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SHOPRITE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1936/007721/06)
Share code: SHP ISIN: ZAE000012084
("Shoprite Holdings"or "the company")
SPECIFIC REPURCHASE OF SHARES
1. INTRODUCTION
An agreement has been reached between the trustees of the Shoprite Holdings
Limited Share Incentive Trust ("the Trust") and Shoprite Checkers
(Proprietary) Limited ("Shoprite Checkers"), a wholly owned subsidiary of
the company, whereby the Trust has sold to Shoprite Checkers 35 718 559
shares in the company for an aggregate purchase consideration of R453 373
261 ("the first specific repurchase"). The first specific repurchase is
subject to the conditions as detailed in paragraph 5. If the conditions are
met, the shares purchased from the Trust will be held by Shoprite Checkers
as treasury stock for possible resale at a later stage to recover the costs
of the first specific repurchase. The company will seek conditional
authority from shareholders to repurchase up to a maximum of 35 718 559
shares in the company from Shoprite Checkers ("the second specific
repurchase"). This will allow for the disposal of those shares repurchased,
but not sold on the open market, and the cancellation thereof. The company
is also seeking authority from shareholders to amend the articles of
association to provide for a subsidiary of the company to purchase shares in
the company.
2. RATIONALE
The Trust was established with the objective of incentivising all employees,
including key executive employees of Shoprite Holdings and its subsidiaries
("the Shoprite Group"), thereby securing their services.
During 1997 and 1998 the Trust, respectively was issued with and purchased
in the open market shares in Shoprite Holdings. Shoprite Checkers largely
funded these acquisitions. This funding has since been replaced with
funding from a financial institution. Shoprite Holdings and Shoprite
Checkers guarantee the obligations of the Trust towards the financial
institution. Thereafter, the Trust sold some of these shares to certain
employees of the Shoprite Group during October 1997 and December 1998 ("the
participants") in accordance with the rules of the Trust.
The Trust extended credit to the participants to enable them to purchase the
shares from the Trust. Interest on the debt outstanding from time to time
was charged at the rate paid by the Shoprite Group in respect of facilities
provided by its bankers. All dividends received by the participants in
respect of the shares purchased from the Trust were to be applied firstly to
the accrued interest on the debt outstanding to the Trust and thereafter to
the satisfaction of the capital balance of the debt.
The difference between the initial purchase price of the shares and the
amount owing at 30 September 2001 is the accumulation of interest charged by
the Trust to the participants for the shares. The decline in the market
price of the company's shares and the interest accumulating on the
outstanding debt served as a major disincentive to the participants.. The
amounts owing by the participants to the Trust in respect of these shares as
at 30 September 2001 will have amounted to approximately R13,66 per share
(in respect of the October 1997 group) and approximately R9,42 per share (in
respect of the December 1998 group).
A quorum of non-executive directors of Shoprite Holdings authorised the
trustees of the Trust, in accordance with the provisions of the trust deed,
to conclude cancellation agreements with the participants with retrospective
effect to its inception. The cancellation agreements were cancelled with all
of the participants in respect of 22 740 000 shares, subject to the
resolutive condition that an ordinary majority of the shareholders of
Shoprite Holdings (excluding the Trust and those of the participants who are
also shareholders of Shoprite Holdings) must approve the cancellation
agreements. The cancellation agreements, if implemented, will result in the
participants being placed, as near as possible, in the position they were
prior to the purchase of the shares from the Trust.
The JSE Securites Exchange, South Africa ("JSE"), in terms of the Listing
Requirements, has directed issuers that their share incentive trusts dispose
of shares that they hold in excess of their requirements. The Trust held 12
978 559 excess shares in Shoprite Holdings as at 30 September 2001.
With effect from 30 September 2001, the Trust accordingly sold 35 718 559
shares (being the aggregate of the shares forming the subject matter of the
cancellation agreements and the excess shares as described in the previous
paragraph) to Shoprite Checkers at an aggregate purchase price of R453 373
261 which amounts to 1269,29326 cents per share. This sale is subject to
the approval of the cancellation agreements by ordinary resolution and the
amendment of the articles of Shoprite Checkers and Shoprite Holdings and the
approval of the first specific repurchase by way of special resolution.
3. TERMS
The terms of the first and second specific repurchases are as set out below:
- the Trust has concluded the cancellation agreements with all of the
participants in respect of 22 740 000 shares;
- with effect from 30 September 2001, the Trust accordingly sold 35 718 559
shares (being the aggregate of the shares forming the subject matter of the
cancellation agreements and the excess shares held by the Trust) to Shoprite
Checkers at a purchase price of R453 373 261, which amounts to an average
purchase price of 1269,29326 cents per share. The proceeds from the first
specific repurchase will be used by the Trust to reduce its obligations;
- the 35 718 559 shares purchased from the Trust will be held by Shoprite
Checkers as treasury stock for possible resale at a later stage to recover
the costs of the first specific repurchase. However, if market conditions
do not allow for the sale of the treasury stock at a reasonable price,
Shoprite Holdings will repurchase and cancel up to a maximum of 35 718 559
shares from Shoprite Checkers in terms of the second specific repurchase.
