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Blackstar Group SE\Times Media Group Inv \Tiso Inv - \Joint announcement regarding Proposed Transaction
BLACKSTAR GROUP SE TIMES MEDIA GROUP TISO INVESTMENT
(Incorporated in Malta) LIMITED HOLDINGS PROPRIETARY
(Incorporated in the Republic of South LIMITED (RF)
(Company number SE4) Africa)
Registration number 2008/009392/06
(Incorporated in the Republic of South
(Registered as an external company Africa)
with limited liability in the Republic of
South Africa under registration number Registration number
2011/008274/10) Share code: TMG 2000/027686/07
LSE Ticker: BLCK
JSE Share code: BCK ISIN: ZAE 000169272 (“TIH”)
ISIN: MT0000620113
("TMG")
(“Blackstar”)
THE TISO FOUNDATION
CHARITABLE TRUST
(Established in the Republic of South
Africa)
Master's Reference No.
IT 2962/02
(“Tiso Foundation”)
(Collectively, “Tiso”)
JOINT ANNOUNCEMENT REGARDING:
- A NON-BINDING EXPRESSION OF INTEREST (“EOI”) FROM BLACKSTAR TO ACQUIRE
THE ENTIRE ISSUED ORDINARY SHARE CAPITAL OF TMG (“TMG SHARES”) BY WAY OF
A SCHEME OF ARRANGEMENT (“SCHEME”) TO BE SETTLED BY A COMBINATION OF
NEW BLACKSTAR ORDINARY SHARES (“BLK SHARES”) AND/OR CASH
- THE PROPOSED SALE BY TISO OF A 22.9% INTEREST IN KAGISO TISO HOLDINGS
PROPRIETARY LIMITED (“KTH”) TO BLACKSTAR FOR A COMBINATION OF NEW BLK
SHARES AND CASH (“TISO TRANSACTION”), RESULTING IN A MAJOR INTEREST BEING
HELD BY TISO IN BLACKSTAR
- THE PROPOSED RENAMING OF BLACKSTAR, AS ENLARGED AFTER THE SUCCESSFUL
IMPLEMENTATION OF THE SCHEME AND THE TISO TRANSACTION, TO “TISO
BLACKSTAR GROUP SE” (“TISO BLACKSTAR”)
- THE PROPOSED TRANSFER OF BLACKSTAR’S LISTING TO THE MAIN BOARDS OF THE
EXCHANGES UPON WHICH ITS SHARES ARE CURRENTLY LISTED
INCORPORATING:
- A RENEWAL OF TMG’S CAUTIONARY ANNOUNCEMENT; AND
- A NOTIFICATION OF THE TEMPORARY SUSPENSION OF TRADE IN THE BLK SHARES ON THE
ALTERNATIVE INVESTMENT MARKET (“AIM”) OF THE LONDON STOCK EXCHANGE (“LSE”) AND
THE ALTERNATIVE EXCHANGE (“ALTX) OF THE JSE LIMITED (“JSE”).
1. INTRODUCTION
1.1 Overview of the Scheme
Shareholders of Blackstar and TMG (respectively, “BLK Shareholders” and “TMG Shareholders”)
are advised that Blackstar has submitted a non-binding EOI to TMG’s board of directors
(‘TMG Board”) regarding the potential acquisition by Blackstar of the entire issued ordinary share
capital of TMG by way of the Scheme. The TMG Board has appointed an independent board
(“TMG Independent Board”) to consider the EOI and the Scheme. The Blackstar board of directors
and the TMG Independent Board have indicated their willingness to engage on an amicable and
constructive basis regarding the negotiation of the Scheme and, should same proceed, its
implementation.
The EOI envisages that Blackstar, by way of the Scheme and through its wholly-owned subsidiary,
Blackstar (Cyprus) Investors Limited (“BCIL”), will acquire all the TMG Shares currently in issue and
not already held as treasury shares by TMG subsidiaries, Blackstar or its subsidiaries. Blackstar
currently owns approximately 32.5% of the TMG Shares and intends, subject to the fulfilment or
waiver of certain conditions, to acquire, pursuant to the Scheme, the remaining 67.5% (approximately
85.4 million TMG Shares) of the TMG Shares (“Scheme Shares”) which will result in TMG becoming
a wholly-owned subsidiary of Blackstar.
