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Omnia Holdings Limited - Acquisition Of 81.45% In Nanotron Investments Proprietary Limited

Release Date: 12/12/2014 07:05:00      Code(s): OMN     
Incorporated in the Republic of South Africa
(Registration number 1967/003680/06)
Share Code: OMN ISIN: ZAE000005153
(?Omnia? or ?the Company? or ?the Group?)


The board of directors of Omnia (?the Board?) has long recognised the need for significant
management and employee ownership participation within the Group and believes that the Group?s
success is related to the excellence and long-term dedication of its people. The Board also believes
that an effective partnership arrangement between the Shareholders of Omnia, its management and
its people enhances the performance and ultimate wealth of the Group.

The Group has followed a five year planning cycle with an associated five year Long-Term Incentive
Plan (?LTIP?) for the last two decades. For each of the past four five year periods, management has
met or exceeded the five year targets set by the Board.

The last five year planning cycle and associated five year LTIP covered the period 1 April 2009 to
31 March 2014 was successfully completed achieving cumulative compound real growth in earnings
of 10.3% (equating to 16.1% nominal compound growth in earnings), comfortably exceeding the 8%
target. This excellent performance contributed to the Omnia share price increasing from R52.00 at the
beginning of this five year plan to R211.05 at the end of the five year plan, and the corresponding
market capitalisation increasing from R2.2 billion to R14.2 billion, a factor of nearly 6.5 times.

During this period, the Group operated three performance based incentive plans as follows:

     -   the Nanotron Executive Share Scheme (the ?Nanotron Scheme?) for 20 senior executives
         which was approved by shareholders on 11 December 2009.

     -   the Partnership with Management Number Four (?Partner 4 Scheme?) scheme for 190
         middle management and professional staff based in South Africa for the five year period
         ended 31 March 2014. The total value created and paid to date to employees was R111.1

     -   the Phantom ?Share? Scheme for 46 selected senior management and professional level
         employees in countries outside of South Africa for the five year period ended 31 March 2014.
         The total value created and paid to date to employees was R48.4 million.

In addition to these three performance based incentive plans, the Board implemented two Broad-
Based Black Economic Empowerment share ownership schemes, being Sakhile Initiative 1 and
Sakhile Initiative 2 - the details of which are set out in the Remuneration Report in Omnia?s 2014
Integrated Annual Report. The two schemes are summarized as follows:

     -   the Sakhile Initiative 1 includes over 2 000 South African employees who participate in the
         wealth created by the increase in the market value of Omnia, through its 10% ownership of
         Omnia Group Proprietary Limited.

     -   the Sakhile Initiative 2 includes a further 135 talented and skilled black South African
         executives and employees who participate in the same wealth creation, through its ownership
         of 3.5% of Omnia Group Proprietary Limited.

The wealth created for employees participating in both Sakhile Initiative 1 and Sakhile Initiative 2 is
considerable and the value of their combined interest in these two companies was R1.2 billion at 31
March 2014 and R1.3 billion at 30 November 2014.


In terms of the Nanotron Scheme for 20 senior executives, the participants subscribed for 81.446% of
the ordinary and preference shares in Nanotron Investments Proprietary Limited (?Nanotron?). The
remaining 18.554% of Nanotron is held by a wholly owned subsidiary of Omnia. Omnia had a call
option to acquire the ordinary and preference shares held by the executives in Nanotron at any time
between 30 June 2014 and 31 December 2015, which was exercised on 30 November 2014 (the

The exercise price for the ordinary shares and preference shares was determined according to the
formula in the call option as set out in the circular approved by shareholders in 2009. The exercise
price of R210.69 is based on the 30 day volume-weighted average price (?VWAP?) of an Omnia
Holdings Limited ordinary share prior to the exercise date, being 28 November 2014.

The option to acquire the shares in Nanotron was incorporated into the Memorandum of Incorporation
of Nanotron. To formalise the exercise of the option, a Call Option and Purchase Agreement (the
?Agreement?) was entered into between Omnia and each shareholder of Nanotron that incorporates
the terms and conditions, purchase price formulae and suspensive conditions for the Transaction.

