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CVH Disposal, Management Agreement Amendment, posting of circular and notice of general meeting
Zeder Investments Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/019240/06)
Linked unit code: ZED ISIN: ZAE000088431
(“Zeder” or “the Company”)
CVH DISPOSAL, MANAGEMENT AGREEMENT AMENDMENT, POSTING OF CIRCULAR
AND NOTICE OF GENERAL MEETING
1. CVH DISPOSAL
1.1. INTRODUCTION
1.1.1. Shareholders are referred to the Company’s announcement on
SENS on Friday, 15 February 2013 and in the press on
Monday, 18 February 2013, advising shareholders that the
Company had, with effect from 15 February 2013, through
its wholly owned subsidiary, Zeder Financial Services
Limited (“Zeder Financial Services”), disposed of a total
of 133 300 000 ordinary listed shares, which it held in
Capevin Holdings Limited (“Capevin Holdings” or “CVH”),
equivalent to 15.1% of the issued share capital of Capevin
Holdings, for a disposal consideration of R6.00 per share,
equating to a total cash consideration of R799.8 million
(“Initial CVH Disposal”).
1.1.2. Following the Initial CVH Disposal, the Company, through
Zeder Financial Services, continues to hold 46 466 692
ordinary shares in Capevin Holdings, equivalent to
approximately 5.3% of the total issued ordinary share
capital of Capevin Holdings (“CVH Sale Shares”).
1.1.3. In terms of the JSE Listings Requirements, the Company
requires the approval of its shareholders should it wish
to dispose of the CVH Sale Shares during the 12 months
following the Initial Disposal.
1.1.4. The Company wishes to obtain the authority of its
shareholders to dispose of the CVH Sale Shares (“CVH
Disposal”) within the aforementioned 12 month period,
should it deem it necessary, for the reasons set out in
paragraph 1.2 below.
1.1.5. To date no agreement has been negotiated or concluded by
the Company in terms of which it has agreed to dispose of
the CVH Sale Shares to any other party.
1.2. RATIONALE FOR THE CVH DISPOSAL AND APPLICATION OF THE
PROCEEDS
1.2.1. Capevin Holdings is an investment holding company, having
as its significant asset an indirect interest of 28.93% in
Distell Group Limited (“Distell”), which is South Africa’s
leading producer and marketer of fine wines, spirits,
ciders and ready-to-drinks.
1.2.2. Zeder is also an investment holding company and mainly
invests in food, beverage and agricultural companies,
where Zeder can directly or indirectly add value. As
Zeder cannot add meaningful value at a Distell level, and
as Zeder’s shareholding in Capevin Holdings has reduced to
approximately 5.3%, Zeder is considering the disposal of
the CVH Sale Shares and thereafter utilising the proceeds
of the CVH Disposal in existing and/or new companies,
where Zeder can play a more meaningful role.
1.3. MECHANISM OF AND CONSIDERATION FOR THE CVH DISPOSAL
The Company is approaching its shareholders for authority to
implement the CVH Disposal on the basis that, should the CVH
Disposal be implemented:
1.3.1. the CVH Sale Shares may be disposed of by the Company in
the open market or by means of any other sale methodology
(including a private placement), and may occur in one or
in several tranches; and
1.3.2. the CVH Sale Shares shall be disposed of at an average
price per share that is, at the time of the disposal, not
less than 90% of the volume weighted average price of
Capevin Holdings ordinary shares over the 30 trading days
immediately preceding the disposal of the CVH Sale Shares.
1.4. CONDITIONS PRECEDENT
The CVH Disposal is not subject to any conditions precedent,
save that, as indicated in paragraph 1.1.3 above, the
approval of Zeder shareholders is required, in terms of the
JSE Listings Requirements, should the Company wish to
dispose of the CVH Sale Shares during the 12 months
following the Initial Disposal.
1.5. CATEGORISATION
In terms of the JSE Listings Requirements, Zeder is required
to aggregate the CVH Disposal with the Initial CVH Disposal
in the event that the CVH Disposal is completed during the
12 month period following the Initial CVH Disposal. The CVH
Disposal, if completed prior to 14 February 2014, taken
together with the Initial CVH Disposal, will constitute a
Category 1 transaction in terms of the JSE Listings
Requirements.
