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Terms Announcement regarding Investments and Loan Settlements
ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
(“Ecsponent” or “the Company”)
TERMS ANNOUNCEMENT REGARDING INVESTMENTS AND LOAN SETTLEMENTS
1. Introduction and rationale
Ecsponent’s board of directors (“the Board”) is pleased to announce that the Company and its
subsidiaries (“the Group”) have agreed terms for a number of transactions in line with the Group’s
strategic focus, which includes investing in assets that provide the Group with medium to long-term
capital growth. These transactions will:
- position the Group for future value-enhancing investments;
- create an efficient and professional management structure for the Group’s equity investments;
- increase the Group’s equity holding in assets considered to have high growth potential; and
- provide a more tax efficient structure for the Group’s equity investments.
These transactions include:
- a proposed investment into Capitis Equities Proprietary Limited (“Capitis”), a black women-
owned (as defined by the Black Economic Empowerment Act 2003) venture capital
company, with specialist skills focused on the acquisition and management of equity
investments. Capitis is registered under section 12J of the Income Tax Act No. 58 of 1962
(“Income Tax Act”). The Company, and/or one of its wholly owned subsidiaries, intends to
invest up to R400 million in Capitis prior to the expiry of the financial year ending 30 June 2019
(“the Capitis Investment”);
- the acquisition by Ecsponent Limited (incorporated in Botswana) (“ECS Botswana”), a wholly
owned subsidiary of the Company, of 352 612 shares in MyBucks S.A. (“MyBucks”),
constituting 2.729% of the total issued share capital of MyBucks, in settlement of a loan owing
by DTM Capital Proprietary Limited (“DTM”) to ECS Botswana of BWP65 million (R81.9 million
at the exchange rate at the date of this announcement) (“the DTM Loan”) (“the DTM
Acquisition”); and
- the acquisition by Ecsponent Treasury Services Proprietary Limited (“Ecsponent Treasury
Services”), a wholly owned subsidiary of the Company, of 1 145 998 shares in MyBucks,
constituting 8.839% of the total issued share capital of MyBucks, in settlement of the loan
owing by Coronado Trading 258 CC (“Coronado”) to Ecsponent Treasury Services of R260
million (“the Coronado Loan”) (“the Coronado Acquisition”);
(collectively “the Transactions”).
2. The Transactions
2.1. The Capitis Investment
2.1.1. Overview and rationale
Capitis provides Ecsponent with an effective and professional investment vehicle to expand
the opportunities available to Ecsponent. Capitis provides Ecsponent with an investment
partner that has the infrastructure and management to perform the sourcing, due diligence
and ongoing investment management for significant transactions, thereby reducing the
investment risk for Ecsponent.
The Capitis Investment supports the Group’s existing business activities, which are aimed at
spurring local economic development through the support, skills transfer and funding of South
African small and medium enterprises (SMEs).
The Board has approved an investment in Capitis of up to R400 million prior to the end of the
financial year ending 30 June 2019, R156.5 million of which has been approved for immediate
investment. The Group intends to invest the remaining balance once the requisite shareholder
approvals have been obtained in accordance with paragraph 2.1.6 below.
In terms of the agreement with Capitis, Ecsponent intends to subscribe for certain classes of
equity shares, amounting to 19% of the company’s share capital, thereby providing funding to
Capitis for onward investment into Qualifying Investee Companies, as defined in the Income
Tax Act, as and when Qualifying Investment Companies are identified and presented to
Ecsponent for investment. Investments by the Group into Capitis will allow Ecsponent or any
of its subsidiaries a Section 12J tax deduction in terms of the Income Tax Act equal to the
value of the amount invested, provided that the provisions of Section 12J are complied with.
2.1.2. Details of the Capitis and Ecsponent’s investment parameters
Capitis is a newly established venture capital company, the directors of whom are MJ Bokwa,
MCS Nell, DP Van der Merwe and JW Miller.
Capitis may not, in terms of Section 12J, invest more than 20% of its funds into a single
Qualifying Investment Company, measured after three years from the commencement of its
operations.
A Qualifying Investment Company is a company that is:
- a resident;
- not a controlled group company in relation to a group of companies;
- a taxpayer in good standing;
- an unlisted company or a junior mining company (unlisted or listed on the Alternate
Exchange of the JSE);
- not carrying on any impermissible trade; and
- generating income where the sum of any investment income does not exceed 20
percent of the gross income.
