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Proposed Restructuring of the BEE Transaction entered into in 2005.
Distell Group Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1988/005808/06)
Share code: DST ISIN: ZAE000028668
(“Distell” or the “Company”)
THE ANNOUNCEMENT RELATING TO THE PROPOSED RESTRUCTURING OF THE BLACK ECONOMIC EMPOWERMENT (“BEE”)
TRANSACTION ENTERED INTO IN 2005, IN TERMS OF WHICH BEE PARTNERS WERE INTRODUCED AS INDIRECT
SHAREHOLDERS OF SOUTH AFRICAN DISTILLERIES AND WINES (SA) LIMITED (“SADW”)
1. INTRODUCTION AND RATIONALE
Distell has supported the South African Government’s BEE initiatives and, in line with its
commitment to transformation, Distell concluded a BEE transaction in 2005 (“Original BEE
Transaction”) in terms of which the BEE Consortium was introduced, through its shareholding
in WIPHOLD Beverages (RF) Proprietary Limited (“WIP Beverages”), as indirect shareholders
into SADW, Distell’s primary operating company.
The BEE Consortium comprises of WIPHOLD Distilleries and Wines Investments Proprietary
Limited (“WIPHOLD Distilleries”), the Distell Employee Share Ownership Program Trust
(“ESOP”) and the the Distell CSI Trust (“CSI Trust”). Women Investment Portfolio Holdings
Limited (“WIPHOLD”), through its interest in WIPHOLD Distilleries, is a member of the BEE
Consortium and established an eight year partnership with Distell and, during this time,
WIPHOLD supported the management of Distell in realising Distell’s growth objectives.
The BEE Consortium holds all the ordinary shares in WIP Beverages, which in turn holds 15%
of the issued ordinary shares in SADW. In terms of the Original BEE Transaction, the BEE
Consortium may exercise the put option granted by Distell to the BEE Consortium (“Put
Option”) pursuant to the agreements which govern the Original BEE Transaction (“Original
Agreements”) and thus sell their shares in WIP Beverages to Distell at a price determined in
terms of a formula set out in the Original Agreements.
Subject to the condition precedent set out in paragraph 7.1, the board of directors of Distell
(“Board”) has agreed with the BEE Consortium to implement the Put Option on similar terms as
set out in the Original BEE Transaction. The Board has agreed to extend the date from when
the Put Option can be exercised in 2013 to within 7 business days after the conditions
precedent as set out in paragraph 7.1 have been fulfilled (“Amended Put Option”).
The Board also proposes certain amendments to the existing BEE structure to ensure the
continuation of the existing BEE structure (“Proposed Restructuring”). Immediately after the
exercise and implementation of the Amended Put Option and before implementation of the
Proposed Restructuring, WIPHOLD Distilleries, ESOP and the CSI Trust will no longer be
shareholders of WIP Beverages and Distell will be the sole ordinary and preference shareholder
of WIP Beverages.
Subject to fulfillment of the conditions precedent set out in paragraph 7.2, upon completion of
the Proposed Restructuring, the CSI Trust will be the sole ordinary shareholder of WIP
Beverages and will be entitled to receive an ordinary dividend from WIP Beverages equal to the
amount it would have received had the Proposed Restructuring not been implemented. This
ensures that Distell’s current BEE ownership rating, based on the current BEE codes as
published by the South African Government (“BEE Codes”) is, to the extent possible,
maintained.
2. THE ORIGINAL BEE TRANSACTION
WIP Beverages was established by Distell in 2005 in order to facilitate the introduction of the
BEE Consortium into SADW.
In terms of the Original BEE Transaction, Distell disposed of 15% of the ordinary shares in the
capital of SADW (“SADW Shares”) to WIP Beverages at the independently determined
aggregate price of R869.4 million. The purchase consideration was funded through the issue to
Distell of preference shares by WIP Beverages (“Preference Shares”) (details of which are
disclosed in the Original BEE Transaction circular) and all the ordinary shares in WIP Beverages
(“WIP Beverages Shares”) were allotted and issued to the BEE Consortium.
