Wrap Text
Proposed simplification of Sabvest’s dual listed share structure
SABVEST LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003753/06)
ISIN: ZAE000006417 – ordinary shares
ISIN: ZAE000012043 – N ordinary shares
Share code: SBV – ordinary shares
Share code: SVN – N ordinary shares
(“Sabvest” or “the Group” or “the Company”)
PROPOSED SIMPLIFICATION OF SABVEST’S DUAL LISTED SHARE STRUCTURE
1. Introduction and background
Shareholders are advised that the board of directors of Sabvest (“Board”) has engaged with the
JSE Limited (“JSE”) and with the Company’s controlling shareholder, The Seabrooke Family Trust
(“SFT”), with a view to simplifying Sabvest’s current dual share structure in order to create a
clearer, unitary shareholder structure, thereby enhancing Sabvest’s investment appeal and
improving the liquidity and marketability of the Company’s shares (“Proposed Restructure”).
The JSE has advised that it has no objection to the Proposed Restructure, subject to certain specific
conditions and ancillary regulatory requirements.
2. Current share ownership structure
Sabvest currently has two classes of shares listed on the JSE. As at the Company’s interim financial
period ended 30 June 2019, the Company’s issued share capital comprised 16,975,293 ordinary
shares of 5c each with 500 votes each (“ordinary shares”) and 24,826 919 N ordinary shares of
0.01c each with 1 vote each (“N ordinary shares”) (together, “shares”). On 30 September 2019,
350,000 N ordinary shares, which were held as treasury shares (having been repurchased by the
Company after its interim financial period ended 30 June 2019), were cancelled. Consequently, at
the date of this announcement, there are 24 476 919 N ordinary shares in issue.
Accordingly, Sabvest currently has 41,452,212 shares in issue with equal economic rights, but
unequal voting rights. SFT currently holds 11,895,000 Ordinary Shares and 4,105,000 N Ordinary
Shares, giving it a 38,6% economic interest in Sabvest and a disproportionate 69.9% voting
interest. The Company’s N ordinary shareholders are currently able to control only 0.29% of the
8,512,473,419 voting rights at a combined shareholders’ meeting.
As an illustrative example of the implications of the current high voting ordinary shares, Sabvest
would be required to issue approximately 3,3 billion N ordinary shares (or approximately 8000%
of the shares in issue / 80 times the number currently in issue) before SFT would lose its position
of control. Consequently, SFT would still have control of Sabvest, while holding only 0.47% of its
issued share capital.
3. Implementation of the Proposed Restructure
It is envisaged that the Proposed Restructure will be implemented by way of a scheme of
arrangement to be proposed by Sabvest between the Company and its shareholders (“Scheme”)
in terms of s114 and s115 of the Companies Act 71 of 2008 (“Companies Act”) and in accordance
with the following key transaction steps:
• a new company, Sabvest Capital Limited (“Sabcap”) will be incorporated and registered;
• Sabcap will create and issue an unlisted Z share to SFT (“Z Share”) at a R1 issue price in order
to preserve SFT’s control post-implementation of the Proposed Restructure (more fully
described in paragraph 4 below);
• Sabcap will create and issue one class of ordinary shares, to be listed on the JSE (“Sabcap
Listing”);
• in terms of the Scheme, Sabcap will make an offer:
– to all Sabvest N ordinary shareholders to acquire all the Sabvest N ordinary shares in
issue in exchange for Sabcap ordinary shares, on a 1:1 basis; and
– to all Sabvest ordinary shareholders to acquire all the high-voting Sabvest ordinary
shares in issue, in exchange for Sabcap ordinary shares, on a 1,1:1 basis – other than
in respect of the Sabvest ordinary shares held by SFT, which will be acquired on a 1:1
basis. The higher exchange ratio means that Sabvest ordinary shareholders (other
than SFT) will hold 10% more Sabcap shares post-implementation of the Scheme than
the number of Sabvest ordinary shares they currently hold. On implementation of the
Scheme, current Sabvest ordinary shareholders will accordingly control 1.2% more of
the Sabcap ordinary shares in issue than they otherwise would (if the exchange ratio
applicable to Sabvest ordinary shareholders (other than SFT) had been on a 1:1 basis,
rather than the 1,1:1 basis proposed);
• Of the 16,975,293 Sabvest ordinary shares in issue 5,080,293 are not held by SFT. An
additional 508,030 Sabcap ordinary shares will therefore be issued in terms of the Scheme,
resulting in a total of 41,960,242 Sabcap ordinary shares in issue. The resultant economic
dilution to all Sabvest N shareholders (and to SFT’s entire ordinary and N ordinary
shareholding) is 1.2 % and is considered necessary in order to facilitate the implementation of
the Proposed Restructure. This dilution will be mitigated by any share repurchases effected
by the Company under an existing general authority; and
• following implementation of the Scheme, all Sabcap ordinary shares will have the same
economic rights and will have one vote each, on a poll. Sabcap will own all the ordinary and N
ordinary shares in Sabvest, which will therefore be Sabcap’s unlisted, wholly-owned
subsidiary.
