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Joint Announcement - Thembeka Scheme of Arrangement and Specific Repurchases of Shares by PSG
PSG Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1970/008484/06
Share code: PSG
ISIN code: ZAE000013017
(“PSG”)
Thembeka Capital Limited (RF)
(Incorporated in the Republic of South Africa)
Registration number: 2005/016065/06
(“Thembeka”)
JOINT ANNOUNCEMENT OF THE FIRM INTENTION OF PSG TO MAKE AN
OFFER TO ACQUIRE ALL THE ORDINARY SHARES IN THEMBEKA, NOT
ALREADY HELD BY PSG OR ITS SUBSIDIARIES, BY WAY OF A SCHEME OF
ARRANGEMENT AND INCLUDING SPECIFIC REPURCHASES OF SHARES BY PSG
1. INTRODUCTION
1.1 Thembeka wishes to unwind its investment portfolio in a
manner that realises value for its shareholders
(“Unwinding”). The Unwinding will be implemented in
consecutive transaction steps.
1.2 In terms of the Unwinding, Thembeka will, inter alia,
transfer its interests in its investments that are
subject to black economic empowerment (“BEE”) lock-in
periods, being Pioneer Food Group Limited and Kaap Agri
Limited and only those shares in Curro Holdings Limited
that are subject to a BEE lock-in period (“BEE Lock-in
Shares”), to a new black-owned and controlled company
at a determined value (“Lock-in Investments Transfer”),
the shareholding of which will ultimately be held by
the Stellenbosch BEE Education Trust (“SBET”), as to
51%, and PSG, as to the remaining 49%. SBET is a
broad-based BEE trust of which 100% of the
beneficiaries are black students.
1.3 Shareholders are hereby notified of PSG’s firm
intention to make an offer (“Firm Intention Offer”) to
acquire all the ordinary shares in Thembeka, not
already held by PSG or its subsidiaries, by way of a
scheme of arrangement in terms of section 114 of the
Companies Act, 2008 (“Companies Act”) (“Scheme”). For
the avoidance of doubt, the Scheme will only be
implemented post the implementation of the Lock-in
Investments Transfer and only after 31 December 2014.
1.4 The implementation of the Scheme will amount to a
category 2 acquisition by PSG in terms of the Listings
Requirements of the JSE Limited (“JSE”) (“JSE Listings
Requirements”). The Unwinding will include a specific
repurchase of shares by PSG from Thembeka (“Thembeka
Specific Repurchase”) and SBET (“SBET Specific
Repurchase”). The Thembeka Specific Repurchase will be
implemented after the Lock-in Investment Transfer but
before the implementation of the Scheme and the SBET
Specific Repurchase will be implemented after the
implementation of the Scheme.
1.5 It is important to note that the values of Thembeka and
PSG are relative, given that Thembeka and PSG have
similar investment exposures, and therefore movements
in the share price of PSG and/or the underlying
investments of Thembeka and PSG from now until the
implementation date of the Scheme should not have a
material impact on the scheme consideration ratio set
out below.
1.6 The purpose of this announcement is to advise PSG
shareholders and Thembeka shareholders of the terms and
conditions of the Firm Intention Offer and to advise
PSG shareholders of the terms and conditions of the
Thembeka Specific Repurchase and the SBET Specific
Repurchase.