Qualifying Investment Companies may not carry on impermissible trades, currently being:
- any trade carried on in respect of immovable property, other than a trade carried on
as a hotel keeper;
- any trade carried on by a bank, a long-term insurer, a short-term insurer and any
trade carried on in respect of money-lending or hire-purchase financing;
- any trade carried on in respect of financial or advisory services, including trade in
respect of legal services, tax advisory services, stock broking services, management
consulting services, auditing or accounting services;
- any trade carried on in respect of gambling;
- any trade carried on in respect of liquor, tobacco, arms or ammunition; and
- any trade carried on mainly outside the Republic of South Africa.
2.1.3. Financial information
Capitis was incorporated on 7 June 2017 and reported net assets of R12 million as at 28
February 2018, being its financial year end. The company reported a loss of R56 271 after tax
for the 9-month period ended 28 February 2018.
The above financial information is based on the unaudited financial information of Capitis for
the nine months ended 28 February 2018, reported in accordance with International Financial
Reporting Standards (“IFRS”).
As Qualifying Investment Companies have not yet been identified, financial information in
relation to any Qualifying Investment Companies cannot be disclosed.
2.1.4. Conditions precedent ad effective date of the Capitis Investment
There is currently no effective date for the Capitis Investment, as subscription agreements
with Capitis will only be concluded as and when Qualifying Investment Companies are
identified, presented to Ecsponent and satisfy Ecsponent’s investment criteria.
In addition to normal conditions precedent contained in a subscription agreement, such
agreement will specifically include the following conditions precedent:
- approval of the Board of Ecsponent following the necessary due diligence on a
Qualifying Investment Company identified and presented by Capitis; and
- approval of shareholders in accordance with the Listings Requirements, as set out in
paragraph 2.1.6 below, for any funds invested in excess of R156.5 million;
2.1.5. Terms of the Capitis Investment
Prior to the subscription for equity shares in Capitis, Ecsponent (or any of its subsidiaries) will
enter into a subscription agreement with Capitis containing terms, conditions and warranties
that are usual for a transaction of that nature.
2.1.6. Categorisation and approval requirements
Based on the proposed investment of R400 million, the Capitis Investment will constitute a
Category 1 transaction in terms of the JSE Listings Requirements (“Listings Requirements”)
and accordingly requires the approval of shareholders of the Company in terms of an ordinary
resolution, requiring the approval of 50% + 1 vote of shareholders present in person or by
proxy.
Capitis is not a related party to Ecsponent as defined in the JSE Listings Requirements.
2.2. The DTM Acquisition
2.2.1. Overview and rationale
In terms of the agreements giving effect to the DTM Acquisition, ECS Botswana will acquire
352 612 shares in MyBucks from Sunblaze Investment Holdings Incorporated (“Sunblaze”),
the guarantor of the DTM Loan, in settlement of the DTM Loan.
In addition to improving the quality of the Group’s assets and growth earnings prospects, the
acquisition of further shares in MyBucks provides the Group with an increased ability to
influence the decisions of MyBucks. The ability to partner with MyBucks will enable Ecsponent
to on lend funding that the Group aims to raise through its preference share program and from
other third parties. In addition, the increased shareholding in MyBucks provides the Group
with access to financial services and related technology which are not currently otherwise
available to the Group.
2.2.2. Consideration
The purchase consideration payable by ECS Botswana for the DTM Acquisition of
BWP65 million (R81.9 million at the exchange rate at the date of this announcement), will be
settled through the settlement of the DTM Loan, having a loan balance of BWP65 million.
2.2.3. Conditions Precedent and effective date
The agreement in relation to the DTM Acquisition is subject to the fulfilment, or waiver if
applicable, of the following suspensive conditions on or before 31 July 2018, or such later date
as agreed in writing between the parties:
- approval by the shareholders of the Company in general meeting;
- approval by the Board of the Company;
- approval by the board of directors of Ecsponent Botswana;
- approval by the board of directors of Sunblaze;
- approval by the board of directors of DTM; and
- approval by the JSE Limited (“JSE”), to the extent necessary.
The effective date of the DTM Acquisition will be the close of business on the last business
day of the month in which the last of the conditions precedent thereto has been fulfilled, or
waived, as the case may be.
2.2.4. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in the DTM Acquisition agreement.
