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Posting of Circular, Notice of General Meeting and Withdrawal of Cautionary Announcement
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1973/007111/06)
Share code: HCI ISIN: ZAE000003257
(“HCI” or “the Company”)
POSTING OF CIRCULAR, NOTICE OF GENERAL MEETING AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders of HCI ("HCI Shareholders") are referred to the announcement released by HCI on SENS on 17 May
2013 and published in the press on 20 May 2013 in relation to:
- the specific acquisition by Squirewood Investments 64 Proprietary Limited, a wholly owned subsidiary of HCI
(“Squirewood”) (or its nominee, which may be HCI) from the Southern African Clothing and Textile Workers Union
(“Sactwu”) of up to 14 024 300 ordinary shares in HCI (“HCI Shares”) in exchange for ordinary shares in HCI Invest
3 Holdco Proprietary Limited, a wholly owned subsidiary of HCI (“SPV”), which will, following an internal
restructuring, hold HCI’s interest in Sabido Investments Proprietary Limited (“Sabido”) (the “Sactwu Option
Repurchase”); and
- the specific repurchase by HCI from Sactwu of a further 1 800 000 HCI Shares for a cash consideration of R112.00
per HCI Share (the “Sactwu Cash Repurchase”)
(hereinafter collectively, the “Transactions”)
HCI Shareholders are hereby advised that a circular (“Circular”) containing, inter alia, details of the Transactions, a
notice of general meeting of the HCI Shareholders (“General Meeting”) and a form of proxy has been posted to HCI
Shareholders today. HCI Shareholders are advised that the Transactions are subject to the fulfilment of certain
conditions precedent detailed in the Circular, and are advised to review the Circular for a summary of the key terms and
conditions of the Transactions.
2. NOTICE OF HCI SHAREHOLDERS MEETING
The General Meeting will be held at the offices of HCI, Block B, Longkloof Studios, Darters Road, Gardens, Cape Town,
8001, on Monday, 22 July 2013 at 10:00 to consider and, if deemed fit, pass, with or without modification, the resolutions
necessary to implement the Transactions.
3. IMPORTANT DATES AND TIMES
The important dates and times in relation to the General Meeting are set out below:
Record date to receive Circular and notice of General Meeting Friday, 14 June 2013
Circular and notice of General Meeting posted to HCI Shareholders on Friday, 21 June 2013
Last day to trade in HCI Shares in order to be recorded in HCI’s securities
Friday, 5 July 2013
register to participate in and vote at the General Meeting
Record date to be entitled to attend, participate in and vote at the General
Friday, 12 July 2013
Meeting by close of trading on
Proxy forms for the General Meeting to be received by 10:00, on (or may
thereafter be lodged by hand with the Company prior to 10:00 on Monday, Thursday, 18 July 2013
22 July 2013)
General Meeting held at 10:00 on Monday, 22 July 2013
Results of the General Meeting released on SENS on Monday, 22 July 2013
Results of the General Meeting published in the South African press on Tuesday, 23 July 2013
Notes:
1. All dates and times may be changed by HCI and/or may be subject to certain regulatory approvals being obtained.
Any change will be published on SENS and 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 5 business days after such trade. Therefore, HCI Shareholders
who acquire shares after Friday, 5 July 2013 will not be eligible to participate in and vote at the General Meeting.
3. All times are local times in South Africa.
4. If the General Meeting is adjourned or postponed, forms of proxy submitted for the initial General Meeting will
remain valid in respect of any adjournment or postponement of the General Meeting.
4. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTIONS
4.1 The table below sets out the unaudited pro forma financial effects of the Transactions on the earnings, diluted
earnings, headline earnings and diluted headline earnings per HCI Share for the year ended 31 March 2013 and
the net asset value and tangible net asset value per HCI Share at that date.
4.2 The unaudited pro forma financial effects have been prepared in accordance with the Listings Requirements of the
JSE Limited, the Guide on Pro Forma Financial Information issued by SAICA, ISAE 3420 and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS). The accounting policies used
to prepare the unaudited pro forma financial effects are consistent with those applied in the preparation of the
financial statements for the year ended 31 March 2013.
4.3 The unaudited pro forma financial effects have been prepared for illustrative purposes only, in order to provide
information on how the Transactions may have affected the financial results and position of an HCI Shareholder
and, because of their nature, may not give a true reflection of the actual financial effects of the Transactions. The
unaudited pro forma financial effects are the responsibility of the directors of HCI.