In terms of the Original BEE Transaction, the Put Option can be exercised by WIPHOLD
Distilleries, on behalf of the BEE Consortium, within 30 days after the distribution of the Distell
annual report for the financial years ended on 30 June 2013, 30 June 2014 or 30 June 2015.
The Put Option would be discharged by the issue of Distell ordinary shares (“Distell Shares”) to
the BEE Consortium.
Distell also has rights under a call option (“Call Option”) to require the BEE Consortium to sell
all its shares held in WIP Beverages, which rights Distell may exercise within 30 days after the
distribution of the Distell annual report for the 2015 financial year.
The WIP Beverages Shares are currently held in the following proportions, namely WIPHOLD
Distilleries (40%), the ESOP (45%) and CSI Trust (15%). Distell continues to hold all of the
issued Preference Shares.
3. AMENDED PUT OPTION
3.1 Amount of Distell Shares to be issued to the BEE Consortium pursuant to the
Amended Put Option
The Board and BEE Consortium applied the same terms and predetermined formula set
out in the Original BEE Transaction to determine the number of Distell Shares that would
be issued to the BEE Consortium as it would have been if the Put Option was exercised
in the initial period as per the Original BEE Transaction. As a result, it was agreed that
17,679,638 Distell Shares (“Gross Agreed Distell Shares”) would be issued to the BEE
Consortium. Each member of the BEE Consortium will receive its pro rata portion of the
Gross Agreed Distell Shares.
Accordingly, WIPHOLD Distilleries will receive 7,071,855 Distell Shares, ESOP will
receive 7,955,837 Distell Shares and the CSI Trust will receive 2,651,946 Distell Shares.
3.2 Amended Put Option
The terms and conditions of the Amended Put Option are set out in the applicable
agreement (“Addendum”) and are on the same terms and predetermined formula as it
would have been if the Put Option were exercised during the initial period as per the
Original BEE Transaction. In terms of the Addendum, the Put Option will be extended to
ensure that the BEE Consortium can exercise the Amended Put Option within 7 business
days after the condition precedent set out in paragraph 7.1 is fulfilled. If the Amended Put
Option is exercised, the Gross Agreed Distell Shares would be issued to the BEE
Consortium as consideration for the transfer of their WIP Beverages Shares to Distell.
WIPHOLD Distilleries and ESOP have agreed to exercise the Amended Put Option within
the 7 business day period. The CSI Trust is obliged to sell its WIP Beverages Shares if
and when WIPHOLD Distilleries and ESOP exercise the Amended Put Option.
4. PROPOSED RESTRUCTURING
4.1 Background to the Proposed Restructuring
The implementation of the Proposed Restructuring would ensure that Distell’s current
BEE ownership structure rating, based on the BEE Codes, is, to the extent possible,
maintained.
4.2 New WIP Beverages Shares
Following implementation of the Amended Put Option and as part of the Proposed
Restructuring, the CSI Trust will subscribe for new ordinary no par value WIP Beverages
Shares (“New WIP Beverages Shares”). As consideration for the issue of the New WIP
Beverages Shares, the CSI Trust will transfer and deliver 2,651,946 Distell Shares, being
the CSI Trust’s pro rata portion of the Gross Agreed Distell Shares to WIP Beverages it
would receive as part of the Amended Put Option (“CSI Trust Distell Shares”).
The rationale for the creation of New WIP Beverages Shares is to ensure that Distell’s
BEE ownership credentials predetermined in terms of the BEE Codes is, to the extent
possible, maintained, in order to ensure compliance with the Companies Act and to
facilitate the commercial terms of the Proposed Restructuring.
4.3 Repurchased Shares
Immediately after the exercise of the Amended Put Option and before implementation of
the Proposed Restructuring, Distell will be the sole ordinary and preference shareholder
of WIP Beverages and as a result Distell will not have a BEE partner at this stage. To
solve this and to ensure that Distell’s ownership credentials in terms of the BEE Codes
are, to the extent possible, maintained, WIP Beverages will repurchase all the WIP
Beverages Shares held by Distell following the exercise of the Amended Put Option and
the allotment and issue of the New WIP Beverages Shares to the CSI Trust.
Upon completion of the Proposed Restructuring, the CSI Trust will be the sole ordinary
shareholder of WIP Beverages.
