Wrap Text
EXX - Exxaro Resources Limited - Terms announcement relating to the company`s
proposed replacement employee share ownership plan ("REPLACEMENT ESOP" OR
"SCHEME")
Exxaro Resources Limited
Incorporated in the Republic of South Africa
Registration number 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
("Exxaro" or "the Company")
TERMS ANNOUNCEMENT RELATING TO THE COMPANY`S PROPOSED REPLACEMENT EMPLOYEE SHARE
OWNERSHIP PLAN ("REPLACEMENT ESOP" OR "SCHEME")
Highlights
- The effective date of the Replacement ESOP will be 1 July 2012
("Implementation Date") and the expiry date will be 31 May 2017 ("Final
Date");
- For illustrative purposes and based on an Exxaro 30 day VWAP of R204.26 to
28 March 2012, 367 units will be issued to each qualifying employee;
- The Replacement ESOP will enable the future ownership of 0.8% shareholding
in Exxaro by the ESOP Trust if the proposed transaction between Exxaro and
Tronox Incorporated ("Tronox"), which inter alia entails the disposal of
Exxaro`s Mineral Sands Operations to Tronox in exchange for shares to be
issued in Tronox to Exxaro ("Tronox Transaction"), becomes unconditional
and is implemented by 30 September 2012 and 1.0% shareholding in Exxaro if
it is not implemented;
- The employer companies in the Exxaro Group ("Employer Companies") will make
capital contributions of R75 000 (in respect of each qualifying employee)
to the ESOP Trust to enable the share subscription; and
- The estimated economic cost of implementing the Replacement ESOP for Exxaro
and its shareholders is estimated to be approximately R584 million if the
Tronox Transaction is implemented and R702 million if the Tronox
Transaction is not implemented.
1 Introduction and rationale
Exxaro`s employee share ownership plan for qualifying employees of Exxaro
and all of its subsidiaries, whether direct or indirect ("Exxaro Group"),
commonly referred to as Mpower and the majority of the beneficiaries of
which were historically disadvantaged South Africans ("HDSA"), expired on
27 November 2011.
The Company intends to adopt a new employee share ownership plan for
employees not participating in any other executive share incentive
arrangements of the Company, the majority of whom are HDSAs ("Qualifying
Employees"). Qualifying Employees who receive and accept the award of
vested rights in the shares held by the ESOP Trust ("Units") will become
participants of the Scheme ("Participants").
The purpose of this announcement is to provide shareholders with details of
the Replacement ESOP. A general meeting of Exxaro shareholders, at which
Exxaro shareholders will be requested to vote on the implementation of the
Replacement ESOP, will be held at 11:00 or immediately after the annual
general meeting of Exxaro shareholders on Tuesday, 22 May 2012 at Exxaro`s
Corporate Centre, Roger Dyason Road, Pretoria West, 0183, South Africa
("General Meeting").
2 Details of the Replacement ESOP
2.1 Purpose of the Replacement ESOP
The purpose of the Replacement ESOP will be to provide a framework for
the continued retention of, and to provide an incentive to, Qualifying
Employees within the Exxaro Group.
The Replacement ESOP will further provide for the promotion by the
Exxaro Group of Black Economic Empowerment ("BEE") and increase broad-
based and effective participation in the equity of the Company by
HDSAs as contemplated in the Broad-Based Socio-Economic Empowerment
Charter for the South African Mining Industry.
2.2 Establishment of the ESOP Trust
The Company established the Exxaro Employee Empowerment Trust ("ESOP
Trust") for the purpose of holding the Replacement ESOP shares for the
benefit of the Participants. The Participants will be appointed as
beneficiaries to the capital and income thereof, by formally accepting
an offer to become employee beneficiaries as contained in an award
notice.
