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BLU - Blue Label Telecoms Limited - Proposed specific repurchase of Blue Label
shares from Microsoft Corporation and resignation of director
Blue Label Telecoms Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022679/06)
Share code: BLU ISIN: ZAE000109088
("Blue Label" or "the Company")
PROPOSED SPECIFIC REPURCHASE OF BLUE LABEL SHARES FROM MICROSOFT CORPORATION
AND RESIGNATION OF DIRECTOR
1. INTRODUCTION
On the listing of Blue Label in 2007, Microsoft Corporation ("Microsoft")
subscribed for 91,851,852 Blue Label shares at a price of R6.75 per
share. On 5 October 2011, Blue Label entered into an agreement with
Microsoft ("Share Buy-Back Agreement") in terms of which Blue Label will
acquire 91,851,852 Blue Label shares ("Microsoft shares") from Microsoft,
subject to the terms and conditions referred to below, at a price of
R4.25 per Blue Label share (the "specific repurchase").
2. RATIONALE FOR THE SPECIFIC REPURCHASE
The specific repurchase, at the repurchase price of R4.25 per Blue Label
share, is earnings accretive to shareholders and is an efficient use of
Blue Label`s excess cash. The specific repurchase also avoids a potential
overhang of the Microsoft shares in the market.
3. TERMS OF THE SPECIFIC REPURCHASE
The repurchase price of R4.25 per share represents a discount of:
- 15.0% to the closing price;
- 15.1% to the 30 day VWAP;
- 11.4% to the 60 day VWAP; and
- 15.4% to the 90 day VWAP
to 5 October 2011, being the business day preceding this announcement.
The Share Buy-Back Agreement is subject to the fulfilment of the
following conditions precedent:
- the shareholders of Blue Label in the Annual General Meeting pass a
special resolution in accordance with the Companies Act, 71 of 2008,
as amended ("Companies Act") and the JSE Limited Listings
Requirements ("Listings Requirements"), authorising Blue Label by
way of a specific authority in accordance with the Companies Act and
the Listings Requirements to buy-back 91,851,852 shares from
Microsoft, at the repurchase price of R4.25 per Blue Label share,
and such special resolution being lodged with the Companies and
Intellectual Property Commission; and
- the grant by the Financial Surveillance Department of the South
African Reserve Bank of any necessary approval for the entering into
and implementation of the sale of the Microsoft shares to Blue Label
as contemplated in the Share Buy-Back Agreement.
Subject to the fulfilment of the above mentioned conditions precedent it
is the intention to cancel the Microsoft shares with effect from
Thursday, 1 December 2011.
In terms of the Listings Requirements the specific repurchase is a
related party transaction as Microsoft, by virtue of its 12% shareholding
in Blue Label, is a material shareholder (as defined in the Listings
Requirements) and is consequently a related party to Blue Label.
Consequently in terms of the Listings Requirements, in order to implement
the specific repurchase a special resolution of the Company must be
passed by securities holders excluding Microsoft.
In terms of the Listings Requirements, the votes of Microsoft will be
taken into account in determining whether a quorum of shareholders is
present at the Annual General Meeting, but such votes will not be taken
into account in determining the results of the voting at the Annual
General Meeting.
4. FINANCIAL EFFECTS
The table below sets out the unaudited pro forma financial effects of the
specific repurchase on the audited basic earnings, diluted basic
earnings, headline earnings, diluted headline earnings and core earnings
per Blue Label share for the year ended 31 May 2011 and the net asset
value and tangible net asset value per Blue Label share at that date. The
unaudited pro forma financial effects have been prepared in accordance
with the Listings Requirements, the Guide on Pro Forma Financial
Information issued by SAICA and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS). The
accounting policies used to prepare the unaudited pro forma financial
effects are consistent with those applied in the preparation of the
financial statements for the year ended 31 May 2011.
The unaudited pro forma financial effects have been prepared for
illustrative purposes only, in order to provide information on how the
specific repurchase may have affected the financial results and position
of a Blue Label shareholder and, because of their nature, may not give a
true reflection of the actual financial effects of the specific
repurchase. The unaudited pro forma financial effects are the
responsibility of the directors.