2. RATIONALE FOR THE UNWINDING
2.1 Rationale for Thembeka
Thembeka was established in 2005 to provide BEE parties
with a vehicle to participate in the opportunities
created by the BEE Act, No 53 of 2003, read together
with the BEE Codes of Good Practice. Thembeka has
successfully over the past 9 years concluded quality
BEE transactions that have contributed towards
Thembeka’s successes to date. Set out below are the key
reasons that the board of Thembeka (“Thembeka Board”)
considered when resolving to proceed with the
Unwinding:
2.1.1 the BEE landscape in corporate South Africa has
changed over the past few years, with many companies
changing the way in which they conclude BEE
ownership transactions, which makes Thembeka’s
business model less viable;
2.1.2 Thembeka has grown its assets under management
substantially over the years. In order to
participate in sizeable transactions that may have
an impact on its underlying intrinsic value Thembeka
would require substantial capital injections. Given
Thembeka’s unique shareholding structure, wherein
51% of its shareholding is black owned, the scarcity
of black capital and stringent bank funding
requirements, Thembeka’s board recognises that
Thembeka’s ability to raise additional capital to
pursue new sizeable investments will be restricted;
and
2.1.3 Thembeka, currently restricts the trading of its
shares to black individuals only. As such Thembeka
has historically traded over-the-counter, at a
substantial discount to its underlying intrinsic
value. Further the recent Financial Services Board
directive that prohibits over-the-counter trading in
its current form, makes it difficult for Thembeka’s
BEE shareholders to exit and/or realise value. The
Scheme, if implemented, will seek to remedy these
effective “lock-in’s” created for Thembeka’s black
shareholders and will result in Thembeka’s black
shareholders realising Thembeka’s underlying
intrinsic value at a fair price. Thembeka’s black
shareholders will receive a more liquid and
tradeable instrument, being new JSE-listed shares in
PSG. As an example and based on the over the counter
traded Thembeka share price at 30 June 2014,
Thembeka’s black shareholders will effectively
realise (in PSG shares) a 56.3% premium to the
Thembeka 30 trading day VWAP at 30 June 2014.
2.2 Rationale for PSG
The Unwinding as proposed is marginally positive for
PSG. However, as PSG was instrumental in the
establishment of Thembeka, together with various BEE
parties, and PSG has derived an indirect benefit from
the commitment of Thembeka’s BEE shareholders since
2006, PSG has elected to assist Thembeka in the
implementation of the Unwinding.
3. MECHANICS OF THE SCHEME
3.1 The Scheme will constitute an “affected transaction” as
defined in section 117(c) of the Companies Act and will
be regulated by the Companies Act, the Companies
Regulations, 2011 (“Companies Regulations”) and the
Takeover Regulation Panel (“TRP”).
3.2 The Scheme will be implemented in terms of section 114
of the Companies Act and will be proposed by the
Thembeka Board between Thembeka and its shareholders
other than PSG Group.
3.3 The Firm Intention Offer will be subject to the
condition precedent set out in paragraph 4.2 below
("Firm Intention Offer Condition").
3.4 The Scheme will be subject to the conditions precedent
set out in paragraph 5.1 below ("Scheme Conditions").
4. THE FIRM INTENTION OFFER
4.1 MATERIAL TERMS OF THE FIRM INTENTION OFFER
4.1.1 The Firm Intention Offer will be made on the basis
that –
4.1.1.1 PSG will acquire all ordinary shares in Thembeka
not already held by PSG or its subsidiaries
(“Scheme Shares”), being 6,880,047 Thembeka
shares;
4.1.1.2 following the implementation of the Scheme,
Thembeka will be a wholly-owned subsidiary of
PSG (PSG confirms that it will adhere to the
provisions of paragraph 10.21 of Schedule 10 of
the JSE Listings Requirements, in this regard);
4.1.1.3 once the Firm Intention Offer Condition and the
Scheme Conditions have been fulfilled and the
Scheme is implemented, Thembeka shareholders
will receive the scheme consideration of 1.7
(one point seven) PSG ordinary shares for every
1 (one) unlisted Scheme Share disposed of in
terms of the Scheme, rounded to the nearest
whole number and credited as fully paid (“Scheme
Consideration”);
4.1.1.4 the Scheme Consideration will not have a cash
alternative;
4.1.1.5 the Scheme Consideration will be issued on
market and will be listed on the main board of
the JSE; and
4.1.1.6 a total of 11,696,079 PSG shares will be issued
as the Scheme Consideration.
4.1.2 The Scheme Consideration has been calculated on the
basis set out below –
4.1.2.1 the Scheme Consideration has been calculated
based on the intrinsic value of R168.03 per
Thembeka ordinary share as at 30 June 2014,
after providing for capital gains tax and
discounts on the BEE Lock-in Shares. For the
avoidance of doubt, the Scheme Consideration has
been calculated post the Lock-in Investments
Transfer; and
4.1.2.2 the 30-day volume weighted average share price
of R97.56 per PSG ordinary share for the 30-day
period ended 30 June 2014.