Unaudited pro forma financial effects of the Sactwu Cash Repurchase:
Before the After the
Sactwu Cash Sactwu Cash
Repurchase Effect Repurchase Change
Per HCI Share Notes (cents) (cents) (cents) (%)
Earnings 3, 4 1,006.16 9.26 1,015.42 0.9%
Headline earnings 3, 4 860.07 7.15 867.22 0.8%
Diluted earnings per share 3, 4 985.05 8.77 993.82 0.9%
Diluted headline earnings per share 3, 4 842.03 6.74 848.77 0.8%
Net asset value 5, 6 10,378.17 (12.18) 10,365.99 (0.1%)
Tangible net asset value 5, 6 9,412.17 (26.50) 9,385.67 (0.3%)
Weighted average number of shares in 7
issue (basic) 126,145,880 (1,800,000) 124,345,880 (1.4%)
Weighted average number of shares in 7
issue (diluted) 128,848,540 (1,800,000) 127,048,540 (1.4%)
Number of shares in issue 7 123,224,436 (1,800,000) 121,424,436 (1.5%)
Notes to the unaudited pro forma financial effects
1. The Before the Sactwu Cash Repurchase column, which is based on the reviewed financial results for the year
ended 31 March 2013, reflects the earnings, headline earnings, diluted earnings and diluted headline earnings
per HCI Share for the year ended 31 March 2013 and the net asset value and the tangible net asset value per
HCI Share as at 31 March 2013.
2. The After the Sactwu Cash Repurchase column is based on the assumption that the 1,800,000 HCI Shares
sold by Sactwu were acquired for a consideration of R112.00 per HCI Share with effect from 1 April 2012 for
earnings, headline earnings, diluted earnings and diluted headline earnings per HCI Share purposes and a
consideration of R112.00 per HCI Share as at 31 March 2013 for net asset value and tangible net asset value
per HCI Share purposes.
3. Earnings have been decreased by the finance income forgone on the excess cash utilised to finance the
Sactwu Cash Repurchase and increased by finance income earned on the excess cash as a result of the
reduction of dividends paid to Sactwu. This amount has been calculated as R6.6 million which is based on an
approximate cash investment rate of 4.5% (3.2% after tax). This effect is expected to be of a continuing
nature.
4. Once-off net transaction costs in respect of the specific repurchase are deemed to be not material and
therefore no adjustment has been made in respect of such costs.
5. Equity has been decreased by R201.6 million reflecting the value of the HCI Shares repurchased in terms of
the Sactwu Cash Repurchase.
6. Cash and cash equivalents have been decreased by an amount of R201.6 million to reflect the cash outflow
required for the Sactwu Cash Repurchase. The Sactwu Cash Repurchase is assumed to be funded from
existing cash balances. No adjustment has been made to cash and cash equivalents for once-off net
transaction costs which are deemed to be not material.
7. The weighted average number of shares and total number of shares in issue have been adjusted for the HCI
Shares acquired in terms of the Sactwu Cash Repurchase.
Unaudited pro forma financial effects of the Sactwu Option Repurchase:
Before the
Sactwu After the
Option Sactwu Option
Repurchase Effect Repurchase Change
Per HCI Share Notes (cents) (cents) (cents) (%)
Earnings 3, 4, 5, 6, 7 1,006.16 39.89 1,046.05 4.0%
Headline earnings 3, 4, 5, 6, 7 860.07 21.09 881.16 2.5%
Diluted earnings per share 3, 4, 5, 6, 7 985.05 36.38 1,021.43 3.7%
Diluted headline earnings per share 3, 4, 5, 6, 7 842.03 18.39 860.42 2.2%
Net asset value 3, 8 10,378.17 (337.73) 10,040.44 (3.3%)
Tangible net asset value 3, 8 9,412.17 (461.80) 8,950.37 (4.9%)
Weighted average number of 3, 10
shares in issue (basic) 126,145,880 (14,024,300) 112,121,580 (11.1%)
Weighted average number of 3, 10
shares in issue (diluted) 128,848,540 (14,024,300) 114,824,240 (10.9%)
Number of shares in issue 3, 10 123,224,436 (14,024,300) 109,200,136 (11.4%)
Notes to the unaudited pro forma financial effects
1. The Before the Sactwu Option Repurchase column, which is based on the reviewed financial results for the
year ended 31 March 2013, reflects the earnings, headline earnings, diluted earnings and diluted headline
earnings per HCI Share for the year ended 31 March 2013 and the net asset value and the tangible net asset
value per HCI Share as at 31 March 2013.
2. The After the Sactwu Option Repurchase column is based on the assumption that the HCI Shares sold by
Sactwu were acquired for a consideration of R112.00 per HCI Share with effect from 1 April 2012 for earnings,
headline earnings, diluted earnings and diluted headline earnings per HCI Share purposes and a consideration
of R112.00 per HCI Share as at 31 March 2013 for net asset value and tangible net asset value per HCI Share
purposes.
3. It is assumed that HCI and Squirewood (or its nominee) will collectively acquire 14 024 300 HCI Shares in
terms of the Sactwu Option Repurchase.