The purchase consideration payable for the Scheme Shares (“Scheme Consideration”) will comprise
of cash and new BLK Shares. The maximum cash consideration that Blackstar shall make available,
in aggregate, is R500 million (approximately GBP28.8 million), which equates to approximately 26.6%
of the Scheme Consideration. The remaining portion of the Scheme Consideration shall be settled by
the issue of new BLK Shares. Accordingly, holders of Scheme Shares (“Scheme Participants”) will
be allowed to indicate what portion of their Scheme Consideration they want to have settled in cash
(“Cash Election”), subject to offsetting elections by other Scheme Participants. If a Scheme
Participant does not make an election, they will be deemed to have elected that their Scheme
Consideration be settled entirely in cash. The total quantum of the Scheme Consideration and
number of new BLK Shares to be issued pursuant to the Scheme shall be dependent on the quantum
of the Cash Elections. The expected minimum and maximum number of new BLK Shares to be
issued pursuant to the Scheme is 90 795 000 and 123 722 650, respectively.
If the aggregate value of the Cash Elections exceeds R500 million (approximately GBP28.8 million),
Scheme Participants will have its Cash Election reduced pro rata in accordance with the value of its
Cash Election relative to the aggregate value of the Cash Elections. This is commonly known as a
“mix-and-match” election. If a Scheme Participant’s Cash Election is reduced, the number of Scheme
Shares to be acquired by the issue new BLK Shares will increase accordingly.
Scheme Shares acquired for cash shall be paid an amount of R22.00 (GBP1.27) per Scheme Share
(representing a premium of 10.9% to the 30 day volume weighted average price of a TMG Share as
at 20 November 2014 of R19.83 (GBP1.14) (“30 Day VWAP”)). Scheme Shares acquired with new
BLK Shares shall receive an amount equivalent in value to R24.50 (GBP1.41) (representing a
premium of 23.6% to the 30 Day VWAP) per Scheme Share with each new BLK Share being
allocated a value of R16.91 (GBP0.93*) per share, being equivalent to Blackstar’s intrinsic net asset
value per share (“NAVPS”) as at 30 June 2014 and the issue price of the new BLK Shares to be
issued to Tiso, as more fully explained and defined in paragraph 1.2 below. This results in each
Scheme Share being equivalent to 1.44885 new BLK Shares in terms of the Scheme.
Furthermore, Blackstar has proposed that TMG declares a pre-acquisition dividend of 30 cents
(GBP0.02) per TMG Share immediately upon the Scheme becoming unconditional but before
Blackstar acquires the Scheme Shares. To the extent that the TMG Board agrees to the pre-
acquisition dividend and same is incorporated into the Scheme, this will result in a 30 cent (GBP0.02)
per Scheme Share increase in a Scheme Participant’s return from the Scheme, thereby increasing
the aggregate value received by a Scheme Participant to:
a) R22.30 (GBP1.29) per Scheme Share (representing a premium of 12.5% to the 30 Day
VWAP) acquired for cash, comprising the Scheme Consideration of R22.00 (GBP1.27) per
Scheme Share and a pre-acquisition dividend of 30 cents (GBP0.02) per Scheme Share; and
b) R24.80 (GBP1.43) per Scheme Share (representing a premium of 25.1% to the 30 Day
VWAP) acquired for new BLK Shares, comprising 1.44885 new BLK Shares issued at R16.91
(GBP0.98) per share and a pre-acquisition dividend of 30 cents (GBP0.02) per TMG Share.
TMG reported attributable earnings per TMG Share of 315 cents (GBP0.18) per share and total profit
attributable to TMG Shareholders of R400 million (GBP23 million) for the financial year ended
30 June 2014.
Following the successful implementation of the Scheme, Blackstar executives that fulfil managerial
roles within TMG, will continue to fulfil the same managerial roles within TMG, and accordingly TMG’s
management structure will remain unchanged. This will ensure continuity of management and a
continuation of the strategy initiated by the Blackstar executives at TMG.
