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Small Related Party Transaction
SEARDEL INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1968/011249/06
N-Shares share code: SRN; Ordinary Shares share code: SER
ISIN: ZAE000030144; ISIN: ZAE000029815
(“Seardel” or “the Company”)
SMALL RELATED PARTY TRANSACTION ANNOUNCEMENT
1. INTRODUCTION
Seardel shareholders (“Shareholders”) are hereby advised that Sabido Investments Proprietary
Limited (“Sabido”), a subsidiary of Seardel, has entered into agreements for the acquisition of
shares in the following companies, the detail of which is set out in the body of this announcement:
1.1. 100% of the issued share capital in Longkloof Limited (“Longkloof”) which is currently
owned 80% by Deepkloof Limited (“Deepkloof”), a subsidiary of Hosken Consolidated
Investments Limited (“HCI”) and 20% by IPROP Holdings Limited (“IPROP”), an indirect
wholly owned subsidiary of Remgro Limited (“Remgro”) (“Longkloof Acquisition”); and
1.2. 100% of the issued share capital of Crystal Brook Distribution Proprietary Limited (“Crystal
Brook”) which is currently owned 80% by HCI International Holdings Limited (“HCI
International”), a subsidiary of HCI, and 20% by Venfin Media Beleggings Proprietary
Limited (“Venfin”), a wholly owned subsidiary of Remgro (“Crystal Brook Acquisition”);
(collectively, “the Transactions”).
2. CLOSING DATE OF THE TRANSACTIONS
The closing date of the Transactions is 5 business days after the conditions precedent to the
Transactions having been fulfilled (“Closing Date”).
3. LONGKLOOF ACQUISITION
3.1. Business description
Longkloof is a media investment holding company incorporated in Jersey, Channel Islands
that holds interests in various offshore media entities. These include:
• Power Entertainment Media Ltd (100% held), a made-for-television movie and mini-series
distributor and producer;
• Lalela Music LLC (85% held), a music publisher and library;
• The Africa Channel (47% held), which produces television channels for the SKY and
Virgin platforms in the United Kingdom;
• Da Vinci Media GMBH (33% held), which distributes educational materials via television
channels in the European market;
• Longkloof US Investment Holding LLC (100% held), which holds an investment in a United
States fund with film and television participation rights;
• e.tv China / e.tv Beijing (70% held), a media investment company in mainland China that
is pursuing several media related investment opportunities; and
• Setanta Sports Asia (50% held), a sports broadcaster in Asia.
3.2. Rationale
The Longkloof Acquisition has the intention to consolidate the off-shore media investments
of HCI, Seardel’s controlling shareholder, with its local media investments held by Sabido.
3.3. Purchase consideration and settlement
The purchase consideration for the issued share capital of Longkloof, payable by Sabido, is
US$100, attributable pro rata to the vendors’ shareholdings: 80% to Deepkloof and 20% to
IPROP.
The purchase consideration in respect of the issued share capital of Longkloof will be
settled in cash on the Closing Date.
3.4. Discharge of Deepkloof and IPROP claims on loan account against Longkloof
Sabido has agreed to discharge in full, on the Closing Date, on behalf of Longkloof, the
amounts owing by Longkloof to Deepkloof and IPROP on loan account as follows:
• Deepkloof claims comprising an interest-free loan of US$29,595,216.33 and interest
bearing loans of US$6,559,496.57 accruing interest at 5.5% per annum compounded
monthly in arrears; and
• IPROP claims comprising an interest-free loan of US$7,398,804.08 and interest bearing
loans of US$1,639,874.14 accruing interest at 5.5% per annum compounded monthly in
arrears.
The discharge by Sabido of the claims of Deepkloof and IPROP on behalf of Longkloof will
be funded by an interest-free loan from Sabido’s major shareholders to Sabido, in the ratio
68.5% by Seardel and 31.5% by Venfin.
3.5. Conditions precedent
The Longkloof Acquisition is subject to the fulfilment of the following condition precedent:
• approval of the Longkloof Acquisition by the Financial Surveillance Department of the
South African Reserve Bank.
