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PNC - Pinnacle Technology Holdings Limited - Repurchase of Pinnacle shares from

Release Date: 03/05/2011 16:30
Code(s): PNC
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PNC - Pinnacle Technology Holdings Limited - Repurchase of Pinnacle shares from Amabubesi Technology Holdings (Proprietary) Limited ("Amabubesi") and withdrawal of cautionary announcement PINNACLE TECHNOLOGY HOLDINGS LIMITED Registration number 1986/000334/06 Share Code: PNC ISIN: ZAE000022570 ("Pinnacle" or "the Company") REPURCHASE OF PINNACLE SHARES FROM AMABUBESI TECHNOLOGY HOLDINGS (PROPRIETARY) LIMITED ("AMABUBESI") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION Further to the cautionary announcement released on SENS on Wednesday, 13 April 2011 and in the press on Thursday, 14 April 2011, shareholders are advised that Pinnacle has entered into an agreement with Amabubesi on 3 May 2011 ("the Agreement"), in terms of which Pinnacle will repurchase 5 815 363 of its own ordinary shares at R5.50 per share out of its available share premium and Pinnacle Holdings Limited, a subsidiary of Pinnacle will acquire 14 184 637 ordinary shares in Pinnacle at R5.50 per share, both from Amabubesi, in terms of section 48 of the Companies Act, 71 of 2008 ("the Act"), amounting to a total of 20 million shares ("Sale Shares") purchased for and on behalf of the Pinnacle Group of Companies ("the Group"), subject to the conditions precedent below (collectively "the Transaction"). The effective date of the Transaction will be the first business day after the date on which the last of the conditions precedent in the Agreement are fulfilled or waived, as the case may be. This is expected to occur once the shareholders have approved the Transaction by way of special resolution in a shareholders` meeting to be held on or about 24 June 2011. 2. RATIONALE FOR THE TRANSACTION Amabubesi is desirous of selling its entire holdings of 37 281 647 ordinary shares in Pinnacle due to the fund in which these shares were owned having reached its investment horizon. Pinnacle holds a pre-emptive right over these shares giving it an effective right of first refusal should Amabubesi decide to sell these shares. Amabubesi has offered a price of R5.50 per share which is 19.9% below its average traded price over the 30 business days prior to concluding the Agreement. If the Group was to have completed this transaction on 1 July 2010 the resultant reduction in issued shares (net of treasury shares) would have had the effect of increasing the pro-forma earnings per share by 7.4% for the six months ended 31 December 2010. For these reasons the board of directors of Pinnacle ("the Board") decided to acquire as much of Amabubesi`s offer that could be funded out of the Group`s current funding capacity without restricting the Group`s funding needs that are expected to arise out of future growth. The Board accordingly decided to repurchase 20 million shares after considering cash flow and balance sheet forecasts prepared by each of its subsidiaries and consolidated to Group level. The Board also decided to retain so much of the shares as treasury shares as will increase the quantity of shares in Pinnacle that the Group owns after the Transaction to 10% of Pinnacle issued share capital after the Transaction and to cancel the remainder out of share premium. The treasury shares so acquired will be retained for strategic purposes including the possibility of securing a new Black Equity Empowerment partner in the future. An independent rating agency has calculated the effect of the loss of Amabubesi as a black shareholder to Pinnacle upon the Group`s level 4 B- BBEE rating and the Company is confident that improvements already achieved in other B-BBEE scorecard elements will ensure that the Group`s Level 4 rating will be maintained at the next audit. 3. TERMS OF THE TRANSACTION The purchase consideration for the Transaction amounts to R110 000 000 of which R78 015 503.50 will be guaranteed by Pinnacle ("the Guarantee Agreement") in respect of the 14 184 637 shares that are being purchased by Pinnacle Holdings Limited. A repurchase price of R5.50 per ordinary share has been agreed for the Transaction, which represents a discount of 19.9% to the 30 business day volume weighted average price of R6.87 up to and including 29 April 2011, being the last business day prior to the signature date of the Agreement. The Transaction is subject to the following unfulfilled conditions precedent: 3.1 by not later than 17h00 on 20 May 2011, the members of Amabubesi have passed all such resolutions as may be required to approve and implement the Transaction, including such special resolutions as may be required in terms of the Act, and such resolutions have, to the extent legally necessary, been filed with the Companies and Intellectual Property Commission; 3.2 by not later than 17h00 on 4 May 2011, the Board has approved and ratified the entering into of the Agreement; 3.3 by not later than 17h00 on 4 May 2011, the board of directors of Pinnacle Holdings Limited has approved and ratified the entering into of the Agreement; 3.4 by no later than 17h00 on the 4 May 2011, 45% (forty-five percent) of the shareholders of the Company have signed irrevocable undertakings to vote in favour of any resolutions