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DAWN / UKHAMBA - DAWN INTRODUCES A BLACK ECONOMIC EMPOWERMENT SHAREHOLDER
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Share code: DAW ISIN: ZAE000018834
("Dawn" or "the Company")
UKHAMBA HOLDINGS (PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/017702/07)
("Ukhamba")
DAWN INTRODUCES A BLACK ECONOMIC EMPOWERMENT SHAREHOLDER
1. Introduction
Further to the cautionary announcements dated 9 June 2004, 21 July 2004, 29
July 2004 and 9 September 2004, Bishop Corporate Finance (Pty) Limited is
authorised to announce that Dawn has reached agreement with Ukhamba in terms of
which Ukhamba, through its wholly-owned subsidiary Dream World Investments 239
(Pty) Limited ("DWI"), will be introduced as a black economic empowerment
("BEE") equity partner to Dawn. DWI will acquire and subscribe for 38,8% in
aggregate in the total issued share capital of Dawn as more fully set out in
this announcement, subject to the fulfilment of the suspensive conditions set
out in paragraph 6 below.
2. Background
Dawn is committed to BEE transformation in its broadest sense. Dawn"s BEE
transformation encompasses the advancement of historically disadvantaged
individuals over a wide front, including skills development, employment equity,
advancement in the workplace, procurement practices which favour developing
businesses and suppliers, enterprise creation and equity ownership of the
Company.
Ukhamba is a broad-based black-owned company whose ultimate beneficiaries
currently include approximately 16 200 historically disadvantaged individuals
and a number of historically disadvantaged communities. Ukhamba"s most notable
investment to date is its 10,1% equity holding in Imperial Holdings Limited
("Imperial"), a public company listed on the JSE Securities Exchange South
Africa ("JSE") and operating as an integrated transportation and mobility group.
Ukhamba also owns and holds equity investments in other businesses predominantly
operating in the transportation industry.
DWI, as nominee for Ukhamba, has entered into an agreement on 28 September 2004
with Imperilog Holdings (Pty) Limited ("Imperilog"), a wholly-owned subsidiary
of Imperial, in terms of which DWI will acquire from Imperilog its entire
shareholding in Dawn comprising of 56 464 960 shares, representing 33,4% of the
total issued ordinary shares in Dawn. DWI will pay an amount of R106 718 774 in
aggregate for such shares, payable in cash and subject to the fulfilment of
certain suspensive conditions. DWI has further agreed to pay Imperilog, after a
period of five years, an additional amount up to a maximum of R40 654 772 in
cash, which additional amount (or pro rata portion thereof) is subject to Dawn
achieving certain headline earnings per share targets.
On 28 September 2004 Dawn entered into a subscription agreement with DWI in
terms of which Dawn will issue 10 000 000 deferred ordinary shares ("deferred
ordinary shares") to DWI at a par value of 1 cent each for cash ("deferred
ordinary share issue"). The deferred ordinary shares issued to DWI will
represent 6,26% of all issued ordinary and deferred ordinary shares in Dawn,
excluding treasury shares and shares held by the Dawn Share Trust ("share
scheme").
3. Rationale
As a leading distributor in the South African building materials market, it is
Dawn"s intention to be at the forefront of embracing change with regard to BEE
in South Africa. Dawn believes that BEE initiatives should address the
discrimination and imbalances of the past, improve the lives of a wide range of
historically disadvantaged people and bring long-term economic benefits to the
country. As such Dawn proposes to issue the deferred ordinary shares on the
terms set out in paragraph 5 below to DWI as a further incentive for DWI to
enter into its agreement with Imperilog, resulting in the introduction of
meaningful BEE participation of 38,8% in the equity of Dawn.
In addition, the terms and conditions of the deferred ordinary shares as set
out in paragraphs 5 and 6 below, respectively, are designed to preserve Dawn"s
future business opportunities in the sectors of the economy in which it operates
and generate enhanced future business opportunities from the BEE status that
Dawn will achieve following the deferred ordinary share issue and DWI"s
acquisition of the Dawn shares owned by Imperilog. Such terms and conditions
also serve to align the goals of Ukhamba with those of Dawn"s shareholders and
to provide an incentive to Ukhamba to add value to the business of Dawn.
