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GRAND PARADE INVESTMENTS LIMITED - BEE Specific Issue and BEE Share Acquisition, Hot Slots Acquisition Issue and Amendment to the MOI

Release Date: 08/11/2013 08:11
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BEE Specific Issue and BEE Share Acquisition, Hot Slots Acquisition Issue and Amendment to the MOI

Grand Parade Investments Limited
Incorporated in the Republic of South Africa
Registration number: 1997/003548/06
Share code: GPL
ISIN: ZAE000119814
(“GPI” or “the Company”)

BROAD-BASED BLACK ECONOMIC EMPOWERMENT (“BEE”) SPECIFIC ISSUE
AND BEE SHARE ACQUISITION, HOT SLOTS ACQUISITION ISSUE AND THE
AMENDMENT TO THE MEMORANDUM OF INCORPORATION (“MOI”)

1.   BEE SPECIFIC ISSUE AND BEE SHARE ACQUISITION

     1.1.   Shareholders of GPI      are   hereby   advised   that   the
            Company wishes to:

            1.1.1.   establish a black ownership structure, being
                     a   broad-based    black   female    economic
                     empowerment   ownership   trust   (“the   BEE
                     Party”) to be established in terms of a
                     trust deed which will be lodged with the
                     Master of the High Court (“the Trust Deed”),
                     in terms of which the BEE Party will:

                     1.1.1.1.   subscribe for 14 814 815 ordinary
                                shares of no par value in the
                                issued    ordinary    listed    share
                                capital   of   the    Company   (“GPI
                                Shares”), at a cash issue price of
                                R4.05 per GPI Share, equal to the
                                30-day   volume    weighted   average
                                trading price of GPI Shares on the
                                JSE Limited (“JSE”), for the 30-day
                                period ending on the day prior to
                                23 October 2013, in terms of a
                                specific issue of shares for cash
                                equating to a total subscription
                                consideration of R60 000 000 (“the
                                BEE Specific Issue”);

                     1.1.1.2.   acquire GPI Shares in the open
                                market to the value of R40 000 000
                                (“the BEE Share Acquisition”); and

            1.1.2.   fund     Rilapath     Proprietary    Limited
                     (registration number 2013/065530/07) (“BEE
                     SPV”), a wholly owned subsidiary of GPI, in
                     an amount of R100 000 000 by way of
                     subscribing    for   redeemable   cumulative
                     preference shares (“RCPS”) in the BEE SPV,
                     the proceeds whereof will be used by the BEE
               SPV to finance, by way of a capital
               contribution, the subscription price payable
               by the BEE Party to the Company pursuant to
               the BEE Specific Issue and to finance the
               purchase price payable by the BEE Party for
               the   BEE   Share  Acquisition   (“the   BEE
               Funding”)

       (collectively referred to hereinafter as “the BEE
       Specific Issue and BEE Share Acquisition”).

1.2.   The BEE Party refers to the GPI Women’s BBBEE
       Empowerment Trust, which is in the process of being
       established to uplift and develop Black females who
       live in the communities in which GPI’s businesses
       and investee companies operate. The Black ownership
       structure will also serve to increase and entrench
       the level of Black female shareholding in GPI,
       thereby benefiting all shareholders given GPI’s
       status as an empowerment company.

1.3.   The BEE Specific Issue and the BEE Share Acquisition
       will result in the BEE Party holding approximately
       24 691 358 GPI Shares equal to approximately 5.19%
       of the issued ordinary share capital of GPI
       (assuming the BEE Share Acquisition is done at the
       30-day volume weighted average trading price of GPI
       Shares on the JSE, for the 30-day period ending on
       the day prior to 23 October 2013).

1.4.   The proceeds of the BEE Specific Issue (being
       R60 000 000) and BEE Funding (being R100 000 000)
       will be partially set-off against each other
       resulting in a net cash outflow of R40 000 000 from
       the perspective of GPI.

1.5.   Acquiring a portion of the GPI Shares in the open
       market, as opposed to a specific issue, increases
       and entrenches the Black female shareholding in GPI
       without diluting existing GPI Shareholders to the
       full extent of the BEE Funding.