The Nanotron Scheme runs concurrently with Omnia's five-year plan cycle which ended in the last
financial year, i.e. on 31 March 2014. The Nanotron Scheme differs from other Omnia schemes in that
participants personally funded R10 million to subscribe for preference shares in Nanotron and
consequently bear a higher investment risk. In addition, Nanotron raised additional third-party funding
which in conjunction with the participants? contribution, financed the purchase of 5% of Omnia Group
Proprietary Limited.

Nanotron allowed for 20 senior executives of the Group to become part owners of the Company
through their investment in Nanotron by participating in the growth in the market capitalisation of the
Group, dependent on and to the extent that the Group achieved its five-year targeted 8% per annum
compound real growth in profit. Participation was determined in accordance with a formula that can be
summarised as follows:

              Real growth rate achieved                          Participation in growth in market
                                                                capitalisation that is attributable to
                                                              Nanotron's 5% investment in the Group
                          <5%                                                     0%
                           5%                                                     30%
                           8%                                                     70%
                          12%                                                    100%

The Group exceeded this target and achieved a 10.3% compound real growth in profit for the current
five-year plan that ended on 31 March 2014. Accordingly, Nanotron will participate in 87.4% of the
growth in the market capitalisation of Omnia that is attributable to Nanotron's 5% investment in Omnia
Group Proprietary Limited (the ?participation factor?).

The total exercise price of the call option is R439.7 million (?the obligation?) and will be settled by way
of a cash payment of R219.9 million equivalent to 50% of the obligation and the remaining 50% by
way of 1 043 527 new Omnia Holdings Limited ordinary shares to be issued.

In terms of the JSE Listings Requirements, Merchantec Capital, a JSE registered independent
professional expert, has provided an opinion that the total exercise price is fair to Omnia
Shareholders. The total exercise price of R439.7 million earned by the executives over this five year
period should be viewed in the context of R12.0 billion of wealth generated for shareholders plus total
dividends of R782 million, in the same period. During this time, Omnia?s market capitalisation
increased six fold from R2.2 billion to R14.2 billion. The decision to settle 50% of the exercise price in
cash was taken after feedback from shareholders that the Group should seek to minimise any dilution
effect on existing shareholders. As the Group has low gearing, a strong balance sheet and available
bank facilities, the Board deemed it in the interest of shareholders to settle 50% of the exercise price
in cash. Based on the issue of 1 043 527 new ordinary shares, the dilution effect on EPS will be a little
more than half the guidance provided in the 2014 Integrated Annual Report which contemplated an
issue of 1 953 547 new ordinary shares to settle the full purchase price upon exercise of the call
option. As a result, diluted headline earnings per share for the six months ended 30 September 2014
increased from 546 cents to 554 cents on a pro-forma basis.


Nanotron is an investment holding company set up for the purposes of the Nanotron Scheme. The
value of the net assets that are the subject of the Transaction as at 31 March 2014 was R447.9
million. The profit after tax attributable to the net assets that are the subject of the Transaction for the
year ended 31 March 2014 was R0.777 million.


All the conditions precedent to the Transaction have been fulfilled and the Transaction is


The Transaction constitutes a small related party transaction in terms of paragraph 10.7 of the JSE
Limited (?JSE?) Listings Requirements (?Listings Requirements?), and consequently requires a
fairness opinion from an independent professional expert acceptable to the JSE that the terms of the
Transaction are fair as far as the shareholders of Omnia are concerned.

In terms of paragraph 10.7(b) of the JSE Listings Requirements the fairness opinion as prepared by
Merchantec Capital, a JSE approved independent expert, and who found the transaction fair to Omnia
Shareholders, will lie open for inspection at Omnia?s registered offices, Omnia House, 13 Sloane
Street, Epsom Downs, Bryanston, Gauteng, for a period of 28 days from the date of this


Shareholders are also advised that the media release relating to the Transaction is available on the
Company?s website (www.omnia.co.za).

12 December 2014

Sponsor and Independent Expert
Merchantec Capital

Date: 12/12/2014 07:05:00 Supplied by www.sharenet.co.za                     
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