4.1.3 It is important to note that the values of Thembeka
and PSG are relative, given that Thembeka and PSG
have similar investment exposures, and therefore
movements in the share price of PSG and/or the
underlying investments of Thembeka and PSG from now
until the implementation date of the Scheme should
not have a material impact on the Scheme
Consideration ratio.
4.2 FIRM INTENTION OFFER CONDITION
4.2.1 The posting of the circular to Thembeka
shareholders, other than PSG, in relation to the
Scheme ("Scheme Circular") is subject to the
fulfilment of the Firm Intention Offer Condition
that, by no later than 31 October 2014, all
requisite approvals have been received from the JSE,
the TRP and the Financial Surveillance Department of
the South African Reserve Bank for the posting of
the Scheme Circular, to the extent required.
4.2.2 The Firm Intention Offer Condition cannot be waived.
4.2.3 PSG will be entitled to extend the date for the
fulfilment of the Firm Intention Offer Condition by
up to 30 days, in its own discretion, upon written
notice to Thembeka, but shall not be entitled to
extend the date to a date later than the aforesaid
30-day period without the prior written consent of
Thembeka.
5. THE SCHEME CONDITIONS
5.1 The Scheme will be subject to (and will become
operative on the relevant operative date upon) the
fulfilment of the following conditions precedent on or
before 31 December 2014 –
5.1.1 that PSG shareholders approve all resolutions
required in order to implement the Unwinding;
5.1.2 that the Scheme be approved by the requisite
majority of Thembeka shareholders, as contemplated
in section 115(2)(a) of the Companies Act, and, to
the extent required, by a High Court in terms of
section 115(2)(c) of the Companies Act, and, if
applicable, that Thembeka does not treat the
aforesaid shareholder resolution as a nullity, as
contemplated in section 115(5)(b) of the Companies
Act;
5.1.3 that, in relation to any objections to the Scheme by
Thembeka shareholders –
5.1.3.1 no Thembeka shareholders give notice objecting
to the Scheme, as contemplated in section 164(3)
of the Companies Act and vote against the
resolution proposed at the general meeting to
approve the Scheme (“Scheme Meeting”); or
5.1.3.2 if Thembeka shareholders give notice objecting
to the Scheme, as contemplated in section 164(3)
of the Companies Act, and vote against the
resolution proposed at the Scheme Meeting,
Thembeka shareholders holding no more than 5% of
all Scheme Shares eligible to be voted at the
Scheme Meeting give such notice and vote against
the resolutions proposed at the Scheme Meeting;
or
5.1.3.3 if Thembeka shareholders holding more than 5% of
all Scheme Shares eligible to vote at the Scheme
Meeting give notice objecting to the Scheme, as
contemplated in section 164(3) of the Companies
Act, and vote against the resolution proposed at
the Scheme Meeting, the relevant Thembeka
shareholders do not exercise their appraisal
rights, by giving valid demands in terms of
sections 164(5) to 164(8) of the Companies Act
within 30 business days following the Scheme
Meeting, in respect of more than 5% of the
Scheme Shares eligible to be voted at the Scheme
Meeting; and
5.1.4 that, in respect of the implementation of the Scheme
and only to the extent that same may be applicable,
the approval of the JSE, the TRP, the South African
competition authorities and any other relevant
regulatory authorities (either unconditionally or
subject to conditions acceptable to PSG) be
obtained.
5.2 The Scheme Conditions in paragraphs 5.1.1, 5.1.2 and
5.1.4 cannot be waived.
5.3 The Scheme Condition in paragraph 5.1.3 may be waived
by PSG upon written notice to Thembeka, prior to the
date for fulfilment of the relevant Scheme Condition.
5.4 PSG will be entitled to extend the date for the
fulfilment of any of the Scheme Conditions, by up to 60
days, in its own discretion, upon written notice to
Thembeka, but shall not be entitled to extend the date
to a date later than the aforesaid 60-day period
without the prior written consent of Thembeka.