2.2.5. Overview of MyBucks
MyBucks is a financial technology company listed on the Frankfurt Stock Exchange under
share code MBC:GR and ISIN LU1404975507, with a market capitalisation of €168,55 million
(equal to R2 688.37 million) as at the date of this announcement.
MyBucks is primarily engaged in the consumer lending sector and currently owns licensed
banking operations in four countries. The business offers a range of products as enumerated
below. MyBucks currently has operations in 11 African countries, Poland and Australia.
Financial products offered by MyBucks include: banking, lending (short-and long term),
insurance, credit reports and budgeting tools. MyBucks operates under three different brands:
- GetBucks, represented in 11 countries and consisting of lending to small and medium-
sized companies and entrepreneurs, including home improvement loans, personal credit
loans, educational loans, agricultural loans, corporate loans, credit reports and
budgeting tools;
- GetSure, represented in 6 countries, consisting of insurance products, including
agricultural catastrophe insurance, corporation insurance, income protection and
education provider cover; and
- GetBanked, represented in 6 countries, consisting of virtual banking products, such as
savings accounts, mobile transactions, transactional cards and remittances.
2.2.6. Financial information of MyBucks
MyBucks reported a total net loss after tax of €2 741 353 for the interim financial period ended
31 December 2017, of which a loss of €2 142 940 related to continuing operations. MyBucks
reported net assets, excluding minority interest, of €7 461 398 as at 31 December 2017.
The above financial information is based on the condensed unaudited interim financial
information of MyBucks for the six months ended 31 December 2017, prepared in accordance
with IFRS as adopted by the European Union.
2.2.7. Categorisation and approvals required
In terms of the Listings Requirements, the DTM Acquisition is on a stand-alone basis a
Category 2 transaction and accordingly the DTM Acquisition does not require any further
shareholder approval.
DTM and Sunblaze are not related parties of the Company as defined in the JSE Listings
Requirements.
2.3. The Coronado Acquisition
2.3.1. Overview and rationale
In terms of the agreement giving effect to the Coronado Acquisition, Ecsponent Treasury
Services will acquire 1 145 998 shares in MyBucks from DTM, the guarantor of the Coronado
Loan, in settlement of the Coronado Loan.
The Coronado Acquisition provides Ecsponent with the opportunity to increase the quality of
the Group’s assets, in addition to the benefits of increasing its shareholding in MyBucks as
already noted in paragraph 2.2.1 above.
2.3.2. Purchase consideration
The purchase consideration payable by Ecsponent Treasury Services for the Coronado
Acquisition of R260 million will be settled through the settlement of the Coronado Loan, having
a loan balance of R260 million.
2.3.3. Conditions Precedent and effective date
The agreement in relation to the Coronado Acquisition is subject to the fulfilment, or waiver if
applicable, of the following conditions precedent on or before 30 September 2018, or such
later date to be agreed between the parties:
- approval by the members of Coronado;
- approval by the board of directors of DTM;
- approval by the board of directors of Ecsponent Treasury Services;
- approval by the shareholders of the Company;
- approval by the Board of the Company; and
- approval by the JSE, to the extent necessary.
The effective date of the Coronado Acquisition will be the close of business on the last
business day of the month in which the last of the conditions precedent thereto has been
fulfilled, or waived, as the case may be.
2.3.4. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in the Coronado Acquisition agreement.
2.3.5. Overview of MyBucks
Refer to paragraph 2.2.5 of this announcement for an overview of MyBucks.
2.3.6. Financial information of MyBucks
Refer to paragraph 2.2.6 above for an overview of the latest financial information of MyBucks.
2.3.7. Categorisation and approvals required
In terms of the Listings Requirements, the Coronado Acquisition is a Category 1 transaction,
both on a stand-alone basis and when aggregated with the DTM Acquisition (as it involves the
acquisition of the same asset and some of the same parties). Accordingly, the Coronado
Acquisition requires the approval of shareholders in terms of an ordinary resolution at a
general meeting, requiring the approval of 50% + 1 vote of shareholders present in person or
by proxy.
Coronado and DTM are not related parties of the Company, as defined in the JSE Listings
Requirements.
3. Circular to shareholders
A circular setting out all the details of the Coronado Acquisition and the Capitis Investments,
and incorporating a notice of a general meeting will be distributed to shareholders of the
Company in due course.
Pretoria
22 May 2018
Sponsor and Corporate Advisor
Questco Corporate Advisory (Pty) Ltd
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