Payment by WIP Beverages of the purchase price for the repurchase of its shares from
Distell will remain outstanding on loan account but be payable within 30 days of receipt of
a demand from Distell to pay the purchase price.
4.4 Distell Call Option
It is intended that the CSI Trust will be Distell’s BEE partner and the sole ordinary
shareholder of WIP Beverages.
WIP Beverages will have a call option at any time over the New WIP Beverages Shares
and may exercise this call option over all but one of the New WIP Beverages Shares held
by the CSI Trust in return for an amount equal to the number of CSI Trust Distell Shares
(“Distell Call Option”). Alternatively, Distell may exercise the Distell Call Option to
acquire all the New WIP Beverages Shares held by the CSI Trust in return for the issue or
delivery of an amount of Distell Shares equal to the number of CSI Trust Distell Shares.
The CSI Trust will also grant Distell an option to purchase all of the New WIP Beverages
Shares held by the CSI Trust for an adequate consideration in the event that the CSI
Trust does not comply with the requirements of the BEE Codes or if it commits a material
breach of the memorandum of incorporation (“MOI”) of WIP Beverages.
4.5 Amended Preference Share Terms
In terms of the Proposed Restructuring, the terms of the Preference Shares issued to
Distell in terms of the Original BEE Transaction shall be amended such that the CSI Trust
will be entitled to receive an ordinary dividend on the New WIP Beverages Shares in an
amount equal to the amount that the CSI Trust would have received had the CSI Trust
remained the holder of the CSI Trust Distell Shares (“Amended Preference Share
Terms”). The reason for this amendment is to ensure that Distell’s current BEE ownership
rating, based on the BEE Codes, is, to the extent possible, maintained and that the CSI
Trust continues to benefit from any cash flow it would have been entitled to receive if the
Proposed Restructuring had not been implemented.
Save for further amendments to provide for the fact that WIPHOLD Distilleries and ESOP
will no longer be ordinary shareholders of WIP Beverages, the Preference Share terms
will remain unaltered and continue to accrue dividends to the holder thereof.
5. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED RESTRUCTURING AFTER IMPLEMENTATION OF THE AMENDED PUT OPTION
5.1 Pro forma financial effects of the Proposed Restructuring after implementation of
the Amended Put Option
The Original BEE Transaction has been accounted for in the financial statements of
Distell over the periods of the Original BEE Transaction through the potential diluted
number of Distell Shares.
If the Original BEE Transaction were to be terminated in its current form as envisaged by
the Amended Put Option, there would be financial effects on the net asset value, net
tangible asset value, earnings and headline earnings per Distell Share. The Proposed
Restructuring will only have a minimal effect on the net asset value, net tangible asset
value, earnings and headline earnings per share in Distell when compared to the financial
effects that will occur if the Original BEE Transaction were to be terminated in its current
form.
The pro forma financial effects, pro forma statement of financial position and pro forma
income statement have been prepared using accounting policies that comply with
International Financial Reporting Standards and that are consistent with those applied in
the audited Distell results for the twelve months ended 30 June 2013. The pro forma
financial effects are presented in accordance with the JSE Listings Requirements, the
Guide on Pro Forma Financial Information issued by SAICA, ISAE 3420 and the
measurement and recognition requirements of IFRS.
Furthermore, Distell is not required to make any further payments or facilitate any shortfall
funding relating to the Original BEE Transaction or the Proposed Restructuring, therefore
neither the Original BEE Transaction or the Proposed Restructuring will create any further
financial effects.
The pro forma financial effects are provided for illustrative purposes only and, because of
their pro forma nature, may not fairly present Distell’s financial position, changes in equity,
results of operations or cash flow.
The effects relate mainly to the transaction costs and Securities Transfer Tax (“STT”)
associated with the Proposed Restructuring and the consolidation of the CSI Trust by
Distell, the effect of which would have also been accounted for under the Original BEE
Transaction after the implementation of the Amended Put Option.
