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Acquisition by Seardel of a further indirect stake in Sabido Investments Proprietary Limited
HOSKEN CONSOLIDATED INVESTMENTS SEARDEL INVESTMENT CORPORATION LIMITED
LIMITED (Incorporated in the Republic of South Africa)
(Incorporated in the Republic of South Africa) Registration number: 1968/011249/06
Registration number: 1973/007111/06 Ordinary share code: SRN
Share code: HCI N-ordinary share code:SER
ISIN: ZAE000003257 ISIN: ZAE000030144; ISIN: ZAE000029815
(“HCI”) (“Seardel”)
JOINT ANNOUNCEMENT REGARDING THE ACQUISITION BY SEARDEL OF A FURTHER INDIRECT
STAKE IN SABIDO INVESTMENTS PROPRIETARY LIMITED
1. Introduction
HCI ordinary shareholders (“HCI Shareholders”) and Seardel ordinary shareholders and N-ordinary
shareholders (collectively “Seardel Shareholders”) are advised that Seardel has concluded an agreement
with the Southern African Clothing and Textile Workers Union (“Sactwu”) to acquire Sactwu’s 30% equity
interest in HCI Invest 3 Holdco Proprietary Limited (“Sabido Holdco”) in exchange for the issue of 150
million new N-ordinary shares in Seardel (“N-Shares”) at R1.60 per N-Share (“the Proposed
Acquisition”). Sabido Holdco holds a 63.9% interest in Sabido Investments Proprietary Limited
(“Sabido”), which in turn holds investments in, inter alia, South Africa’s first and only private commercial
free-to-air television channel, e-tv, South Africa’s first 24-hour television news channel, the eNews Channel
as well as yfm and Sasani Studios.
2. Rationale
The Proposed Acquisition provides a number of strategic benefits to HCI, Seardel and their shareholders
including:
- simplifying the group structure as, following the Proposed Acquisition, Seardel will hold all of the
issued shares of Sabido Holdco;
- increasing Seardel Shareholders exposure to Sabido and its underlying investments; and
- increasing Seardel’s BEE ownership by introducing Sactwu as a direct shareholder of Seardel .
From a Sactwu perspective, the Proposed Acquisition will ensure that it retains exposure to the highly
cash-generative Sabido investment and will result in it holding an investment in N-Shares with a listed
reference price rather than unlisted shares in Sabido Holdco.
3. Terms of the Proposed Acquisition
The current structure of Seardel and Sactwu’s investment in Sabido is as follows:
(Please refer to www.hci.co.za for this announcement including images)
In terms of the Proposed Acquisition, Seardel will acquire Sactwu’s 30% stake in Sabido Holdco in
exchange for the issue of 150 million new N-Shares at R1.60 per N-Share. The effective date of the
Proposed Acquisition will be the 5th business day following the fulfilment (or waiver) of the conditions
precedent outlined in paragraph 5.
The Proposed Acquisition will simplify the group structure and will result in Seardel holding 100% of Sabido
Holdco with Sactwu acquiring listed N-Shares as follows:
(Please refer to www.hci.co.za for this announcement including images)
4. An overview of Sabido
Sabido is a media group that is jointly owned by Sabido Holdco and Remgro Limited. The media group
grew out of the success of e.tv, South Africa’s first and only private commercial free-to-air television
channel, which launched in 1998 and which is wholly owned by Sabido.
In 2008, Sabido launched South Africa’s first 24-hour television news channel, the eNews Channel. It also
operates a pan-African entertainment channel, e.tv Africa, which broadcasts in 49 countries across the
continent and has direct investments in broadcasting businesses in Botswana and Ghana.
Sabido continues to expand its media business with investments in content, production and distribution as
well as the launch of services across multiple platforms and territories.
5. Conditions precedent to the Proposed Acquisition
The Proposed Acquisition is subject to the fulfilment or waiver of the following conditions precedent:
- the obtaining of the approval of the JSE Limited (“JSE”):
- of the documentation to be issued to shareholders of Seardel in connection with the
Proposed Acquisition; and
- for the listing of the N-Shares to be issued to Sactwu as consideration in terms of the
Proposed Acquisition;
- the obtaining of the approval of the shareholders of Seardel for the Proposed Acquisition in
accordance with the provisions of the Listings Requirements of the JSE (“Listings
Requirements”) and the Companies Act, 2008, as amended (“Companies Act”);
- the obtaining of the consents of the bankers of Seardel and HCI to the Proposed Acquisition;
- the obtaining of such regulatory approvals as may be necessary; and
- the filing and registration by the Companies and Intellectual Property Commission of the special
resolution amending Seardel’s Memorandum of Incorporation in order to increase the number of
N-Shares.
6. Financial effects
6.1 HCI
HCI Shareholders are hereby advised that the financial effects of the Proposed Acquisition on HCI’s
historical earnings, headline earnings, net asset value and net tangible asset value are not significant.
6.2 Seardel
The table below sets out the unaudited pro forma financial effects of the Proposed Acquisition on the
earnings, diluted earnings, headline earnings and diluted headline earnings per Seardel share for the
year ended 31 March 2013 and the net asset value and tangible net asset value per Seardel share at
that date.
The unaudited pro forma financial effects have been prepared in accordance with the Listings
Requirements, the Guide on Pro Forma Financial Information issued by the South African Institute of
Chartered Accountants and the measurement and recognition requirements of the 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.
The unaudited pro forma financial effects have been prepared for illustrative purposes only, in order to
provide information on how the Proposed Acquisition may have affected the financial results and
position of a Seardel Shareholder and, because of their nature, may not give a true reflection of the
actual financial effects of the Proposed Acquisition. The unaudited pro forma financial effects are the
responsibility of the directors of Seardel.
