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Termination of the Management Agreement
GAIA INFRASTRUCTURE CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2015/115237/06)
Share code: GAI ISIN: ZAE000210555
(“GAIA” or “the Company”)
TERMINATION OF THE MANAGEMENT AGREEMENT
1. INTRODUCTION
GAIA shareholders (“Shareholders”) are advised that the board of directors of GAIA (“the
Board”) has resolved to internalise the management of GAIA's investment portfolio and assets
by (i) amending the termination fee payable and (ii) terminating the management services
agreement dated 27 October 2015 (“Management Agreement”) concluded between, inter alia,
GAIA Infrastructure Partners Proprietary Limited (“Manco”) and GAIA (“Internalisation” or
“Proposed Transaction”). Consistent with this, on 15 April 2020 the parties signed a termination
agreement (“Termination Agreement”) in terms of which they agreed, subject to inter alia
obtaining the requisite Shareholder approval, to the consensual termination of the Management
Agreement, with effect from the date on which the last of the conditions precedent set out in
paragraph 3.5 have been fulfilled or waived (“Termination Date” or “Effective Date”), in
consideration for payment by GAIA of a reduced termination fee of R18 million (“Termination
Fee”).
In the Board's view, the Internalisation is consistent with global best practice and will better align
the interests of the Company’s management and Shareholders.
2. SALIENT TERMS OF THE EXISTING MANAGEMENT AGREEMENT
Under the existing Management Agreement:
2.1.1. Manco was appointed to, inter alia, originate and investigate investment opportunities
for acquisition or divestment (“Transaction”), advise on and assist with negotiations
regarding the terms of any Transaction, as well as monitor investments, provide
operational interventions to investments that GAIA has made and where appropriate,
advise the board of directors of portfolio companies for the duration of GAIA’s
investment in such portfolio companies.
2.1.2. Manco is entitled to:
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• an annual fee equal to 0.80% of GAIA’s average enterprise value (the
“Management Fee”), which Management Fee is payable in arrears in four quarterly
instalments; and
• a transaction fee equal to 1% of the acquisition cost or disposal proceeds of a
Transaction by GAIA or realisation of an investment by GAIA.
2.1.3. In the event of its termination, the Management Agreement provides that:
• GAIA is liable to pay Manco a termination fee equal to 5% (five percent) of the
enterprise value determined as at the termination date. As at the last practicable
date, being 15 April 2020, this fee was calculated to be approximately R24 million
(“Existing Termination Fee”);
• an ordinary resolution as defined in the Companies Act, 71 of 2008 (“Companies
Act”), approved by Shareholders, is required to terminate the Management
Agreement.
3. TERMS OF THE PROPOSED TRANSACTION
3.1. Pursuant to the Termination Agreement, the parties agreed to the consensual termination of
the Management Agreement with effect from the Termination Date, subject to inter alia
obtaining the requisite Shareholder approval, in consideration for payment by GAIA of the
Termination Fee.
3.2. The Termination Fee will be funded through internal cash resources and will be payable on
the Termination Date, after which the Management Agreement will be deemed as terminated.
3.3. The termination of the Management Agreement will not affect any fees which were payable by
GAIA to Manco up to and including the Effective Date, which amounts if unpaid, will be paid
by GAIA to Manco on the Effective Date.
3.4. Save as disclosed in paragraphs 3.1 and 3.3 above, Manco will not be entitled to payment of
any further amounts from GAIA in terms of or arising from the Management Agreement or its
termination in terms of the Internalisation.
3.5. Conditions precedent
The implementation of the Internalisation pursuant to the Termination Agreement is subject to
the fulfilment of, inter alia, the following conditions precedent:
3.5.1. Manco providing GAIA with a copy of a resolution of the board of directors of Manco
approving the terms of the Termination Agreement;
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3.5.2. GAIA delivering to Manco a copy of resolutions of the Board approving the terms of the
Termination Agreement;
3.5.3. GAIA obtaining the approval of the requisite majority of its Shareholders for purposes
of implementing the Proposed Transaction, as outlined in paragraph 7 below; and
3.5.4. Mich Nieuwoudt resigning as a director of GAIA SPV (RF) Proprietary Limited and Coria
(PKF) Investments 28 (RF) Proprietary Limited, whereat he serves as a shareholder
representative of the Company.
