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BASIL READ HOLDINGS LIMITED - Posting of BBBEE transaction circular, including updated unaudited financial effects, and reminder of cautionary

Release Date: 28/09/2012 17:23
Code(s): BSR     PDF:  
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Posting of BBBEE transaction circular, including updated unaudited financial effects, and reminder of cautionary

Basil Read Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/007758/06)
Share code: BSR       ISIN: ZAE000029781
("Basil Read" or the "Company")

POSTING OF CIRCULAR IN RESPECT OF THE BBBEE
TRANSACTION FOR AN EFFECTIVE HOLDING OF 25.1% OF THE
TOTAL ISSUED SHARE CAPITAL OF BASIL READ INCLUDING
THE UPDATED UNAUDITED PRO FORMA FINANCIAL EFFECTS
SUBSEQUENT TO THE RELEASE OF THE UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2012, AND REMINDER
OF CAUTIONARY ANNOUNCEMENT

1.INTRODUCTION

  Further to the announcement released by Basil Read on 28 June 2012, using the terms defined in that
  announcement unless otherwise stated, shareholders are advised that today, Friday, 28 September 2012,
  Basil Read posted to shareholders a circular containing details in respect of:

  - the BBBEE Transaction; and
  - the issue of the Subscription Shares;
  (collectively the "Proposals"),
  and incorporating
  - a notice convening a general meeting of Basil Read ordinary shareholders to approve the Proposals
    ("General Meeting"); and
  - a form of proxy for use by Basil Read certificated shareholders and Basil Read dematerialised shareholders
    with "own name" registration only, (hereinafter the "BBBEE Circular").

2.SALIENT DATES AND TIMES OF THE BBBEE TRANSACTION
                                                                                                                          2012
  Record date, as determined by the Board in accordance with section 59 of the
  Companies Act, for shareholders to be eligible to receive the BBBEE Circular and
  notice of General Meeting                                                                               Friday, 21 September
  Posting of this Circular                                                                                Friday, 28 September
  Last day to trade in order to be eligible to vote at the General Meeting                                  Friday, 12 October
  Record date to be eligible to vote at the General Meeting                                                 Friday, 19 October
  Last day to lodge forms of proxy by 8h30 on                                                             Thursday, 25 October
  General Meeting to be held at 8h30 on                                                                     Friday, 26 October
  Results of the General Meeting published on SENS                                                          Friday, 26 October
  Results of the General Meeting published in the press                                                     Monday, 29 October
  Expected date of Transaction to be unconditional no later than                                           Friday, 30 November
  Expected listing of the new Ordinary Shares on the JSE on or about                                       Friday, 30 November
  
Notes:
  1.  Shareholders will be notified of any amendments to the above dates or times on SENS and in the press.
  2.  Unless otherwise indicated, all times referred to in this announcement are local times in South Africa on a 24-hour basis

3.UNAUDITED PRO FORMA FINANCIAL EFFECTS

  The table below sets out the unaudited pro forma financial effects of the issue of the Initial Ordinary Shares
  and the issue of the "A" Ordinary Shares on the published unaudited results of Basil Read for the six months
  ended 30 June 2012. The unaudited pro forma financial effects have been prepared for illustrative purposes
  only and because of their nature may not fairly present Basil Read's financial position, changes in equity,
  results of operations or cash flows, nor the effect and impact of the Transaction going forward.

  The directors of the Company are responsible for the compilation, contents and preparation of the unaudited
  pro forma financial effects of the Transaction. Their responsibility includes determining that the unaudited
  pro forma financial effects have been properly compiled on the basis stated, which is consistent with the
  accounting policies of Basil Read and the pro forma adjustments are appropriate for the purposes of the
  unaudited pro forma financial effects disclosed pursuant to the Listings Requirements of the JSE Limited
  ("JSE"). The unaudited pro forma financial effects are presented in a manner consistent in all respects with
  International Financial Reporting Standards ("IFRS"), with the SAICA Guide on Pro Forma Financial Information
  and with the basis on which the historical financial information has been prepared in terms of accounting
  policies of Basil Read as at 30 June 2012.

  There has recently been volatility in the Basil Read share price which has a direct effect on certain assumptions
  underlying the pro forma financial effects. Consequently, shareholders should exercise caution in reading the
  pro forma financial effects. Volatility is one of the inputs in the option pricing model and impacts on the value
  of the option and the economic cost. Due to the fact that volatility will change at the effective date of the
  transaction the IFRS 2 charge will be recalculated on the effective date. Volatility has been calculated based
  on a 4 year period.
                                               Before the     After Initial     After the         %   
                                              Transaction   Ordinary Shares   Transaction    impact
   
Earnings per share (cents)                          17.41             18.04        (9.89)   (156.8)   
Headline earnings per share (cents)                 14.75             15.53       (12.39)   (184.0)   
Diluted earnings per share (cents)                  17.41             18.04        (9.89)   (156.8)   
Diluted headline earnings per share (cents)         14.75             15.53       (12.39)   (184.0)   
Net asset value per share (cents)                 1476.05           1459.96       1457.30     (1.3)   
Tangible net asset value per share (cents)         830.76            853.30        850.64       2.4   
Weighted average number of shares in issue                                                            
net of treasury shares ('000)                     123 798           131 681       131 681             

                                               Before the     After Initial     After the        %   
                                              Transaction   Ordinary Shares   Transaction   impact   
Diluted weighted average number of shares                                                          
in issue ('000)                                   123 798           131 681       131 681            
Number of shares in issue net of treasury                                                          
shares ('000)                                     123 803           131 686       131 686            
Diluted number of shares in issue ('000)          123 803           131 686       131 686            

Notes and assumptions in calculating the pro forma financial effects:

1.   The financial information in the "Before the Transaction" column has been based on the unaudited consolidated abridged
     interim financial statements of Basil Read for the six months ended 30 June 2012.

