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BK ONE LIMITED - Announcement regarding the restructure; update relating to the Target Assets and renewal of cautionary announcement

Release Date: 08/11/2012 17:39
Code(s): BK1P     PDF:  
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Announcement regarding the restructure; update relating to the Target Assets and renewal of cautionary announcement

BK One Limited
Incorporated in the Republic of South Africa
Registration Number: 2011/008103/06
Preference Share Code: BK1P
ISIN: ZAE000161352
“BK One” or “the Company”


Announcement regarding the Company’s decision to restructure; an update relating to
developments in terms of the proposed acquisition by the Company of controlling interests
in selected assets (the “Target Assets”) owned by Basileus Investments Proprietary Limited
(in business rescue) (“Basileus Investments”); and the renewal of cautionary announcement

1     Introduction

      BK One preference shareholders (“Shareholders”) are referred to the announcement
      published by the Company on the Securities Exchange News Service (“SENS”) on 28
      August 2012 (the “Previous Announcement”) in which Shareholders were informed that the
      BK One Board of Directors (the “Board”) intended restructuring BK One, and that BK One
      had entered into a binding memorandum of understanding (“MOU”) to acquire the Target
      Assets from Basileus Investments, subject to the fulfilment of a number of conditions
      precedent.

      The Board is pleased to advise Shareholders of the following developments: the Board has
      conducted a thorough analysis of the optimal structure through which the Target Assets,
      and BK One’s existing assets, should be managed. In light of its analysis, the Board
      concluded that the existing BK One structure, although appropriate for a co-investment
      vehicle, is not appropriate for a company responsible for the principal management of a
      portfolio of developmental assets such as the Target Assets and would, in the view of the
      Board, not be conducive to creating a platform for sustainable growth.

      For this reason, the Board has decided to enter into an assignment and option agreement
      with Isitsaba Investment Group Limited (presently K2012149573 (South Africa) Proprietary
      Limited) (“IIG”), a company established to take control of the Target Assets in a structurally
      efficient manner (the “Assignment”). In addition to the Target Assets, IIG has secured a
      pipeline of additional assets and has assisted in raising funding to support the Target
      Assets until such time as Basileus Investments is able to dispose of the Target Assets.

2     Terms of the Assignment

      The Assignment entitles IIG, subject to IIG entering into a binding sale and purchase
      agreement with Basileus Investments, to acquire the Target Assets from Basileus
      Investments. In turn, IIG has agreed to a “put” and “call” arrangement in terms of which BK
      One will have the right to:

          •   acquire the Target Assets from IIG (the “Call Option”), at the value BK One would
              have been entitled to acquire these assets from Basileus Investments reduced by
              any changes in the interim value (the “Initial Valuation”), should certain trigger
              events occur, which events are set out in more detail below (the “Trigger Event/s”);
                                 
          •   call on IIG to make an offer, using IIG ordinary shares, at the election of BK One,
              either to acquire the assets of BK One or to acquire the shares and claims of
              Shareholders (the “Put Option”) at a valuation which is the higher of:

                    o    the Company’s valuation at the date of the call;

                    o    the Company’s net asset value at 24 August 2012; or

                    o    the Company’s market capitalisation at 24 August 2012.

       IIG intends seeking a listing of its ordinary shares on the Johannesburg Stock Exchange
       (“JSE”). Should IIG fail to obtain a listing, for whatever reason, a Trigger Event will occur
       and BK One will be entitled to exercise its rights in terms of the Call Option and will acquire
       the Target Assets from IIG in exchange for BK One preference shares. In addition, should
       any director of IIG be removed from office for any reason, a further Trigger Event will occur
       and BK One will be entitled to exercise its rights in terms of the Call Option.

3   Developments pertaining to the MOU

    During the course of IIG and the Company’s evaluation of the various Target Assets
    detailed in the Previous Announcement, the parties have, by mutual consent with Basileus
    Investments, agreed that the following assets will no longer form part of the Target Assets
    and will not be acquired by either IIG or BK One:

            •     Lefatse Minerals Proprietary Limited;

            •     Tor Oil Infrastructure Construction Proprietary Limited; and

            •     Agri-Technologies and Services Proprietary Limited.

4   Rationale for the Assignment

    The Board’s objective is to assist in creating a platform which will result in:

        •       the protection of Shareholders’ value; and

        •       the transformation of BK One and the creation of an efficient and transparent
                structure within which to develop the Target Assets and other suitable
                developmental and investment opportunities.

    The Assignment, and ultimate intended shareholding structure, allows for:

        •       the creation of an entity better placed to act as the principal manager of a portfolio
                of developmental assets;

        •       the deployment of people with significant skills and experience to manage the new
                entity;

        •       the implementation of the acquisition of the Target Assets within the timeline set by
                the business rescue process at Basileus Investments;

        •       a simplified capital structure for the purposes of raising equity capital;
       
        •       greater access to potential investors by virtue of employing a widely accepted
                capital structure, which is seen by investors as a traditional mechanism for early-
                stage developmental capital projects and businesses;

        •       greater ability to utilise ordinary shares to make acquisitions;

        •       greater ability to attract and retain skilled staff through share-based incentive
                mechanisms; and

        •       greater tax efficiency.

5     Regulatory approvals and conditions precedent

      Once IIG and Basileus Investments have entered into a binding sale and purchase
      agreement, the Assignment will become unconditional. The Assignment is not subject to
      any regulatory approvals.

      As the exercise of the Call Option and the Put Option are solely at BK One’s discretion, in
      terms of the Listings Requirements of the JSE, the transaction will only be categorised
      upon the exercise of the Call Option or the Put Option.

      The conditions precedent per the MOU, and as detailed in the Previous Announcement,
      remain in force and the Company and IIG are confident that these conditions will be fulfilled
      before 30 November 2012, which will result in IIG acquiring the Target Assets from
      Basileus Investments.

6     Renewal of cautionary announcement

      The Company will continue to update Shareholders, through SENS, of developments
      pertaining to IIG and the Company. Shareholders are consequently advised to continue to
      exercise caution when dealing in the Company’s securities until a further announcement is
      made.



Cape Town

8 November 2012




    Investment Bank, Corporate Advisor and                             Attorneys
             Sponsor to BK One
                                                               Cliffe Dekker Hofmeyr Inc
    Nedbank Capital, a division of Nedbank
                  Limited


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