1.6.   The BEE Party shall be restricted from selling the
       GPI Shares acquired pursuant to the BEE Specific
       Issue without the express permission of GPI for a
       period of 5 years from the subscription date of the
       BEE Specific Issue Shares by the BEE Party, thereby
       ensuring that it continues to contribute to GPI’s
       level of Black Shareholding.

1.7.   In   terms   of   paragraph   5.51(g)   of   the   Listings
            Requirements of the JSE, the BEE Specific Issue
            requires the approval by way of an ordinary
            resolution (requiring at least a 75% majority of the
            votes cast in favour of such resolution) by all GPI
            Shareholders present or represented by proxy at the
            general meeting on which any BEE Specific Issue
            participants and their associates, have not voted
            on, or whose votes have not been counted in respect
            of such ordinary resolution.

     1.8.   In terms of sections 44 and 45 of the Companies Act,
            No. 71 of 2008, as amended (“Companies Act”), the
            BEE Funding will or may constitute financial
            assistance as contemplated in the Companies Act,
            and, as such, requires the approval by way of a
            special resolution.

2.   RATIONALE FOR    THE   BEE   SPECIFIC   ISSUE   AND   BEE   SHARE
     ACQUISITION

     2.1.   GPI is an established empowerment company and has
            historically leveraged its strong Black ownership
            credentials to unlock value for investee companies
            and the holders of GPI Shares (“GPI Shareholders”).

     2.2.   In light of GPI’s current proportion of Black GPI
            Shareholders and taking into account the increasing
            importance of Black female ownership under the
            Broad-Based Black Economic Empowerment Codes of Good
            Practice (“BEE Codes”), GPI wishes to implement the
            BEE Specific Issue and BEE Share Acquisition to
            increase and entrench its level of Black female
            shareholding.

     2.3.   Furthermore, the BEE Specific Issue and BEE Share
            Acquisition is intended to uplift and develop Black
            females who live in the communities in which GPI’s
            businesses and investee companies operate.

3.   THE BEE PARTY

     3.1.   The BEE Party will be established as a broad-based
            black   economic  empowerment   ownership  trust in
            accordance with the BEE Codes. The Trust Deed and
            operating practices of the BEE Party will be
            prepared in compliance with the rules relating to
            Broad-Based   Ownership   Schemes   and   Trusts as
            prescribed by the BEE Codes.

     3.2.   The beneficiaries of the BEE Party will be limited
            to black previously disadvantaged females and will
            specifically exclude:

            3.2.1.   employees    (including    any     of    their
                     associates)   of   GPI   and   any    of   its
                     subsidiaries (“GPI Group”); and

            3.2.2.   GPI Group board members    (including any of
                     their associates).

     3.3.   In terms of the Trust Deed, and consistent with the
            BEE Codes, more than 50% of the Trustees of the BEE
            Party   must  be   independent  persons   having  no
            employment or indirect beneficial interest in the
            BEE Party. In addition, at least 50% of the Trustees
            must be Black people, and 25% must be Black women.
            Furthermore, in order to safeguard the independence
            of the BEE Party, the Trust Deed provides that more
            than 50% of the Trustees of the BEE Party must not
            (i) be an executive or non-executive director of any
            company in the GPI Group; (ii) be an employee of any
            company in the GPI Group; (iii) be engaged in any
            business relationship with any company in the GPI
            Group; or (iv) have any interest in any entity that
            is engaged in any business relationship     with any
            company in the GPI Group.

     3.4.   The BEE Party will be a public shareholder, with
            “public”   being   as   defined in the   Listings
            Requirements of the JSE.

4.   CONDITIONS PRECEDENT TO THE BEE SPECIFIC ISSUE AND BEE
     SHARE ACQUISITION

     4.1.   The BEE Specific Issue and BEE Share Acquisition is
            subject to, inter alia, the fulfilment of the
            following conditions precedent:

            4.1.1.   GPI Shareholder approval of the BEE Specific
                     Issue and the BEE Funding;

            4.1.2.   the amendment of the MOI of the BEE SPV to
                     include the RCPS; and

            4.1.3.   the Trustees of the BEE Party passing and
                     providing copies of all relevant Trustee
                     resolutions approving the conclusion of all
                     agreements to which it is or will become a
                     party in order to implement the BEE Specific
                     Issue and BEE Share Acquisition.
5.   THE HOT SLOTS ACQUISITION

