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HLM - Hulamin Limited - Proposed amendments to The Hulamin Bee transaction
following the rights issue concluded in June 2010
Hulamin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/013924/06)
Share code: HLM ISIN: ZAE000096210
("Hulamin" or "the Company")
PROPOSED AMENDMENTS TO THE HULAMIN BEE TRANSACTION FOLLOWING THE RIGHTS ISSUE
CONCLUDED IN JUNE 2010
1. Introduction and rationale
In 2007 Hulamin concluded transactions that resulted in Black Economic
Empowerment ("BEE") parties acquiring an effective 15% interest in Hlulamin (the
"BEE Schemes"). Chaldean Trading 67 (Proprietary) Limited ("BEE SPV") acquired
a 10% interest in the form of A ordinary shares, which shares carry only voting
rights, and a 10% interest in the ordinary shares of Hulamin Operations (Pty)
Ltd, a wholly-owned subsidiary of Hulamin. In addition the Hulamin Management
Share Ownership Trust ("MSOP Share Trust") and the Hulamin Employee Share
Ownership Trust ("ESOP Share Trust") (the "Trusts") jointly acquired a 5%
interest in Hulamin in the form of B ordinary shares.
In June 2010 Hulamin raised R750 million by way of an underwritten rights issue
of 100,000,000 new ordinary shares of 10 cents each ("Rights Issue Shares"), at
a subscription price of R7.50 per share, in the ratio of 46.25457 rights for
every 100 Hulamin ordinary shares held on the record date ("Rights Issue").
The Articles of Association of Hulamin ("Articles") do not confer upon the
holders of A ordinary shares and B ordinary shares specific rights to
participate in the Rights Issue.As the Rights Issue Shares were issued at a
discount to the market price, the issuing of these additional ordinary shares
has resulted in a dilution of both the value of the shares and the voting rights
held by the BEE parties. The Rights Issue has consequently had a negative
impact on Hulamin`s BEE status.
Shareholders were advised at the time of the Rights Issue that the Company would
subsequently approach ordinary shareholders, where necessary, to approve certain
adjustments to these BEE Schemes to restore the BEE parties to the same economic
and/or voting position they were in prior to the Rights Issue, which would also
ensure that Hulamin`s BEE rating is preserved.
The Company therefore proposes to amend the terms of the BEE Schemes to
neutralise the impact of the Rights Issue ("BEE Schemes Amendments"). In
addition, the Company proposes to amend the Articles to allow the Directors to
approve changes to the BEE Schemes which may be required following any future
corporate actions ("Articles Amendments"). The BEE Schemes Amendments and
Articles Amendments are hereafter collectively referred to as "the Amendments".
The following authorities will be required from ordinary shareholders in order
to effect the Amendments:
- an increase in the authorised share capital;
- a specific issue of 2 261 240 B ordinary shares for cash;
- an issue of 11 235 471 A ordinary shares;
cancellation of the current memorandum of association and adoption of a new
memorandum of association;
- amendments to the Articles to allow for the impact of the Rights Issue to
be neutralised in respect of the holders of the B ordinary shares;
- amendments to the Articles to give authority to the Directors to approve
changes to the BEE Schemes as a result of future corporate actions;
- authority to repurchase A ordinary shares and B ordinary shares; and
- approval to provide financial assistance.
2. The Amendments
2.1 Increase in authorised share capital
In order to place the BEE SPV in the same voting position and the participants
of the Trusts in the same economic position as they were in prior to the Rights
Issue, additional A ordinary shares will be issued to the BEE SPV and additional
B ordinary shares will be issued to the Trusts . The authorised share capital
will therefore have to be increased to ensure there are sufficient A ordinary
shares and B ordinary shares to be able to effect these Specific Issues, which
will necessitate the cancellation of the current memorandum of association and
the adoption of a new memorandum of association. The authorised share capital
will be increased by the creation of an additional 11 000 000 A ordinary shares
and 7 000 000 B1 ordinary shares.
2.2 The share issues
Additional A ordinary shares will be allotted and issued at par value, and B1
ordinary shares and B3 ordinary shares will be allotted and issued at fair value
(the "Specific Issues"), as follows:
Share class Number of Subscription Subscription
shares to be consideration price per
issued share
B1 ordinary shares issued to 2 197 700 R1,328,801 R0.60
ESOP Share Trust
B3 ordinary shares issued to 63 540 R565,556 R8.90
MSOP Share Trust
A ordinary shares issued to 11 235 471 R1,123,547 R0.10
BEE SPV
2.3 Amendment of strike price
The issue price (strike price) of the B2 ordinary shares will be amended from
R21.44 to R18.93 and the Articles will be amended to authorise the Directors to
issue additional B ordinary shares or to amend the terms of the B ordinary
shares in the event of a corporate action (e.g. issue for cash, vendor placing,
rights issue or capitalisation issue of shares), so that the fair value of the
shares is similar before and after such corporate action.