Original BEE Pro Forma
Reported at Transaction Change after Proposed Change
For the year ended 30 June 2013 30 June 2013 (Amended Put (%) Restructuring (%)(4)
(cents)(1) Option)(cents)(2) cents)(3)
Net asset value per share 3,581.2 3,290.7 -8.1% 3,283.5 -0.2%
Net tangible asset value per share 2,837.0 2,606.0 -8.1% 2,598.8 -0.3%
Earnings per share 540.8 502.6 -7.1% 495.3 -1.4%
Diluted earnings per share 496.1 501.4 1.1% 494.1 -1.4%
Headline earnings per share 535.7 497.8 -7.1% 490.5 -1.5%
Diluted headline earnings per share 491.4 496.6 1.1% 489.4 -1.5%
Normalised headline earnings per share (5) 666.2 619.3 -7.0% 612.0 -1.2%
Diluted normalised headline earnings per 611.2 617.9 1.1% 610.6 -1.2%
share(5)
Weighted average number of Distell 202,752 217,780 7.4% 217,780 0.0%
shares in issue (’000)
Weighted average diluted number of 221,008 218,287 -1.2% 218,287 0.0%
Distell shares in issue (’000)
Number of shares in issue (’000) 203,298 220,978 8.7% 220,978 0.0%
Notes and assumptions:
1. The Distell financial information reflected in the “Reported at 30 June 2013” column has been extracted from the
published audited group results of Distell for the twelve months ended 30 June 2013.
2. The Distell financial information reflected in the “Original BEE Transaction (Amended Put Option)” column has been
calculated on the basis that the Original BEE Transaction would be unwound based on the published audited group
results of Distell for the twelve months ended 30 June 2013 and on the terms as have been agreed with WIP
Beverages shareholders in the Amended Put Option. It is also prepared on the assumption that the CSI Trust Distell
Shares would be treated as treasury shares indefinitely as a result of the consolidation of the CSI Trust. The income
statement financial effects are prepared on the basis that the Amended Put Option took place on 1 July 2012, while
statement of financial position financial effects were based on the 30 June 2013 statement of financial position to
ensure these financial effects are consistent per the JSE Listings Requirements.
3. The Distell financial information reflected in the “Proposed Restructuring” column has been calculated on the basis
that the Proposed Restructuring would be implemented based on the published audited group results of Distell for
the twelve months ended 30 June 2013 by only considering the incremental effect in relation to the financial effects
in the “Original BEE Transaction” column. The income statement financial effects are prepared on the basis that the
Proposed Restructuring took place on 1 July 2012, while statement of financial position financial effects were based
on the 30 June 2013 statement of financial position to ensure these financial effects are consistent per the JSE
Listings Requirements.
4. The change reflects the difference between the financial effects after the Original BEE Transaction is unwound and
the Proposed Restructuring on a percentage basis.
5. Normalised headline earnings is based on the disclosure as per Distell’s audited financial information as at 30 June
2013.The items adjusted for in the normalised headline earnings is for certain once-off items, including but not
limited to Distell’s provision related to excise duty and new business development expenses.
6. SHAREHOLDER SUPPORT
Distell has received irrevocable undertakings from certain Distell shareholders to vote the stated
number of Distell Shares held by them as at the date of the general meeting in favour of the
Amended Put Option and the Proposed Restructuring (“General Meeting”) and the resolutions
to be proposed at the General Meeting. Details of shareholdings of these parties as at the last
practicable date are set out below:
Party Shares subject to Shares subject to Percentage Effective voting
undertaking at the undertaking at holding at last rights for the
signature date of last practicable practicable date General Meeting
irrevocable date % %
undertaking(1)
Remgro-Capevin Investments 117,348,000 117,348,000 57.8% 57.8%
Limited
Other Beverages Interests 58,674,000 58,674,000 28.9% 28.9%
Proprietary Limited (SABMiller) 176,022,000 176,022,000 86.7% 86.7%
Notes
(1)
The shareholding of Distell Shares reflected in the irrevocable undertakings provided by Distell shareholders may differ
to their shareholding of Distell Shares as at the General Meeting date due to trading in Distell Shares between the
signature date of the irrevocable undertakings and the General Meeting date.