4. CRYSTAL BROOK ACQUISITION
4.1. Business description
Crystal Brook is engaged in the distribution of broadcasting content and special interest
DVD’s and operates principally in South Africa.
4.2. Rationale
The Crystal Brook Acquisition is part of a restructuring with the intention of consolidating the
media investments of HCI into Sabido.
4.3. Purchase consideration and settlement
The purchase consideration payable by Sabido is R11,000,000, attributable pro rata to the
vendors’ shareholdings: 80% to HCI International and 20% to Venfin.
The purchase consideration will be settled in cash on the Closing Date.
4.4. Conditions precedent
The Crystal Brook Acquisition is subject to the conditions precedent that the Longkloof
Acquisition agreement is entered into and becomes unconditional in accordance with its
terms.
5. FINANCIAL EFFECTS
Based on Seardel’s reviewed results for the year ended 31 March 2014 ("Results"), the
financial effects of t he Transactions on Seardel’s earnings per share ("EPS"), diluted earnings
per share ("DEPS”), headline earnings per share ("HEPS"), diluted headline earnings per
share (“DHEPS”), net asset value per share (“NAV”) and net tangible asset value per share
(“NTAV”) are set out below. The financial effects are prepared for illustrative purposes
only, and because of their nature, may not give a fair presentation of Seardel's financial
position, changes in equity, results of operations and cash flows or the effect and impact of the
Transactions.
The financial effects are the responsibility of the Seardel board of directors and have not
been reviewed or reported on by Seardel’s auditors.
Pro forma
Seardel Pro forma adjustments
After the
results adjustments of the Pro forma Change
Rights Offer
31 of the Transactions after the
before the
March Rights 3,4, 5, 6 Transactions
1 2 Transactions
2014 Offer
%
EPS (cents) (1.3) 8.4 7.1 (1.4) 5.7 (20%)
- continuing 16.8 (5.8) 11.0 (1.4) 9.6 (13%)
- discontinued (18.1) 14.1 (4.0) 0.0 -4 0%
DEPS (cents) (1.2) 8.2 7.0 (1.4) 5.6 (20%)
- continuing 16.4 (5.4) 11.0 (1.4) 9.6 (13%)
- discontinued (17.6) 13.6 (4.0) 0.0 -4 0%
HEPS (cents) 0.1 7.3 7.4 (1.0) 6.4 (14%)
- continuing 14.1 (3.6) 10.5 (1.0) 9.5 (10%)
- discontinued (14.0) 10.9 (3.1) 0.0 -3.1 0%
DHEPS (cents) 0.1 7.2 7.3 (1.0) 6.3 (14%)
- continuing 13.7 (3.3) 10.4 (1.0) 9.4 (10%)
- discontinued (13.6) 10.5 (3.1) 0.0 -3.1 0%
NAV per Seardel
229.0 (50.8) 178.2 (0.5) 177.7 (0.3%)
share (cents)
NTAV per Seardel
(320.8) 347.6 26.8 (4.9) 21.9 (18%)
Share (cents)
Weighted average
number of shares 884 3125 4009 0 4,009.0 0%
(millions)
Number of shares in
884 3,125 4,009 - 4,009 0%
issue (millions)
Diluted weighted
average number of 1,187 3,125 4,312 - 4,312 0%
shares (millions)
Notes:
1. The "Seardel results 31 March 2014" column reflects Seardel's reviewed consolidated annual
results as reported for the year ended 31 March 2014.