as may be required to approve and implement the Transaction; 3.5 by not later than 30 June 2011, the members of Pinnacle have passed all such resolutions as may be legally necessary to, approve and implement the Transaction, approve and/or authorise the provision by Pinnacle of financial assistance to Pinnacle Holdings Limited in terms of the Agreement and/or the Guarantee Agreement in connection with and/or for purposes of the Transaction, approve and/or authorise the acquisition by the Group of the Sale Shares, including such special resolution as may be required in terms of the Act; and 3.6 by no later than 30 June 2011, the resolutions referred to in paragraph 3.5 above, to the extent legally necessary, have been filed with the Companies and Intellectual Property Commission. It is intended that the Transaction will be funded out of existing cash resources. Following the implementation of the Transaction, application will be made to the JSE Limited for the cancellation and delisting of the 5 815 363 shares repurchased by Pinnacle. Pinnacle Holdings Limited and the Group controlled Pinnacle Share Purchase Scheme Trust will hold a total of 18 131 645 shares in Pinnacle as treasury shares after the Transaction. At that point in time this will represent 10% of the reduced number of issued shares in Pinnacle, after the repurchase and cancellation of the 5 815 363 shares repurchased by Pinnacle. 4. PRO-FORMA FINANCIAL EFFECTS The table below sets out the unaudited pro forma financial effects of the Transaction on Pinnacle. These pro forma financial effects are the responsibility of the Company`s directors and are presented for illustrative purposes only to show how the Transaction may have affected Pinnacle`s financial performance and position for the six months ended 31 December 2010. The accounting policies of Pinnacle have been used in calculating the pro-forma financial effects. The pro forma financial effects which, due to their nature, may not provide a fair reflection of Pinnacle`s financial performance or position after the Transaction, are based on the assumptions that: - For the purpose of calculating earnings per share, headline earnings per share and fully diluted headline earnings per share, the Transaction was implemented at start of business on 1 July 2010; and - For the purpose of calculating net asset value per share and net tangible asset value per share, the Transaction was implemented on 31 December 2010. Before the After the %
Transaction Transaction Change Earnings per share (cents per share) 48.0 51.5 7.4. Headline earnings per share (cents per 48.0 51.5 7.4. share) Fully diluted headline earnings (cents 48.0 51.5 7.4. per share) Net asset value per share (cents per 331.08 303.67 (8.3) share) Net tangible asset value per share 286.94 254.12 (11.4) (cents per share) Number of shares in issue net of 183 328 163 328 (10.9) treasury shares (`000) Weighted average shares in issue 180 949 160 949 (11.1) (`000) Notes and assumptions: a. The "Before" information has been extracted, without adjustment, from Pinnacle`s published unaudited results for the six months ended 31 December 2010. b. The Transaction is expected be funded fully out of existing cash resources. An interest rate of prime rate minus 4% has been assumed for interest forfeited on the cash resources, which is expected to be of a continuing nature. c. Dividends payable on the 14 184 637 shares purchased by Pinnacle Holdings Limited as treasury shares will be retained in the Group and which means that on a consolidated basis effectively no dividend will have been paid on these shares. d. R289 200 has been provided as estimated Transaction costs in respect of the shares that Pinnacle will repurchase, cancel and delist. Transaction costs estimated at R705 300 in respect of the shares to be purchased by Pinnacle Holdings Limited and retained as treasury shares will be capitalised as costs of the acquisition of those shares. Both are once off by nature. 5. CATEGORY The Transaction is classified as a specific repurchase of securities in terms of section 5.67 of the JSE Listing Requirements from a related party as defined in section 10.1(b) of the JSE Listings Requirements, as Amabubesi is a material shareholder holding 19.9% of the issued share capital of the Company before the Transaction. As the price at which the securities are purchased is not at a premium to the average traded price over the 30 days prior to concluding the Agreement, a fairness opinion is not required in terms of the JSE Listings Requirements. 6. CIRCULAR A circular, providing further information on the Transaction and containing a notice of general meeting and a form of proxy will be posted to shareholders on or about 25 May 2011. 7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT As details of the Transaction have been provided in this announcement, shareholders are advised that they no longer need to exercise caution when dealing in their Pinnacle securities. Midrand 3 May 2011 Sponsor Deloitte & Touche Sponsor Services (Pty) Limited Attorneys for the Group Tugendhaft Wapnick Banchetti and Partners Attorneys for Amabubesi Cliffe Dekker Hofmeyr Inc Reporting Accountants BDO South Africa Inc Date: 03/05/2011 16:30:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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