4. RATIONALE
The Proposed Transaction is to effect the internalisation of the management of the Company’s
business and the substitution of the current externalised management arrangements with
internalised arrangements that better align the new management team with Shareholder interests
and reduce the cost structure with lower annual fees for the Company with a view to maximising
shareholder returns.
The Board has considered that an internal management function could achieve long term benefits
for Shareholders including much improved decision-making structures being in place.
5. CHANGE OF THE COMPANY NAME
It has been agreed between Manco and GAIA that, within six months of the Termination Date,
GAIA and GAIA Financial Services (RF) Proprietary Limited shall amend their names so that they
do not include the word "GAIA" or any variation thereof.
The change of name of the Company is subject to the passing of a special resolution of
Shareholders and compliance with the processes envisaged in the Listings Requirements (as
defined below) and the Companies Act. Further details relating to the name change will be
announced on SENS in due course.
6. RELATED PARTY AGREEMENT, FAIRNESS OPINION AND RECOMMENDATION
Mr Phillip Schabort, Mr Leon de Wit, Mr Clive Ferreira and Mr Matthys Nieuwoudt are directors
and shareholders of Manco and were directors of GAIA within the 12 months preceding the
conclusion of the Termination Agreement (all such directors resigned from the Board on 12
December 2019). Accordingly, the Proposed Transaction constitutes an agreement with a related
party in terms of section 10 of the JSE Listings Requirements (“Listings Requirements”).
As the Termination Fee is less than the Existing Termination Fee (by an amount of approximately
R6 million), the JSE Limited (“JSE”) ruled that the Proposed Transaction is to be categorised as
a small related party transaction and, consequently, the usual requirements of a related party
transaction set out in paragraph 10.4 of the Listings Requirements do not apply to the Proposed
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Transaction. In particular, on the basis that the benefit of the reduction in the Termination Fee
payable to Manco is easy ascertainable, the JSE dispensed with the requirement for the Board
to obtain a fairness opinion from an independent expert in relation to the Proposed Transaction
and accordingly, no fairness opinion will be included in the circular (as referred to in paragraph 7
below) or lie for inspection at the Company's registered office as envisaged in paragraph 10.7(c)
of the Listings Requirements.
The Board has considered the terms of the Termination Agreement, believes them to be fair to
the Company and its Shareholders (on the basis that the benefit of the reduction in the
Termination Fee payable to Manco is easy ascertainable) and in the best interests of GAIA for
the reasons set out above, and unanimously recommends that Shareholders vote in favour of
the resolutions required to be adopted by Shareholders in order to implement Proposed
Transaction.
7. CIRCULAR AND SHAREHOLDER APPROVAL
Although the provisions of paragraph 10.7 of the Listings Requirements applicable for small
related party transactions do not require Shareholder approval of the Proposed Transaction, the
amendment of the Management Agreement and the conclusion of the Termination Agreement
must be approved by a majority of Shareholders (being more than 50% of the voting rights
exercised on the resolution approving the Internalisation, excluding the votes of the related
parties and their associates) in terms of the Management Agreement.
A circular, containing full details of the Proposed Transaction, including, inter alia, a notice of
written resolutions to be submitted to Shareholders in terms of section 60 of the Companies Act,
pertaining to the approval of the Internalisation by Shareholders, will be sent to Shareholders in
due course.
Melrose Arch
16 April 2020
Corporate advisor
Birkett Stewart McHendrie
Sponsor
Sasfin Capital (A member of the Sasfin Group)
Legal advisor
Webber Wentzel
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Date: 16-04-2020 09:00:00
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