Transaction will complement the proposed KTH Transaction and it will        
    ensure that AECI exceeds the B-BBEE ownership target being set for          
    it by the customers who generate most of its business revenues.             
    The proposed B-BBEE Transaction will also advance AECI`s empowerment        
objective of increasing Black participation in the Group by                 
    transferring long-term economic benefits of its success to a broad          
    spread of Black South Africans, more specifically the Group`s               
    eligible employees, as set out in paragraph 3.1 below, and, through         
the CST, to Black communities in areas in South Africa surrounding          
    the operations of the Group or areas in which the Group has an              
    interest ("Affected Areas").                                                
    The proposed B-BBEE Transaction and the proposed KTH Transaction            
will ensure that AECI maximises its equity ownership scorecard in           
    terms of the Codes and the Amended Broad-Based Socio-Economic               
    Empowerment Charter for the South African Mining and Minerals               
    Industry, for the benefit of the Group.                                     
The inclusion of employees is intended to spread a significant              
    portion of the benefits of the proposed B-BBEE Transaction among            
    AECI`s permanent employees. The sustainability and growth prospects         
    of AECI will be enhanced by:                                                
*    improving AECI`s ability to attract, incentivise and retain            
         Black employees and managers;                                          
    *    aligning the interests of employees and Shareholders; and              
    *    recognising and rewarding employees who have enabled the               
success of the Group.                                                  
    The inclusion of Black communities in Affected Areas in the proposed        
    B-BBEE Transaction is aimed at uplifting and developing skills              
    pertinent to AECI`s businesses, and to South Africa as a whole, in          
those communities. Mathematics and science education will be a              
    particular focus.                                                           
3.   Mechanics of the proposed B-BBEE Transaction                               
    The proposed B-BBEE Transaction will be implemented through:                
*    the creation and the specific issue of 10 117 951 unlisted             
         redeemable convertible B ordinary shares ("AECI B Ordinary             
         Shares") to the EST, constituting 8% of the Net Enlarged Issued        
         Share Capital; and                                                     
*    the specific issue of 4 426 604 AECI ordinary shares to the CST        
         ("CST Ordinary Shares"), constituting 3,5% of the Net Enlarged         
         Issued Share Capital.                                                  
    3.1  The EST                                                                
The beneficiaries of the EST ("Eligible Employees") will be:           
         *    current and future permanent, Black employees and Black           
              managers employed by AECI`s South African operations; and         
         *    current and future permanent, non-Black employees employed        
by AECI`s South African operations who do not participate,        
              nor will be ineligible to participate, in any of the              
              Group`s existing long-term share incentive schemes.               
         The Group currently has about 3 900 Eligible Employees of whom         
approximately 72% are Black and 12% of these are Black women.          
         Once the proposed B-BBEE Transaction has been approved by AECI         
         ordinary shareholders and becomes unconditional, the EST               
         beneficiaries will be entitled to elect four trustees while the        
board of directors of AECI ("the Board") will be entitled to           
         appoint one trustee to the EST.                                        
         The EST will subscribe for 10 117 951 AECI B Ordinary Shares           
         for no cash consideration. The AECI B Ordinary Shares issued to        
the EST will have a market value of approximately R767 million         
         ("EST Equity Value"), using the Notional Issue Price. The EST          
         Equity Value will be funded by a notional loan from AECI ("EST         
         Notional Loan"), to be settled at the end of seven years ("the         
EST Transaction Term").                                                
         The EST Transaction Term may be extended by up to one year             
         should market volatility result in there being no value to the         
         EST and its beneficiaries at the end of the initial seven year         
term. The EST Transaction Term may also be anticipated in order        
         to facilitate an offer which, if accepted, would result in an          
         affected transaction as defined in the Companies Act, No. 71 of        
         2008 ("Companies Act").                                                
The EST Notional Loan in respect of each Beneficiary will carry        
         a notional interest rate equivalent to 85% of the prime lending        
         rate (compounded monthly in arrears) and will be reduced by the        
         difference between the aggregate value of the distributions            
that would have been paid to that Beneficiary had he held AECI         
         ordinary shares instead of AECI B Ordinary Shares and the              
         aggregate value of the distributions paid on the AECI B                
         Ordinary Shares held by him over the EST Transaction Term. At          
the end of the EST Transaction Term, the outstanding notional          
         funding and any administrative costs of the EST paid by AECI           
         will be settled through the redemption of AECI B Ordinary              
         Shares for no consideration according to a redemption formula.         