The ESOP Trust is regulated by the ESOP Trust Deed, which will
stipulate the rules and regulations that the trustees of the ESOP
Trust ("ESOP Trustees") must follow when managing their entitlements
on behalf of Participants ("ESOP Trust Deed"). In particular, the
ESOP Trust shall comply with the provisions of section 97 of the
Companies Act, 2008, as amended.
The ESOP Trust and trust property will be managed by the ESOP
Trustees. Although the majority of the ESOP Trustees will be elected
by the unions which have obtained bargaining rights in terms of a
recognition agreement with the Exxaro Group ("Recognised Unions"), it
is envisaged that the Company will also appoint some of the ESOP
Trustees, with at least one independent trustee being appointed by the
body of ESOP Trustees.
The number of ESOP Trustees appointed by the Company will always be
less than the number of ESOP Trustees elected by the Recognised
Unions. The Replacement ESOP will consequently be controlled by the
Participants.
The majority of ESOP Trustees will be HDSAs, and at no time will an
ESOP Trustee be a director of the Employer Companies or other related
party.
2.3 Acquisition of shares
The Employer Companies will pay the following amounts to the ESOP
Trust:
- an initial capital contribution in respect of the acquisition of the
Initial Subscription Shares (as defined in paragraph 2.3.1 below) in
an amount of R509 400 000 ("Initial Contribution Amount");
- a further capital contribution of R117 900 000 to the extent that the
Tronox Transaction does not become unconditional and is not
implemented, in order to subscribe for the Further Subscription Shares
(as defined in paragraph 2.3.2 below) in the Company ("Additional
Contribution Amount");
- a capital contribution in respect of any new employees as may be
identified subsequent to the Implementation Date for participation in
the Scheme, if applicable ("New Employees Contribution Amount");
- an amount of R74 677 500 on an unsecured loan basis for purposes of
subscribing for shares in the Company ("Loan Amount") in order to
acquire shares for future employees, and
- a capital contribution if there is any outstanding balance owing by
the ESOP Trust to the Company in respect of an amount advanced to the
ESOP Trust prior to 31 May 2017 ("Final Contribution Amount")
(collectively the "Capital Contribution Amounts").
The ESOP Trust will subscribe for and be issued with up to 1.5%
(depending on the 30 (thirty) day volume weighted average price
("VWAP") of the ordinary shares in the share capital of Exxaro
("Exxaro Shares") to 22 June 2012 ("Transaction Share Price")), as
follows:
2.3.1 Initial Specific Issue for Cash
Exxaro will issue the Initial Subscription Shares to the ESOP Trust at the
Transaction Share Price on 28 June 2012 ("Initial Subscription Date"). The
Initial Specific Issue for Cash will enable the ESOP Trust to allocate
Units with a value of R75 000 to each Qualifying Employee who is not
employed by Exxaro TSA Sands Proprietary Limited and Exxaro Sands
Proprietary Limited ("Exxaro Mineral Sands Operations") ("Exxaro Other
Operations employee").
The number of Initial Subscription Shares to be issued by Exxaro in
consideration for the Initial Subscription Amount (E+F in the formula
below) shall be determined with reference to the following formula:
D = (E + F) / G
Where:
D means the number of Initial Subscription Shares;
E means the Initial Contribution Amount;
F means the Loan Amount; and
G means the Transaction Share Price.
For illustrative purposes, based on an Exxaro 30 day VWAP of R204.26 to
Wednesday, 28 March 2012, being the last practicable date prior to the
finalisation of this announcement ("Last Practicable Date"), the number of
Exxaro Shares expected to be issued to the ESOP Trust is as follows:
Number of Exxaro Cash value of
Shares Initial
Subscription
(Rand)
Exxaro Shares to 2 859 480 584 077 500
be issued
2.3.2 Further Specific Issue for Cash
Should the Tronox Transaction not become unconditional in accordance with
its terms ("Further Subscription Date") by 30 September 2012, Exxaro will
issue the Further Subscription Shares to the ESOP Trust ("Further Specific
Issue for Cash") at the Transaction Share Price. To the extent applicable,
the Further Specific Issue for Cash will enable the ESOP Trust (in addition
to the underlying shares issued to the ESOP Trust for the benefit of Exxaro
Other Operations employees under the Initial Specific Issue for Cash) to
allocate Units to the value of R75 000 to each Exxaro Mineral Sands
Operations employee.