1.6. PRO FORMA FINANCIAL EFFECTS
The purpose of the table below is to illustrate the
unaudited pro forma financial effects of the CVH Disposal
and such unaudited pro forma financial effects, as set out
below, are the responsibility of Zeder’s directors. The
unaudited pro forma financial effects are presented in a
manner consistent with the basis on which the historical
financial information of Zeder has been prepared and in
terms of Zeder’s accounting policies. The unaudited pro
forma financial effects have been presented for illustrative
purposes only and, because of their nature, may not give a
fair reflection of Zeder’s financial position, changes in
equity or of the effect on future earnings post the
implementation of the CVH Disposal.
Audited Adjustment Pro forma % Change
28 Feb for the after the
2013 CVH CVH
cents Disposal Disposal
cents cents
Attributable earnings per
share 52.3 0.2 52.5 0.4
(1)(3)(5)(6)(7)(8)(15)
Headline earnings per
share 20.1 (0.5) 19.6 (2.5)
(1)(3)(5)(6)(7)(9)(15)
Recurring headline
earnings per share 25.7 (0.9) 24.8 (3.5)
(1)(3)(5)(6)(10)(15)(16)
Net asset value per share
(2)(4)(11)(12)(13)(14)(15) 335.7 0.7 336.4 0.2
Tangible net asset value
per share 319.5 0.7 320.2 0.2
(2)(4)(11)(12)(13)(14)(15)
Notes and assumptions:
None of the adjustments for the CVH Disposal will have a
continuing effect, except for the interest income effect (refer
note 5) and the decrease in the share of profits of associated
companies (refer note 6) and their related tax effects.
1. The attributable earnings per share, headline earnings per
share and recurring headline earnings per share figures after
the CVH Disposal are calculated on the basis that the CVH
Disposal was effected on 1 March 2012.
2. The net asset value per share and tangible net asset value
per share figures after the CVH Disposal are calculated on
the basis that the CVH Disposal was effected on 28 February
2013.
3. The attributable earnings per share, headline earnings per
share and recurring headline earnings per share figures are
calculated using a weighted average number of shares in issue
of 978,088,517 for the period ended 28 February 2013.
4. The net asset value per share and tangible net asset value
per share calculations are based on 978,088,517 shares in
issue as at 28 February 2013.
5. Investment income increased with R14.0m, which consists of
the following:
5.1. Assuming the net proceeds from the CVH Disposal are
invested in Zeder's Money Market account, additional
interest income of R14.3m would have been received during
the year. The net proceeds are calculated by assuming that
the CVH Sale Shares are sold for R6.42 per share, which is
the VWAP of the 30 trading days preceding the last
practicable date and less transaction costs of R 1.9m.
5.2. The CVH Disposal would have resulted in less Capevin
Holdings dividends being received and consequently less
interest income on cash balances. The effect of the
aforementioned is a decrease in interest income of R0.3m.
5.3. Interest income from investing in Zeder's Money Market
account is calculated by applying a net annualised interest
rate of 4.8% to the relevant periods.
6. The share of profits of associated companies relating to the
CVH Sale Shares was R15.2m for the year, and is therefore
excluded from the calculation of attributable earnings per
share, headline earnings per share and recurring headline
earnings per share.
7. The non-headline profit from the CVH Disposal amounts to
R8.7m, which is calculated as the difference between the net
proceeds (refer note 5.1) and the carrying value of the CVH
Sale Shares at 28 February 2013.
8. The taxation expense for the year is increased with R5.5m,
which consists of the following:
8.1. Taxation payable of R3.9m on the net increase in interest
income (refer note 5), at the applicable rate of 28%.
8.2. A capital gains tax expense on the CVH Disposal of R25.5m
and the realisation of a deferred tax liability relating to
the CVH Sale Shares of R23.9m, which are both calculated at
an effective rate of 18.67%.
9. The adjustment to non-headline earnings consists of a
decrease of R0.1m in the non-headline profit from associated
companies, the above mentioned R8.7m profit from the CVH
Disposal and the R1.6m net effect of the capital gains tax
expense and the deferred tax realised (refer note 8.2).
