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LISTING OF NIVEUS INVESTMENTS LIMITED AND PRO-RATA OFFER BY HCI TO REPURCHASE HCI
SHARES IN EXCHANGE
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1973/007111/06
Share code: HCI
ISIN: ZAE000003257
(“HCI”)
LISTING OF NIVEUS INVESTMENTS LIMITED AND PRO-RATA OFFER BY HCI TO REPURCHASE HCI
SHARES IN EXCHANGE FOR NIVEUS INVESTMENTS SHARES
1. Introduction
HCI has undertaken a strategic review of its investments and has taken the decision to restructure certain
of its investments into a new investment platform called Niveus Investments Limited (“Niveus
Investments”), which will be separately listed under the “Investment Entities” subsector of the Financial
Services sector of the JSE Limited (“JSE”), with HCI retaining a majority shareholding in Niveus
Investments (collectively the “Listing”). Niveus will hold the following investments which are described in
more detail in section 3.1 below:
Vukani Gaming Corporation Proprietary Limited (“Vukani Gaming”);
HCI Gaming and Entertainment Proprietary Limited (“HCI Bingo”);
HCI-KWV Holdings Proprietary Limited (“HCI KWV”); and
Formex Industries Proprietary Limited (“Formex”).
In order to effect the Listing, and to ensure that Niveus Investments has the necessary spread of
shareholders in terms of the Listings Requirements of the JSE (“Listings Requirements”), HCI will, by
means of a pro rata offer, offer holders of ordinary shares in HCI (”HCI Shareholders”) the opportunity to
receive their pro rata portion of 45% of the shares in Niveus Investments by tendering one HCI ordinary
share (“HCI Share”) for repurchase by HCI in exchange for the distribution in specie by HCI of 11.95191
Niveus Investments ordinary shares (“Niveus Investments Shares”) per HCI Share repurchased
(collectively the “Pro-rata Repurchase and Distribution”). A maximum of 48 203 589 Niveus Investments
Shares are available for distribution to HCI Shareholders in terms of the Pro-rata Repurchase and
Distribution. The Pro-rata Repurchase and Distribution is described in more detail in section 4 below.
2. Rationale
The Listing is intended to provide HCI Shareholders with direct exposure to investments which offer an
alternative risk and return profile to their current shareholding in HCI and which have attractive growth
prospects over the medium- to long-term.
The investments which form part of Niveus Investments have, in the past, been overlooked by investors
because of their size relative to other larger and higher profile HCI investments. The Listing will provide
visibility regarding these investments which will allow investors to better assess their value, and may
potentially unlock value for HCI Shareholders.
Furthermore, the Listing is intended to achieve the following:
provide Niveus Investments with a further source from which capital can be raised to facilitate
future expansion; and
afford institutions, private clients, and members of the public the opportunity to participate directly
in the equity of Niveus Investments.
HCI is of the view that Niveus Investments provides HCI Shareholders with an attractive investment
opportunity and therefore intends to retain a majority shareholding in the business in order to benefit from
the future performance of the investments within Niveus Investments.
3. Overview of Niveus Investments
3.1 Niveus Investments
Following the implementation of the Pro-rata Repurchase and Distribution, Niveus Investments will
be a listed investment entity holding interests in Vukani Gaming, HCI KWV, HCI Bingo and
Formex. A brief overview of each investment is outlined below:
3.1.1 Vukani Gaming
Vukani Gaming is a group of companies principally engaged in the offering of limited
payout machine (“LPM”) gaming services. To date the most prominent business within
Vukani Gaming is that of VSlots which was established in 1994 and is the largest operator
of LPMs in South Africa. VSlots manages a network of sites and is licensed as a LPM
route operator in all of the provinces across South Africa, with the exception of the
Northern Cape province.
The future growth strategy for Vukani Gaming will be focused on the continued
improvement of gross gaming revenue per machine and the rollout of machines in the
various provinces, particularly where licences have only recently been awarded.
3.1.2 HCI KWV
HCI KWV is the holding company for Niveus Investments’ interest in KWV Holdings
Limited. At the date of this announcement, HCI KWV’s shareholding was 39.9% of KWV
Holdings Limited.
KWV Holdings Limited is one of the leading wine and spirits producers in South Africa. The
company sources wines and grapes from a variety of viticultural regions in South Africa. In
addition, the company owns several internationally renowned brands such as Roodeberg,
KWV Wines, Laborie, Golden Kaan, Cathedral Cellar, Cafe Culture, Wild Africa Cream and
the KWV 3, 5, 10, 15 and 20-year old brandies.
