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Afe/afep - Aeci Limited - Update On The Proposed B-bbee Transaction And

Release Date: 19/12/2011 13:30:01      Code(s): AFE AFEP
AFE/AFEP - AECI Limited - Update on 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 Company")                                                       
UPDATE ON THE PROPOSED B-BBEE TRANSACTION AND WITHDRAWAL OF CAUTIONARY          
ANNOUNCEMENT                                                                    
1.   Introduction                                                               
    AECI shareholders ("Shareholders") are referred to the detailed terms       
    announcement released on the Securities Exchange News Service ("SENS")      
on Thursday, 13 October 2011 and published in the press on Friday, 14       
    October 2011 relating to the proposed Broad-based Black Economic            
    Empowerment ("B-BBEE") transaction ("the proposed B-BBEE Transaction")      
    and the results of the general meeting and the cautionary announcement      
released on SENS on Thursday, 24 November 2011 and published in the         
    press on Friday, 25 November 2011 ("the 24 November Announcement").         
    Shareholders are further referred to the circular to Shareholders           
    containing the full terms of the proposed B-BBEE Transaction ("the          
Circular"), posted to Shareholders on Wednesday, 26 October 2011.           
2.   Mechanics of the proposed B-BBEE Transaction                               
    As set out in the Circular, 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 AECI Employees Share Trust ("the EST"),           
              constituting 8% of the Net Enlarged Issued Share Capital (as      
defined in the Circular); and                                     
         *    the specific issue of 4 426 604 AECI ordinary shares to the       
              AECI Community Education and Development Trust ("the CST")        
              ("CST Ordinary Shares"), constituting 3,5% of the Net             
Enlarged Issued Share Capital.                                    
3.   Changes to the proposed B-BBEE Transaction                                 
    In the 24 November 2011 Announcement, Shareholders were advised that        
    following feedback from key Shareholders on the terms of the proposed B-    
BBEE Transaction, the Company was giving further consideration to these     
    and was engaging with Shareholders in this regard.                          
    Shareholders are hereby advised that, following discussions with key        
    Shareholders, the transaction term relating to the EST ("the EST Term")     
has been amended from seven years to 10 years.                              
    Accordingly, the notional loan provided by AECI to the EST to fund the      
    subscription by the EST of the 10 117 951 AECI B Ordinary Shares will       
    now be settled at the end of a period of 10 years, as extended or           
anticipated in terms of the EST trust deed .                                
    No other material changes have been made to the terms of the proposed B-    
    BBEE Transaction.                                                           
    The amendment to the EST Term will allow AECI to maintain the B-BBEE        
benefits derived from the EST for a further three years and, at the         
    same time, will increase the potential for eligible employees to unlock     
    greater value from the proposed B-BBEE Transaction.                         
4.   Economic cost                                                              
AECI had previously estimated the economic cost of implementing the         
    proposed B-BBEE Transaction to be approximately R257 million. Based on      
    the revised EST Term, this figure has been revised upwards to               
    approximately R260 million, calculated in accordance with International     
Financial Reporting Standards ("IFRS"), specifically IFRS 2 - Share-        
    based Payments.                                                             
5.   Unaudited pro forma financial effects                                      
    Based on the revised EST Term, 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  B-BBEE        change                   
                            Transaction  Transaction   (%)                      
EPS (cents)        275        (129)        146           (47)                   
HEPS (cents)       265        (130)        135           (49)                   
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 (R14,9 million) and the CST     
         (R122,1 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.                                        
6.   Conditions precedent                                                       
    The proposed B-BBEE Transaction is subject, inter alia, to the              
fulfillment 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 of any special resolution with the Companies and            
         Intellectual Property Commission, to the extent required; and          
    *    the lodging of the amendments to the trust deeds with the Master       
         of the High Court.                                                     
7.   Fairness opinion                                                           
    As set out in the Circular, Ernst & Young Advisory Services Limited         
    ("E&Y"), the independent professional expert appointed by the AECI          
    board of directors ("the Board") in terms of the Listings Requirements      
of the JSE Limited ("JSE"), has considered the terms and conditions of      
    the AECI B Ordinary Shares and is of the opinion that such terms and        
    conditions are fair to Shareholders.  E&Y has considered the revised        
    EST Term and has informed the Board that its opinion, as set out in the     
Circular, remains unchanged.                                                
8.   Supplementary circular and salient dates and times                         
    A supplementary circular setting out the revised terms of the EST ("the     
    Supplementary Circular") will be posted to Shareholders on or about         
Wednesday, 21 December 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 Supplementary Circular, on Wednesday, 25            
January 2012 at 13h30 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:                                                    
                                                                                
                                                                                
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 Supplementary Circular and notice of   Thursday, 15 December      
General Meeting                                    2011                       
  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 vote at the      Friday, 13 January 2012    
General Meeting                                                               
  Record date to be eligible to vote at the General  Friday, 20 January 2012    
  Meeting                                                                       
  Last day to lodge forms of proxy for the General                              
Meeting by 13h30 on                                Monday, 23 January 2012    
  General Meeting of AECI ordinary shareholders to                              
  be held at 13h30 on                                Wednesday, 25 January      
                                                     2012                       
Results of General Meeting released on SENS        Wednesday, 25 January      
                                                     2012                       
  Results of General Meeting published in the South                             
  African press                                      Thursday, 26 January       
2012                       
  Expected listing of the new AECI ordinary shares                              
  on the JSE on or about                             Friday, 3 February 2012    
    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.                                                         
9.   Withdrawal of cautionary announcement                                      
    Shareholders are advised that as the revised EST Term has now been          
    announced, Shareholders no longer need to exercise caution when dealing     
    in their AECI Securities in this regard.                                    
Woodmead                                                                        
19 December 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 expert           
implementation managers                                 
                                                                                
                        Barnstone Corporate       Ernst & Young Advisory        
Deloitte                 Services Proprietary      Services Limited             
Limited                                                 
                        Corporate sponsor                                       
                                                                                
                        Rand Merchant Bank (a                                   
division of FirstRand                                   
                        Bank Limited)                                           
Date: 19/12/2011 13:30:01 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.                                          



                                        
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