The number of Further Subscription Shares to be issued by Exxaro in
consideration for the Additional Contribution Amount shall be determined
with reference to the following formula:
A = B / C
Where:
A means the number of Further Subscription Shares;
B means the Additional Contribution Amount; and
C means the Transaction Share Price.
For illustrative purposes, based on an Exxaro 30 day VWAP of R204.26 to the
Last Practicable Date, the number of Exxaro Shares expected to be issued to
the ESOP Trust is as follows:
Number of Exxaro Cash value of
Shares Further
Subscription
(Rand)
Exxaro Shares to 577 205 117 900 000
be issued
The Employer Companies shall pay the Initial Contribution Amounts to the
ESOP Trust in the ratio of the number of Participants employed by each
Employer Company as bears to the total number of Participants employed by
the Employer Companies in order to enable the ESOP Trustees to partially
subscribe for the Subscription Shares.
The Company shall lend the Loan Amount to the ESOP Trust. The Capital
Contribution Amounts, to the extent applicable, and the Loan Amount, will
enable the ESOP Trustees to subscribe for the Initial Subscription Shares
and Further Subscription Shares (collectively, the "Subscription Shares").
The ESOP Trustees shall vest Units in respect of the underlying
Subscription Shares in favour of the Participants, in accordance with the
ESOP Trust Deed. On the Final Date, the ESOP Trustees shall deliver the
Subscription Shares underlying each Unit to the Participants.
The Subscription Shares will be held in the ESOP Trust for the full
duration of the Replacement ESOP for the beneficial interest of the
relevant Participants, and may not be disposed of before the expiry of a
period of 7 (seven) business days (being a calendar day other than a
Saturday, Sunday or gazetted national public holiday in South Africa)
("Business Days") after the Final Date, unless specifically provided for in
terms of the ESOP Trust Deed.
2.4 Participation in the Replacement ESOP
To qualify to participate in the Replacement ESOP, the following
requirements must be complied with:
- the employee must be permanently employed by an Employer Company and a
salient term of such employment is that the employee must remain so
employed for the duration of the Replacement ESOP and be employed on
the Final Date;
- only South African resident employees or non-residents who are
employed and based in the Republic of South Africa qualify for
participation; and
- only employees who do not qualify to take part in any other managerial
share based incentive may participate.
It is envisioned that approximately 71% of Participants will be "Black
People" as defined in the Broad-Based Black Economic Empowerment Act No 53
of 2003, as amended from time to time. In this regard, the Scheme shall be
implemented on the basis that the majority of Participants shall at all
times be Black People.
2.5 Creation of Units
In terms of the ESOP Trust, Units will be created for allocation to
Qualifying Employees. The Units will in principle represent a vested right
of each Participant from inception in the Subscription Shares pursuant to
acceptance thereof by each such Participant.
At inception, all Qualifying Employees will receive the same number of
Units regardless of race, remuneration package and years of service.
Except as to be provided in the ESOP Trust Deed, the Participants will not
be entitled to dispose of their Units until after a period of 7 (seven)
Business Days after the Final Date.
2.6 Final Date
On the Final Date, the ESOP Trustees shall deliver the Subscription Shares
underlying each Unit to the Participants.
However, pursuant to the delivery of the relevant Subscription Shares
underlying the Units on the Final Date, a Participant may request in
writing that the ESOP Trust sell the relevant Subscription Shares in the
market after a period of 7 (seven) Business Days after the Final Date as
agent for and on his behalf, deduct the tax liability and any additional
costs resulting from participation in the Replacement ESOP before payment
of the balance to the Participant.
