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Keaton Energy Holdings Limited - Small Related Party Transaction Announcement

Release Date: 27/06/2014 17:15:00      Code(s): KEH     
Keaton Energy Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/011090/06)
JSE code: KEH
ISIN code: ZAE000117420
("Keaton" or ?the company?)


SMALL RELATED PARTY TRANSACTION ANNOUNCEMENT RELATING TO THE ACQUISITION BY KEATON
OF 18% OF THE ISSUED SHARE CAPITAL OF LEEUW MINING AND EXPLORATION (PTY) LTD (?THE TRANSACTION?)
  

1. INTRODUCTION

   Keaton holds a 74% equity interest in Leeuw Mining and Exploration Proprietary
   Limited (?LME?). A 26% equity interest in LME is currently held by JPI Leeuw and
   Associates Proprietary Limited (?JPI?).
   Keaton has subsequently entered into a share purchase agreement with JPI to
   acquire 18% of the equity interest held by JPI in LME for the purchase
   consideration as disclosed in 3.2 below, with effect from 30 September 2014 or
   such earlier or later date as Keaton may, in its sole discretion, nominate in writing
   ("Effective Date").

2. RATIONALE

   JPI wishes to exit from its investment in LME. In order to advance the economic
   interest and welfare of JPI and to enable JPI to substantially and meaningfully
   benefit from its equity interest in LME, Keaton has agreed to acquire 18% of the
   equity interest held by JPI in LME.

   Keaton recognises the importance of the objectives of the Broad-Based Socio-
   Economic Empowerment Charter for the South African Mining and Minerals
   Industry (?The Mining Charter?). To this end and in order to comply with the
   ownership objectives of the Mining Charter, ownership of 18% of the equity
   interest held by JPI in LME will only pass to Keaton on the Effective Date. The
   board of directors of Keaton ("Board") recognise that the Effective Date cannot
   occur unless 26% effective HDSA (historically disadvantaged South Africans)
   ownership in LME is in place at that time.

   This Transaction is the first phase of the restructuring and consolidation of BEE
   (black economic empowerment) within the greater Keaton group...

3. THE TRANSACTION

   3.1. THE BUSINESS

        LME has one operating colliery, Vaalkrantz and holds the mining rights for
        Braakfontein and Koudelager.

   3.2. THE PURCHASE CONSIDERATION

        The purchase consideration payable by Keaton is R26,000,000 plus interest
        to be settled as follows:

           -   Such portion of the purchase consideration which is equal to the
               amount owing by JPI to Keaton shall be settled by way of set-off on 30
               June 2014; and
           -   The balance of the purchase consideration, after applying set-off, shall
               be settled in 11 monthly instalments starting on 30 June 2014 bearing
               and accruing interest at prime.


4. CONDITIONS PRECEDENT

   All the conditions relating to this acquisition have been fulfilled or waived.

5. FINANCIAL EFFECTS

   Based on Keaton?s reviewed results for the year ended 31 March 2014
   ("Results"), the Financial Effects of the above Transaction on Keaton?s earnings
   per share ("EPS"), diluted earnings per share ("DEPS?), headline earnings per
   share ("HEPS"), diluted headline earnings per share (?DHEPS?), net asset value
   per share (?NAV?) and net tangible asset value per share (?NTAV?) are set out
   below. The Financial Effects are prepared for illustrative purposes only, and
   because of their nature, may not give a fair presentation of Keaton's financial
   position, changes in equity, results of operations and cash flows or the effect and
   impact of the Transaction.

   The Financial Effects are the responsibility of the Board and have not been
   reviewed or reported on by Keaton?s auditors.

                               Before the            After the            Change
                             Transaction(?)       Transaction (?)           %
   EPS (cents) (?)               30.3                   27.2              -10.2%
   DEPS (cents) (?)              30.0                   26.9              -10.3%
   HEPS (cents) (?)              30.3                   27.2              -10.2%
   DHEPS (cents) (?)             30.0                   26.9              -10.3%
   NTAV (4)                      96.1                   84.5              -12.1%

   Notes:

   1. Based on Keaton's 31 March 2014 reviewed results.
   2. In calculating the Financial Effects, it was assumed that the Transaction was
      implemented on 1 April 2013 for statement of comprehensive income
      purposes and on 31 March 2014 for statement of financial position purposes.
   3. The EPS, DEPS, HEPS and DHEPS were adjusted for:
          a. net profit attributable to owners of the company decreasing by
             R5,427,193 relating to the change in non-controlling interest.
          b. assumed interest paid of R672,064 to JPI on the purchase
             consideration.
   4. The NTAV per share was adjusted for:
          a. a decrease in minority interest of R 26,000,000.
   5. The impact on NAV per share was not considered significant, as the %
      change was less than 3%.

6. SMALL RELATED PARTY TRANSACTION

   JPI is a material shareholder of LME which is a subsidiary of Keaton and this
   acquisition is therefore a related party transaction in terms of the JSE Listings
   Requirements.
   The JSE has been provided with written confirmation from BDO Corporate
   Finance (Proprietary) Limited, an independent professional expert acceptable to
   the JSE, confirming that the acquisition is fair to Keaton?s shareholders ("the
   fairness opinion").
   The fairness opinion will be available for inspection at Keaton`s registered office
   for a period of 28 days from the date of this announcement.

   Bryanston
   27 June 2014

   Sponsor
   Investec Bank Limited

Date: 27/06/2014 05:15:00 Supplied by www.sharenet.co.za                     
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