4. Salient terms of the Z Share
It is anticipated that the Z Share to be issued to SFT pursuant to the Scheme will have the following
salient terms:
• it will entitle SFT to 51% voting control of Sabcap, providing that SFT maintains a minimum
10% shareholding in Sabcap;
• it will have no economic rights;
• it will not be transferrable;
• in the event that SFT ceases to hold 10% or more of the economic rights in Sabcap (Sabcap
ordinary shares), the voting rights attached to the Z Share will cease to be of force and effect
and Sabcap will repurchase and cancel the Z Share for a consideration of R1.
It follows that, in contrast to the current structure as illustrated in paragraph 2 above, following
implementation of the Proposed Restructure, SFT’s control is materially less entrenched and is
removed entirely in the event that its ordinary shareholding in Sabcap falls below 10%. By way of
example, this would occur if Sabcap were to issue 2.8 times more Sabcap ordinary shares (being
approximately 117,7 million more ordinary shares than in issue). Under the existing structure,
Sabvest would need to issue more than 80 times the Sabvest N ordinary shares in issue, in order
to remove SFT’s control.
5. Offers to shareholders
Mandatory offers to all Sabcap shareholders equally (and without any value attributable to the Z
Share) will always be made in terms of JSE and Takeover Regulation Panel (“TRP”) requirements
in the event that the Z Share is repurchased and cancelled and any shareholder (other than SFT)
holds 35%+ of the Sabcap ordinary shares in issue at that time or at any future date.
6. Rationale for the Proposed Restructure
The Sabvest Independent Board believes that the Proposed Restructure will be beneficial to
Sabvest and its shareholders as it is expected, inter alia, to:
• result in the elimination of the current dual ownership structure, creating a simplified, clear
structure of one class of listed share with equal voting and economic rights;
• improve the demand, liquidity and marketability of the Sabcap ordinary shares;
• enhance Sabcap’s ability to raise capital should it need to do so in order to support its long-
term growth strategy;
• create enhanced voting for current Sabvest N ordinary shareholders, from 0.29% currently to
approximately 29% post-implementation of the Proposed Restructure;
• result in shareholder participation in a higher market capitalisation share; and
• require SFT to hold a materially higher economic interest in Sabcap in order to retain its
reduced voting control, in the event of new issues of Sabcap ordinary shares post-
implementation of the Scheme.
7. General and scheme meetings, shareholder documentation and salient dates
A Scheme circular, convening general and Scheme meetings by way of separate notices of ordinary
and N ordinary shareholder scheme meetings, and setting out full details of the Proposed
Restructure (including a detailed assessment of the voting status / shareholding structure of the
Group both currently and post implementation of the Proposed Restructure, as well as an analysis
of the merits of the Proposed Restructure) will be distributed to shareholders in due course
(“Scheme Circular”).
The votes attaching to shares held by SFT will be excluded from the determination of a quorum
for the Scheme meetings and from voting on the resolutions proposed at the Scheme meetings to
approve the Proposed Restructure.
A prospectus, prepared in accordance with the JSE Listings Requirements and the provisions of
the Companies Act (“Prospectus”), will be distributed by Sabcap together with the Scheme
Circular. The detailed terms of the Z Share, together with other salient features of the
memorandum of incorporation of Sabcap, will be contained in the Prospectus.
The salient dates and times applicable to the implementation of the Proposed Restructure will be
announced on the Stock Exchange News Service and published in the press in due course.
The Board has determined that the optimal implementation date for the Proposed Restructure is
following publication of Sabvest’s financial results for the year ending December 2019 (including
the declaration of any final dividend approved by the Board) by or before the end of March 2020.