2.7 Events influencing benefits to be received
Certain events could influence the benefits to be received by Participants
if they happen before the Final Date. These are listed below:
2.7.1 Termination of services
A distinction will be made between:
- Participants whose employment with the Employer Companies is
terminated due to:
- retrenchment;
- retirement;
- Employer Company ceasing to form part of the Employer Companies,
provided that any transfer of employment by a Participant to
another Employer Company shall not be deemed to constitute any
termination of employment by a Participant with the Employer
Companies;
- death;
- disability or incapacity which results in the employee being
unable to perform the inherent job requirements of their
occupation; or
- promotion out of the relevant qualifying category
(collectively "Good Leavers"); and
- Participants whose participation in the Replacement ESOP is terminated
due to:
- the Participant being lawfully dismissed or resigning from his
employment with the relevant Employer Company;
- the Participant being declared insolvent;
- there being grounds which would have justified a summary dismissal at
law by the relevant Employer Company and the ESOP Trustees elect to
rely on such grounds for the purposes of the Replacement ESOP; or
- a Participant being in breach of any of the provisions of the ESOP
Trust Deed and failing to remedy such breach within 7 (seven) days
after being called upon in writing to do so by the ESOP Trustees
(collectively "Bad Leavers").
Good Leavers shall receive the benefits in relation to the Units vested in the
Participant until the date of such event (i.e. their benefits will be pro-
rated), save in the case of death and/or retrenchment and/or voluntary
retrenchment, as approved by the Exxaro Remuneration and Nomination Committee,
where the estate of the Participant or the Participant, as the case may be,
shall receive all benefits in relation to the Units.
Bad Leavers will forfeit their Units for no consideration and cease to be
Participants in the Replacement ESOP.
2.7.2 Company Activities
Reconstruction or Takeover
If there is any reconstruction or takeover of the Company all Units will
become immediately unrestricted, and the Trustees shall deliver the
Subscription Shares underlying each Unit to the Participants, as set out in
2.6.
Variation in Share Capital
If there is any variation in share capital, the ESOP Trustees shall make
such adjustment to the number of scheme shares and Units to place the
Participants in a substantially similar economic position.
2.8 Unallocated Units in the ESOP Trust
Employees who join the Employer Companies after the Implementation Date of
the Replacement ESOP and who qualify as outlined above, will also qualify
for Units.
However, those Qualifying Employees will receive the benefits of the
Replacement ESOP pro rata. For instance, if a Qualifying Employee joins
two and a half years (30 months) after introduction of the Replacement
ESOP, he will only enjoy approximately half (50%) of the benefits of
participating in the Replacement ESOP for the remaining two and half years.
To accommodate the above, it is intended that all of the Units will not be
allocated at inception of the Replacement ESOP. In addition, Units
forfeited by Bad Leavers due to early termination of employment may also be
utilised by the ESOP Trust for allocation to new joiners. All
distributions received by the ESOP Trust in relation to any unallocated
Subscription Shares shall be utilised by the ESOP Trust to acquire
additional Exxaro Shares in the market.
To the extent that there are unallocated Units on the Final Date, with the
consequence that all Subscription Shares at that time in the ESOP Trust are
not being utilised for the benefit of Qualifying Employees, these
Subscription Shares shall be dealt with as follows as determined by the
Trustees:
- any unallocated Subscription Shares will be used to settle the
outstanding liabilities of the ESOP Trust at the time, and to the
extent that the establishment of a new scheme is contemplated at the
time, the remainder rolled over into that new scheme; or
- the Company shall appoint in writing a residual beneficiary of the
ESOP Trust at that time, provided that the ESOP Trustees shall be
entitled to sell the relevant Subscription Shares in the market and
the proceeds distributed back to such residual beneficiary.
