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Specific Repurchase of ISA shares, Financial Assistance and Withdrawal of cautionary
ISA HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/009608/06)
Share Code: ISA ISIN: ZAE000067344
(“ISA” or “the Company”)
SPECIFIC REPURCHASE OF ISA SHARES, FINANCIAL ASSISTANCE AND WITHDRAWAL OF
CAUTIONARY
BACKGROUND TO AND RATIONALE FOR THE SPECIFIC REPURCHASE AND FINANCIAL
ASSISTANCE
On 29 June 2006, ISA concluded a black economic empowerment (“BEE”) transaction with
EmpowerGroup Technology Proprietary Limited (“EmpowerGroup”), in terms of which EmpowerGroup
entered into a subscription agreement with ISA to acquire 62 592 594 ordinary shares in the
Company, constituting 32.5% of ISA’s entire issued share capital (“First BEE Transaction”).
Contemporarily, EmpowerGroup entered into a financing arrangement with a third party financier to
raise the funds required for the First BEE Transaction, which arrangement has now matured and is
due and payable.
In order to retain EmpowerGroup as the Company’s BEE partner, with a minimum of a 25.1%
shareholding in ISA’s entire issued share capital as required by the ICT Charter of the Broad-Based
Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended, ISA has assisted
EmpowerGroup with the raising of the funds required to settle their obligations to their third party
financier. In this regard, ISA has entered into an additional agreement with EmpowerGroup (“Second
BEE Transaction”), the key points of which are summarised as follows:
- EmpowerGroup will borrow from the Company an amount of R30 million plus related
transactional costs by way of an interest bearing loan, which will be utilised by EmpowerGroup
towards the settlement of their obligations to their third party financier (“Loan”).
- The Loan plus interest accrued thereon, will be repaid by EmpowerGroup to ISA from the
proceeds received from the Company by virtue of its shareholding in the Company.
- EmpowerGroup will not sell any of their ordinary shares in the capital of the Company, without
prior approval from the Company, for a period of the later of 3 years or until the Loan plus
interest thereon is fully settled.
- EmpowerGroup will grant the Company an option to acquire 22 million ordinary shares in the
capital of the Company (“Option Shares”), at a price of 40 cents per ordinary share (“Option
Price”) (“Call Option”). The repurchase of these Option Shares would be subject to ISA
shareholder approval.
1. SPECIFIC REPURCHASE
On 29 October 2013, notice to exercise the Call Option was given by the Company to
EmpowerGroup. In terms of paragraph 10.1(b)(i) of the Listings Requirements of JSE Limited
(“JSE”), EmpowerGroup is a material shareholder of the Company and is therefore considered to
be a related party. Therefore, the repurchase by the Company of the Option Shares is deemed to
be a “Specific Repurchase” in terms of section 5.69 of the JSE Listings Requirements.
It is noted that after the Specific Repurchase, EmpowerGroup will have an interest of 25.1% of
the entire issued share capital of the Company, net of treasury shares.
As the Option Price is not at a premium to the weighted average price of the Companies shares,
measured over the 30 business days prior to the date on which notice to exercise the Call
Option was given by the Company to EmpowerGroup, the Specific Repurchase will not require a
fairness opinion in terms of paragraph 5.69(e) of the JSE Listings Requirements.
However, as the Specific Repurchase will result in the Company acquiring in excess of 5% of the
entire issued share capital of the Company, the Specific Repurchase is, in terms of section
48.8(b) of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies Act”), subject to
the provisions of sections 114 and 115 of the Companies Act.
Accordingly, an independent expert will be appointed by the board of directors of ISA (“the
Board”) to advise them on the Specific Repurchase and to compile a report in terms of section
114 of the Companies Act, which report will be included in the circular to shareholders referred
to in paragraph 1.4 below.
1.1 Terms of the Specific Repurchase and closing date
The consideration of R8.8 million in respect of the Option Shares will be discharged on the
closing date, being the second business day following the fulfilment of the conditions precedent
set out in paragraph 1.3 below, by the Company setting off such amount against the amount
owed by EmpowerGroup to the Company under the Loan.
Subsequent to the closing date, the Option Shares will revert to authorised but unissued shares
in the capital of the Company and delisted.
1.2 Financial effects
The table below sets out the unaudited pro forma financial effects of the Specific Repurchase on
ISA’s earnings per share, headline earnings per share, net asset value per share and net
tangible asset value per share.
The unaudited pro forma financial effects have been prepared to illustrate the impact of the
Specific Repurchase on the reported financial information of ISA for the six months ended
31 August 2013, had the Specific Repurchase occurred on 1 March 2013 for statement of
comprehensive income purposes and on 31 August 2013 for statement of financial position
purposes.