4. Creation of the deferred ordinary shares
It is proposed that R100 000 of the unissued but authorised ordinary share
capital of the Company, comprising 10 000 000 ordinary shares of a par value of
1 cent each and representing 1,8% of the total unissued but authorised ordinary
share capital, be converted into 10 000 000 deferred ordinary shares of a par
value of one cent each, having the rights and conditions as set out in a new
Article 143 to be included in the Company"s articles of association, the salient
terms and conditions of which Article are set out in paragraphs 5 and 6 below,
respectively.
5. Terms of the deferred ordinary share issue
Subject to the suspensive conditions set out in paragraph 6 below, the deferred
ordinary shares will be issued to DWI as follows:
- The deferred ordinary shares shall be issued at a par value of one cent each,
which subscription price shall be paid in cash on the issue date, being the
third business day following the completion date, which will be the later date
of 8 December 2004 or the day following the date on which all the suspensive
conditions have been fulfilled.
- The deferred ordinary shares will have the same rights as the existing
ordinary shares in Dawn except that, to the extent that the deferred ordinary
shares have not been converted to ordinary shares as detailed below, the
deferred ordinary shares will not participate in the profits or dividends of
Dawn.
- The deferred ordinary shares will rank pari passu with the ordinary shares
with regards to voting rights.
- The deferred ordinary shares will convert into ordinary shares as follows:
* On a one-for-one basis in equal tranches of 2 000 000 deferred ordinary
shares into 2 000 000 ordinary shares per year over a five-year period reckoned
from 1 July 2004 ("initial period").
* Each conversion will be effective on 1 July with the first conversion being
effective on 1 July 2005.
* The conversion of each tranche of deferred ordinary shares is conditional
upon the achievement by Dawn of more than a cumulative compounded 17,5% growth
rate per annum in headline earnings per share ("HEPS") ("HEPS hurdles"),
calculated as follows:
- The HEPS hurdles for each performance year will be calculated using the actual
audited HEPS achieved for the financial year ended 30 June 2004 as base year.
- The actual HEPS of Dawn for the financial year ending 30 June 2005 will serve
as the first performance year results.
- The performance year results for each year during the initial period will be
calculated taking into account any additional ordinary shares issued at the
beginning (1 July) of such year as a result of a successful conversion of the
deferred ordinary shares, but the calculation will exclude any deferred ordinary
shares not yet converted at the financial year end in each instance.
- Notwithstanding the fact that Dawn achieves a cumulative compound 17,5% growth
in actual HEPS in any performance year, the deferred ordinary shares will only
qualify for conversion should the actual HEPS in each performance year increase
by at least 9% over the actual HEPS achieved in the year immediately preceding
such performance year.
* In the event that deferred ordinary shares remain unconverted after the
initial period, such remaining number of deferred ordinary shares will convert
to ordinary shares in five equal tranches over a further period of five years
("additional period").
* Such remaining deferred ordinary shares will be converted over the additional
period without the requirement that Dawn achieves a hurdle rate.
* Deferred ordinary shares converted with effect from 1 July of any year shall
be eligible for dividends declared to shareholders registered after such date
regardless of whether such dividends are declared out of profits earned prior to
such conversion.
The following additional terms relate to the deferred ordinary share issue:
- DWI will be entitled to initially nominate two non-executive directors, (which
initial nominees shall be black people) to the board of Dawn and such DWI
nominated directors will replace current directors of Dawn representing Imperial
(or its subsidiaries).
- For the duration of the initial period Dawn will adopt the following
distribution policy:
* Dawn will declare and pay a dividend or capital reduction in terms of section
90 of the Companies Act, 1973, ("the Act") ("dividend") equal to a minimum of
25% of its headline earnings (representing a dividend cover of 4 times) to
ordinary shareholders per annum.
* Dawn will endeavour to adhere to a clear dividend cycle with the final
dividend being payable within five months of the relevant financial year-end in
each instance.
