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Announcement relating to: a trading statement, the rights offer, the restructuring, and withdrawal of cautionary
ELLIES HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2007/007084/06)
JSE share code: ELI ISIN: ZAE000103081
(“Ellies” or the “company”)
ANNOUNCEMENT RELATING TO:
- A TRADING STATEMENT,
- THE RIGHTS OFFER,
- THE RESTRUCTURING, AND
- WITHDRAWAL OF CAUTIONARY
1. Introduction
Shareholders are referred to the announcement dated 29 October 2014 in terms of which shareholders were
advised of, inter alia, the Proposed Rights Offer and the Restructuring.
Further to that announcement and other developments, shareholders are provided herein with a trading
statement, full details of the Proposed Rights Offer and further information regarding the Restructuring.
2. Trading statement
Shareholders are advised that Ellies’ loss per share for the six months ended 31 October 2014 (the “current
financial period”) is expected to be between 10 and 15 cents per share compared to the earnings per share of
25.27 cents per share for the six months ended 31 October 2013 (the “comparative period”), which is between
139.57% and 159.35% lower than the earnings per share for the comparative period. Headline loss per share for
the current financial period is expected to be between 10 and 15 cents per share compared to the headline
earnings of 25.09 cents per share for the comparative period, which is between 139.85% and 159.77% lower
than the headline earnings per share for the comparative period.
The information on which this trading statement has been based has not been reviewed or reported on by the
company’s auditors.
Ellies’ results for the six months ended 31 October 2014 will be announced on SENS on or about
18 December 2014.
3. Rights Offer
3.1 Introduction
Ellies is undertaking a fully underwritten rights offer to Ellies shareholders in order to raise
approximately R115 million (the “Rights Offer”).
The Rights Offer serves as a mechanism to enable the company to settle the outstanding amounts under
the management loans (detailed below) and to reduce the company’s interest bearing liabilities, in
addition to financing the costs of the Rights Offer.
3.2 Salient terms of the Rights Offer
Ellies shareholders will be entitled to subscribe for a maximum of 104 551 707 Ellies shares (“rights
offer shares”) at an issue price of 110 cents per share in the ratio of 30 rights offer shares for every
100 Ellies shares held by them on the initial record date, being Friday, 2 January 2014.
The JSE has granted listings for the letters of allocation and the rights offer shares as follows:
- letters of allocation in respect of a maximum of 104 551 707 rights offer shares will be listed from
the commencement of business on Wednesday, 24 December 2014 to close of business on Friday,
9 January 2015, both days inclusive, under the JSE code: ELIN and ISIN:ZAE000196580; and
- a maximum of 104 551 707 new Ellies shares will be listed with effect from the commencement of
business on Monday, 12 January 2015.
3.3 Management loans and underwriting
Ellie Salkow (“Salkow”), the executive chairman of the company, in his personal capacity, has
committed a loan facility of up to R25 million to the company in order to fund the working capital
requirements of the Ellies consumer business exclusively (the “Salkow facility”). In addition, Salkow has
agreed to furnish a guarantee in favour of The Standard Bank of South Africa Limited for a maximum
amount of R45 million (the “Salkow guarantee”).
Ryan Otto (“Otto”), an executive director of the company and the chief executive officer of the Megatron
business, in his personal capacity, has committed a loan facility of up to R20 million to the company in
order to fund the working capital requirements of the Megatron business exclusively (the “Otto
facility”).
As a first underwriting commitment, each of Salkow and Otto have agreed to underwrite the rights offer
by way of following their respective rights under the rights offer and applying for excess allocations in
respect of rights offer shares in order to settle the outstanding amounts under each of the Salkow facility
(including under the Salkow guarantee, if necessary) and the Otto facility, which will be owing by Ellies
to each of them as at the relevant date (the “first underwriting commitments”).
Mazi Capital Proprietary Limited (“Mazi”) has agreed to underwrite the balance of the issue of the rights
offer shares, after fulfilment of the first underwriting commitments, up to a maximum aggregate
subscription price of R70 million, in consideration for an underwriting fee of R2.1 million (an amount
equal to 3% of Mazi’s commitment on the rights offer shares).
The effect of the above underwriting commitments is that the rights offer is fully underwritten.
Accordingly, the rights offer will be fully subscribed and is therefore not conditional on a minimum
subscription.