The unaudited pro forma financial effects have been prepared using accounting policies that
comply with International Financial Reporting Standards and that are consistent with those
applied in the results for the six months ended 31 August 2013 as well as the audited results of
ISA for the 12 months ended 28 February 2013.
The unaudited pro forma financial effects, which are the responsibility of the directors, are
provided for illustrative purposes only and, because of their pro forma nature, may not fairly
present ISA’s financial position, changes in equity, results of operations or cash flow.
Before After Change
(cents) (cents) (%)
Earnings per share 4.0 4.6 15.0
Headline earnings per share 4.0 4.6 15.0
Net asset value per share 22.7 20.1 (11.5)
Net tangible asset value per share 20.8 18.0 13.5)
Weighted average number of shares in issue,
net of treasury shares (‘000) 183 676 161 676 (12.0)
Total number of shares in issue, net of treasury
shares (‘000) 184 058 162 058 (12.0)
Notes:
1. The “Before” column has been extracted from the unaudited interim results of ISA for the six months
ended 31 August 2013.
2. The “After” column reflects the financial effects of the Specific Repurchase on ISA and are based on
the following assumptions:
a. a repurchase of 22 million shares at 40 cents per share, as well as the costs associated with the
purchase, is set off against capital.
b. a R15 million loan obtained by the Company from a financial institution. Interest paid on the R15
million loan is paid at a rate of prime less 0.37% and the costs to obtain the R15 million loan is
capitalised to the Loan; and
c. the Loan, being R30 million, plus costs to raise the Loan from the financial institution, being
granted to EmpowerGroup. Interest on the Loan is received at the prime lending rate.
3. The effects on earnings per share and headline earnings per share are calculated based on the
assumption that the Specific Repurchase was effected on 1 March 2013.
4. The effects of net asset value per share and net tangible asset value per share are calculated based
on the assumption that the Specific Repurchase was effected on 31 August 2013.
5. The Specific Repurchase shares constitute 11.42% of the issued share capital of ISA. Currently ISA
holds 8 534 592 shares in treasury. After the Specific Repurchase, ISA will still hold 8 534 592 shares
in treasury.
1.3 Conditions precedent
The Specific Repurchase is conditional upon the fulfilment of the following conditions precedent:
- the Company having complied with all necessary requirements of the JSE Listings
Requirements and the Companies Act; and
- ISA shareholders in general meeting approving the necessary resolutions in terms of the
Companies Act, and the JSE Listings Requirements, to effect the Specific Repurchase.
1.4 Circular to ISA shareholders
A circular containing full details of the Specific Repurchase and a notice to convene a general
meeting of ISA shareholders to be held on or about Friday, 10 January 2014 in order to consider
and, if deemed fit, to pass with or without modification, the resolutions necessary to approve and
implement the Specific Repurchase, will be sent to ISA shareholders on or about Monday,
9 December 2013.
2. FINANCIAL ASSISTANCE
Shareholders are referred to the special resolution tabled and approved at the annual general
meeting held on 26 June 2013 authorising the Board in terms of section 45 of the Companies Act
to provide direct or indirect financial assistance to a director or prescribed officer of the company,
or to a related or inter-related company or corporation or to a member of any such related or inter-
related corporation or to a person related to any such company, corporation, director or
prescribed officer, and to the corresponding explanatory note which notified shareholders in terms
of section 45(5) of the Companies Act of the resolution adopted by the Board (“Section 45 Board
Resolution”), which contemplated that such financial assistance in the aggregate would exceed
one-tenth of one percent of the Company’s net worth at the date of adoption of such Section 45
Board resolution.
Shareholders are advised that the provision of the Loan by the Company to EmpowerGroup, as
contemplated above, constitutes financial assistance in terms of section 45 of the Companies Act
as EmpowerGroup is a company related to certain directors on the Board.
Furthermore, in terms of the resolution to provide the Loan adopted by the Board on 28 August
2013 and which Loan was provided on 25 October 2013:
- the Loan exceeded one-tenth of one percent of the Company’s net worth at the date thereof;
and
- the Board has satisfied itself that:
o immediately after granting the financial assistance, the Company will satisfy the solvency
and liquidity as referred to in section 45(3)(b)(i) of the Companies Act; and
o the terms under which the financial assistance is to be given are fair and reasonable to
the Company as referred to in section 45(3)(b)(ii) of the Companies Act.
3. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 2 September 2013 and the
subsequent renewal of cautionary announcement dated 15 October 2013 and are advised that
further to the above, caution is no longer required to be exercised by shareholders when dealing
in their ISA securities.
Johannesburg
30 October 2013
Designated Adviser
Merchantec Capital
Date: 30/10/2013 07:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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