The AECI B Ordinary Shares remaining after the redemption to           
         settle the notional loan and administrative costs will convert         
         into new AECI ordinary shares and will be distributed to the           
         Eligible Employees.                                                    
3.1.1     Allocation and forfeiture                                    
                   Allocation of the AECI B Ordinary Shares to eligible         
                   Black and non-Black employees will be based on their         
                   years of service and allocations to Black managers           
will be linked to their annual basic salary.                 
                   Approximately 10% of the total number of AECI B              
                   Ordinary Shares issued to the EST will be reserved           
                   for allocation to future Eligible Employees during           
the EST Transaction Term.                                    
                   AECI B Ordinary Shares allocated to Eligible                 
                   Employees will be subject to a forfeiture profile            
                   depending on the reason for Eligible Employees               
leaving the employ of the Group during the EST               
                   Transaction Term.                                            
         3.1.2     Salient terms of the AECI B Ordinary Shares                  
                   Subject to the provisions of the EST:                        
*    the AECI B Ordinary Shares will be unlisted             
                        redeemable convertible B ordinary shares of no          
                        par value in the share capital of AECI and will         
                        carry the same voting rights as AECI ordinary           
shares;                                                 
                   *    the AECI B Ordinary shares will be taken into           
                        consideration when determining a quorum at any          
                        general meeting of AECI Shareholders and the            
Trustees (in accordance with the instructions of        
                        the Eligible Employees in respect of the AECI B         
                        Ordinary Shares vested in the Eligible                  
                        Employees) will be entitled to vote on any or           
all resolutions proposed at any general meeting,        
                        for so long as the AECI B Ordinary Shares are           
                        registered in the name of the EST;                      
                   *    the EST and its beneficiaries will, if declared         
by the Board, be entitled to receive                    
                        distributions on the AECI B Ordinary Shares             
                        provided that such distributions will not in any        
                        financial year exceed 100% of the distributions         
paid per AECI ordinary share.  It is expected           
                        that the AECI B Ordinary Shares will attract 10%        
                        of the distributions declared on the AECI               
                        ordinary shares; and                                    
*    the AECI B Ordinary Shares remaining after              
                        redemption will convert into AECI ordinary              
                        shares on a one-for-one basis.                          
         3.2  The CST                                                           
The CST will among other things focus on improving                
              education in Black communities where AECI operates or has         
              an interest. The CST will complement AECI`s existing              
              initiatives to uplift and develop skills pertinent to             
AECI`s businesses, and to South Africa as a whole. The            
              trust deed of the CST stipulates that at least 85% of the         
              economic benefit accruing to the CST will benefit Black           
              people and at least 30% will benefit Black women.                 
The CST will have five trustees ("CST Trustees") who will be           
         entitled to exercise all voting rights attached to the CST             
         Ordinary Shares. For as long as the majority of Trustees are           
         not independent, the Trust will not be entitled to vote the CST        
Ordinary Shares. Of the five CST Trustees, at least three will         
         be Black, at least two will be Black women and at least three          
         will be independent trustees. At least one of the independent          
         trustees will be required to have a financial background. AECI         
will have the right to appoint and remove two of the CST               
         Trustees.                                                              
         The CST will participate in the proposed B-BBEE Transaction by         
         subscribing for 4 426 604 AECI ordinary shares at a par value          
of R1,00 per share for a total consideration of R4 426 604,            
         funded by a once-off grant from AECI ("the CST Grant"). The            
         AECI ordinary shares issued to the CST will have a market value        
         of approximately R336 million, based on the Notional Issue             
Price.                                                                 
         The difference between the market value of R335 625 115 and the        
         subscription consideration of R4 426 604, being R331 198 511,          
         will be funded as a notional loan ("CST Notional Loan"), to be         
settled at the end of 10 years ("CST Transaction Term") through        
         a future repurchase, for no consideration, and subsequent              
         cancellation of AECI ordinary shares, determined in accordance         
         with a share cancellation formula. The CST Ordinary Shares             
remaining after the repurchase and cancellation will be                
         retained by the CST.                                                   
         The CST Transaction Term may be anticipated in order to                
         facilitate an offer which, if accepted, would result in an             
affected transaction as defined in the Companies Act.                  