3.4 Excess shares application
Ellies shareholders will have the right to apply for any excess rights offer shares not taken up by the first
underwriting commitments, and any such excess shares will be attributed equitably, taking cognisance of
the number of shares and rights held by the shareholder just prior to such allocation, including those
taken up as a result of the rights offer, and the number of excess rights offer shares applied for by such
shareholder.
If you are a certificated shareholder and you wish to apply for excess rights offer shares you must
complete the form of instruction attached to the rights offer circular (defined in 3.7 below) in accordance
with the instructions contained therein. If you are a dematerialised shareholder and you wish to apply for
excess rights offer shares, you must instruct your CSDP or broker as to the number of excess rights offer
shares for which you wish to apply.
3.5 Salient dates and times
Last day to trade in Ellies shares in order to participate in the Tuesday, 23 December 2014
rights offer
Listing and trading of letters of allocation on the JSE under JSE Wednesday, 24 December 2014
code: “ELIN” and ISIN: ZAE000196580
Ellies shares commence trading on the JSE ex-rights offer Wednesday, 24 December 2014
entitlement
Rights offer circular and form of instruction posted to certificated Monday, 29 December 2014
shareholders
Record date for determination of shareholders entitled to Friday, 2 January 2015
participate in the rights offer (initial record date)
Dematerialised shareholders will have their accounts at their Monday, 5 January 2015
CSDP or broker automatically credited with their entitlement
Certificated shareholders on the register will have their Monday, 5 January 2015
entitlement credited to an electronic account held at the transfer
secretaries
Rights offer opens at 09:00 Monday, 5 January 2015
Rights offer circular posted to dematerialised shareholders (where Tuesday, 6 January 2015
applicable)
Last day to trade letters of allocation on the JSE Friday, 9 January 2015
Maximum number of rights offer shares listed and trading therein Monday, 12 January 2015
commences on the JSE
Rights offer closes at 12:00 Friday, 16 January 2015
Record date for letters of allocation (final record date) Friday, 16 January 2015
New Ellies shares issued Monday, 19 January 2015
Dematerialised shareholders’ accounts updated and debited by Monday, 19 January 2015
CSDP or broker (in respect of entitlements to rights offer shares)
Certificates posted to certificated shareholders (in respect of the Monday, 19 January 2015
rights offer shares)
Results of rights offer announced on SENS Monday, 19 January 2015
Results of rights offer announced in the press Tuesday, 20 January 2015
Refunds (if any) to certificated shareholders in respect of Wednesday, 21 January 2015
unsuccessful excess share applications made and share certificates
posted to successful excess share applications
Dematerialised shareholders’ accounts updated and debited by Wednesday, 21 January 2015
their CSDP or broker (in respect of successful excess share
applications)
Notes:
1. All references to dates and times are to local dates and times in South Africa.
2. Dematerialised shareholders are required to inform their CSDP or broker of their instructions in terms
of the rights offer in the manner and time stipulated in the agreement governing the relationship
between the shareholder and its CSDP or broker.
3. Share certificates may not be dematerialised or rematerialised between Wednesday, 24 December
2014 and Friday, 2 January 2015, both days inclusive.
4. Dematerialised shareholders will have their accounts at their CSDP or broker automatically credited
with their rights and certificated shareholders will have their rights credited to their accounts at Link
Market Services South Africa Proprietary Limited.
5. CSDPs effect payment in respect of dematerialised shareholders on a delivery-versus-payment
method.
3.6 Foreign shareholders
Introduction
Foreign shareholders may be affected by the Rights Offer, having regard to prevailing laws in their
relevant jurisdictions. Such foreign shareholders should inform themselves about and observe any
applicable legal requirements of such jurisdiction in relation to all aspects of the circular that may affect
them, including the Rights Offer. It is the responsibility of each foreign shareholder to satisfy himself as
to the full observation of the laws and regulatory requirements of the relevant foreign jurisdiction in
connection with the Rights Offer, including the obtaining of any governmental, exchange or other
consents or the making of any filing which may be required, the compliance with other necessary
formalities and the payment of any issue, transfer or other taxes or other requisite payments due in such
jurisdiction. The Rights Offer is governed by the laws of South Africa and is subject to applicable laws
and regulations, including the Exchange Control Regulations.