In accordance with the Companies Regulations 2011, the TMG Board has appointed the TMG
Independent Board to evaluate the Scheme. The TMG Independent Board will appoint an
independent expert acceptable to the South African Takeover Regulation Panel to provide the TMG
Independent Board with external advice in regard to the Scheme, in the form of a fair and reasonable
opinion, in order for the TMG Independent Board to form an opinion on the Scheme Consideration for
the benefit of TMG Shareholders. The substance of the external advice and the opinion of the TMG
Independent Board on the Scheme will be detailed in the Scheme circular that is expected to be sent
to TMG Shareholders in due course.
1.2 Overview of the Tiso Transaction
Before submission of the EOI to the TMG Independent Board, Blackstar commenced negotiations
with TIH and the Tiso Foundation to acquire their interests in KTH. Tiso collectively owns an equity
interest of 22.9% in KTH, a South African incorporated investment holding company.
TIH is a co-founder of KTH, one of South Africa’s leading privately held investment companies and
was established in 2001. TIH is jointly owned and managed by co-founders Nkululeko Sowazi
(“Sowazi”) and David Adomakoh (“Adomakoh”). In July 2011, TIH agreed to merge its investment
holding company with Kagiso Trust Investments Proprietary Limited to form KTH. Sowazi is Chairman
of KTH and Adomakoh is Chairman of the KTH Investment and Valuation Committee. In addition to
their roles at TIH and KTH, both Adomakoh and Sowazi hold positions on the boards of directors of a
variety of listed and unlisted companies.
The KTH investment portfolio has an aggregate net asset value (“NAV”) approaching R10 billion
(GBP576.7 million) comprising quality blue chip companies principally in South Africa, and
increasingly, other parts of the continent. These include investments in the resources, financial
services, media, property and infrastructure sectors. Larger investments include Kagiso Media, MMI
Holdings, Exxaro, Actom and Fidelity Bank in Ghana.
On Friday, 5 December 2014, Blackstar and Tiso entered into an agreement (“Tiso Agreement”) in
terms of which Tiso shall reverse into Blackstar its equity interest in KTH for an aggregate amount of
R2.06 billion (GBP118.8 million) (“Tiso Consideration”), comprising, subject to minor adjustments,
R485 million (GBP27.9 million) in cash and 92.8 million new BLK Shares issued at a price of R16.91
(GBP0.98) per share, being the BLK Share NAVPS as at 30 June 2014. Accordingly, the Tiso
Transaction does not result in a dilution of Blackstar’s NAVPS and provides Tiso with a significant
interest in Tiso Blackstar, expected to be approximately 35% after the Scheme, depending on the
quantum of the Cash Elections.
The Tiso Transaction is classified in accordance with the AIM Rules as a reverse takeover and
represents the consolidation of two successful Africa focused investment entities as well as a
significant milestone in the growth paths of Blackstar and TIH.
As a result KTH being an investment holding company, the profits attributable to its shares are not
considered an appropriate measure of their value and the NAV attributable to the KTH shares to be
acquired by Blackstar amounts to R2.07 billion (GBP119.3 million) as at 30 June 2014.
1.3 The Proposed Transaction
Pursuant to the Tiso Agreement, the Tiso Transaction is conditional upon the proposal and successful
implementation of the Scheme upon the salient terms contained in the EOI. Similarly, the finance to
be raised for purposes of funding the cash portion of the Scheme Consideration and the Tiso
Consideration (“Acquisition Finance”) is conditional upon the successful implementation of the Tiso
Transaction and the Scheme. Accordingly, the Tiso Transaction and the Scheme (collectively, the
“Proposed Transaction”) are inter-conditional. Blackstar has already procured conditional credit
approval from major South African lenders to provide debt funding in an amount sufficient to settle the
cash payable pursuant to the Proposed Transaction (R1 billion) (GBP57.6 million), related costs and
additional finance for purposes of future limited expansion / capital expenditure opportunities.
Immediately upon completion of the Proposed Transaction, Blackstar, as enlarged by the Tiso
Transaction and the Scheme, will change its name to Tiso Blackstar Group SE and, subject to
eligibility and approval of the related regulatory documentation, proposes to migrate its listing to the
main boards of the exchanges upon which its shares are currently listed (i.e. AIM and ALTX).