2.   The effects on earnings, diluted earnings, headline earnings and diluted headline earnings per share are based on the
     following assumptions:

     a.   The Transaction was effective 1 January 2012.

     b.   There is no IFRS 2 impact on the issue of the Initial Ordinary Shares as the issue price of R12.56 per share is above the
          closing market price of R8.10 per share on Friday, 31 August 2012, being the last practical date used for calculating the
          pro forma financial effects. To the extent that the issue price is at a discount to the market price on the issue date, an
          IFRS 2 charge equivalent to the extent of the discount will be charged to the income statement.

     c.   The economic substance of the issue of the "A" Ordinary Shares is the granting of a call option on Basil Read shares.
          A once-off IFRS 2 charge on the issue of "A" Ordinary Shares of R32.9 million has been accounted for. On initial
          recognition, being the date on which the "A" Ordinary Shares are issued, the derivative financial liability will be measured
          at fair value using a Monte Carlo simulation based option pricing model. The assumptions used in this model for
          purposes of the pro forma financial effects include a closing spot price of R8.10 per share as at 31 August 2012, being
          the latest practical date, volatility of 34 percent and a dividend yield that ranges between 3.7 percent and 6.3 percent
          during the term of the option. To the extent that the actual spot price on initial recognition is higher than the assumed
          spot price of R8.10 used for purposes of illustrating the pro forma financial effects, the actual IFRS 2 charge will exceed
          the R32.9 million pro forma IFRS 2 charge. The converse will also apply.

     d.   The calculation of diluted earnings and diluted headline earnings per share at reporting dates is determined on the
          number of shares to be issued for no consideration which is calculated as the difference between the average market
          price of Basil Read shares for the period, minus the value of the notional loan at the reporting date. Based on the share
          price of Basil Read on 31 August 2012 and the fair value of the notional loan, there is currently no diluting effect arising
          on the issue of the "A" Ordinary Shares.

     e.   The cash proceeds from the issue of the Initial Ordinary Shares and the "A" Ordinary Shares will be used to repay
          interest bearing debt at an average rate of 6.4 percent, before taxation, which interest saving thereon is of a continuing
          nature.

     f.   Tax at 28 percent on the interest adjustment has been applied.

     g.   Once-off transaction costs of R7.7 million excluding VAT have been apportioned equally between equity and profit and
          loss and are once-off in nature.

3.   The effects on net asset value per share and tangible net asset value per share are based on the following assumptions:

     a.   The Transaction was effective 30 June 2012.

     b.   The issue of 7 883 243 Initial Ordinary Shares at R12.56 per share for a cash consideration of R99 013 532.08. To the
          extent that the issue price is at a discount to the market price on the issue date, an IFRS 2 charge equivalent to the
          extent of the discount will be charged to the income statement.

     c.   The issue of 33 607 507 "A" Ordinary Shares issued of at R0.01 per share for a cash consideration of R336 075.07.
          The economic substance of the issue of the "A" Ordinary Shares is the granting of a call option on Basil Read shares.
          A once-off IFRS 2 charge on the issue of "A" Ordinary Shares of R32.9 million has been accounted for. On initial
          recognition, being the date on which the "A" Ordinary Shares are issued, the derivative financial liability will be measured
          at fair value using a Monte Carlo simulation based option pricing model. The assumptions used in this model for
          purposes of the pro forma financial effects include a closing spot price of R8.10 per share as at 31 August 2012, being
          the latest practical date, volatility of 34 percent and a dividend yield that ranges between 3.7 percent and 6.3 percent
          during the term of the option. To the extent that the actual spot price on initial recognition is higher than the assumed
          spot price of R8.10 per share used for purposes of illustrating the pro forma financial effects, the actual IFRS 2 charge
          will exceed the R32.9 million pro forma IFRS 2 charge. The converse will also apply.

     d.   The cash proceeds from the issue of the Initial Ordinary Shares and the "A" Ordinary Shares will be used to repay debt.

     e.   Once-off transaction costs of R7.7 million excluding VAT have been apportioned equally between equity and profit and
          loss and are once-off in nature.

4.   There are no post balance sheet events which need adjustment to the pro forma financial information.

     The summarised unaudited pro forma consolidated statement of financial position and consolidated income statement are
     presented in Annexure 1 of the BBBEE Circular.

     The unaudited pro forma financial information should be read in conjunction with the Independent Reporting Accountants'
     limited assurance report thereon as presented in Annexure 2 in the BBBEE Circular.

4. CAUTIONARY ANNOUCEMENT

   Basil Read shareholders are reminded that Basil Read is currently trading under cautionary which was released
   on SENS on 2 July 2012 and renewed on 14 August 2012 and on 23 August 2012. Such announcements relate
   to a separate transaction.

Johannesburg
28 September 2012

Corporate advisor to Basil Read
Deloitte
Corporate Finance Division
Deloitte & Touche

Lead and transaction sponsor to Basil Read
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)

Attorneys to Basil Read
Werksmans Attorneys

RamsayWebber
Attorneys, Notaries & Conveyancers

Independent expert
BDO

Reporting accountants and auditors
PWC

Corporate advisor and fund manager to SIOC
Arkein Capital Partners
Leading Capital Project Investment

Investment bank and corporate advisor to SIOC
Nedbank Capital

Attorneys to SIOC
Schindlers
Attorneys - Conveyancers - Notaries

Sponsor to Basil Read
Macquarie
Date: 28/09/2012 05:23:00 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
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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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