7. CONDITIONS PRECEDENT TO THE AMENDED PUT OPTION AND THE PROPOSED
RESTRUCTURING
7.1 The Amended Put Option
The Amended Put Option is conditional on the fulfilment of the condition precedent that
the requisite majority of Distell shareholders approve the amendments to the Original
BEE Transaction to provide for the Amended Put Option, as set out in the Addendum, at
the General Meeting.
7.2 The Proposed Restructuring
The Proposed Restructuring is subject to the fulfilment of the conditions precedent that
the requisite majority of Distell shareholders approve the following:
o the financial assistance granted by Distell to WIP Beverages in terms of section
45 of the Companies Act;
o the issue of Distell Shares to the CSI Trust, if the Distell Call Option is exercised
by WIP Beverages or Distell, in terms of section 41 of the Companies Act; and
o the amendments to the Original BEE Transaction to provide for the Amended
Preference Share Terms.
In addition, the issue of the New WIP Beverages Shares and the repurchase of the
Repurchased Shares as per paragraph 4.3 is conditional upon the fulfilment of, inter
alia, the condition precedent that the current MOI of WIP Beverages is replaced with a
MOI embodying, inter alia, the relevant terms of the Proposed Restructuring and relate
mainly to the New WIP Beverages Shares and the Amended Preference Share Terms.
8. DIRECTORS’ RECOMMENDATION
Taking into account the relevant information, the Board, is of the opinion that the Proposed
Restructuring will benefit Distell shareholders and, accordingly, recommends that Distell
shareholders vote in favour of the Proposed Restructuring and Amended Put Option.
With respect to the information provided in this announcement, the Board:
o have considered all statements of fact and opinion in this announcement;
o collectively and individually accept full responsibility for the accuracy of the
information provided;
o certify that, to the best of their knowledge and belief, there are no other facts or
omissions which would make any statement in this announcement false or
misleading;
o confirm that they made all reasonable enquiries in this regard; and
o confirm that this announcement contains all the necessary information required in
terms of the Listings Requirements.
9. SALIENT DATES AND TIMES
A circular containing full details of the Amended Put Option, the Proposed Restructuring and
incorporating the notice of the General Meeting, which is subject to the approval of the JSE, will
be posted to Distell shareholders on or about 17 December 2013 (“Circular”).
The General Meeting will take place at the Auditorium of The House of J.C. Le Roux, Devon
Valley Road, Devon Valley, Stellenbosch, Western Cape at 11:00 am on Friday,
17 January 2014.
2013
Record date for Distell shareholders to be recorded in the Friday, 6 December 2013
register in order to be entitled to receive the Circular
Circular posted to Distell shareholders Tuesday, 17 December 2013
2014
Last day to trade in order to be eligible to vote at the General Friday,3 January
Meeting
Record date in order to vote at the General Meeting Friday, 10 January
General Meeting to be held at 11:00am Friday, 17 January
Results of General Meeting to be announced on SENS Friday, 17 January
Results of General Meeting to be published in the press Monday, 20 January
Notes:
1. All dates and times may be changed by Distell. Any change will be published on SENS and in the press.
2. All times given in this document are local times in South Africa.
3. 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. Should Distell shareholders wish to lodge a form of proxy with the transfer secretaries, the form of proxy
will need to be received by the transfer secretaries, Computershare Investor Services Proprietary
Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), by
no later than 11:00am on Wednesday, 15 January 2014, so that arrangements can be made for the
lodgment thereof with the Company by 11:00am on Friday, 17 January 2014. Any forms of proxy not
received by this time must be handed to the chairperson of the General Meeting immediately prior to the
General Meeting.
Stellenbosch
6 December 2013
Investment bank and transaction sponsor to Distell
Investec Bank Limited
Corporate law advisers to Distell
Edward Nathan Sonnenbergs Incorporated
Sponsor to Distell
Rand Merchant Bank (a division of FirstRand Bank Limited)
Tax advisers and reporting accountants to Distell
PricewaterhouseCoopers Incorporated
Corporate law advisers to WIPHOLD Distilleries
DLA Cliff Dekker Hofmeyr
Transaction advisers to WIPHOLD Distilleries
WIP Capital Proprietary Limited
Date: 06/12/2013 01:00:00 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
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