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SEP - Sephaku Holdings - Terms announcement relating to the issue of
shares for cash by Sephaku Cement (Pty) Limited to Dangote Industries
Limited and the restructuring of the Sephaku Holdings group and
withdrawal of cautionary announcement
Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/003306/06)
Share code: SEP ISIN: ZAE000138459
("Sephaku Holdings" or "the company")
Terms announcement relating to the issue of shares for
cash by Sephaku Cement (Pty) Limited ("Sephaku Cement") to
Dangote Industries Limited ("Dangote") and the
restructuring of the Sephaku Holdings group and withdrawal
of cautionary announcement
1. Introduction
Shareholders are referred to the announcement dated 1
February 2010 relating to the proposed restructuring of
the Sephaku Holdings group and to the announcements dated
1 June 2010 and 4 June 2010 which included information
relating to the heads of agreement signed with Dangote in
terms of which, subject to various conditions precedent,
Sephaku Cement, an 80.22%-held subsidiary of Sephaku
Holdings, would undertake the issue of ordinary shares in
its share capital ("shares") to Dangote for an aggregate
subscription price of R779 million for the funding of its
cement project ("the Cement Project") ("the Dangote
issue").
The Cement Project comprises the Aganang Project (a
limestone mine and cement manufacturing plant located near
Lichtenburg in the North West Province of South Africa,
formerly known as the Itsoseng Project) and the Delmas
Project (a cement milling plant located in Delmas in the
Mpumalanga Province of South Africa). It is expected that
the Aganang Project and the Delmas Project will come on
line in late 2012 and will yield approximately 0.90Mtpa
and 1.25Mtpa of cement, respectively.
Dangote is one of Nigeria`s largest manufacturing
conglomerates with interests in cement, sugar, salt and
flour. Dangote currently holds a 19.76% interest in
Sephaku Cement as a result of its subscription for shares
in an amount of R350 million in 2008.
2. The Dangote issue
Sephaku Holdings and Sephaku Cement entered into a
convertible loan agreement and a subscription agreement
with Dangote on 24 June 2010 and 20 August 2010,
respectively ("the loan agreement" and "the subscription
agreement").
In terms of the loan agreement, subject to certain
conditions precedent, Sephaku Cement has agreed to issue
to Dangote 21 117 318 shares in order to settle the loan
of R75.6 million (US$10 million) advanced by Dangote to
Sephaku Cement in late June 2010.
In terms of the subscription agreement, subject to certain
conditions precedent, Sephaku Cement has agreed to issue
to Dangote 196 480 447 shares for a subscription price of
R703.4 million.
The shares that are to be issued to Dangote under the loan
agreement and the subscription agreement are to be issued
at an issue price of R3.58 per share, bringing the average
subscription price for Dangote`s entire interest in
Sephaku Cement to R4.47 per share. Subsequent to the
Dangote issue, Dangote will have increased its
shareholding in Sephaku Cement from 19.76% to 64.00%, with
Sephaku Holdings retaining a 35.994% interest and three
minority shareholders together holding the remaining
0.006%.
The Dangote issue provides the outstanding equity
requirement necessary for the completion of the Cement
Project.
Although Dangote holds no shares in Sephaku Holdings, it
holds a material interest in Sephaku Cement. The Dangote
issue is therefore classified as a related party
transaction in terms of the JSE Limited ("JSE") Listings
Requirements and is subject to approval by Sephaku
Holdings shareholders. PSG Capital (Pty) Limited ("PSG
Capital"), in conjunction with Minxcon (Pty) Limited
("Minxcon"), were appointed as the independent experts to
provide a fairness opinion on the Dangote issue.
3. Debt funding for the Cement Project and for limestone
exploration
The senior debt required for the Cement Project is
expected to amount to R1.845 billion ("the Cement Project
debt financing"). Sephaku Cement has allowed for an
additional R265 million of debt as a contingency amount to
fund any cost overruns ("the contingency amount").
Dangote has agreed to provide the necessary guarantees
required for Sephaku Cement to secure the Cement Project
debt financing and, should it be necessary, the
contingency amount.
Dangote has also agreed to fund Sephaku Cement`s limestone
exploration programme relating to its assets in the
Western Cape, Mpumalanga and Limpopo Provinces of South
Africa by way of a loan of up to R35 million which loan
will be advanced to Sephaku Cement on commercial terms.