Tiso Blackstar’s Chief Executive Officer will be Andrew Bonamour, Blackstar’s founder. Andrew will be
joined by Adomakoh and Sowazi who, pursuant to the Tiso Agreement, will assume active roles in
Tiso Blackstar’s management through key Chairmanship roles within the Tiso Blackstar Group.
Adomakoh will become Chairman of Tiso Blackstar (the Group’s listed holding company) and Sowazi
will serve as a non-executive director of Tiso Blackstar and become Chairman of Tiso Blackstar South
Africa (the Group’s primary advisory entity). Tiso Blackstar’s senior management, comprising
Bonamour, Adomakoh and Sowazi, shall be supported by the Group’s existing team of investment
professionals.
As a significantly enlarged investment vehicle housing the combined interests of Tiso and Blackstar,
Tiso Blackstar expects to further improve its operating cost to NAV ratio, and capacity for leverage for
the benefit of all stakeholders.
Service contracts for any of the proposed directors have not yet been agreed but, once agreed, the
salient terms of these contracts will be published via the LSE’s Regulatory News Service at the
appropriate time before Blackstar shareholders are required to vote on the Proposed Transaction.
2. RATIONALE FOR THE PROPOSED TRANSACTION
Blackstar was established in 2005 to participate in African listed and unlisted investment opportunities
with the underlying themes of strategic market position, strong cash flows and the capability to extend
the reach of its South African base into the African continent. Blackstar has accomplished excellent
returns, in South African Rand terms, since its establishment and continues to extract value in a
pro-active manner and a hands-on approach to investment management.
Since its establishment in 2001, TIH, through the Tiso Group, has developed a solid reputation
amongst a wide range of stakeholders for the manner in which it has conducted its business. A strong
adherence to core principles of integrity and professionalism saw the Tiso Group steadily evolve into
one of South Africa's leading black companies with high quality investments across a range of
sectors, and the development of a robust network of relationships which TIH continues to enjoy. The
success of TIH was meaningfully shared with the Tiso Foundation, an entity established by TIH
through a donation of a significant shareholding in Tiso Group. TIH continues to be the sponsor of the
Tiso Foundation. The Tiso Foundation is today a self-sustaining public benefit organisation whose
primary focus is the enablement of young South Africans through programmes designed to develop
academic and leadership talent. The successful implementation of the Tiso Transaction will serve to
strengthen, underpin and extend the core programmes of the Tiso Foundation as a consequence of
the cash component of the proceeds received through the Tiso Transaction.
The creation of Tiso Blackstar is expected to result in:
a) a dual listed Africa-focused diversified investment company of scale;
b) the consolidation of complementary skills, expertise and networks of the combined
management teams of Tiso and Blackstar;
c) a company positioned to further develop a strategic and mutually beneficial relationship with
KTH through co-investment and other business development opportunities; and
d) the pursuit of a growth strategy supported by solid, cash producing assets.
Since first acquiring a significant interest in TMG during September 2012, Blackstar management has
assumed key positions within the TMG management team and led numerous value augmenting
initiatives to the benefit of all TMG Shareholders. Blackstar has developed significant knowledge and
expertise with regards to TMG and its operations and is well positioned to extract further value in the
face of challenging market conditions for the benefit of Tiso Blackstar’s shareholders, including those
Scheme Participants which elect to receive BLK Shares under the Scheme.
In the face of digital media and the decline of tangible media (i.e. print media), TMG currently has
limited scope for future investment and therefore limited opportunity to optimise shareholder returns.
As a wholly-owned subsidiary of Tiso Blackstar, TMG’s future cash flows may be utilised to support
Tiso Blackstar’s broader strategy allowing for potential reinvestment in other value yielding sectors.
Further to the ultimate strategic direction and value path of Tiso Blackstar, shorter term value
enhancements for Tiso Blackstar shareholders are expected to include, inter alia:
i) improved liquidity in the Tiso Blackstar share (versus the BLK Shares and TMG Shares)
resulting from the increased number of shares in issue and shareholders, the proposed
migration to the main boards of the JSE and LSE and a reconfigured shareholder base;
ii) upon completion of the Scheme, Tiso Blackstar is expected to have a NAV in excess of
R4.6 billion (GBP234 million) and, by implication, a similarly enlarged market capitalisation.
