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Posting of circular and notice of general meeting
IMPERIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1946/021048/06
Share code: IPL ISIN: ZAE000003620
("Imperial”)
POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING TO AMEND IMPERIAL’S
MOI TO REVISE THE CONVERSION PROFILE OF ITS DEFERRED SHARES
1. INTRODUCTION
Ukhamba Holdings Proprietary Limited’s (“Ukhamba”) 10.1% shareholding in
Imperial, which arises from Ukhamba’s holding of Imperial Ordinary Shares
(“Imperial Shares”) and Deferred Shares (“Deferred Shares”), is an important
component of Imperial’s black economic empowerment (“BEE”). Ukhamba is an
investment holding company formed by Imperial on 6 November 1998 as a venture
between Imperial and the Ukhamba Trust. Ukhamba is 46.9% owned by Imperial
with the balance owned by the Ukhamba Trust (47.1%) and the Imperial and
Ukhamba Community Development Trust (“Development Trust”) (6.0%). The
beneficiaries of the Ukhamba Trust constitute approximately 15 575 Historically
Disadvantaged Individuals (“HDI”) each of whom own units in the Ukhamba Trust
which allow them to participate in dividends and other amounts arising from
Ukhamba's investments, including its investment in Imperial Shares and Deferred
Ordinary Shares.
The beneficiaries of the Ukhamba Trust, which owns 47.1% of Ukhamba, have, for
some time, been indicating to Imperial a desire for liquidity in order to realise value
for the units they hold in the Ukhamba Trust.
Ukhamba is, at present, free to dispose of or unbundle the unencumbered Imperial
Shares which it currently holds and those Imperial Shares that it will receive as the
Deferred Shares convert. The pace and quantum of conversion of Deferred Shares
is, however, uncertain and can potentially take up to 29 years, which creates
significant uncertainty regarding the value that can be unlocked by the respective
trusts.
As a result, and in order to achieve an outcome that is beneficial to all stakeholders,
Imperial is recommending the following proposed amendments to its existing BEE
structure with Ukhamba:
• amending the conversion period of the Deferred Shares from the existing
conversion profile to a proposed conversion profile of 12 equal tranches of
831 469 Deferred Shares converting each year over a 12 year period
(“Proposed Conversion Profile”). This amendment requires approval by
special resolution to amend Imperial’s memorandum of incorporation
(“MOI”).
• Ukhamba agreeing not to transfer ownership of the Imperial Shares and
Deferred Shares during the 12 year duration of the Proposed Conversion
Profile;
• facilitating the trading of the Ukhamba shares held by the Ukhamba Trust
and the Development Trust on an over the counter (“OTC”) trading platform;
and
• Ukhamba agreeing to relinquish its right to appoint a director to Imperial’s
board in view of the fact that the Deferred Shares will now convert
automatically and their conversion will no longer be dependant on the
financial performance of Imperial.
(collectively the “Proposed Amendments”)
2. RATIONALE
As a leading transportation and mobility group, it is Imperial's intention to continue to
support BEE in South Africa. Imperial believes that BEE will bring long-term economic
benefits to the country and that empowerment initiatives will improve the lives of a
wide range of HDI by addressing the discrimination and imbalances of the past.
It is in this light that Imperial is recommending the Proposed Amendments, which
have been designed to:
• provide an opportunity to the existing beneficiaries to realise monetary value;
• preserve and enhance Imperial’s existing BEE ownership structure;
• preserve Imperial's current business in the sectors of the economy in which it
operates;
• demonstrate Imperial's continued commitment to BEE and transformation;
• achieve the initial objectives of the Ukhamba structure to empower
beneficiaries including Imperial employees; and
• enhance staff morale of the Imperial employees who have participated in the
Ukhamba BEE structure for 9 years and who have expressed a desire to
monetise their investment.
In order to achieve these objectives, Ukhamba shares will be tradeable on an OTC
platform to 100% black owned entities or black individuals. Imperial will revise the
existing conversion profile of the remaining Deferred Shares to introduce certainty to
the conversion profile and increase the attractiveness of Ukhamba shares as an
investment alternative for qualifying investors (being 100% black owned entities or
black individuals).