2.4 Specific authority to repurchase shares
Hulamin currently has the right to repurchase the A ordinary shares and certain
of the B ordinary shares from the BEE SPV and the Trusts, respectively, on the
termination of the BEE Schemes. The creation and issue of additional A ordinary
shares and B ordinary shares will require an extension of the authority of
Hulamin to cover the repurchase of these additional shares.
2.5 Facilitation of the subscription
Hulamin will provide a capital contribution of R1,123,547 to the BEE SPV to
enable it to subscribe for the additional A ordinary shares, and Hulamin`s
operating subsidiaries will provide a capital contribution of R1,894,357 to the
Trusts to facilitate their subscription for the additional B1 ordinary shares
and the additional B3 ordinary shares.
3. Financial effects
The Specific Issues will not have a significant impact on the net asset value,
net tangible assets, earnings per share and headline earnings per share of the
Company.
There is no change in economic value arising from the issue of additional A
ordinary shares as these shares carry only voting rights. The issue of
additional B1 ordinary shares and B3 ordinary shares and the amendment to the
strike price of the B2 ordinary shares does not result in an incremental IFRS 2
cost. There are therefore no financial effects resulting from the Specific
Issues. The reporting accountants have reported to the Directors on the
financial effects of the Specific Issues, which report is available for
inspection at the Company`s registered office.
The financial assistance to be provided is an inter-company transaction and thus
has no financial effect on the financial position and performance of Hulamin.
Other than the transaction costs relating to the Amendments (including the
Specific Issues), which amounts will be deducted from equity, there are no other
financial effects.
4. Conditions precedent to implementing the Amendments.
Implementation of the Amendments is subject to the following conditions being
fulfilled:
- approval of the required resolutions at the general meeting by a requisite
majority of ordinary shareholders; and
- registration by CIPRO of the special resolutions set out in the notice to
the general meeting posted to ordinary shareholders today.
5. Salient dates and times
2011
Last day to lodge forms of proxy with the transfer Tuesday, 22 February
secretaries to vote at the general meeting by
15h00 on
General meeting to be held at 15h00 on Thursday, 24 February
Results of general meeting released on SENS on Thursday, 24 February
Results of general meeting published in the press Friday, 25 February
on
Registration of special resolutions with CIPRO on Friday, 11 March
or about
The above dates and times are subject to change. Any material changes will be
released on SENS and published in the press.
All times referred to in this announcement are local times in South Africa.
6. Independent fairness opinion
When the A ordinary shares and B ordinary shares were first created upon the
implementation of Hulamin`s BEE transaction, the JSE Limited ("JSE") required a
fairness opinion to be issued because unlisted voting instruments were created.
The JSE has again requested that a fairness opinion be obtained from an
independent expert as the proposed amendments to the Articles and Specific
Issues involve the issue of additional, and/or adjustment to the terms and
conditions of, unlisted voting securities in terms of a special dispensation
granted by the JSE to waive the restrictions outlined in paragraph 4.24 of its
Listings Requirements, which dispensation is conditional upon Hulamin obtaining
the appropriate fairness opinion.
Hulamin has accordingly engaged the services of Vunani Corporate Finance,
trading as a division of Vunani Capital (Proprietary) Limited ("Vunani") as
independent expert, and they have confirmed that the proposed Amendments
(including the Specific Issues) are fair to Hulamin ordinary shareholders. Their
full opinion is included the circular posted to ordinary shareholders today.
7. General meeting
A general meeting of ordinary shareholders will be held at 15h00 on 24 February
2011 at the company`s registered offices, Moses Mabhida Road, Pietermaritzburg,
to consider and, if deemed fit, pass, inter alia, the resolutions required to
authorise the Amendments.
8. Posting of circular
A circular was posted today to ordinary shareholders holding certificated
shares, as well as to those ordinary shareholders holding dematerialised shares,
that have elected to receive such documents. Ordinary shareholders who hold
dematerialised shares and have not elected to receive such documents must
contact their CSDP or broker in the manner and at times stipulated in the terms
of the agreement entered into between such shareholders and their CSDPs or
brokers should they wish to receive the relevant documents.
31 January 2011
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal advisors
Bowman Gilfillan Inc.
Independent expert
Vunani Corporate Finance
Reporting accountants
PricewaterhouseCoopers Inc.
Date: 31/01/2011 08:43:01 Supplied by www.sharenet.co.za
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