     5.1.   GPI Shareholders were advised on Friday, 2 August
            2013, on SENS that GPI, through its wholly-owned
            subsidiary, GPI Slots Proprietary Limited (“GPI
            Slots”), had, subject to GPI Shareholder approval
            and the Hot Slots acquisition conditions precedent
            (“Hot Slots Acquisition”), concluded an agreement to
            acquire the entire issued share capital of Bohwa 1
            Gaming Proprietary Limited (“Hot Slots”) from the
            owners thereof (“Hot Slots Vendors”).

     5.2.   Hot Slots is licensed as a route operator in Gauteng
            to operate 1 000 limited pay-out machines (“LPMs”)
            and has 343 active LPMs in the Gauteng province and
            a strong management team with a proven track record
            in the LPM-industry. The Hot Slots brand has an
            established presence in Gauteng and will join the
            GPI Slots stable alongside its other brands which
            include Grandslots in the Western Cape, Kingdomslots
            in Kwazulu Natal and Grand Gaming Slots in Gauteng
            and Mpumalanga.

     5.3.   The total purchase price payable in respect of the
            Hot Slots Acquisition (“the Hot Slots Purchase
            Consideration”) amounts to R62 000 000, plus any
            increase in the Hot Slots Vendors’ loan claims
            against Hot Slots from 9 April 2013 until the 3rd
            business day following the fulfillment of the Hot
            Slots Acquisition conditions precedent (“the Hot
            Slots Completion Date”).

     5.4.   The Hot Slots Purchase Consideration will be settled
            in a combination of a cash payment and the issue of
            so many GPI Shares (rounded down to the nearest
            whole number) to the Hot Slots Vendors as is
            determined by dividing R40 000 000 by a subscription
            price per GPI Share equal to the 30-day volume
            weighted average trading price of GPI Shares on the
            JSE, for the 30-day period immediately preceding the
            Hot   Slots   Completion   Date  (“the   Hot   Slots
            Acquisition Issue”).

     5.5.   The Hot Slots Acquisition is subject to the
            fulfilment of the following outstanding conditions
            precedent:

            5.5.1.   that by not later than 31 December 2013, to
                     the    extent   required    by    law,  the
                     unconditional written approval of the Hot
                     Slots Acquisition shall have been obtained
                     from the Gauteng Gambling Board; and

            5.5.2.   that by not later than 31 December 2013, the
                     approval by the shareholders of GPI of the
                     Hot   Slots  Acquisition   Issue  has   been
                     obtained.

     5.6.   The Hot Slots Acquisition does not constitute a
            reportable transaction for JSE Listings Requirements
            purposes and accordingly, GPI Shareholder approval,
            in terms of the JSE Listings Requirements, is not
            required.

     5.7.   However, notwithstanding the aforegoing, in terms of
            the MOI of GPI, GPI Shareholder approval is required
            for any issue of GPI Shares and due to the fact that
            a portion of the Hot Slots Purchase Consideration
            will be settled by the Hot Slots Acquisition Issue,
            GPI Shareholder approval will have to be obtained in
            respect thereof.

6.   AMENDMENT TO THE MOI

     6.1.   The amendment to the MOI is being proposed      in order
            to align the MOI with the provisions of          the JSE
            Listings Requirements and the Companies         Act, in
            relation to the issue of GPI Shares             for the
            acquisition of assets by the Company             or its
            subsidiaries (“Amendment to the MOI”).

     6.2.   Section 16(1)(c) of the Companies Act requires the
            shareholders of the Company to authorise the
            Amendment to the MOI by way of a special resolution.

7.   CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

     7.1.   The consolidated pro forma financial effects of the
            BEE Specific Issue and the BEE Share Acquisition, as
            set out below, are the responsibility of the
            directors of GPI. The consolidated pro forma
            financial   effects  are    presented  in   a   manner
            consistent with the basis on which the historical
            financial information has been prepared and in terms
            of the Company’s accounting policies. The pro forma
            financial    effects   have    been   presented    for
            illustrative purposes only and, because of their
            nature, may not give a fair reflection of the
            Company’s financial position post the implementation
            of the BEE Specific Issue and the BEE Share
            Acquisition.
       7.2.   No pro forma financial effects of the Hot Slots
              Acquisition Issue have been included given that the
              Hot Slots Acquisition is below the threshold to
              categorise same in terms of the JSE Listings
              Requirements and the pro forma financial effects on
              GPI are not significant.

