Wrap Text
Prposed Rights Offer and Cautionary announcement
Gijima Group Limited
(previously Gijima AST Group Limited)
Registration number 1998/021790/06
Share code: GIJ
ISIN: ZAE000147443
(“Gijima” or the “Company”)
PROPOSED RIGHTS OFFER AND CAUTIONARY ANNOUNCEMENT
1. Introduction
The board of Gijima (“the Board”) is comfortable that the implementation of the turnaround strategy is
showing satisfactory progress despite tough trading conditions, and despite the year’s loss making
position. This multi-year turnaround strategy has achieved the majority of its initial milestones,
including:
- The Company’s losses have been reduced and a targeted cost reduction of R200 million per
annum has been achieved;
- Gijima’s customer base has been stabilised, a key feature has been a 100% renewal of private
sector annuity contracts;
- R41 million capital repayment of interest bearing debt; and
- Attraction and recruitment of key talent for the new executive committee has been concluded.
With a reconfigured sales force led by the newly appointed Chief Sales Officer, the Company is
preparing itself for the next stage of the turnaround which will see a drive into new markets with new
products.
In order to underpin the next stage of the turnaround, Gijima needs to ensure that it has sufficient
working capital without incurring additional debt. After due consideration of the options, the Board has
concluded that a proposed rights offer together with a restructuring of its existing trade receivables
securitisation funding program (the “Securitisation”) is the appropriate course of action.
In terms of the Securitisation, pursuant to which GijimaAst Finance Proprietary Limited has issued
debentures to funders, including its majority funder Futuregrowth Asset Management Proprietary
Limited (“Futuregrowth”) (in its capacity as agent for its respective investment clients), the Company is
required to comply with certain financial covenants including minimum asset cover and gearing
covenants (the “Securitisation Covenants”).
The Company and Yebo Guma Investments Proprietary Limited (“Yebo Guma”), Guma Tech
Proprietary Limited, Guma Support Proprietary Limited, Guma Investment Holdings Proprietary
Limited, Guma Tech Group Proprietary Limited and Main Street 1282 Proprietary Limited (the “Guma
Entities”) have signed a heads of agreement with Futuregrowth, in which, inter alia, a deferral of
capital repayments by two years, and a restructuring of the Securitisation Covenants in line with the
agreed turnaround strategy (the “Heads of Agreement”) has been agreed. The Heads of Agreement is
subject to, amongst others, the following conditions:
- the Company raising R100 million in terms of a rights offer which is fully underwritten on a joint
and several basis by the Guma Entities (the “Rights Offer”); and
- Yebo Guma providing an immediate interim bridge loan to the Company of R30 million (the
“Bridge Loan”) to be used for compliance with the Securitisation Covenants prior to the
implementation of the Rights Offer and which is to be settled from the proceeds of the Rights
Offer. The Bridge Loan has been made available by Yebo Guma with effect from 30 September
2014.
The Board has therefore resolved to raise R100 million, by way of a renounceable rights offer to
Gijima shareholders and to agree to new terms in the Heads of Agreements.
2. Rights Offer
In terms of the Rights Offer, Gijima will offer 1 000 000 000 shares (the “Rights Offer Shares”) at a
subscription price of 10 cents per Rights Offer Share, in the ratio of 503.9867 Rights Offer Shares for
every 100 shares held at the close of business on the record date for the Rights Offer.
The proceeds from the Rights Offer will be used, inter alia, to recapitalise the Company, to ensure
compliance with all of the Securitisation Covenants, to finance the working capital and capital
expenditure requirements of the Company and to settle the Bridge Loan. The Rights Offer is expected
to be concluded within the current financial year.
3. Shareholder support
Asset managers, collectively managing 35.5% of Gijima’s shares (or 66.7% of the remaining shares
excluding those shares held by the Guma Entities), have committed to recommend to their clients to
vote in favour of all of the resolutions required to facilitate the implementation of the Rights Offer (refer
to Rights Offer conditions precedent below) as follows:
Percentage of total
Number of Percentage of
Shareholder shares excluding the
shares total shares
Guma Entities
Allan Gray Proprietary Limited 1 45 825 926 23.1% 43.3%
Investec Asset ManagementProprietary Limited1
18 704 653 9.4% 17.7%
Futuregrowth Asset ManagementProprietary Limited1
5 986 833 3.0% 5.7%
Total 70 517 412 35.5% 66.7%
1 Acting on behalf of their clients and not as principals
4. Underwriting
The Guma Entities, collectively owning 46.7% of the total shares, have signed an irrevocable
undertaking to follow their rights. The balance of the Rights Offer shares, not subscribed for by
shareholders, will be underwritten by the Guma Entities, equating to 53.3% of the Rights Offer value.
5. Rights Offer conditions precedent
The implementation of the Rights Offer is subject to the fulfilment of, inter alia, the following conditions
precedent:
- Gijima shareholders approving an increase in the authorised shares of Gijima and an
amendment to the Memorandum of Incorporation of Gijima in order to give effect to the increase
in authorised shares;
- Gijima shareholders approving the issue of new Gijima shares pursuant to the Rights Offer;
- the JSE Limited approving the Rights Offer circular to be issued to Gijima shareholders as well
as the letters of allocation and the listing of the Rights Offer Shares;
- CIPC acceptance of the special resolution to increase the authorised shares as a condition
precedent to the Rights Offer; and
- the Competition Tribunal of South Africa approving the increase in the Guma Entities’
shareholding in Gijima above 50%.
6. Bridge Loan
The Bridge Loan was made available to the Company with effect from 30 September 2014 in terms of
the Heads of Agreement. The terms of the Bridge Loan provide that Gijima will provide security to
Yebo Guma. However, as this security will constitute financial assistance in terms of the Companies
Act No 71 2008, it is conditional on the approval by shareholders at the next General Meeting. The
Bridge Loan will be settled by way of set-off against the subscription price owed by the Guma Entities
under the Rights Offer.
7. Share Consolidation
In order to reduce the number of issued shares and to improve the bid-offer trading spread the
Company proposes to undertake a share consolidation after the implementation of the Rights Offer on
the basis of one consolidated share for every twenty shares held before consolidation (“Share
Consolidation”).
8. Circular and General Meeting
Further information relating to the above Rights Offer, Bridge Loan, Share Consolidation and notice of
the General Meeting to approve such resolutions required to give effect to the above will be included
in a circular to shareholders to be distributed in due course.
9. Cautionary announcement
Shareholders are advised to exercise caution when dealing in Gijima shares until a final terms
announcement containing salient dates of the Rights Offer is made.
30 September 2014
Corporate advisor and transaction sponsor Legal advisor
PricewaterhouseCoopers Corporate Finance Webber Wentzel
Proprietary Limited
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