ELLIES HOLDINGS LIMITED - Announcement relating to: general issue of share for cash, proposed rights offer, restructure and further cautionary

Announcement relating to: general issue of share for cash, proposed rights offer, restructure and further cautionary

ELLIES HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2007/007084/06)
JSE share code: ELI ISIN: ZAE000103081
(“Ellies” or the “Company”)


ANNOUNCEMENT RELATING TO:

   -   A GENERAL ISSUE OF SHARES FOR CASH;
   -   A PROPOSED RIGHTS OFFER;
   -   THE RESTRUCTURE OF ELLIES; AND
   -   FURTHER CAUTIONARY ANNOUNCEMENT


1. Introduction

   Shareholders are referred to the cautionary announcement dated Monday, 6 October 2014 in terms of
   which shareholders were advised that Ellies has reached agreement with its bank to reschedule certain
   obligations in respect of its debt and facilities in order to pursue negotiations regarding the disposal of
   certain non-core assets and the implementation of an underwritten rights offer.

   The board of directors of the Company (“the Board”) has agreed to rescheduled debt terms and
   conditions with its primary lender, The Standard Bank of South Africa Limited, and has resolved to
   pursue the course of action outlined below.

2. The general issue of shares for cash (“the General Issue”)

   The Company will proceed with a capital raising by way of a general issue of shares for cash in order to
   reduce its gearing and fund its working capital in terms of the general authority to issue shares for cash
   approved by shareholders at the Company’s Annual General Meeting on 29 November 2013.

   The Company will issue 45 000 000 Ellies ordinary shares at 110 cents per share to client funds
   managed by Mazi Capital Proprietary Limited (“Mazi Capital”), for settlement by no later than
   Thursday, 6 November 2014. These shares will be listed on the JSE Limited from commencement of
   business on the same day.

   The average discount to the weighted average traded price of Ellies ordinary shares over the 30 business
   days prior to the date on which the General Issue was agreed upon between the parties was 8.3%.

3. Shareholder loans and proposed fully underwritten rights offer

   Ellie Salkow, the executive chairman of the Company, in his personal capacity, has committed a loan
   facility of R25 million to the Company in order to fund the Ellies consumer business. In addition,
   Salkow has guaranteed obligations of Ellies to its primary lender in an amount capped at R45 million.
   Any amounts paid by Salkow pursuant to this guarantee will be added to the capital of his loan facility to
   the Company.

   Ryan Otto, an executive director of the Company and the chief executive officer of its Megatron
   business, in his personal capacity, has committed a loan facility of R20 million to the Company to fund
   the Megatron business (collectively, “the Management Loans”).

   In order to raise an aggregate amount of approximately R115 million, the Company intends to undertake
   a fully underwritten rights offer, offering shareholders 30 new shares at 110 cents per share for every
   100 shares held (“the Proposed Rights Offer”).

   Salkow and Otto will be the first underwriters of the Proposed Rights Offer in an amount equal in each
   case to the amount due by the Company in respect of the relevant Management Loans. In effect, their
   underwriting of the Proposed Rights Offer will serve to convert all or part of the Management Loans into
   Ellies shares at 110 cents per share, any balance remaining on the Management Loans to be repaid with
   interest at prime, subject to solvency and liquidity and the consent of the Company’s primary lender. The
   balance of the shares to be issued pursuant to the Proposed Rights Offer will be underwritten by Mazi
   Capital for an underwriting fee of 3%.

   The proceeds of the Proposed Rights Offer will be used to fund working capital and to further reduce the
   Company’s gearing.

4. Restructure

   Shareholders are advised that the Board has resolved to separate the two operating divisions of Ellies
   Proprietary Limited in order for the Ellies consumer business and the Megatron business to be held by
   separate wholly-owned subsidiaries of the Company, in preparation for a further restructuring whereby
   the capital required by each business will be funded on a stand-alone basis going forward (“the
   Restructuring”)

5. Further cautionary announcement

   Further to the information as set out above, shareholders are advised to continue to exercise caution until
   a further announcement is made including the full terms and salient dates and times of the Proposed
   Rights Offer as well as details of the Restructuring.


Johannesburg
29 October 2014


Sponsor and joint corporate advisor
Java Capital

Joint corporate advisor
Standard Bank 

Legal advisor
Cliffe Dekker Hofmeyr

Underwriter
Mazi Capital

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