3.1.3 HCI Bingo
HCI Bingo is the holding company for Niveus Investments’ interest in Galaxy Bingo
International South Africa Proprietary Limited and its subsidiaries (“Galaxy Bingo”). Galaxy
Bingo was incorporated in early 1997 with the purpose of operating licensed bingo centres
around South Africa.
Games of bingo are offered through both electronic bingo terminals and paper bingo
games at Galaxy Bingo’s licensed bingo centres. To date four centres have been opened
in Gauteng.
3.1.4 Formex
Formex is a company of highly skilled mechanical, industrial and metallurgical engineers
involved in the development, manufacturing and supply of pressed components for the
catalytic converter and original equipment manufactuer (“OEM”) markets.
The company is divided into two principal divisions, namely Formex Pressings, which
focuses on the development, manufacturing and supply of pressed components for the
automotive catalytic converter and OEM markets, and Formex Tubing, which focuses on
the manufacturing and supply of tubular and exhaust-related components.
Both Formex Pressings and Formex Tubing are engaged in several automotive export
programmes, serving a multinational client base which includes such customers as Fiat,
BMW, Ford Motor Company of South Africa, VW South Africa and Toyota.
3.2 Key investment highlights
Niveus Investments’ key investment highlights include:
3.2.1 Successful track record of Niveus Investments’ management and the HCI group
The management of Niveus Investments and the HCI group have a successful track
record of managing investments and creating value for shareholders over the long-term.
This is demonstrated by the growth in HCI’s headline earnings from a loss of R209 million
in the 2001 financial year to a headline profit of R1 020 million in the 2012 financial year
and the growth in HCI’s share price which has increased from approximately R2.00 in
2002 to over R85.00 in 2012, which is a compound annual growth rate in excess of 40%.
2
The track record of management is further highlighted by the relative performance of HCI
versus the JSE All Share Index since January 1997. HCI has increased by over 1 500%
over this period, while the JSE All Share Index has increased by 470%.
3.2.2 Relative value per Niveus Investments Share
In terms of the Pro-rata Repurchase and Distribution, HCI Shareholders will receive
11.95191 Niveus Investments Shares for every one HCI Share repurchased by HCI, up to
3.07% of their HCI shareholding. Considering the value of an HCI Share of R85.07, which
is based on the 60-day Volume Weighted Average Price up to and including 5 July 2012,
this implies a distribution value of R7.12 per Niveus Investments Share.
The directors of HCI and Niveus Investments, in considering the ratio of one HCI Share for
every 11.95191 Shares and the resultant distribution value of R7.12 per Niveus
Investments Share, have taken a number of factors into account, including, inter alia, the
discounts applied to comparable investment entities traded on the JSE. Accordingly, the
directors of HCI and Niveus Investments are of the view that the relative value per Niveus
Investments share is fair.
3.3 Investment Policy
The main investment criteria for Niveus Investments in relation to new investments are the
following:
Niveus Investments will seek to invest in established businesses across a variety of
sectors which display asymmetrical risk / reward profiles;
in line with the aforementioned asymmetrical payoff profile, Niveus Investments will also
consider investing in turnaround opportunities which will allow value to be unlocked for
shareholders over the medium to long term; and
Niveus Investments will also invest in businesses with strong management teams, which it
can incubate, capitalise and grow within the Niveus Investments stable.
Niveus Investments has no pre-determined exit strategy and intends to invest in businesses that
are able to generate sustainable cash flows over the long term.
It is intended that Niveus Investments will fund its investments through a combination of internally
generated cash and either debt or equity financing.
4. The Pro-rata Repurchase And Distribution
The Pro-rata Repurchase and Distribution will collectively entail the following:
4.1 Subject to HCI Shareholder approval, HCI Shareholders shall be entitled to tender one HCI Share
for every 11.95191 Niveus Investments Shares received, up to 3.07% of their HCI shareholding. In
addition HCI Shareholders may elect to tender such additional HCI Shares in terms of excess
applications provided that HCI shall not repurchase more than 3.07% of its entire issued share
capital, net of treasury shares. In aggregate, a total of 48 203 589 Niveus Investments Shares are
available for distribution.