6. SHAREHOLDINGS IN THEMBEKA AND ACTING AS PRINCIPAL
6.1 Currently PSG, through its wholly owned subsidiary PSG
Private Equity (Proprietary) Limited, holds 49% of the
issued share capital of Thembeka.
6.2 PSG confirms that it is the ultimate prospective
purchaser of the Scheme Shares and is acting alone and
not in concert with any party.
7. AUTHORISED SHARE CAPITAL
PSG confirms that it has sufficient authorised share
capital available to settle the Scheme Consideration shares
to be issued to Thembeka shareholders in terms of the
Scheme.
8. THEMBEKA INDEPENDENT BOARD, OPINION AND RECOMMENDATIONS
8.1 In accordance with the Companies Regulations, an
independent Thembeka board, comprised of independent
non-executive directors, has been appointed by the
Thembeka Board to evaluate the Scheme (“Thembeka
Independent Board”).
8.2 The Thembeka Independent Board will appoint an
independent expert acceptable to the TRP to provide the
Thembeka Independent Board with external advice in
regard to the Scheme and to make appropriate
recommendations to the Thembeka Independent Board for
the benefit of Thembeka shareholders. The substance of
the external advice and the opinion of the Thembeka
Independent Board on the Scheme will be detailed in the
Scheme Circular.
9. FURTHER DOCUMENTATION AND SALIENT DATES
9.1 Further details of the Scheme will be included in the
Scheme Circular that will, subject to the fulfilment of
the Firm Intention Offer Condition, be posted to
Thembeka shareholders in due course. The Scheme
Circular will, inter alia, also contain a notice of the
Scheme Meeting, a form of proxy and a form of surrender
and transfer.
9.2 The Scheme will become effective and be implemented
following the fulfilment of the Firm Intention Offer
Condition and the Scheme Conditions. The salient dates
in relation to the Scheme will be published in due
course.
10. THE THEMBEKA SPECIFIC REPURCHASE AND SBET SPECIFIC
REPURCHASE
10.1 As steps in the Unwinding, PSG will repurchase
9,902,349 ordinary shares (representing 4.5% of the
issued shares of PSG) from Thembeka (“Thembeka
Repurchase Shares”) at R97.56 per share and 1,785,850
ordinary shares (representing 0.8% of the issued shares
of PSG) from SBET and its subsidiary (“SBET Repurchase
Shares”) at R97.56 per share.
10.2 The purchase consideration in respect of the Thembeka
Repurchase Shares, being R966 million, shall be settled
by way of the creation of a loan account against PSG in
favour of Thembeka, and the purchase consideration in
respect of the SBET Repurchase Shares, being R174
million, shall be settled by way of the creation of a
loan account against PSG in favour of SBET.
10.3 The Thembeka Specific Repurchase and the SBET Specific
Repurchase (“Specific Repurchases”) will be subject to
the following conditions precedent:
10.3.1 the approval of the Specific Repurchases by the
requisite majority of PSG shareholders, as
contemplated in section 48(8) and 115(2)(a) of the
Companies Act, and, to the extent required, by a
High Court in terms of section 115(2)(c) of the
Companies Act, and, if applicable, that PSG does not
treat the aforesaid shareholder resolutions as a
nullity, as contemplated in section 115(5)(b) of the
Companies Act; and
10.3.2 that, in respect of the implementation of the
Specific Repurchases and only to the extent that
same may be applicable, the approval of the JSE, the
TRP, the South African competition authorities and
any other relevant regulatory authorities (either
unconditionally or subject to conditions acceptable
to PSG) be obtained.
10.4 Subsequent to the implementation of the Specific
Repurchases, the Thembeka Repurchase Shares and the
SBET Repurchase Shares shall be cancelled.
10.5 The effective date of the Thembeka Specific Repurchase
is expected to be during January 2015 and will take
place prior to the implementation of the Scheme. The
effective date of the SBET Specific Repurchase is
expected to be during January 2015 and will take place
post implementation of the Scheme.
10.6 Given that the Specific Repurchases will entail the
acquisition of more than 5% of the issued share capital
of PSG, the Specific Repurchases are subject to the
requirements of section 114 and 115 of the Companies
Act. In terms of section 115 of the Companies Act and
section 5.69 of the JSE Listings Requirements, the
Specific Repurchases will require shareholder approval
by way of a special resolution.