During the interim period the treasury stock held by Shoprite Checkers will
be presented as a deduction from equity on consolidation and therefore will
not be taken into account when presenting group financial information in
accordance with Generally Accepted Accounting Practice;
- the second specific repurchase and cancellation will be effected at the
ruling market price of the shares at the time of the transaction and in
accordance with the Listing Requirements of the JSE during the eighteen
month period following the date on which shareholders of Shoprite Holdings
grants approval for the second specific repurchase;
- the first specific repurchase will be funded from existing cash resources
and overdraft facilities available to the Shoprite Group; and
- Shoprite Holdings intends to apply to the JSE to cancel the listing of the
shares forming the subject matter of the second specific repurchase, should
that eventuate.
The closing price of Shoprite Holdings shares on the JSE was 621 cents on
Wednesday, 3 October 2001.
4. FINANCIAL EFFECTS
The table below sets out the effects of the first specific repurchase on the
earnings per share ("EPS"), headline earnings per share ("Headline EPS"),
net asset value ("NAV") and net tangible asset value per share ("NTAV") of
Shoprite Holdings based on the published audited annual financial statements
for the 12 months ended 30 June 2001, being the most recent reporting
period. The 'Pro forma after the first specific repurchase' figures have
been calculated with the following assumptions:
- for the purpose of determining the EPS and Headline EPS it has been
assumed that the first specific repurchase took place on 1 July 2000. The
repurchase consideration of R453 373 261 was adjusted to R399 421 053, to
exclude the Trust losses and interest charged on participants' loan accounts
during the 15 months ended 30 September 2001;
- interest was calculated at an average nominal rate of 11 % per annum, on a
monthly basis, on the adjusted repurchase consideration of R399 421 053;
- an exceptional item of R127,378 million that related to the Trust had been
reversed as this provision would not have been required had the first
specific repurchase been effected on 1 July 2000;
- a tax rate of 30 %;
- the reduction in tax due to the loss of interest income resulted in a
decrease in the deferred tax asset utilised. This had the corresponding
effect that the negative goodwill amortised to the income statement was also
reduced with the same amount; and
- for the purpose of determining the NAV and NTAV it has been assumed that
the first specific repurchase took place on 30 June 2001. The repurchase
consideration of R453 373 261 was adjusted to exclude the Trust losses and
interest charged on the participants' loan accounts during the 3 months
ended 30 September 2001. The adjusted repurchase consideration applied was
R445 292 364.
Audited before Pro forma perrcentage
the first after the first Increase/
specific repurchase specific repurchase (Decrease)
(cents) (cents)
EPS 44,3 63,4 43,1
Headline EPS 58,0 55,7 (4)
NAV 261,8 227,7 (13)
NTAV 260,1 225,9 (13,2)
Number of shares
in issue ('000) 543 479 507 761
Note: The difference in the percentage increase/decrease between EPS and
Headline EPS is a result of the reversal of the R127, 378 million provision
raised against the Trust in the calculation of the pro forma EPS. This
amount had previously been excluded in the calculation of Headline EPS in
the published audited annual financial statements for the 12 months ended
30 June 2001.
5. CONDITIONS
The implementation of the specific repurchases is conditional, as follows:
- the cancellation agreements are subject to the non fulfilment of the
resolutive condition that an ordinary majority of the shareholders of
Shoprite Holdings present and entitled to vote (excluding the Trust and
those of the participants who are also shareholders of Shoprite Holdings)
fail to approve the cancellation agreements;
- the first specific repurchase is subject to the cancellation agreements
becoming unconditional and to the fulfilment of two suspensive conditions
being firstly, that the articles of association of the company and of
Shoprite Checkers are amended by special resolution to allow for
subsidiaries of Shoprite Holdings to acquire shares issued by the company
and secondly, that the first specific repurchase is approved by way of
special resolution and in accordance with the Listing Requirements of the
JSE; and
- the second specific repurchase is subject to the first specific repurchase
becoming unconditional and to the fulfilment of the suspensive condition
that the second specific repurchase is approved by special resolution and in
accordance with the Listing Requirements of the JSE.
6. FAIR AND REASONABLE
The JSE has requested a fair and reasonable opinion on the first specific
repurchase. An announcement regarding the fair and reasonable opinion of an
independent third party will be published in the press in due course prior
to the annual general meeting to be held on 26 October 2001 and will be
available for inspection at the registered office of Shoprite Holdings from
the date of the said announcement.
7. DOCUMENTATION
A circular containing full details of the first and second specific
repurchases and incorporating a notice of annual general meeting will, , be
posted to shareholders on or about Thursday, 4 October 2001. The annual
general meeting of Shoprite Holdings will take place at 11:15 on Friday, 26
October 2001 in the boardroom at the registered office of Shoprite Holdings,
corner William Dabs and Old Paarl Roads, Brackenfell, 7560.
Cape Town
4 October 2001
Sponsor Reporting accountants and auditors Attorneys
BoE Securities PricewaterhouseCoopers Jan S de Villiers
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