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HUG - Huge Group Limited - Disposal by Huge Telecom (Pty) Ltd, a wholly owned
subsidiary of Huge Group Limited, of a 49% shareholding in and loan account
claims against, Telepassport Communications (Pty) Ltd, a Namibian Company, to
a related party
HUGE GROUP LIMITED
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
("Huge" or "the Group" or "the company")
DISPOSAL BY HUGE TELECOM (PTY) LTD, A WHOLLY OWNED SUBSIDIARY OF HUGE GROUP
LIMITED, OF A 49% SHAREHOLDING IN AND LOAN ACCOUNT CLAIMS AGAINST,
TELEPASSPORT COMMUNICATIONS (PTY) LTD, A NAMIBIAN COMPANY, TO A RELATED PARTY
1. INTRODUCTION
Shareholders are advised that in terms of a sale of shares agreement
("the sale agreement") entered into on 23 May 2011 ("the signature
date"), Huge Telecom (Pty) Ltd ("Huge Telecom"), a wholly owned
subsidiary of Huge, has disposed of 1 176 ordinary shares of $N1 (one
Namibian Dollar) each in the share capital of TelePassport Communications
(Pty) Ltd ("TelePassport"), a Namibian company, representing 49% of the
entire issued share capital of TelePassport, to Luigi`s Trust ("the
purchaser"), a trust formed for the benefit of Anton Daniel Potgieter, a
related party to Huge ("the sale transaction"), for a purchase
consideration of R4 900 000 (four million nine hundred thousand Rand).
The effective date of the sale transaction is the date on which all of
the suspensive conditions to the sale agreement are fulfilled or waived
to the extent that waiver is possible.
2. PURCHASE CONSIDERATION
The purchase consideration of R4 900 000 due to Huge Telecom in terms of
the sale agreement will be settled by the purchaser transferring 3 500
000 Huge Group Ltd ordinary shares with a par value of R0.0001 ("the
consideration shares") each to Huge Telecom on the closing date of the
sale agreement.
3. CATEGORIZATION AND RELATED PARTY NATURE OF TRANSACTION
The purchaser is a related party as defined in Section 10.1(b) of the JSE
Limited`s ("the JSE") Listings Requirements ("the Listings
Requirements"), being a material shareholder and director of Huge.
Section 10.6(e) of the Listings Requirements provides that a transaction
is not regarded as a related party transaction if the transaction is one
where both of the percentage ratios referred to in Section 9.6 of the
Listings Requirements are equal to or less than 0.25%. Section 21.11 (a)
of the Listings Requirements amends the ratio stipulated in Section 9.6
of the Listings Requirements in respect of companies listed on the
Alternative Exchange to 10%.
The purchase consideration referred to in the sale transaction represents
3.43% of the market capitalization of Huge on the signature date,
calculated by dividing the purchase consideration by the product of the
total number of ordinary shares of Huge in issue, 111 760 000, and the
closing price of the ordinary shares of Huge on 20 May 2011 of 128 cents.
Accordingly, and because the purchase consideration does not meet the
percentage requirements set by Section 9.6 as amended by Section 21.11(a)
of the Listings Requirements the transaction is not regarded as a related
party transaction.
4. SPECIFIC REPURCHASE AND FAIRNESS OPINION
The transfer of the consideration shares to Huge Telecom constitutes a
specific repurchase ("the repurchase transaction") of securities in terms
of Section 5.69 of the Listings Requirements at an implied price of 140
cents per share ("the repurchase price") and is a specific repurchase
from a related party as defined by Section 10.1(b) of the Listings
Requirements.
The weighted average trade price of the Huge securities measured over the
30 business days prior to the date that the price of the repurchase,
being today, 23 May 2011, is agreed in writing is 121.4 cents per share.
The repurchase price is accordingly at a premium to the weighted average
price requiring the board of directors ("the board") of Huge to issue a
circular including a statement stating whether the repurchase is fair
insofar as the shareholders (excluding the related party who is an equity
securities holder) of Huge are concerned and that the board have been so
advised by an independent expert acceptable to the JSE. The Board is
required to obtain a fairness opinion which must be included in the
circular.
BDO Corporate Finance (Pty) Ltd has been appointed as the independent
expert.
5. NATURE OF THE BUSINESS OF TELEPASSPORT
TelePassport is based in Windhoek, Namibia. TelePassport was formed in
2004 by Huge Telecom and local high profile residents of Namibia with a
view to growing Huge Telecom`s market share outside the borders of South
Africa.
6. RATIONALE FOR THE DISPOSAL
Namibia is a small market for the provision of managed telecommunications
services and is roughly equal in size to half of Huge Telecom`s Kwa-Zulu
Natal office.
Namibia also has a different regulatory environment as far as
telecommunications services are concerned making the management thereof
different to the group`s SA operation.
Huge is also committed to continue repurchasing its own shares and the
sale transaction accordingly affords Huge the opportunity of doing so
without the outflow of cash resources.
7. CONDITIONS PRECEDENT
The sale transaction is subject to the following suspensive conditions:
- The granting of all regulatory and statutory approvals insofar as
they may be necessary in law and/or required by the JSE for the
implementations of the transactions contemplated in the sale
agreement;
- The delivery of an irrevocable written waiver by the other
shareholders of TelePassport of all pre-emptive and similar rights
pertaining to the ordinary shares subsisting under the
constitutional documents of the company or the shareholders`
agreement or otherwise in relation to the transactions contemplated
in the sale agreement; and
- The entering into of a software license agreement, pursuant to which
Huge Telecom grants to TelePassport the right to continue to use the
billing software currently supplied by Huge Telecom to TelePassport.
8. DOCUMENTATION
In terms of the paragraph 4 above the Board is required to issue a
circular to shareholders incorporating a fairness opinion.
The Board expects the circular to be issued within 6 weeks from the date
of this announcement.
9. PRO-FORMA FINANCIAL EFFECTS
Huge is required to publish the pro-forma effects of the transaction.
The pro-forma effects will be published in due course.
10. RENEWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement dated 29 March
2011 and renewed on 10 May 2011, and are advised that since the pro-forma
effects of the sale transaction are still required to be published,
further caution is required to be exercised when dealing in the ordinary
shares of Huge.
Woodmead, Johannesburg
25 May 2011
Designated Advisor
Arcay Moela Sponsors (PTY) Limited
Date: 25/05/2011 17:23:01 Supplied by www.sharenet.co.za
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