10.The adjustment to non-recurring headline earnings is a R3.7m
non-recurring headline profit, which is the result of Zeder
sharing in less of Distell's excise duties provision and
Capevin's restructuring costs.
11.The non-current assets held for sale of R287.7m, as per the
statement of financial position at 28 February 2013, are de-
recognised with the CVH Disposal.
12.As a result of the CVH Disposal, equity attributable to
owners of the parent is adjusted with a R8.7m gain on
disposal and a net taxation expense of R1.6m.
13.A deferred tax liability of R23.9m relating to the non-
current assets held for sale is realised with the CVH
Disposal.
14.The CVH Disposal results in a capital gains tax payable of
R25.5m, which is calculated at an effective rate of 18.67%.
15.The audited financial information for the year ended 28
February 2013 incorporates the effects of the Initial CVH
Disposal. The effects mainly consist of a non-headline gain
on disposal of R508m, a capital gains tax expense of R67m and
a fair value loss of R7m resulting from the subsequent
measurement of the sale shares.
16.Recurring headline earnings includes equity securities' see-
through recurring headline earnings and excludes the related
net fair value gains/losses and investment income (as
recognised in the income statement). Associated companies'
and subsidiaries' one-off gains/losses are excluded from
recurring headline earnings.
2. MANAGEMENT AGREEMENT AMENDMENT
2.1. In terms of the Company’s existing management agreement
(“Management Agreement”), PSG Corporate Services
(Proprietary) Limited (“the Manager”), as the duly appointed
nominee of PSG Group Limited, provides various advisory,
management, investment, support and other other services to
the Company and its subsidiaries (“Zeder Group”).
2.2. The Manager is remunerated for its services to the Zeder
Group under the Management Agreement, through the payment of
a base fee and a performance fee on the terms set out in the
Management Agreement (“Existing Management Fee Structure”).
2.3. Zeder has received enquiries from certain of its
institutional shareholders regarding the Existing Management
Fee Structure and, in particular, the base fee component.
2.4. Having reviewed same, Zeder proposes that the Management
Agreement be amended (“Management Agreement Amendment”) by
replacing the Existing Management Fee Structure with a new
mechanism for the calculation of the base fee and
performance fee due to the Manager (“New Management Fee
Structure”).
2.5. There is no statutory or regulatory requirement for the
Management Agreement Amendment to be approved by Zeder
shareholders. However, for purposes of good corporate
governance and in order to obtain the view of Zeder
shareholders in this regard, the Company wishes to provide
shareholders with the opportunity to vote on the adoption of
the Management Agreement Amendment.
2.6. In order to allow Zeder shareholder to make an informed
decision when voting on the adoption of the Management
Agreement Amendment, the circular to Zeder shareholders,
referred to in paragraph 3 below, contains detailed
information regarding the Existing Management Fee Structure
and the proposed New Management Fee Structure.
3. POSTING OF CIRCULAR
3.1. Zeder shareholders are hereby advised that a circular,
containing details of the CVH Disposal and Management
Agreement Amendment, will be posted to Zeder shareholders
today, 20 May 2013 (“the Circular”).
3.2. The Circular incorporates a notice convening a general
meeting of Zeder shareholders for purposes of approving the
CVH Disposal and Management Agreement Amendment.
3.3. The Circular will be available on the website
www.zeder.co.za.
4. NOTICE OF GENERAL MEETING OF ZEDER SHAREHOLDERS
Notice is hereby given that a general meeting of Zeder
shareholders will be held at 10h00 on Thursday, 20 June 2013
at 1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch,
Western Cape (“General Meeting”) for the purpose of
considering and, if deemed fit, passing with or without
modification, the resolutions relating to the approval of the
CVH Disposal and the Management Agreement Amendment, as set
out in the notice of the General Meeting included in the
Circular.
20 May 2013
Stellenbosch
Corporate advisor and sponsor: PSG Capital (Pty) Ltd
Lead independent sponsor: Questco (Pty) Ltd
Independent reporting accountant: PricewaterhouseCoopers Inc
Date: 20/05/2013 04:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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