3. TRADE ON AN OTC PLATFORM
Trade in Ukhamba shares will be facilitated on an OTC trading platform to allow
beneficiaries of the Ukhamba Trust to monetise their entitlements in the trusts. The
Development Trust will also be able to trade its shares on the OTC trading platform.
Only black individuals and 100% black owned entities will be allowed to buy and own
the Ukhamba shares to ensure Imperial’s BEE ownership is not diluted.
It is anticipated that the trading on the OTC platform will commence on or about
15 November 2013.
4. CONDITIONS PRECEDENT
The proposed amendment to the MOI is subject to the fulfilment, inter alia, of the
following conditions precedent:
4.1 the requisite majority of Imperial shareholders providing the necessary
approvals required to amend the MOI in terms of Imperial’s MOI, the
Companies Act and the Listings Requirements, to the extent required;
4.2 the cancellation of the Ukhamba shareholders agreement and the
amendment of the subscription agreement to remove the ability of Ukhamba
to appoint a director to the Imperial board;
4.3 the amendment of the trust deed of the Ukhamba Trust in order to implement
the changes as outlined in the circular; and
4.4 the obtaining of such regulatory approvals as may be necessary, including,
but not limited to, the approval of the JSE.
5. SALIENT DATES AND TIMES
The salient dates and times are summarised below:
Circular and notice of general meeting posted to Wednesday, 18
shareholders on September
Last day to trade Imperial Shares in order to be recorded in
Friday, 4 October
the register to vote at the general meeting
Record date for the general meeting, being the date on
which Imperial shareholders must be registered in the
Friday, 11 October
register in order to be eligible to attend and participate in
the general meeting to vote thereat
Proxy forms for the general meeting to be received, for
administrative purposes, by 10:00 on Thursday, 17
(or may thereafter be lodged by hand with the Company October
prior to 10:00 on Monday, 21 October 2013)
General meeting held at 10:00 on Monday, 21 October
Results of the general meeting released on SENS on Monday, 21 October
6. IRREVOCABLE UNDERTAKINGS
Imperial has received irrevocable undertakings from certain Imperial shareholders,
holding a total of 79,870,401 Imperial Shares, which represent a voting interest of
41.8% of the Imperial Shares excluding treasury shares and Imperial Shares held by
Ukhamba, to vote in favour of the amendment of the MOI.
7. OPINION AND RECOMMENDATIONS
The board has considered the Proposed Amendments and is of the opinion that the
Proposed Amendments are in the best interests of:
• the Ukhamba Trust, their beneficiaries and the Development Trust as the
Proposed Amendments shorten the likely conversion period of the Deferred
Shares which enhances the value in Ukhamba and provide the beneficiaries
with the opportunity to realise monetary value for their units in the trusts;
• Imperial shareholders as they secure Imperial’s BEE ownership for a further
12 years at an acceptable cost. The estimated range of the IFRS 2 cost of
amending the conversion profile from the existing conversion profile to the
proposed conversion profile has been calculated, based on a number of
assumptions at the date of the Circular, as approximately R70 million to R100
million, which will be incurred as a once-off charge on implementation of the
Proposed Amendments.
Accordingly, the board recommends that Imperial shareholders vote in favour of the
resolutions required to amend the MOI.
8. PUBLICATION OF CIRCULAR AND NOTICE OF GENERAL MEETING
A circular containing the full details of the Proposed Amendments and incorporating a
notice of general meeting has been posted to Imperial shareholders, Wednesday, 18
September 2013.
The general meeting will be held in the Boardroom at Imperial Place, Jeppe
Quondam, 79 Boeing Road East, Bedfordview, 2007, on Monday, 21 October 2013 at
10:00, to consider and, if deemed fit, pass, with or without modification, the ordinary
and special resolution required to implement the amendment to Imperial’s MOI.
Bedfordview
18 September 2013
Investment Bank, Corporate Advisor and Transaction Sponsor
Investec Corporate Finance
Corporate Legal Adviser
Tugendhaft Wapnick Banchetti and Partners
Sponsor
Merrill Lynch South Africa Proprietary Limited, a subsidiary of Bank of America
4
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