2. The "Pro forma adjustments of the Rights Offer" column reflects the financial effects of the
rights offer set out in the circular to Shareholders dated 24 February 2014 whereby Seardel
undertook a rights offer to raise R5 billion through the issue of 3.125 billion Seardel N shares at
an issue price of R1.60 per share (the "Rights Offer"). The financial effects of the Rights Offer
were not included in Seardel's 31 March 2014 financial results as the completion of the Rights
Offer occurred subsequent to its financial year end. The pro forma financial effects are based
on the principal assumptions set out in the aforementioned circular and included below:
a. The pro forma financial effects of the Rights Offer on EPS, DEPS, HEPS and DHEPS are
based on the following assumptions:
i. the 3.125 billion new N-Shares were issued at R1.60 per share for proceeds of R5
billion on 1 April 2013;
ii. the proceeds of the Rights Offer are applied on 1 April 2013, firstly to settle interest
bearing debt of R4.5 billion, resulting in an interest saving at a rate of 72% of the
South African prime lending rate at the date of the circular with the excess cash
raised assumed to be placed on call, earning interest at 5.5% before taxation; and
b. The pro forma financial effects of the Rights Offer on NAV and NTAV per Seardel share
are based on the following assumptions:
i. the 3.125 billion new N-Shares were issued at R1.60 per share for proceeds of
R5 billion on 31 March 2014;
ii. the proceeds of the Rights Offer are assumed to have been applied on
31 March 2014, firstly to settle interest bearing debt of R4.5 billion with the excess
cash raised assumed to be placed on call; and
iii. transaction costs estimated at R35.4 million have been offset against the R5 billion
Rights Offer share issue.
3. In calculating the financial effects of the Transactions, it was assumed that the Transactions
were implemented on 1 April 2013 for statement of comprehensive income purposes and on
31 March 2014 for statement of financial position purposes.
4. The EPS, DEPS, HEPS and DHEPS were adjusted for:
a. Net profit of R2.8 million from Crystal Brook and a net loss of R39.9 million from Longkloof
being Seardel's 63.9% share of the profit and losses attributable to it from its 63.9%
shareholding in Sabido.
b. Transaction funding costs comprising of the following:
i. Seardel's share of the interest income forgone on the R11m cash settlement of the
Crystal Brook Acquisition purchase consideration by Sabido at a deposit rate of
5.75% before tax;
ii. Seardel's share of the interest saving on the settlement of the interest bearing
promissory notes of Longkloof; and
iii. Interest expense on Seardel's loan to Sabido of 68.5% of the Longkloof Acquisition
purchase consideration accruing interest at the South African prime rate less tax.
5. The NAV and NTAV per share (excluding treasury shares) was adjusted for:
a. Seardel's share of the investment in Crystal Brook and Longkloof;
b. Seardel raising external funding to loan 68.5% of the Longkloof Acquisition purchase
consideration to Sabido; and
c. Seardel's share of the goodwill recognised by Sabido on the Crystal Brook Acquisition and
Longkloof Acquisition of R0.1m and R107m respectively, as well as, R190m intangible
assets in Longkloof on the date of acquisition.
6. USD: ZAR exchange rate applied to the statement of financial position is the closing rate on 31
March 2014 of R10.5953 and the USD: ZAR exchange rate applied to the statement of
comprehensive income is the average rate for the year 1 April 2013 - 31 March 2014 of
10.12306.
6. CATEGORISATION OF TRANSACTIONS
Remgro is the controlling shareholder of Venfin and IPROP as well as being a material
shareholder of Sabido (31.5% shareholding) and, accordingly, Venfin and IPROP are related
parties to Seardel in terms of the JSE Listings Requirements.
HCI is the controlling shareholder of Seardel, HCI International and Deepkloof and, accordingly,
HCI International and Deepkloof are related parties to Seardel in terms of the JSE Listings
Requirements.
The Transactions will be implemented contemporaneously and with the same group companies
(HCI and Remgro) and as such will be aggregated for the purposes of their categorisation as
related party transactions in terms of the JSE Listings Requirements.
The Transactions constitute small related party transactions in terms of the JSE Listing
Requirements.
The JSE has been provided with written confirmation from BDO Corporate Finance Proprietary
Limited, an independent professional expert acceptable to the JSE, confirming that the
Transactions are fair to Seardel’s Shareholders ("the Fairness Opinion").
The Fairness Opinion will be available for inspection at Seardel`s registered office for a period
of 28 days from the date of this announcement.
Cape Town
28 August 2014
Transaction Advisor and Sponsor
Investec Bank Limited
Corporate Law Advisor
Tabacks and Associates Proprietary Limited
Independent Professional Expert
BDO Corporate Finance Proprietary Limited
Date: 28/08/2014 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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