2.9 Estimated economic cost
The estimated economic cost of implementing the Replacement ESOP for Exxaro
and its shareholders is estimated to be approximately R584 million if the
Tronox Transaction becomes unconditional and R702 million if the Tronox
Transaction does not become unconditional. This represents between
approximately 0.8% and 1.0% of the market capitalisation of Exxaro as at
the Last Practicable Date.
3 Pro forma financial effects of the Replacement ESOP
The table below sets out the unaudited pro forma financial effects of the
Replacement ESOP on, inter alia, Exxaro`s audited basic earnings per share,
headline earnings per share, fully diluted headline earnings per share, net
asset value per share and net tangible asset value per share based on the
most recently published condensed audited group results of Exxaro for the
year ended 31 December 2011. The unaudited pro forma financial effects are
based on the assumptions set out below and include assumptions on share
price.
The accounting policies of Exxaro for the year ended 31 December 2011 have
been used in preparing the pro forma financial effects.
The unaudited pro forma financial information was prepared for illustrative
purposes only and may not, because of its nature, fairly present Exxaro`s
financial position, changes in equity, and results of its operations or
cash flows as at the relevant reporting date. It does not purport to be
indicative of what the financial results would have been, had the
Replacement ESOP been implemented on a different date.
The unaudited pro forma financial information of Exxaro presented below is
the responsibility of Exxaro`s directors.
Effects per Exxaro share Before After the % After the % change
(cents) (1) Initial change Intial &
Specific Further
Issue (2) Specific
Issue (2)
Earnings per share (3) 2 199 2 174 (1.1%) 2 169 (1.4%)
Headline earnings per 2 098 2 073 (1.2%) 2 068 (1.4%)
share (3)
Diluted headline earnings 2 069 2 040 (1.4%) 2 035 (1.6%)
per share (3)
Net asset value ("NAV") 6 663 6 662 - 6 662 -
per share (4)
Net tangible asset 6 627 6 626 - 6 626 -
("TNAV") value per share
(4)
Weighted average number 348 348 348
of shares (millions) (5)
Diluted weighted average 353 354 354
number of shares
(millions) (6)
Number of shares in issue 354 354 354
(millions) (5)
Notes and assumptions:
(1) Extracted from Exxaro`s condensed audited group results for the year ended
31 December 2011.
(2) Represents the unaudited pro forma financial effects after the Initial
Specific Issue for Cash and the Further Specific Issue for Cash.
(3) Earnings, headline earnings and diluted headline earnings per share effects
are based on the following principal assumptions:
- the Initial Specific Issue for Cash and the Further Specific Issue for Cash
were effective 1 January 2011;
- 2 859 480 shares issued in the Initial Specific Issue for Cash;
- 577 205 shares issued in the Further Specific Issue for Cash;
- a share price of R204.26, being the 30 day VWAP as at the Last Practicable
Date was used to determine the number of shares issued in terms of the
Initial Specific Issue for Cash and the Further Specific Issue for Cash;
- the cash contribution to the Replacement ESOP is expensed in terms of IFRS
2, Share-based Payments evenly over a five year period;
- total estimated transaction costs of R5.3 million were incurred, which are
once off in nature; and
- taxation accrued at 28%.
(4) NAV and NTAV effects are based on the following principal assumptions:
- the Initial Specific Issue for Cash and the Further Specific Issue for Cash
were effective 31 December 2011;
- the shares issued to the Replacement ESOP will be held as treasury shares
until vesting, being after a five year period;
- total estimated transaction costs of R5.3 million were incurred, which are
once off in nature; and
- taxation thereon at 28%.
(5) Assuming a 30 day VWAP of R204.26 per Exxaro share, 2 859 480 and 577 205
Exxaro shares will be issued in terms of the the Initial Specific Issue for
Cash and the Further Specific Issue for Cash, respectively and held as
treasury shares until the Final Date. Treasury shares are equity
instruments, which have not yet been issued to the employees until all
vesting conditions have been met and as a result are excluded from the
calculation of basic earnings per share.
