CHEMICAL SPECIALITIES LIMITED - Compulsory Convertible Preference Share Rights Offer To Raise Approximately R193 Million Of New Equity And Proposed

Compulsory Convertible Preference Share Rights Offer To Raise Approximately R193 Million Of New Equity And Proposed

Chemical Specialities Limited
Incorporated in the Republic of South Africa
Registration number 2005/039947/06
Share code: CSP
ISIN: ZAE000109427
("Chemspec" or "the Company")

COMPULSORY CONVERTIBLE PREFERENCE SHARE RIGHTS OFFER TO RAISE
APPROXIMATELY R193 MILLION OF NEW EQUITY AND PROPOSED CIRCULAR TO
SHAREHOLDERS

1. INTRODUCTION, RATIONALE AND PURPOSE OF THE RIGHTS OFFER

   Chemspec has reached the point in its growth path where it needs to be
    financially independent while it generates sustainable profits.

   The milestones achieved so far can be summarised as follows:

  •   A strong board
          o Excellent non- executive directors
          o Revised executive team comprising industry leaders
  •    very good corporate governance
  •    industry specific workforce with good knowledge and experience
  •    good products that only need to be fine tuned
  •    good production and infrastructure with a focus on improved service
       delivery
  •    good international and local partners
  •    good sales growth

  There is a strategic focus on Chemspec’s sales growth which is founded
  on building strong customer relationships and by a focus on new
  markets, products and territory opportunities. Clearly defined and
  specific sales channels and products as well as margin and cost
  management with a de-complication plan and supply chain improvements
  should result in double digit sales growth and improved financial
  performance.

  The levels of growth opportunities that Chemspec will achieve both
  locally and internationally will require capital to “stay ahead of the
  curve” as well as further accelerate its organic growth strategies as
  well as to strengthen and improve the structure and efficiency of its
  balance sheet.

  The Company intends to use the proceeds to:

   • fund organic growth initiatives;

   • increase the balance sheet flexibility and proactively manage the
     capital structure, better aligning the funding of the Group’s long
     term investments with long term capital and diversifying and
     improving funding sources and additional borrowing capacity; and
   • further improving working capital management, leveraging increased
     liquidity to obtain better terms from suppliers and strategically
     building inventory in an inflationary environment.

   Shareholders are reminded that the funds are not expected to fund
   further losses.

   In light of the above, the board of directors of Chemspec (“the
   board”) has decided to raise approximately R193 million from its
   shareholders in the form of a renounceable compulsory convertible
   preference share rights offer (“the proposed rights offer”) as more
   fully set out in paragraph 3 below.

2. PROPOSED CIRCULAR TO SHAREHOLDERS

   In order to effect the proposed rights offer in terms of the Companies
   Act, no 71 of 2008 (“the Act”) and the JSE Listings Requirements,
   shareholders will be asked in general meeting to approve the following
   corporate actions:

   • an increase in authorised share capital by the creation of
     compulsory convertible preference shares (“CCP’s”);
     and

   • the placing of all unissued compulsory convertible preference shares
     under the control of the directors for the purposes of the proposed
     rights offer.

   Chemspec is in the process drafting a circular to shareholders
   incorporating a notice of general meeting and further details will be
   announced as soon as possible.

3. PARTICULARS OF THE PROPOSED RIGHTS OFFER

      Ratio               40 CCP’s for every 100 ordinary shares
                          held
      Coupon rate         8% cumulative preference dividend per
                          annum, payable six-monthly
      Issue price         45 cents per CCP*
      Conversion terms    1 ordinary share for every 1 CCP after
                          3 years from issue
      Listing             Application will be made for the
                          listing of the CCP’s on the JSE

    * A discount of 10% to the 30 day volume weighted average share price
    of Chemspec ordinary shares on the JSE

4. IRREVOCABLE UNDERTAKINGS

   Chemspec shareholders representing 66,7% of the shares in issue have
   irrevocably undertaken to vote in favour of the shareholders’
   resolutions (required in terms of the Act and the JSE Listings
   Requirements) necessary to give effect to the proposed rights offer.

5. CONDITIONS PRECEDENT

   The proposed rights offer is conditional upon, inter alia:

   • the approval by the JSE of the required documentation so as to
     implement the proposed rights offer;
   • the passing of any necessary shareholder resolutions required to
     implement the proposed rights offer;

   • the registration by the Companies and Intellectual Property
     Commission of all documents and resolutions (if any) required in
     respect of the proposed rights offer; and

   • obtaining all regulatory approvals required (if any) in terms of the
     Act including a white wash resolution (if necessary) to ensure that
     no mandatory offers are required pursuant to the proposed rights
     offer.

6. CAUTIONARY ANNOUNCEMENT AND FURTHER DETAILED ANNOUNCEMENT

   Shareholders are advised that the proposed rights offer may have a
   material effect on the price of the Company’s securities. Accordingly,
   shareholders are advised to exercise caution when dealing in the
   Company’s securities until a full announcement is made setting out the
   salient dates and times as well as the pro forma financial effects of
   the proposed rights offer. A further detailed announcement will be made
   in due course.

Durban
27 June 2013
Designated Advisor
Grindrod Bank Limited

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