       7.3.   The table below sets out the pro forma financial
              effects of the adjustments on the Company, based on
              the audited results for the year ended 30 June 2013
              and on the assumption that, for calculating the net
              asset value per GPI Share and net tangible asset
              value per GPI Share, the adjustments were effected
              on 30 June 2013. In respect of the earnings per GPI
              Share and headline earnings per GPI Share it is
              assumed that the adjustments were effected on 1 July
              2012.

                                     Results        Pro forma       Change (%)
                                   before the     results after
                                  adjustments         the BEE
                                                     Specific
                                                  Issue and BEE
                                                       Share
                                                   Acquisition
 Net asset value per Share
 (cents)                             359.00          339.00           (5.6%)
 Net tangible asset value
 per Share (cents)                   320.00          301.00           (5.9%)
 Earnings per Share (cents)           28.55           27.36           (4.2%)
 Headline earnings per Share
 (cents)                             28.76            27.56           (4.2%)
 Number of Shares in issue
 (‘000)                             460 680          475 495              3.2%
 Weighted number of Shares
 in issue (‘000)                    460 680          475 495              3.2%

ASSUMPTIONS:

  a)    It has been assumed that the BEE Specific Issue and the BEE Share
        Acquisition took place on 1 July 2012 when determining the effect on
        the condensed statement of comprehensive income.

  b)    It has been assumed that the BEE Specific Issue and the BEE Share
        Acquisition took place on 30 June 2013 when determining the effects
        on the condensed statement of financial position.

  c)    Where applicable the tax rate has been assumed at 28%.

  d)    It has been assumed that the issue of GPI Shares has been made at
        R4.05 per share.

  e)    It has been assumed that the acquisitions of GPI Shares on the open
        market have been made at R4.05 per share.

  f)    Where applicable    the   Securities   Transfer   Tax   (“STT”)    has   been
        assumed at 0.25%.
  g)     It has been assumed that the average interest rate earned on cash
         investments by the GPI Group is 4.78% per annum.

NOTES:

  1.     The “Unadjusted and audited results for the year ended 30 June 2013”
         column has been extracted from the audited financial statements of
         GPI for the twelve months ended 30 June 2013.

  2.     In order to implement the black ownership structure, GPI made a
         specific issue of 14 814 815 ordinary no par value shares to the BEE
         Party. The total consideration for the BEE Specific Issue amounts to
         R60 000 000 and the shares were issued at R4.05 per share.

         In terms of SIC 12: Consolidation – Special Purpose Entities, the
         BEE Party forms part of the GPI Group, therefore the 14 814 815
         shares issued to the BEE Party are treated as treasury shares. When
         calculating the adjusted headline and adjusted diluted headline
         earnings per share for the GPI Group, the treasury shares held by
         the BEE Party are deducted from the weighted average number of
         shares (“WANOS”) and the BEE Party’s net profit after tax eliminated
         from the group’s headline earnings.

  3.     Also in terms of the implementation of the black ownership
         structure, the BEE Party acquired 9 876 543 GPI Shares on the open
         market. The GPI Shares were acquired at R4.05 per share for a total
         consideration of R40 000 000.

         In terms of SIC 12: Consolidation – Special Purpose Entities, the
         BEE Party forms part of the GPI Group, therefore the 9 876 543
         shares that the BEE Party acquired on the open market are treated as
         treasury shares. When calculating the adjusted headline and adjusted
         diluted headline earnings per share for the GPI Group, the treasury
         shares held by the BEE Party are deducted from the WANOS and the BEE
         Party’s net profit after tax eliminated from the group’s headline
         earnings.

  4.     Transaction fees for the proposed transaction are R1 527 000 in
         total. These costs have been allocated on a pro rata basis to the
         BEE Specific Issue (R916 000) and to the BEE Share Acquisition
         (R611 000).