         The CST will be entitled to receive all dividends in specie but        
         only 60% of cash dividends declared on the AECI ordinary shares        
         during the CST Transaction Term. After the CST Transaction             
Term, the CST will receive 100% of dividends on AECI ordinary          
         shares retained by the CST.                                            
         The CST Notional Loan will carry an interest rate of 85% of the        
         prime lending rate (compounded monthly in arrears) and will be         
reduced by the difference between the aggregate value of the           
         dividends declared and paid on 4 426 604 AECI ordinary shares          
         and the aggregate value of the dividends actually received by          
         the CST on the CST Ordinary Shares over the CST Transaction            
Term.                                                                  
4.   Economic cost                                                              
    AECI has estimated the economic cost of implementing the proposed B-        
    BBEE Transaction to be approximately R257 million. This figure has          
been calculated in accordance with International Financial Reporting        
    Standards ("IFRS"), specifically IFRS 2 - Share-Based Payments, and         
    includes both transaction costs and the CST Grant.                          
5.   Conditions precedent                                                       
The proposed B-BBEE Transaction is subject, inter alia, to the              
    fulfilment of the following conditions precedent:                           
    *    the passing of all requisite special and ordinary resolutions          
         by the requisite majority of votes at a general meeting of AECI        
ordinary shareholders;                                                 
    *    the filing and registration of any special resolution with the         
         Companies and Intellectual Property Commission, to the extent          
         required; and                                                          
*    the Master of the High Court of South Africa having issued             
         letters of authority to the initial trustees of the EST and the        
         CST to act as such.                                                    
6.   Fairness opinion                                                           
The JSE does not ordinarily allow unlisted securities to be taken           
    into account in determining either a quorum or for the approval of          
    any resolution considered at shareholder meetings.  However, in the         
    interests of B-BBEE legislation, and subject to a fairness opinion          
on the terms of the AECI B Ordinary Shares, the JSE has agreed that         
    the AECI B Ordinary Shares can be taken into account in determining         
    a quorum and for the approval of any resolution considered at any           
    Shareholder meeting.                                                        
Ernst & Young Advisory Services Limited ("E&Y"), the independent            
    professional expert appointed by the Board in terms of the Listings         
    Requirements of the JSE, has considered the terms and conditions of         
    the AECI B Ordinary Shares and is of the preliminary opinion that           
such terms and conditions are fair to Shareholders ("the preliminary        
    E&Y Opinion").                                                              
7.   Opinion and recommendation of the Board                                    
    The Board has considered the terms and conditions of the proposed B-        
BBEE Transaction and the preliminary E&Y Opinion and is of the              
    opinion that the proposed B-BBEE Transaction is in the best                 
    interests of AECI and Shareholders and recommends that Shareholders         
    vote in favour of the resolutions to be proposed at the General             
Meeting.                                                                    
8.   Unaudited pro forma financial effects                                      
    The unaudited pro forma financial effects set out below have been           
    prepared to assist Shareholders to assess the impact of the proposed        
B-BBEE Transaction on the earnings per share ("EPS"), headline              
    earnings per share ("HEPS"), net asset value per share ("NAV") and          
    tangible net asset value per share ("TNAV").                                
    The unaudited pro forma financial effects are presented for                 
illustrative purposes only and because of their nature may not              
    fairly present AECI`s financial position, changes in equity, results        
    of operations or cash flows after the proposed B-BBEE Transaction.          
    It has been assumed for purposes of the pro forma financial effects         
that the proposed B-BBEE Transaction took place with effect from 1          
    January 2011 for statement of comprehensive income purposes and at          
    30 June 2011 for statement of financial position purposes.                  
    The Board is responsible for the preparation of the unaudited pro           
forma financial effects.                                                    
                   Before     Effects of   After the     Percentage             
                            the          B-BBEE        change                   
                             B-BBEE      Transaction   (%)                      
Transaction                                         
EPS (cents)        275        (127)        148           (46)                   
HEPS (cents)       265        (128)        137           (48)                   
NAV (cents)        4 186      0            4 186         0                      
TNAV per share     3 184      0            3 184         0                      
(cents)                                                                         
    Notes:                                                                      
    1.   The "Before" column has been extracted without adjustment from         
the condensed consolidated unaudited interim financial results         
         for the half-year ended 30 June 2011.                                  