Affected foreign shareholders
Any Ellies shareholder who is in doubt as to his position with respect to the Rights Offer in any
jurisdiction, including, without limitation, his tax status, should consult an appropriate independent
professional advisor in the relevant jurisdiction without delay. Foreign shareholders are reminded that
they may dispose of their Ellies shares on or prior to the last day to trade, in which case they will not
participate in the Rights Offer.
Foreign shareholders accordingly must take their own advice on whether they are entitled, after the
Rights Offer, to continue beneficially to hold any Ellies shares distributed to them and take the
appropriate action in accordance with that advice.
Note to U.S. shareholders
The rights offer shares will not be registered with the U.S. Securities and Exchange Commission (“SEC”)
under the U.S. Securities Act of 1933, as amended, or any U.S. state securities laws. Neither the SEC nor
any U.S. federal or state securities commission has registered, approved or disapproved the rights offer
shares or passed comment or opinion upon the accuracy or adequacy of the rights offer circular. Any
representation to the contrary is a criminal offence in the U.S.
Ellies shareholders who are citizens or residents of the U.S. are advised that the rights offer shares have
not been and will not be registered under the U.S. Securities Exchange Act of 1934, as amended.
Sale of letters of allocation
It is the responsibility of any person outside the common monetary area (including, without limitation,
nominees, agents and trustees for such persons) receiving the rights offer circular and wishing to take up
rights offer shares under the Rights Offer, to satisfy themselves as to full observance of the applicable
laws of any relevant territory, including obtaining any requisite governmental or other consents,
observing any other requisite formalities and paying any issue, transfer or other taxes due in such
territories.
If a premium can be obtained over the expenses of the sale, the rights of Ellies shareholders in the
jurisdictions in which it is illegal to make an offer will be sold by the transfer secretaries on the JSE for
the benefit of such Ellies shareholders. Any premium over the expenses of the sale of the rights of Ellies
shareholders in these jurisdictions (including applicable taxes, brokerage fees and commissions) shall be
remitted to such Ellies shareholders.
None of Ellies, the transfer secretaries or any broker appointed by them or Ellies, will have any obligation
or be responsible for any loss or damage whatsoever in relation to, or arising out of, the timing of such
sales or the remittance of the net proceeds of such sales.
3.7 Circular
Further details of the Rights Offer will be set out in the circular to Ellies shareholders (the “rights offer
circular”) which is expected to be posted to certificated shareholders on Monday, 29 December 2014 and
to dematerialised shareholders on Tuesday, 6 January 2014. The rights offer circular will be made
available on the company’s website www.elliesholdings.com. from Wednesday, 24 December 2014.
4. Update on restructure
As set out in the announcement dated 29 October 2014, the board of directors of the company (the “board”) has
resolved to separate the two operating divisions of Ellies Proprietary Limited in order for the Ellies consumer
business and the company’s Megatron infrastructure business to be held by separate wholly-owned subsidiaries
of the company, in preparation for a further restructuring whereby the capital required by each business will be
funded on a stand-alone basis going forward (the “Restructuring”).
It has been resolved by the board to give effect to the Restructuring by:
- establishing a new wholly owned subsidiary (“Ellies Electronics”), into which the Ellies consumer
business is to be transferred in exchange for new shares in Ellies Electronics (“Ellies Electronics
shares”);
- subject to all required approvals being obtained, the subsequent unbundling of the Ellies Electronics
shares to Ellies shareholders and simultaneous listing of Ellies Electronics on the appropriate board of the
JSE Limited,
with the result that the Megatron infrastructure business will remain the sole asset of the company, which will
be renamed in due course.
The company is of the view that the separate listings of the Ellies Electronics business and the Megatron
infrastructure business will allow for the increased focus on their respective core operations. It will also enable
the Ellies consumer business and the Megatron infrastructure business to access different sources of funding,
better suited to their respective needs and cash flow profiles. The unbundling and simultaneous separate listing
of Ellies Electronics will also provide greater investor flexibility.
5. Withdrawal of cautionary
Following the publication of the information in respect of the Rights Offer and the Restructuring set out in this
announcement, caution is no longer required to be exercised by shareholders when dealing in the company’s
securities.
11 December 2014
Joint corporate advisor and sponsor
Java Capital
Joint corporate advisor
Standard Bank
Legal advisor
Cliffe Dekker Hofmeyr
Date: 11/12/2014 08:59:00 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,
information disseminated through SENS.
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