It is accordingly the Company’s intention to seek confirmation from each of the JSE and the TRP
that the Scheme Circular and Sabcap Prospectus may be posted on or about Friday 28 February
2020.
8. JSE listings
If the Scheme is approved and successfully implemented, the Sabvest ordinary and N ordinary
shares will be delisted from the Main Board of the JSE and Sabvest will be an unlisted, wholly-
owned subsidiary of Sabcap. Sabcap will be accounted for as a reverse acquisition transaction
under IAS 3.
If the Scheme is approved and successfully implemented, the Sabcap ordinary shares will be listed
on the Main Board of the JSE in the Financials – Investment Instruments – Equities sector of the
JSE list (in which Sabvest is currently listed). The Sabcap Listing will ensure that Sabvest
shareholders are able to trade their Sabcap shares on the Main Board of the JSE, as they were
previously able to trade their Sabvest shares.
The Scheme and the Sabcap Listing together represent implementation of the Proposed
Restructure and are inter-conditional and indivisible.
9. Conditions precedent to the Proposed Restructure
The implementation of the Proposed Restructure is subject to the fulfilment or waiver, where
capable of waiver, of the following outstanding conditions precedent:
• the approval by Sabvest ordinary and N ordinary shareholders (other than SFT) of the Scheme at the Scheme meetings;
• within the period prescribed by s164(7) of the Companies Act, no demands, or valid demands
which in aggregate represent more than 5% of Sabvest shares are received by the Company
in accordance with s115(8) of the Companies Act;
• the registration of the Prospectus in relation to Sabcap with the Companies and Intellectual Property Commission;
• the registration of the special resolutions required to establish Sabcap and to adopt the Sabcap memorandum of incorporation;
• the following regulatory approvals being obtained:
– JSE approval in respect of the Scheme Circular, the Sabcap Prospectus and the Sabcap Listing;
– to the extent required, the approval of the competition authorities; and
– TRP approval in respect of the Scheme Circular; and
• the conclusion of an agreement between Sabvest and SFT, in terms of which, amongst other
things, (i) SFT will waive its rights to attend and vote at each Scheme meeting and (ii) SFT will
consent to the Proposed Restructure (subject to any further variations to the Proposed
Restructure being subject to the prior consent of SFT); and
such other conditions precedent as may be required for the purposes of implementation of the Proposed Restructure.
10. Financial information relating to the Proposed Restructure
Given that Sabvest shareholders will, in terms of the Scheme, exchange their Sabvest shares for
ordinary shares in Sabcap, their Sabcap ordinary shares following implementation of the Scheme
will mirror the current economics of their Sabvest shares.
Accordingly, there will be no impact on the earnings (other than transaction costs) and underlying
net asset value attributable to each shareholder of Sabvest as a result of the Proposed
Restructure, other than for the impact of the proposed higher exchange ratio applicable to the
acquisition by Sabcap of all the Sabvest ordinary shares in issue, in exchange for Sabcap ordinary
shares, on a 1,1:1 basis (excluding the Sabvest ordinary shares held by SFT, which will be acquired
on a 1:1 basis). Thus, the higher exchange ratio means that Sabvest ordinary shareholders (other
than SFT) will hold 10% more Sabcap shares post-implementation of the Scheme than the number
of Sabvest ordinary shares they currently hold, resulting in a corresponding marginal dilution for
SFT and for all N ordinary shareholders.
The table below sets out the pro forma financial effects of the Proposed Restructure on Sabvest’s
published, unaudited interim financial results for the six months ended June 2019. The pro forma
financial effects have been prepared for illustrative purposes only and because of their nature,
may not fairly present Sabvest's financial position, changes in equity, results of operations or cash
flows.
The pro forma financial effects have been prepared using accounting policies that comply with
IFRS and that are consistent with those applied in the published audited consolidated financial
results of Sabvest for the year ended 31 December 2018. The pro forma financial effects are
furthermore presented in accordance with the JSE Listings Requirements and the Guide on Pro
Forma Financial Information issued by the South African Institute of Chartered Accountants. The
Board is responsible for the compilation, contents and preparation of the pro forma financial
effects. This responsibility includes determining that the Sabvest pro forma financial effects have
been properly compiled on the basis stated and that the pro forma adjustments are appropriate.