4. The restructuring of the Sephaku Holdings group and the
distribution of certain of its assets
As set out in the announcements referred to in paragraph 1
above, the board of the company ("the board") has taken a
strategic decision to reorganise the assets of the Sephaku
Holdings group in order to present a more defined and
focused investment opportunity to the market, which it
believes will be beneficial to both existing and new
investors. Accordingly, subject to the approval of the
Department of Mineral Resources, Sephaku Holdings shall
dispose of all of the shares it holds in those
subsidiaries of the Sephaku Holdings group which hold
mineral rights, other than those rights which relate to
cement and fluorspar, to a wholly-owned subsidiary of the
company, Saldopax Limited, which is to be renamed Incubex
Minerals Limited ("Incubex") ("the restructuring"). As
part of the restructuring, the board has also disposed of
all of Sephaku Holdings` claims against such subsidiaries
to Incubex.
The board intends to distribute to Sephaku Holdings
shareholders, as a dividend in specie, all of the issued
shares in Incubex in the ratio of one Incubex share for
every ten Sephaku Holdings shares held ("the
distribution"). The distribution is considered to be a
specific payment to shareholders in terms of the JSE
Listings Requirements and is therefore subject to
shareholder approval.
5. Termination of negotiations with the Wu Group
Shareholders are advised that the negotiations with Mr
Mong Seng Wu and Mandra Capital referred to in the
announcement dated 1 February 2010 relating to their
potential investment in the Sephaku Holdings group have
been terminated.
6. Conditions precedent and effective dates
The implementation of the Dangote issue and the
distribution are conditional upon, inter alia:
the approvals, to the extent required, of the relevant
regulatory bodies including the South African Reserve Bank
and the JSE; and
the passing of the relevant shareholder resolutions
relating to the Dangote issue and the distribution.
The effective date of the implementation of the Dangote
issue is the second business day after the date on which
the last of the conditions precedent to the Dangote issue
is fulfilled or waived (as the case may be), which is
anticipated to be on or about Tuesday, 28 September 2010.
7. Pro forma financial effects
The unaudited pro forma financial effects of the Dangote
issue, the Cement Project debt financing, the
restructuring and the distribution are presented below.
Such pro forma financial effects are the responsibility of
the board and are presented for illustrative purposes only
to provide information on how such transactions may have
impacted on the reported financial information of Sephaku
Holdings if they had been implemented in the twelve months
ended 28 February 2010. Because of their nature, the pro
forma financial effects may not give a fair indication of
the Sephaku Holdings group`s financial position at 28
February 2010 or its future earnings.
Pro forma
Actual After the
Before the Dangote %
transactions issue change
(i) (ii) (vii)
(Loss)/Earnings
per
Sephaku
Holdings
ordinary
share for the
twelve months
ended 28
February 2010
(cents) (v) (28.30) 77.13 n/a
Headline
(loss)/earnings
per
Sephaku
Holdings
ordinary
share for the
twelve months
ended 28
February 2010
(cents) (v) (43.09) (25.75) 40.2
Diluted
(loss)/earnings
per
Sephaku
Holdings
ordinary
share for the
twelve months
ended 28
February 2010
(cents) (v),
(viii) (27.56) 75.08 n/a
Diluted
headline
(loss)/earnings
per Sephaku
Holdings
ordinary
share for the
twelve months
ended 28
February 2010
(cents) (v),
(viii) (41.95) (25.07) 40.2
Net asset value
per
Sephaku
Holdings
ordinary
share at 28
February 2010
(cents) (vi) 233.48 339.70 45.5
Net tangible
asset value per
Sephaku
Holdings
ordinary
share at 28
February 2010
(cents) (vi) 186.71 315.85 69.2
Weighted
average number
of Sephaku
Holdings
ordinary shares
in issue
for the period 155 209 963 155 209 963 -
Diluted
weighted
average
number of
Sephaku
Holdings
ordinary shares
in issue for
the period
(viii) 159 431 838 159 431 838 -
Number of
Sephaku
Holdings
ordinary shares
in issue at
the end of the
period 155 805 362 155 805 362 -
Pro forma
After the
Cement
Project
debt %
financing change
(iii) (vii)
(Loss)/Earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v) 53.85 n/a
Headline (loss)/earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v) (49.04) (13.8)
Diluted (loss)/earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v), (viii) 52.42 n/a
Diluted headline (loss)/earnings
per Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v), (viii) (47.74) (13.8)
Net asset value per
Sephaku Holdings ordinary
share at 28 February 2010
(cents) (vi) 339.70 (45.5)
Net tangible asset value per
Sephaku Holdings ordinary
share at 28 February 2010
(cents) (vi) 315.85 69.2
Weighted average number
of Sephaku Holdings
ordinary shares in issue
for the period 155 209 963 -
Diluted weighted average
number of Sephaku Holdings
ordinary shares in issue for
the period (viii) 159 431 838 -
Number of Sephaku Holdings
ordinary shares in issue at
the end of the period 155 805 362 -
Pro forma
After the
restructuring
and the %
distribution change
(iv) (vii)
(Loss)/Earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v) 58.44 n/a
Headline (loss)/earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v) (49.95) (15.9)
Diluted (loss)/earnings per
Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v), (viii) 56.89 n/a
Diluted headline
(loss)/earnings
per Sephaku Holdings ordinary
share for the twelve months
ended 28 February 2010
(cents) (v), (viii) (48.63) (15.9)
Net asset value per
Sephaku Holdings ordinary
share at 28 February 2010
(cents) (vi) 328.67 40.8
Net tangible asset value per
Sephaku Holdings ordinary
share at 28 February 2010
(cents) (vi) 308.38 65.2
Weighted average number
of Sephaku Holdings
ordinary shares in issue
for the period 155 209 963 -
Diluted weighted average
number of Sephaku Holdings
ordinary shares in issue for
the period (viii) 159 431 838 -
Number of Sephaku Holdings
ordinary shares in issue at
the end of the period 155 805 362 -
Notes:
i. The figures in this column are extracted from the
published audited interim financial results of the
Sephaku Holdings group for the twelve months ended 28
February 2010.