This is expected to enhance Tiso Blackstar’s market visibility and potentially improving the
marketability of Tiso Blackstar shares;
iii) increased black economic empowerment ownership levels;
iv) portfolio and head office costs will be spread over a larger base reducing their effect on the
share price; and
v) recognition of a control premium in relation to TMG, this is currently entrenched and
inaccessible in TMG’s existing structure.
The implementation of the Proposed Transaction is believed to represent an attractive value
proposition for all future Tiso Blackstar stakeholders.
3. CONDITIONS TO THE TISO TRANSACTION
Implementation of the Tiso Transaction remains, pursuant to the Tiso Agreement, conditional upon
the fulfilment or waiver, as the case may be, inter alia, of the following conditions precedent by no
later than 30 April 2015:
a) the procurement by Blackstar of the Acquisition Finance;
b) all necessary regulatory approvals and clearances for the implementation of the Tiso
Transaction by the JSE and the South African Reserve Bank;
c) the KTH shareholders waiving any pre-emptive rights they may have over the Tiso’s KTH
shares and approving the encumbrance of these shares by Blackstar for purposes of the
Acquisition Finance;
d) TIH procuring the necessary approvals from its financiers to transfer its KTH shares to
Blackstar;
e) approval by the shareholders of Blackstar and TIH as well as the trustees of the Tiso
Foundation of all resolutions required for the implementation of the Proposed Transaction
pursuant to those laws, regulations and other statutory documents relevant to them;
f) Blackstar procuring confirmation by an independent expert that the issue of the new BLK
Shares has occurred at fair value; and
g) the Scheme being proposed and becoming unconditional in accordance with its terms, save
for any condition pertaining to the Tiso Transaction becoming unconditional.
4. CONDITIONS TO THE POTENTIAL OFFER AND THE SCHEME
The TMG Independent Board and Blackstar intend to conclude an implementation agreement for
purposes of establishing the relationship between the parties and detailing the proposed terms and
conditions of the Scheme and related processes (“Implementation Agreement”). The presentation of
a firm offer by BCIL to acquire the Scheme Shares (“Firm Offer”) is expected to be, at Blackstar’s
discretion, subject to:
a) the execution of the Implementation Agreement, which shall not be a Firm Offer;
b) the procurement by Blackstar of a cash confirmation acceptable to the Takeover Regulation
Panel (“TRP”) in support of the cash portion of the Scheme Consideration. In this regard,
Blackstar has procured credit approved term sheets for the Acquisition Finance and is in
process of contractually formalising these arrangements;
c) TMG reaching an equitable arrangement with the holders of options under the TMG
Management Incentive Plan in terms of which any requirement for Blackstar to make a
comparable offer to such option holders is removed; and
d) confirmation from the TMG Independent Board that it intends to favourably recommend the
Scheme to Scheme Participants.
This announcement does not constitute a Firm Offer and in the event that a Firm Offer is presented,
the Scheme would be conditional upon the fulfilment or, as the case may be, waiver of, inter alia, the
following conditions precedent:
i) approval of the Scheme by Scheme Participants representing 75% or more of the voting
rights attached to the Scheme Shares;
ii) approval of the Proposed Transaction by BLK Shareholders pursuant to the applicable laws
and regulations;
iii) approval of the Scheme by Blackstar and TMG’s regulators including, inter alia, the TRP, the
JSE, the South African Reserve Bank and the South African competition authorities; and
iv) the Tiso Transaction becoming unconditional in accordance with its terms, save for any
condition pertaining to the Scheme becoming unconditional.
5. TMG SHAREHOLDER SUPPORT
TMG Shareholders holding in excess of 80% of the Scheme Shares have provided Blackstar with
letters of firm support in terms of which they indicate that they intend to vote in favour of the Scheme
should a Firm Offer materialise.
6. EXCLUSIVITY AND BREAK FEE ARRANGEMENT
The TMG Independent Board has agreed on an in-principle basis to a break-fee and exclusivity
arrangement with Blackstar (“Exclusivity Arrangement”) designed for the purposes of compensating
the parties for costs incurred in the event that the Scheme is not proposed or fails and preventing
TMG from actively soliciting a counter-offer from a third party. The EOI was unsolicited and the TMG
Independent Board does not intend on soliciting an offer from a third party.