4.2 The effect of the Pro-rata Repurchase and Distribution is that HCI will repurchase up to 4 033 129
of its own shares, which is the maximum number of HCI Shares that HCI is willing to repurchase
so as to ensure that it retains a shareholding of 55% in Niveus Investments post the Pro-rata
Repurchase and Distribution.
4.3 The consideration offered by HCI for the Pro-rata Repurchase and Distribution is Niveus
Investments Shares. There is no cash component or cash alternative to the consideration.
4.4 The Pro-rata Repurchase and Distribution requires HCI Shareholder approval by way of a special
resolution in terms of clause 37 of HCI’s memorandum of incorporation and section 48(8)(a) of the
Companies Act, to the extent that any HCI Shares are repurchased from a director or prescribed
officer of HCI.
5. Important dates and times
The important dates and times in relation to the Pro-rata Repurchase and Distribution are set out below:
2012
Circular posted to HCI Shareholders and notice convening the general
Monday, 30 July
meeting released on SENS on
Notice convening the general meeting published in the South African press
Tuesday, 31 July
on
Last day to trade HCI Shares in order to be recorded in the HCI securities
Friday, 17 August
register to vote at the General Meeting (see note 2 below) on
Record date to be eligible to vote at the General Meeting by close of trade
Friday, 24 August
on
Last day to lodge forms of proxy in respect of the General Meeting by 10h00
Tuesday, 28 August
on
General Meeting to be held at 10h00 on Thursday, 30 August
Results of the General Meeting published on SENS on Thursday, 30 August
Results of the General Meeting published in the South African press on Friday, 31 August
Publication of finalisation information on SENS on Friday, 31 August
Last date to trade HCI Shares in order to be recorded in the HCI securities
register on the record date in order to elect to participate in the Pro-rata Friday, 7 September
Repurchase and Distribution on
Listing of Niveus Investments Shares on the JSE with effect from the
commencement of business under the abbreviated name: Niveus, JSE Monday, 10 September
code: NIV, and ISIN ZAE000169553 on
Commencement of trade in Niveus Investments Shares on Monday, 10 September
HCI Shares trade excluding the entitlement to the Pro-rata Repurchase and
Monday, 10 September
Distribution on
Record date to participate in the Pro-rata Repurchase and Distribution being
the date on which HCI Shareholders must be recorded in the HCI securities
Friday, 14 September
register in order to elect to participate in the Pro-rata Repurchase and
Distribution on
Last date on which the HCI Shareholders can make an election to
Friday, 14 September
participate in the Pro-rata Repurchase and Distribution by 12h00 on
Effective date of the Pro-rata Repurchase and Distribution Monday, 17 September
Niveus Investments share certificates posted to certificated HCI
Shareholders who elected to participate in the Pro-rata Repurchase and
Distribution (provided their Form of Election, Surrender and Transfer (blue) Monday, 17 September
and documents of title are received on or prior to 12h00 on the record date)
on or about
Niveus Investments Shares credited to the accounts (held at the relevant
CSDP or broker) of those dematerialised HCI Shareholders who elected to
Monday, 17 September
participate in the Pro-rata Repurchase and Distribution (and the relevant
number of HCI Shares debited from their accounts) on or about
Notes:
1. The above dates and times are subject to amendment at the discretion of HCI. Any such amendment will be released on SENS
and published in the South African press.
2. HCI Shareholders should note that, as transactions in HCI Shares are settled in the electronic settlement system used by Strate,
settlement of trades takes place five business days after such trade. Therefore, HCI Shareholders who acquire HCI Shares after
close of trade on Friday, 17 August 2012 will not be eligible to vote at the General Meeting.
3. All dates and times indicated above are South African Standard Times.
4. HCI Shareholders are advised that no dematerialisation or rematerialisation of HCI Shares may take place between Monday, 10
September 2012 and Friday, 14 September 2012.
6. Documentation
A circular providing information on the Pro-rata Repurchase and Distribution and incorporating a notice
convening the General Meeting to approve the Pro-rata Repurchase and Distribution, as well as a pre-
listing statement issued by Niveus Investments to HCI Shareholders providing information on the Listing,
will be posted to HCI Shareholders on Monday, 30 July 2012. Both the circular and pre-listing statement
will also be available on HCI’s website www.hci.co.za after they have been posted.
Cape Town
30 July 2012
Investment bank Sponsor
Investec Bank Limited Investec Bank
Legal advisers Reporting accountants and auditors
Edward Nathan Sonnenberg PKF Inc.
Date: 30/07/2012 09:22:00 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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