ii. The figures in this column are based on the figures
set out in the previous column, having adjusted for
the effects of the Dangote issue.
iii. The figures in this column are based on the figures
in Column 2 ("After the Dangote issue"), having adjusted
for the effects of the Cement Project debt financing.
iv. The figures in this column are based on the figures in
Column 4 ("After the Cement Project debt financing"),
having adjusted for the effects of the restructuring
and the distribution.
v. For purposes of the pro forma (loss)/earnings and
headline (loss)/ earnings per Sephaku Holdings ordinary
share it was assumed that:
the proceeds from the Dangote issue were received and
the scheduled debt draw downs relating to the Cement
Project debt financing commenced on 1 March 2009 and the
restructuring and the distribution were implemented with
effect from 1 March 2009.
(The pro forma adjustment for the net profit recognised on
the disposal of a subsidiary as a result of the Dangote
issue, amounting to R108 537 082, was calculated using the
net asset value of Sephaku Cement at 28 February 2010, not
1 March 2009, as this more accurately reflects the actual
profit that will be recognised in respect of the
transaction when it occurs.);
the costs of the Dangote issue amounted to R10.05
million and were written off against the share premium
account of Sephaku Cement;
the proceeds from the Dangote issue were invested in the
Cement Project immediately;
no debt repayments relating to the Cement Project debt
financing were made;
pre-tax interest payments and amortised transaction
costs in respect of the Cement Project debt financing
amounted to R100 370 168 of which R36 133 260 was
attributable to Sephaku Holdings as an equity accounted
loss, based on an interest rate of approximately 10%,
calculated on a nominal annual compounded quarterly basis,
and all such payments and costs were expensed in Sephaku
Cement. Pre-tax interest payments were not adjusted for
tax as Sephaku Cement is not currently in a tax paying
position.
vi. For purposes of net asset value and net tangible asset
value per Sephaku Holdings ordinary share, it was
assumed that the proceeds from the Dangote issue were
received on and the restructuring and the distribution
were implemented with effect from 28 February 2010.
vii. The figures in these columns reflect the overall
percentage change between the figures set out in the
preceding column and the figures set out in Column 1
("Actual Before the transactions").
viii. The figures in these rows reflect the effects of the
issue of Sephaku Holdings shares in respect of all
outstanding share options on earnings and headline
earnings per Sephaku Holdings ordinary share and on the
weighted average number of Sephaku Holdings ordinary
shares in issue for the period.
8. Shareholder approval and further documentation
A circular setting out further details of the transactions
described above and containing the fairness opinion
referred to in paragraph 2 as well as a notice convening a
general meeting to consider and vote on resolutions
relating to, inter alia, the Dangote issue and the
distribution will be posted to shareholders as soon as
possible. It is expected that the shareholders` meeting
will be held on or about 23 September 2010. A further
announcement confirming this date as well as other dates
relating to the distribution will be released as soon as
possible.
9. Withdrawal of cautionary
Shareholders are advised that, in light of the information
presented above, there is no longer a need to exercise
caution when dealing in Sephaku Holdings shares.
Pretoria
25 August 2010
Sponsor and Corporate advisor to Sephaku Holdings
QuestCo
Corporate advisor to Sephaku Cement
SASFIN CAPITAL
(A Division of Sasfin Bank Limited)
Legal advisors to Sephaku Holdings
DLA CLIFFE DEKKER HOFMEYR
Independent experts
PSG CAPITAL
and
MINXCON
Independent Competent Person
VENMYN
independence you can trust
Reporting accountants
PKF (Jhb) Inc
Date: 25/08/2010 11:04:01 Supplied by www.sharenet.co.za
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