         The R916 000 transaction fees relating to the BEE Specific issue
         have been deducted from the par value of the shares issued.

         The R611 000 transaction fees relating to the BEE Share Acquisition
         have been considered to be capital in nature and as a result have
         been added to the carrying value of the treasury shares.

  5.     In order to implement the black ownership structure, GPI made a
         specific issue of 14 814 815 ordinary no par value shares to the BEE
         Party. The total consideration for the BEE Specific Issue amounts to
         R60 000 000 and the shares were issued at R4.05 per share. No STT
         has been levied on the new issue of shares.

         In terms of SIC 12: Consolidation – Special Purpose Entities, the
         BEE Party forms part of the GPI Group, therefore the 14 814 815
         shares issued to the BEE Party are treated as treasury shares. When
         calculating the adjusted headline and adjusted diluted headline
         earnings per share for the GPI Group, the treasury shares held by
       the BEE Party are deducted from the WANOS and the BEE Party’s net
       profit after tax eliminated from the group’s headline earnings.

 6.    Also in terms of the implementation of the black ownership
       structure, the BEE Party acquired 9 876 543 GPI Shares on the open
       market. The GPI Shares were acquired at R4.05 per share for a total
       consideration of R40 000 000. R100 000 in STT has been levied on the
       BEE Share Acquisition and added to the carrying value of the
       treasury shares.

       In terms of SIC 12: Consolidation – Special Purpose Entities, the
       BEE Party forms part of the GPI Group, therefore the 9 876 543
       shares that the BEE Party acquired on the open market are treated as
       treasury shares. When calculating the adjusted headline and adjusted
       diluted headline earnings per share for the GPI Group, the treasury
       shares held by the BEE Party are deducted from the WANOS and the BEE
       Party’s net profit after tax eliminated from the group’s headline
       earnings.

 7.    The GPI Group utilized R916 000 to settle the transaction fees
       related to the BEE Specific Issue of 14 814 815 ordinary no par
       value shares to the BEE Party.

       GPI earns on average 4.78% per annum on its cash reserves and as a
       result of utilizing its cash reserves to settle the transaction fees
       related to the BEE Specific Issue, reduced its interest earned for
       the year by R44 000.

       Interest earned by the GPI Group is subject to companies tax and as
       a result of the reduction in the interest of R44 000, the tax value
       reduced by R12 000 for the year.

 8.    The GPI Group utilized R40 000 000 of cash on hand to fund the
       acquisition of the 9 876 543 shares on the open market and a further
       R711 000 to settle the STT (R100 000) and the transaction fees
       (R611 000) relating to the BEE Share Acquisition.

       GPI earns on average 4.78% per annum on its cash reserves and as a
       result of utilizing its cash reserves to fund the acquisition of
       shares on the open market and to settle the STT and transaction fees
       related to the BEE Share Acquisition, reduced its interest earned
       for the year by R1 944 000.

       Interest earned by the GPI Group is subject to companies tax and as
       a result of the reduction in the interest of R1 944 000, the tax
       value reduced by R544 000 for the year.

 9.    All adjustments, except for transaction costs, are expected to have
       a continuing effect.

8.    GENERAL MEETING

      A general meeting of GPI Shareholders will be held at
      19:00 on Wednesday, 11 December 2013, at the Market Hall,
      GrandWest Casino, Goodwood, Western Cape, to consider and,
      if deemed fit, to pass, with or without modification, the
      resolutions required to approve the the BEE Specific Issue
      and the BEE Share Acquisition, the BEE Funding, the Hot
     Slots Acquisition Issue and the Amendment to the MOI.

9.   CIRCULAR

     A circular containing full details     of the BEE Specific
     Issue and the BEE Share Acquisition,   the BEE Funding, the
     Hot Slots Acquisition Issue and the    Amendment to the MOI
     will be posted to shareholders on      or about 8 November
     2013.

8 November 2013

Stellenbosch

Sponsor and corporate advisor:
PSG Capital

Lead corporate advisor:
Leaf Capital

Legal advisor:
Bernadt Vukic Potash & Getz

Independent Reporting Accountants and Auditors:
Ernst & Young Incorporated

Date: 08/11/2013 08:11:00 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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