- DWI shall not be entitled to sell or encumber the deferred ordinary shares,
converted ordinary shares or ordinary shares in Dawn acquired from Imperilog
(collectively, "the DWI shares") for a period of five years reckoned from 1 July
2004 other than:
* DWI encumbering the DWI shares for purposes of obtaining the funding it
requires to purchase the Dawn shares owned by Imperilog;
* DWI selling the DWI shares (or a portion thereof) to another BEE grouping
approved by Dawn and which submits to the same arrangement; or
* DWI reducing its shareholding in Dawn in accordance with the ruling received
from the Securities Regulation Panel ("SRP") as set out in paragraph 8 below.
- In addition to the restrictions contained above, DWI shall not be entitled to
sell the deferred ordinary shares and ordinary shares converted from deferred
ordinary shares until all the deferred ordinary shares have converted to
ordinary shares in Dawn.
- DWI and Ukhamba warrant to Dawn that they will remain black companies during
the course of the initial period.
- In the event that DWI and/or Ukhamba do not adhere to the abovementioned
restrictions on sale or breach the warranty in terms of which they undertook to
remain black companies, all deferred ordinary shares and ordinary shares
converted from deferred ordinary shares, will be deemed to have been offered for
acquisition by Dawn at par value of one cents each by way of a share repurchase
in terms of section 85 of the Act, subject to the JSE Listings Requirements and
approval by shareholders.
6. Conditions of the deferred ordinary share issue
The deferred ordinary share issue is subject to the fulfilment of the following
suspensive conditions by
31 December 2004:
- the agreement between DWI and Imperilog in terms of which DWI will acquire all
the Dawn shares owned by Imperilog, becomes unconditional;
- approval of the terms and conditions relating to the creation and issue of the
deferred ordinary shares by Dawn shareholders at the general meeting, and
registration of the relevant special resolutions;
- waiver by a majority of independent shareholders of the requirement in terms
of the SRP Code on Take-overs and Mergers that DWI make a mandatory offer to all
Dawn shareholders; and
- to the extent required, approval of the deferred ordinary share issue and the
acquisition by DWI of Dawn shares from Imperilog being obtained from the
Competition Authorities and the JSE.
7. Pro forma financial information
The unaudited pro forma financial effects of the deferred ordinary share issue
on the headline earnings, earnings, net asset value and net tangible asset value
per Dawn share, before and after the deferred ordinary share issue, are set out
below. The unaudited pro forma financial information provided is the
responsibility of the directors of Dawn. The unaudited pro forma financial
information has been prepared for illustrative purposes only and because of its
nature, may not fairly reflect the financial position of Dawn, or results of its
operations, after the deferred ordinary share issue.
Before1 After Change
Notes (cents) (cents) (%)
Basic earnings and headline earnings 2 30,53 28,62 (6,26)
- Earnings and headline earnings
per ordinary share 30,53 26,83
- Earnings and headline earnings
per deferred ordinary share - 1,79
Net asset value and net tangible asset
value 3 84,04 78,80 (6,24)
- Net asset value and net tangible
asset value per ordinary share 84,04 73,83
- Net asset value and net tangible asset value
per deferred ordinary share - 4,97
Number of ordinary shares in issue
(net of treasury and share scheme) ("000) 148 480 148 480
Number of deferred ordinary shares ("000) - 10 000
Total number of ordinary and deferred ordinary
shares ("000) 148 480 158 480
Weighted average number of ordinary
shares ("000) 149 445 149 445
Weighted average number of deferred ordinary
shares ("000) - 10 000
Weighted average number of ordinary and deferred
ordinary shares ("000) 149 445 159 445
Notes:
1. Extracted from the audited financial results of Dawn for the year ended 30
June 2004.
2. The pro forma effects on earnings and headline earnings after the deferred
ordinary share issue are based on the assumption that the deferred ordinary
share issue had been effective 1 July 2003.
3. The pro forma effects on net asset value and net tangible asset value after
the deferred ordinary share issue are based on the assumption that the deferred
ordinary share issue had been effective 30 June 2004.