    2.   The "After the B-BBEE Transaction" EPS and HEPS have been              
         adjusted to include the IFRS2 charge of the EST (R14,7 million)        
and the CST (R120,2 million), as well as implementation                
         expenses of R2,0 million. The charge relating to the EST is            
         spread over the vesting period and varies from year to year            
         whilst the charge relating to the CST is recognised                    
immediately. The weighted average number of shares in issue has        
         been adjusted to exclude the 10,1 million shares issued to the         
         EST as these shares are treasury shares and have not been              
         issued to external parties. The weighted average number of             
shares in issue has been adjusted further to exclude the 4,4           
         million shares relating to the CST as these shares are                 
         contingently returnable and are treated as not outstanding             
         until the date they are no longer subject to cancellation.             
3.   The "After the B-BBEE Transaction" NAV and TNAV have been              
         adjusted to include the IFRS2 charge of the CST, though this           
         has no effect on the NAV or TNAV. The weighted average number          
         of shares in issue has been adjusted to exclude the 10,1               
million shares issued to the EST as these shares are treasury          
         shares and have not been issued to external parties. The               
         weighted average number of shares in issue has been adjusted           
         further to exclude the 4,4 million shares relating to the CST          
as these shares are contingently returnable and are treated as         
         not outstanding until the date they are no longer subject to           
         cancellation.                                                          
9.   Circular and salient dates and times                                       
A circular setting out the full terms of the proposed B-BBEE                
    Transaction ("the Circular"), and including the E&Y Opinion, will be        
    posted to Shareholders on or about Wednesday, 26 October 2011.              
    A general meeting ("the General Meeting") of AECI ordinary                  
shareholders will be convened in terms of the notice of General             
    Meeting attached to and forming part of the Circular, on Thursday,          
    24 November 2011 at 13h00 at AECI Place, Ground Floor, 24 The               
    Woodlands, Woodlands Drive, Woodmead, Sandton whereat AECI ordinary         
shareholders will be requested to consider and, if deemed fit, pass         
    with or without modification the resolutions required to implement          
    the proposed B-BBEE Transaction.                                            
    Salient dates and times:                                                    
2011                         
  Record date, as determined by the Board, in                                   
  accordance with Section 59 of the Companies                                   
  Act, for AECI ordinary shareholders to be                                     
eligible to receive the Circular and notice of   Friday, 21 October           
  General Meeting                                                               
  Last day to trade AECI ordinary shares on the                                 
  JSE in order to be recorded in the share                                      
register on the record date to be eligible to    Friday, 11 November          
  vote at the General Meeting                                                   
  Record date to be eligible to vote at the                                     
  General Meeting                                  Friday, 18 November          
Last day to lodge forms of proxy for the                                      
  General Meeting by 13h00 on                      Tuesday, 22 November         
  General Meeting of AECI ordinary shareholders    Thursday, 24 November        
  to be held at 13h00 on                                                        
Results of General Meeting released on SENS      Thursday, 24 November        
  Results of General Meeting published in the                                   
  South African press                              Friday, 25 November          
  Expected listing of the new AECI ordinary                                     
shares on the JSE on or about                    Friday, 2 December           
    Notes:                                                                      
    *    All times shown are South African local times.                         
    *    These salient dates and times are subject to change. Any               
material changes will be released on SENS and published in the         
         South African press.                                                   
10.  Withdrawal of cautionary announcement                                      
                                                                                
Shareholders are advised that as a result of the full terms of the          
    proposed B-BBEE Transaction having now been released, Shareholders          
    no longer need to exercise caution when dealing in their AECI shares        
    in relation to the proposed B-BBEE Transaction.                             
Woodmead                                                                        
13 October 2011                                                                 
Investment bank and      Attorneys and tax        Reporting accountants         
transaction sponsor      advisers                 and auditors                  

The Standard Bank of                              KPMG Inc.                     
South Africa Limited     Webber Wentzel                                         
Accounting advisers      Programme and            Independent                   
implementation managers  professional  expert           
                                                                                
                        Barnstone Corporate                                     
Deloitte                 Services Proprietary     Ernst & Young Advisory        
Limited                  Services Limited               
                        Corporate sponsor                                       
                                                                                
                        Rand Merchant Bank (a                                   
division of FirstRand                                   
                        Bank Limited)                                           
Date: 13/10/2011 10:00:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
The SENS service is an information dissemination service administered by the    
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or            
implicitly, represent, warrant or in any way guarantee the truth, accuracy or   
completeness of the information published on SENS. The JSE, their officers,     
employees and agents accept no liability for (or in respect of) any direct,     
indirect, incidental or consequential loss or damage of any kind or nature,     
howsoever arising, from the use of SENS or the use of, or reliance on,          
information disseminated through SENS.                                          



                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.