(6) For the purpose of calculating "diluted weighted average number of shares
in issue"
- Exxaro has assumed a share price of R204.26, being the share price as
at the Last Practicable Date; and
- 571 896 shares in respect of the Initial Specific Issue for Cash and
115 441 shares in respect of the Further Specific Issue for Cash shall
be treated as an issue of ordinary shares for no consideration and
will be added to the diluted weighted average number of shares in
issue.
Please note, the treasury stock method should be applied annually to
determine the dilutive effect of the Initial Specific Issue for Cash and
Further Specific Issue for Cash on the EPS calculations.
4 Conditions precedent
4.1 Initial Specific Issue for Cash
The Initial Specific Issue for Cash is conditional upon:
(i) the Company obtaining the approval, by ordinary resolution of its
shareholders (at the General Meeting) with a 75% majority of the votes
cast in favour thereof, for the placing of sufficient authorised but
unissued ordinary shares in the Company under the control of its
directors in order to issue the Initial Subscription Shares and give
effect to the Subscription Agreement (being the agreement in terms of
which the Trustees undertake to Exxaro to use the Capital Contribution
Amounts to subscribe for the Subscription Shares) in accordance with
the provisions of the Replacement ESOP. This is in accordance with
paragraph 5.51 of the Listings Requirements and in accordance with
clause 3.2 of the current memorandum of incorporation ("MOI") of the
Company and clause 3.1(3) of the proposed MOI of the Company
(scheduled for approval at the General Meeting); and
(ii) Anglo South Africa Capital Proprietary Limited and BHP Billiton
SA Holdings Limited consent in terms of the relationship
agreement entered into between Anglo South Africa Capital
Proprietary Limited, Exxaro, BHP Billiton SA Holdings Limited,
Exxaro EEPS Trust and BEE Holdco in terms of which Exxaro and BEE
Holdco undertake, inter alia, that Exxaro will remain an HDSA
until the final date ("Newco Relationship Agreement"). As at the
Last Practicable Date, the Company has secured the consent of BHP
Billiton SA Holdings Limited.
4.2 Further Specific Issue for Cash
The Further Specific Issue for Cash is conditional upon:
(i) the Tronox Transaction not becoming unconditional in accordance with
its terms and not being implemented by 30 September 2012;
(ii) the Company obtaining the approval, by ordinary resolution of its
shareholders (at the General Meeting) with a 75% majority of the
votes cast in favour thereof, for the placing of sufficient
authorised but unissued ordinary shares in the Company under the
control of its directors in order to issue the Further
Subscription Shares and give effect to the Subscription Agreement
in accordance with the provisions of the Replacement ESOP. This
is in accordance with paragraph 5.51 of the Listings Requirements
and in accordance with clause 3.2 of the current MOI of the
Company and clause 3.1(3) of the proposed MOI of the Company
(scheduled for approval at the General Meeting); and
(iii) Anglo South Africa Capital Proprietary Limited and BHP Billiton
SA Holdings Limited consent in terms of the Newco Relationship
Agreement. As at the Last Practicable Date, the Company has
secured the consent of BHP Billiton SA Holdings Limited.
5 Documentation
Exxaro shareholders are advised that in accordance with the JSE Listings
Requirements, a circular to shareholders, together with a notice of a
general meeting of Exxaro shareholders, will be issued in due course
containing further details of the Replacement ESOP.
Pretoria
30 March 2012
For enquiries
Riaan Koppeschaar
Exxaro Resources Limited
General Manager, Corporate Finance & Treasury
Telephone +27 12 307 4145
Facsimile +27 12 307 4969
Email Riaan.Koppeschaar@exxaro.com
Merchant bank and transaction sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Sponsor
Deutsche Securities (SA) Proprietary Limited
Legal and tax adviser
Cliffe Dekker Hofmeyr Incorporated
Reporting accountants and auditors
PricewaterhouseCoopers Inc
Date: 30/03/2012 15:12:01 Supplied by www.sharenet.co.za
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