4. Earnings have been decreased by the finance expense on the preference shares issued to Sactwu to part
fund the repurchase of HCI Shares in terms of the Sactwu Option Repurchase. This amount has been
calculated as R84.2 million which is based on an interest rate of 72% of Prime, being 6.5% after tax for the
period between 1 April 2012 to 20 July 2012 and 6.1% after tax for the period between 21 July 2012 to 31
March 2013. This effect is expected to be of a continuing nature.
5. Earnings have been decreased by the finance income forgone on the cash from income and dividends on the
30% stake in SPV and increased by finance income earned on the reduction of dividends paid to Sactwu. This
amount has been calculated as R0.6 million which is based on an approximate cash investment rate of 4.5%
(3.2% after tax). This effect is expected to be of a continuing nature.
6. Earnings have been decreased by the increased minority interest of R11.5 million as a result of Sactwu’s 30%
stake in SPV.
7. Once-off net transaction costs in respect of the specific repurchase are deemed to be not material and
therefore no adjustment has been made in respect of such costs.
8. Equity has been decreased by R1,824.3 million: R1,570.7 million reflecting the value of the HCI Shares
repurchased in terms of the Sactwu Option Repurchase and R253.6 million being a reduction in reserves
attributable to equity holders of the parent as a result of the 30% minority interest in SPV.
9. Borrowings have increased by R1 330.9 million as a result of the preference shares issued to Sactwu by SPV
for the outstanding loan balance owing to Sactwu pursuant to the Sactwu Option Repurchase. The preference
shares issued to HCI are eliminated on consolidation.
10. The weighted average number of shares and total number of shares in issue have been adjusted for the HCI
Shares acquired in terms of the Sactwu Option Repurchase, which, to the extent they constitute greater than
10% in aggregate, of the issued share capital of HCI, are assumed to be cancelled after the Sactwu Option
Repurchase. It is estimated that 5 895 171 HCI Shares repurchased in terms of the Sactwu Option
Repurchase will need to be cancelled (in addition to the 1 827 643 HCI Shares currently held as treasury
shares by Squirewood which will be repurchased by HCI from Squirewood and cancelled).
11. The Sactwu Cash Repurchase and the Sactwu Option Repurchase are not inter-conditional.
Summary of unaudited pro forma financial effects of the Transactions:
Before the After the
Transactions Effect Transactions Change
Per HCI Share (cents) (cents) (cents) (%)
Earnings 1,006.16 50.98 1,057.14 5.1%
Headline earnings 860.07 29.49 889.56 3.4%
Diluted earnings per share 985.05 46.81 1,031.87 4.8%
Diluted headline earnings per
share 842.03 26.26 868.29 3.1%
Net asset value 10,378.17 (357.17) 10,021.01 (3.4%)
Tangible net asset value 9,412.17 (499.50) 8,912.67 (5.3%)
Weighted average number of
shares in issue (basic) 126,145,880 (15,824,300) 110,321,580 (12.5%)
Weighted average number of
shares in issue (diluted) 128,848,540 (15,824,300) 113,024,240 (12.3%)
Number of shares in issue 123,224,436 (15,824,300) 107,400,136 (12.8%)
Notes to the unaudited pro forma financial effects
1. The Before the Transactions column, which is based on the reviewed financial results for the year ended 31
March 2013, reflects the earnings, headline earnings, diluted earnings and diluted headline earnings per HCI
Share for the year ended 31 March 2013 and the net asset value and the tangible net asset value per HCI
Share as at 31 March 2013.
2. The After the Transactions column is based on the combined effect of the Sactwu Cash Repurchase and the
Sactwu Option Repurchase.
5. PRO FORMA FINANCIAL EFFECTS OF THE SEARDEL TRANSACTION
The pro forma financial effects in relation to the proposed transaction with Seardel Investment Corporation Limited
(“Seardel”), whereby HCI will sell to Seardel its 70% interest in SPV (as set out in the announcement released on SENS on
Friday, 17 May 2013 and published in the press on Monday, 20 May 2013), are not material.
6. WITHDRAWAL OF CAUTIONARY
HCI Shareholders are advised that as the pro forma financial effects in relation to the Transactions and the proposed
transaction with Seardel have been disclosed in this announcement, caution is no longer required to be exercised by HCI
Shareholders when dealing in HCI Shares.
Cape Town
21 June 2013
Investment Bank and Transaction Sponsor to HCI
Investec Corporate Finance
Joint Legal Advisor
Taback and Associates Proprietary Limited
Joint Legal Advisor
Edward Nathan Sonnenbergs Inc.
Reporting Accountants
PKF (Jhb) Inc
Independent Expert
BDO Corporate Finance Proprietary Limited
Date: 21/06/2013 05:18:00 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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