10.7 In accordance with the Companies Regulations, an
independent PSG board, comprised of independent non-
executive directors, has been appointed by the board of
directors of PSG to evaluate the Specific Repurchases
(“PSG Independent Board”).
10.8 The PSG Independent Board will appoint an independent
expert acceptable to the TRP to provide the PSG
Independent Board with external advice in regard to the
Specific Repurchases and to make appropriate
recommendations to the PSG Independent Board for the
benefit of PSG shareholders. The substance of the
external advice and the opinion of the PSG Independent
Board on the Specific Repurchases will be detailed in
the circular referred to in paragraph 10.9 below.
10.9 A circular containing full information on the Specific
Repurchases and also incorporating a notice of general
meeting (“General Meeting”) of PSG shareholders will be
posted to PSG shareholders in due course (“Repurchase
Circular”). The required resolutions authorising the
Specific Repurchases will be tabled at the General
Meeting.
10.10 It is important to note that PSG will issue 11,696,079
PSG shares in terms of the Scheme but PSG acquires
9,902,349 PSG shares in terms of the Thembeka Specific
Repurchase and 1,785,850 PSG shares in terms of the
SBET Specific Repurchase. Accordingly, any movement in
the PSG share price from now until the implementation
date of the Unwinding should not have a material
financial impact on PSG.
11. PRO FORMA FINANCIAL EFFECTS ON THEMBEKA SHAREHOLDERS
11.1 The pro forma financial effects on Thembeka
shareholders are the responsibility of the Thembeka
directors and have been prepared for illustrative
purposes only to provide information about how the
Scheme, incorporating the Thembeka Specific Repurchase
and the SBET Specific Repurchase, may affect the
financial position of the Thembeka shareholders. The
pro forma financial effects on Thembeka shareholders
have been calculated in respect of 1 (one) Thembeka
Scheme Share held before the Scheme and 1.7 (one point
seven) PSG shares held after the Scheme.
11.2 The pro forma financial effects are presented for
illustrative purposes only and, because of their
nature, may not fairly present the actual financial
effects of the Scheme, incorporating the Thembeka
Specific Repurchase and the SBET Specific Repurchase,
on Thembeka shareholders.
Audited
results for
the year
ended
February Pro forma
2014 (1) after (2) Change
Net asset value per
share (R) 146.42 63.44 (56.7%)
Tangible net asset value
per share (R) 146.42 46.36 (68.3%)
Recurring headline
earnings per share
(cents) 673.6 773.3 14.8%
Headline earnings per
share – basic (cents) 3,613.7 935.5 (74.1%)
Attributable earnings
per share – basic
(cents) 3,692.9 992.6 (73.1%)
Sum-of-the-Parts value
per share at 30 June
2014 (R) before tax 216.75 198.40 (8.5%)
30-day volume weighted
average over-the-counter
price per share at 30
June 2014 (R) (3) 106.12 165.85 56.3%
Notes and assumptions:
1. Extracted, without adjustment, from the audited results
of Thembeka for the year ended 28 February 2014, except
for the sum-of-the-parts value per share at 30 June
2014, which was calculated using quoted market prices
for all JSE-listed and over-the-counter traded
investments, with unquoted investments being valued
using market-related multiples.
2. The “Pro forma after” column sets out the position of a
Thembeka shareholder following implementation of the
Scheme, now owning PSG shares. The financial information
is based on PSG’s pro forma financial effects for the
year ended 28 February 2014 (refer paragraph 12 below),
pursuant to implementation of the Scheme, multiplied by
the scheme consideration of 1.7 PSG ordinary shares in
order to provide the pro forma financial effects for
Thembeka shareholders. The predominant reason for the
decrease in pro forma net asset value and net tangible
asset value per share as well as headline and
attributable earnings per share results from Thembeka
having accounted for substantial marked-to-market
profits on its JSE-listed equity investments, whereas
PSG either equity accounted or consolidated the majority
of its underlying investments for the financial year
ended 28 February 2014. Thembeka and PSG’s accounting
treatment of similar underlying investments in
accordance with International Financial Reporting
Standards thus differed during the aforementioned
financial period.