4. Since the deferred ordinary shares issue is not contingent on future events,
but rather simply on a passage of time and the consideration for the shares is
certain, all the deferred ordinary shares are taken into account in the per
share calculation above.
8. Waiver of mandatory offer to minorities
Following the deferred ordinary share issue and DWI"s acquisition of Dawn
shares from Imperilog, DWI and thus Ukhamba will hold 38,8% of the voting rights
in Dawn, excluding treasury shares. The SRP has given a ruling to dispense with
the requirement for DWI to make a mandatory offer to the minority shareholders
subject to the following conditions:
- the majority of independent shareholders waiving the requirement for DWI to
make an offer;
- DWI undertaking by agreement to reduce its voting rights in Dawn to below 35%
within a period of 12 months from the issue date, failing which DWI will make an
offer to the minorities after expiration of such 12-month period on the same
terms and conditions as those relating to its acquisition of shares from
Imperilog; and
- within such period of 12 months DWI will only exercise up to a maximum of
34,9% of the voting rights in Dawn, after excluding the surplus votes held by
DWI.
9. independent financial advice
The deferred ordinary share issue constitutes an issue of convertible
securities for cash which will be converted on a one-for-one basis into Dawn
ordinary shares on the terms set out in paragraph 5 above. Such conversion will
take place over the initial period or the initial period and the additional
period at a discount to the then market prices of Dawn ordinary shares, which
discount at the date of this announcement is unknown. The deferred ordinary
share issue also constitutes a related party transaction in terms of the
Listings Requirements of the JSE, as DWI will own more than 10% of the total
issued shares in Dawn pursuant to its acquisition of Dawn shares from Imperilog.
PricewaterhouseCoopers Corporate Finance (Pty) Limited, the independent
financial adviser, has advised the board that it has considered the terms and
conditions of the deferred ordinary share issue in the context of Dawn"s broader
BEE initiative and specifically considered the deferred ordinary share issue
together with DWI"s acquisition of Dawn shares from Imperilog, as the two
transactions are integrally linked, and that they are of the opinion that the
terms and conditions of the deferred ordinary share issue in that context are
fair and reasonable to the shareholders of Dawn.
Imperilog, being a shareholder holding more than 10% of the total issued shares
in Dawn, is a related party in terms of the Listings Requirements of the JSE and
it will be excluded from voting on any resolutions to be proposed and pertaining
to the deferred ordinary share issue as well as the waiver of DWI"s requirement
to make a mandatory offer to Dawn shareholders, as Imperilog"s transaction with
DWI as set out in paragraph 2 above is conditional upon such resolutions being
passed by shareholders.
10. Notice of general meeting and withdrawal of cautionary announcement
A circular containing full detail of the deferred ordinary share issue,
including a notice to shareholders convening a general meeting to be held to
enable shareholders to consider and if deemed fit to approve, with or without
modification, the resolutions required to implement the deferred ordinary share
issue, will be posted to shareholders in due course.
Shareholders are referred to the cautionary announcements dated 9 June 2004, 21
July 2004, 29 July 2004 and 9 September 2004 and are advised that, as full
disclosure of the transaction referred to therein has been made in this
announcement, caution in the dealing of the Company"s securities is no longer
required.
Johannesburg
1 October 2004
Corporate adviser
Bishop Corporate Finance (Pty) Ltd
(Registration number 2000/012695/07)
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Attorneys
Werksmans Incorporated
(Registration number 1990/007215/21)
Independent financial adviser
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
(Registration number 1970/003711/07)
Financial adviser and arranger to Ukhamba
IMPERIAL BANK
Attorneys to Ukhamba
TUGEMDHAFT WAPNIK BANCHETTI AND PARTNERS
Reporting accountants
PricewaterhouseCoopers Inc.
Chartered Accountants (SA)
Registered Accountants & Auditors
(Registration no. 1998/012055/21)
Date: 01/10/2004 07:57:50 AM Supplied by www.sharenet.co.za
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