The broad terms of the Exclusivity Arrangement are expected to provide that TMG shall make
payment to Blackstar an amount of R15 million (GBP0.865 million) in the event that the Scheme fails
as a result of TMG or its representatives:
a) actively soliciting another offer; or
b) acting in a manner, other than pursuant to a fiduciary duty, regulation or law, which prejudices
or frustrates the implementation of the Scheme.
Similarly, the Exclusivity Arrangement will require that, in the event that the Scheme fails as a result of
similar actions by Blackstar, Tiso or their respective representatives, Blackstar shall pay to TMG an
amount of R15 million (GBP0.865 million). In addition, to the extent that the Firm Offer is not extended
to TMG, Blackstar shall reimburse TMG for the costs incurred in relation to the Proposed Transaction.
The terms and conditions of the Exclusivity Arrangement shall be finalised and included in the
Implementation Agreement.
7. TERMINATION OF TMG’S LISTING
Application will be made to the JSE, subject to the Scheme becoming unconditional in accordance
with its terms, for the suspension and termination of the listing on the JSE of the TMG Shares.
Further details regarding the Proposed Transaction will be published on SENS in due course.
8. NOTIFICATION OF THE SUSPENSION OF BLK SHARES
The Proposed Transaction is classified as a reverse takeover in terms of the AIM Rules and its
implementation would have a material effect on Blackstar securities.
In accordance with the AIM Rules, trading in BLK Shares will be suspended pending confirmation that
BLK will no longer be pursuing the Proposed Transaction, the publication of an admission document
or, in respect of a move to the main market of the LSE, a prospectus that constitutes an admission
document. In addition, trading in BLK Shares will be suspended on the ALTX for the corresponding
period.
9. RENEWAL OF CAUTIONARY ANNOUNCEMENT
TMG Shareholders are referred to TMG’s cautionary announcement on 21 November 2014 and are
cautioned that there is no certainty at this stage that the Firm Offer will be made or that the Scheme
will be either proposed or implemented. The Firm Offer may have a material effect on the price of
TMG securities. Accordingly, TMG Shareholders are advised to continue exercising caution when
dealing in TMG securities until a further announcement is made.
10. RESPONSIBILITY STATEMENTS
The TMG Independent Board accepts responsibility for the information contained in this
announcement insofar as it relates to TMG. To the best of its knowledge, the information contained in
this announcement is true and the announcement does not omit anything likely to affect the
importance of the information.
The board of directors of Blackstar accepts responsibility for the information contained in this
announcement insofar as it relates to Blackstar and BCIL. To the best of their knowledge, the
information contained in this announcement is true and the announcement does not omit anything
likely to affect the importance of the information.
The board of directors of TIH accept responsibility for the information contained in this announcement
insofar as it relates to TIH and Tiso Foundation. To the best of their knowledge, the information
contained in this announcement is true and the announcement does not omit anything likely to affect
the importance of the information.
Johannesburg
8 December 2014
*: All amounts quoted in British Pound Sterling (“GBP”) have been converted into from South African
Rand at a rate of GBP1.00 : R17.34 being the approximate exchange rate as at 2 December 2014
with the exception of Blackstar’s NAVPS as at 30 June 2014 which was reported as GBP0.93 per
share based on the prevailing exchange rate at that time.
Sole corporate adviser to Blackstar in relation to the Scheme and transaction sponsor to
Blackstar in relation to the Proposed Transaction
One Capital
Sole corporate adviser to Tiso in relation to the Tiso Transaction
One Capital
Attorneys to Blackstar in relation to the Proposed Transaction
ENSafrica
Attorneys to Tiso
Cliffe Dekker Hofmeyr
Attorneys to TMG in relation to the Scheme
Webber Wentzel
Corporate advisor and transaction sponsor to TMG
PSG Capital
AIM NOMAD to Blackstar
Liberum Capital
Christopher Bowman – 0203 100 2222
Date: 08/12/2014 09:00:00 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
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,
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