Before the After the
Proposed Proposed
Acquisition Acquisition
1 2, 3, 4
Per Seardel share (cents) (cents) % Change Notes
Earnings 9.4 10.3 9.6% 3
Diluted earnings 9.2 10.1 9.8% 3
Headline earnings 5.3 5.8 9.4% 3
Diluted headline earnings 5.1 5.7 11.8% 3
Net asset value 195.6 191.1 -2.3% 4
Tangible net asset value -267.8 -213.5 20.3% 4
Weighted average number of Seardel
shares in issue (‘000) 1,035,310 1,185,310 14.5%
Diluted weighted average number of
Seardel shares in issue (‘000) 1,060,913 1,210,913 14.1%
Number of Seardel shares in issue (‘000) 1,032,892 1,182,892 14.5%
Notes to the unaudited pro forma financial effects
1. The Before the Proposed Acquisition column reflects the earnings, diluted earnings, headline
earnings, diluted headline earnings, net asset value and the tangible net asset value per Seardel
share based on the unaudited pro forma financial effects disclosed in the Seardel circular to
shareholders dated 10 July 2013.
2. The After the Proposed Acquisition column is based on information extracted from the audited
consolidated financial statements of Sabido Holdco and the consolidated audited financial
statements of Sabido for the year ended 31 March 2013.
3. The effects on earnings, diluted earnings, headline earnings and diluted headline earnings per
Seardel share are based on the following assumptions and information:
- the Proposed Acquisition was effective 1 April 2012 and the 150 million new N-Shares were
issued at R1.60 per Seardel share on this date in settlement of the purchase price;
- the costs relating to the Proposed Acquisition, which are once-off in nature, have not been
included in the calculation as they are not considered to have a significant impact;
4. The effects on net asset value and tangible net asset value per Seardel share are based on the
following assumptions:
- the Proposed Acquisition was effective 31 March 2013 and the 150 million new N-Shares
were issued at R1.60 per Seardel share on this date in settlement of the purchase price;
- the costs relating to the Proposed Acquisition, which are once-off in nature, have not been
included in the calculation as they are not considered to have a significant impact.
7. Restructuring of HCI’s holding of Seardel N-Shares
HCI Shareholders are further advised that, pursuant to the Proposed Acquisition, HCI and Sactwu have
entered into an agreement in terms of which 350 000 000 N-Shares owned by HCI and the 150 000 000 N-
Shares which will owned by Sactwu on implementation of the Proposed Acquisition, will be transferred to
HCI Invest 6 Holdco Proprietary Limited (“SPV”) in exchange for shares in SPV (“N-Share
Restructuring”). The shares in SPV will be held as to 70% by HCI and 30% by Sactwu such that HCI and
Sactwu’s respective effective beneficial interests in N-Shares are unchanged.
The N-Share Restructuring is subject to the fulfilment of a number of conditions precedent including, inter
alia:
- the Proposed Acquisition being implemented;
- the obtaining of the consents of the bankers of HCI; and
- the obtaining of the necessary regulatory approvals.
8. Categorisation and documentation
8.1 HCI
In terms of the Listings Requirements, the Proposed Acquisition is a related party transaction as
Sactwu is a material shareholder of HCI. However, due to the size of the Proposed Acquisition, it is
classified as a small related party transaction. Accordingly, HCI Shareholder approval is not required
in order to implement the Proposed Acquisition although a fairness opinion has been obtained in
terms of the Listings Requirements as detailed in paragraph 9 below.
8.2 Seardel
The Proposed Acquisition is a category 2 transaction for Seardel. In terms of the Listings
Requirements, the Proposed Acquisition is also a related party transaction as Sactwu is a material
shareholder of Sabido Holdco and of HCI, Seardel’s holding company. Accordingly, the transaction is
subject to approval by means of an ordinary resolution by Seardel Shareholders excluding Sactwu.
A circular will be issued to Seardel Shareholders in accordance with the Listings Requirements and
the Companies Act, which will incorporate a notice convening a general meeting of Seardel
Shareholders to pass the resolutions necessary to approve the Proposed Acquisition.
9. Fairness opinion
9.1 HCI
The directors of HCI have appointed BDO Corporate Finance Proprietary Limited as the independent
expert (“Independent Expert”) to provide the fairness opinion on the Proposed Acquisition required
as a result of it being classified as a small related party transaction in terms of the Listings
Requirements.
In accordance with paragraph 10.7(b) of the Listings Requirements, HCI has provided the JSE with
confirmation from the Independent Expert that the terms of the Proposed Acquisition with Sactwu are
fair as far as the remaining HCI Shareholders are concerned. The fairness opinion will lie for
inspection at HCI’s registered office (Block B, Longkloof Studios, Darters Road, Gardens, Cape
Town, 8001) for a period of 28 days from the date of this announcement.
9.2 Seardel
The directors of Seardel have appointed BDO Corporate Finance Proprietary Limited as the
independent expert to provide the fairness opinion on the Proposed Acquisition. The fairness opinion
will form part of the circular to Seardel Shareholders referred to above.
Cape Town
10 October 2013
Investment Bank and Transaction Sponsor to HCI and Seardel
Investec Corporate Finance
Joint Legal Adviser to HCI and Seardel
Taback and Associates Proprietary Limited
Joint Legal Adviser to HCI and Seardel
Edward Nathan Sonnenbergs Inc.
Reporting Accountants to HCI and Seardel
Grant Thornton South Africa
Independent Expert to HCI and Seardel
BDO Corporate Finance Proprietary Limited
Date: 10/10/2013 03:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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