Per Blue Label share Before the After the % Notes
specific specific Change
repurchase repurchase
(cents)(1) (cents) (2)
Basic earnings 57.04 62.57 9.7% 3, 6, 7
Diluted basic earnings 56.49 61.88 9.5% 3, 6, 7
Headline earnings 46.20 50.23 8.7% 3, 6, 7
Diluted headline earnings 45.75 49.67 8.6% 3, 6, 7
Core earnings 60.34 66.32 9.9% 3, 6, 7
Net asset value 388.90 383.63 -1.4% 4, 5, 6, 7
Tangible net asset value 331.58 318.38 -4.0% 4, 5, 6, 7
Weighted average number of 756,359 664,508
shares in issue (`000)
Diluted weighted average 763,742 671,891
number of shares in issue
(`000)
Number of shares in issue 756,269 664,417
(`000)
Notes to the unaudited pro forma financial effects
1. The "Before the specific repurchase" column reflects the basic
earnings, diluted basic earnings, headline earnings, diluted
headline earnings and core earnings per Blue Label share for the
year ended 31 May 2011 and the net asset value and the tangible net
asset value per Blue Label share as at 31 May 2011.
2. The "After the specific repurchase" column is based on the
assumption that the 91,851,852 shares were repurchased for a total
consideration of R390.4 million (excluding costs, as the costs are
charged to equity) with effect from 1 June 2010 for earnings per
share purposes and a total consideration of R392.22 million
(including costs) from 31 May 2011 for net asset value and tangible
net asset value per share purposes.
3. Earnings have been decreased by the finance income earned on the
excess cash utilised to finance the specific repurchase. This amount
has been calculated as R15.7 million which is based on the average
interest rate realised for the year of 5.4% (3.9% after tax). This
effect is expected to be of a continuing nature.
4. Once-off net transaction costs assumed in respect of the specific
repurchase of approximately R1.85 million have been taken into
account and charged to equity. This comprises Securities Transfer
Tax of approximately R1.0 million on the repurchase of the shares
and additional transaction costs of approximately R0.85 million.
5. Cash and cash equivalents have been decreased by an amount of
R392.22 million to reflect the cash outflow required for the
specific repurchase and transaction costs. The specific repurchase
is assumed to be funded from existing cash balances.
6. The weighted average number of shares, diluted weighted average
number of shares and total number of shares in issue have been
adjusted for the 91,851,852 shares repurchased, which are assumed to
be cancelled after the specific repurchase.
7. In terms of the dividend definition in section 1 of the Income Tax
Act, Act 58 of 1962, as amended, an acquisition by a company of its
own securities through a reduction of its contributed tax capital
will not be regarded as a dividend and therefore no secondary tax on
companies is payable in respect of the specific repurchase.
5. IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to vote in favour of the specific repurchase
have been secured from Blue Label shareholders holding 61.9% of the
shares. 10.3% of the 61.9% are irrevocable undertakings to recommend to
clients, in terms of mandates, that clients vote in favour of the
resolutions necessary to implement the specific repurchase.
All Blue Label directors and their associated entities that hold shares
in Blue Label have signed irrevocable undertakings to vote in favour of
the specific repurchase.
6. FURTHER ANNOUNCEMENTS
A circular, including the Notice of Annual General Meeting, detailing the
terms of the specific repurchase and actions required by shareholders
will be posted to shareholders on or about 20 October 2011. It is
expected that the Annual General Meeting will be held on Tuesday, 22
November 2011.
7. RESIGNATION OF DIRECTOR
In compliance with paragraph 3.59 of the Listings Requirements and as a
consequence of the Share Buy-Back Agreement, shareholders are advised
that Mr Mteto Nyati has tendered his resignation from the Blue Label
board of directors with effect from 5 October 2011.
Johannesburg
6 October 2011
Investment Bank:
Investec Bank Limited
Sponsor:
Investec Bank Limited
Attorneys:
ENS
Date: 06/10/2011 07:30:01 Supplied by www.sharenet.co.za
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