3. The 30-day volume weighted average price of R106.12 per
share was calculated with reference to Thembeka shares
traded over-the-counter until 30 June 2014. The R165.85
per share was calculated with reference to PSG’s JSE-
listed 30-day volume weighted average price of R97.56
per share being multiplied by the 1.7 exchange ratio.
12. PRO FORMA FINANCIAL EFFECTS ON PSG SHAREHOLDERS
12.1 The pro forma financial effects on PSG shareholders are
the responsibility of the PSG directors and have been
prepared for illustrative purposes only to provide
information about how the Scheme, incorporating the
Thembeka Specific Repurchase and the SBET Specific
Repurchase, may affect the financial position of PSG
shareholders.
12.2 The pro forma financial effects are presented for
illustrative purposes only and, because of their
nature, may not fairly present the actual financial
effects of the Scheme, incorporating the Thembeka
Specific Repurchase and the SBET Specific Repurchase,
on PSG shareholders.
Audited
results
for the
year ended
February Pro forma
2014 (1) after (2) Change
Net asset value per
share (R) 37.48 37.32 (0.4%)
Tangible net asset value
per share (R) 26.03 27.27 4.8%
Recurring headline
earnings per share
(cents) 446.9 454.9 1.8%
Headline earnings per
share – basic (cents) 551.3 550.3 (0.2%)
Attributable earnings
per share – basic
(cents) 574.9 583.9 1.6%
Sum-of-the-Parts value
per share at 30 June
2014 (R) 116.13 116.71 0.5%
Notes and assumptions:
1. Extracted, without adjustment, from the audited results
of PSG for the year ended 28 February 2014, except for
the sum-of-the-parts value per share at 30 June 2014,
which was calculated using quoted market prices for all
JSE-listed and over-the-counter traded investments,
whilst unquoted investments were valued using market-
related multiples.
2. The “Pro forma after” column sets out the results of the
Scheme and incorporates the following financial effects:
a. The Lock-in Investments Transfer (refer paragraph
1.2 above) being implemented at a transaction value
of R825 million and that SBET is treated as an
associate of PSG.
b. The Thembeka Specific Repurchase (refer paragraph
10 above) being implemented.
c. The acquisition of 6,880,047 Thembeka shares, being
those not already held by PSG and its subsidiaries,
settled by way of issuing 11,696,079 PSG shares.
d. The elimination of Thembeka’s equity and reserves
in accordance with standard consolidation
procedures.
e. The SBET Specific Repurchase (refer paragraph 10
above) being implemented.
f. Capitalised transaction costs are estimated to be
R8 million.
g. All adjustments are expected to have a continuing
effect.
13. THEMBEKA INDEPENDENT BOARD RESPONSIBILITY STATEMENT
The Thembeka Independent Board accepts responsibility for
the information contained in this announcement which
relates to Thembeka in connection with the Scheme and
confirms that, to the best of its knowledge and belief,
such information is true and the announcement does not omit
anything likely to affect the importance of such
information.
14. PSG INDEPENDENT BOARD RESPONSIBILITY STATEMENT
The PSG Independent Board accepts responsibility for the
information contained in this announcement which relates to
PSG in connection with the Specific Repurchases and
confirms that, to the best of its knowledge and belief,
such information is true and the announcement does not omit
anything likely to affect the importance of such
information.
15. PSG BOARD RESPONSIBILITY STATEMENT
The board of directors of PSG accepts responsibility for
the information contained in this announcement which
relates to PSG in connection with the Scheme and confirms
that, to the best of its knowledge and belief, such
information is true and the announcement does not omit
anything likely to affect the importance of such
information.
16. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Thembeka shareholders are referred to Thembeka’s voluntary
cautionary announcement on 15 July 2014 and the further
announcement on 17 July 2014, and are advised that, whereas
the terms of the Scheme have now been announced, caution is
no longer required to be exercised by shareholders.
Stellenbosch
10 September 2014
PSG Capital: Transaction adviser and sponsor to PSG
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