Unaudited Pro forma Unaudited % change
interim results - adjustments pro forma -
before the after the
Proposed Proposed
Restructure Restructure
(Note 1)
Earnings per share - cents* 125,7 (20.4) 105.3 (16.23)
Headline earnings per share - cents* 125,7 (20.4) 105,3 (16.23)
Net asset value per share - cents 5 908 (90) 5 818 (1,52)
Number of shares in issue - 000's 41 802 508 42 310 1,22
Number of weighted shares in issue - 000's 41 802 508 42 310 1,22
* There are no diluting instruments
Notes and Assumptions
1. This information has been extracted, without adjustment, from Sabvest's unaudited
results for the six months ended 30 June 2019 (“interim results”).
2. The above table reflects the financial effects of the total number and weighted number of
shares in issue. The ordinary and 'N' ordinary shares have been combined as they both
hold the same economic interest.
3. The pro forma number and weighted number of shares in issue are calculated as to the
number of shares in issue at the date of the interim results of 41 802 212, plus the
additional 508 030 shares issued in terms of the Proposed Restructure.
4. The pro forma financial information reflects the impact on the interim results, had the
Proposed Restructure been implemented as at 1 January 2019, for both earnings per share
and headline earnings per share purposes, and at 30 June 2019, for net asset value per
share purposes.
5. The pro forma financial information takes into account the estimated, non-tax deductible,
transaction costs of R8 million. The one-off transaction costs will have no continuing effect
on the Group and have been written off as an expense. These costs had the effect on the
pro forma financial results of reducing both earnings per share and headline earnings per
share by 18.9 cents and the net asset value per share by 18.9 cents.
6. The issue of the 'Z' Share has no effect on the earnings per share, headline earnings per
share and net asset value per share.
7. Subsequent to the interim results date, the Group repurchased and cancelled 350 000 N
ordinary shares. If that repurchase and cancellation had been effective at 1 January 2019,
the pro forma financial effects on the adjusted interim results would have been as follows:
Before the Pro forma After the % change
Proposed adjustments Proposed
Restructure Restructure and
and after after
cancellation of cancellation of
treasury treasury shares
shares repurchased
repurchased
Earnings per share - cents* 126,8 (20.6) 106.2 (16.25)
Headline earnings per share - cents* 126,8 (20.6) 106.2 (16.25)
Net asset value per share - cents 5 958 (91) 5 867 (1,53)
Number of shares in issue - 000's 41 452 508 41 960 (1,23)
Number of weighted shares in issue - 000's 41 452 508 41 960 (1,23)
The Company’s financial results for the year ending December 2019, including the declaration of
any final dividend approved by the Board, will be published by or before the end of March 2020.
11. Tax consequences of the Proposed Restructure
The tax consequences of the Proposed Restructure will depend on the individual tax
circumstances and residency of each shareholder. Shareholders should seek advice from
appropriate professional advisers if they are in any doubt about their tax positions.
In general, shareholders who are South African tax residents will roll forward the base cost of their
Sabvest shares in terms of s42 of the Income Tax Act 58 of 1962 and will not be liable for tax on
the share exchange effected pursuant to the Scheme.
Shareholders who are not tax residents of South Africa will be required to determine the tax
effects of the share disposals in their personal, foreign, tax jurisdiction but will not be subject to
Dividend Withholding Tax (“DWT”), for deemed DWT or otherwise in South Africa.
12. TRP confirmation
Sabvest has confirmed to the TRP that Sabcap will have sufficient authorized and unissued
ordinary shares in order to fulfil its obligations in terms of the Scheme.
13. Independent Expert
The Sabvest Independent Board has appointed BDO Corporate Finance Proprietary Limited to act
as Independent Expert in terms of s114(2) of the Companies Act and regulation 90 of the
Companies Regulations, 2011, in relation to the Scheme. The report of the Independent Expert
and the opinion and recommendation of the Independent Board will be included in the Scheme
Circular referred to in paragraph 7 above.
14. Responsibility statement
The Sabvest Independent Board accepts responsibility for the information contained in this
announcement and confirms that, to the best of its knowledge and belief, such information is true
and correct and that this announcement does not omit anything which would make any statement
in the announcement false or misleading or which would affect the importance of the information.
Sandton
28 October 2019
Merchant Bank and Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Transaction Advisor
Apex Partners
Legal Advisor
ENSafrica
Reporting accountants
Deloitte
Independent Expert
BDO Corporate Finance Proprietary Limited
Date: 28/10/2019 12:30:00
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