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Pro forma financial effects of Northam’s BEE Transaction and withdrawal of cautionary announcement
NORTHAM PLATINUM LIMITED
Incorporated in the Republic of South Africa
(Registration number 1977/003282/06)
Share code: NHM
Debt issuer code: NHMI
ISIN Code: ZAE 000030912
(“Northam” or “Company”)
PRO FORMA FINANCIAL EFFECTS OF NORTHAM’S BEE TRANSACTION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Northam shareholders are referred to the announcement dated 22 October 2014
(“Announcement”) regarding Northam’s fully funded R6.6 billion 10 (ten) year secured BEE
transaction, incorporating a fully funded R4.6 billion equity capital raising. Unless otherwise
indicated, capitalised terms contained in this announcement shall bear the same meaning as the
capitalised and defined terms contained in the Announcement.
2. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
The consolidated pro forma financial effects of the Transaction (“Financial Effects”) have been
prepared using Northam’s financial results for the financial year ended 30 June 2014 (“AFS”). The
Financial Effects have been prepared in accordance with the JSE Listings Requirements, SAICA’s
Guide on Pro Forma Financial Information and the accounting policies adopted by the Company
when preparing the AFS, which comply with International Financial Reporting Standards (“IFRS”).
The Financial Effects are prepared for illustrative purposes only, and because of their nature, may
not provide a fair presentation of the Northam group’s financial position. The Financial Effects are
the responsibility of Northam’s board of directors.
To facilitate an improved understanding of the Financial Effects, Shareholders are provided with a
brief summary of certain of the Transaction’s salient features below:
i. BEE SPV is an entity created for purposes of housing the combined economic interests of the
HDSA Participants who own the entire issued ordinary share capital of BEE SPV. BEE SPV is
not a subsidiary of Northam and is created solely for purposes of facilitating the Transaction.
ii. BEE SPV is required to maintain its HDSA status and may not dispose of the BEE NHM
Shares for 10 years.
iii. Northam shall receive R4.6 billion in cash from the issue 112 million new NHM Shares to BEE
SPV at R41.00 per share. Additionally, BEE SPV shall acquire a further 47 million existing
NHM Shares for R2 billion at R41.00 per share.
iv. BEE SPV shall fund the acquisition of the NHM Shares through the issue of 160 million
cumulative, redeemable BEE Preference Shares for a total value of R6.6 billion. The BEE
Preference Shares shall accrue Preference Dividends annually over a 10 year period at a
Dividend Rate based on the prime interest rate plus 350 basis points.
v. Whilst the BEE Preference Shares are in issue, BEE SPV shall be required to apply the
majority of any income earned from the BEE NHM Shares towards the settlement of
Preference Dividends. After 10 years BEE SPV shall be required to redeem the BEE
Preference Shares and any accumulated Preference Dividends. BEE SPV may elect to settle
this liability with the BEE NHM Shares or cash.
vi. If BEE SPV is unable to settle the full amount due to the BEE Preference Shareholders,
Northam shall be required to settle the shortfall. Northam may elect to settle any shortfall with
cash or by the issue of new NHM Shares.
For purposes of the Company’s consolidated financial statements, BEE SPV shall be consolidated
by Northam as if it were a subsidiary. Consequently, Northam is required to incorporate the
financial statements of BEE SPV into its consolidated financial statements, including the balances
relating to the BEE Preference Shares, Preference Dividends and BEE NHM Shares. These items
will be accounted for as described below:
a. The BEE Preference Shares (issued by BEE SPV) shall be accounted for as a debt
instrument by Northam. Accordingly, Northam shall record a liability equal to the value of the
BEE Preference Shares (R6.6 billion) plus accumulated Preference Dividends.
b. Northam shall account for the Preference Dividends accrued each year and payable by BEE
SPV, as a finance charge expense with no related tax deduction.
c. Because Northam will account for BEE SPV as a subsidiary, the BEE NHM Shares held by
BEE SPV will be treated by Northam as unissued shares. This will result in the number of
NHM Shares in issue being reduced by 160 million shares for accounting purposes.
Before the After the Change
Transaction Transaction (%)
Earnings per NHM Share (cents) 2.40 (607.30) (25 404.2)
Headline earnings per NHM Share (cents) 2.20 (607.60) (27 718.2)
Diluted earnings per NHM Share (cents) 2.40 (607.30) (25 404.2)
Diluted headline earnings per NHM Share (cents) 2.20 (607.60) (27 718.2)
Net asset value per NHM Share (cents) 2 865 2 584 (9.8)
Net tangible asset value per NHM Share (cents) 2 865 2 584 (9.8)
Weighted number of NHM Shares in issue 390 969 652 343 259 321 (12.2)
Diluted weighted average number of NHM Shares
390 969 652 343 259 321 (12.2)
in issue
Number of NHM Shares in issue 397 586 090 349 875 759 (12.0)
Notes:
1. The figures included in the “Before the Transaction” column have been extracted, without
adjustment, from the AFS.
2. For purposes of the consolidated statement of comprehensive income, it is assumed that the
Transaction occurred on 1 July 2013, and for purposes of the consolidated statement of
financial position, it is assumed that the Transaction occurred on 30 June 2014.
3. Northam shall receive cash in an amount of R4.6 billion through the issue of NHM Shares to
BEE SPV, however, no income earned from the application or investment of these funds has
been included in the Financial Effects.
4. BEE SPV will be consolidated in accordance with IFRS 10 and is therefore accounted for as a
subsidiary of Northam resulting in the 160 million BEE NHM Shares held by BEE SPV being
treated as unissued and the number of NHM Shares in issue, as disclosed in the AFS, being
reduced by the 47 million issued NHM Shares acquired by BEE SPV. Furthermore, the BEE
Preference Shares are treated as a liability of Northam (R6.6 billion) and the Preference
Dividends accrued thereon (R836 million) are accounted for as an interest expense with no
related tax deduction.
5. Estimated transaction costs of R120 million have been expensed together with a related
reduction in taxation of R17 million. Liquidity fees payable by Northam of R163 million are
deemed to be a component of the borrowing costs and are recognised as a finance charge
over the 10 year term of the BEE Preference Shares.
6. The Lock-in and Restraint Payment of R400 million is expensed together with the related
reduction in tax payable of R112 million.
7. The issue of ordinary shares in BEE SPV to the HDSA Participants other than the employee
and community trusts, results in the need to account for a share based payment charge in
accordance with IFRS 2. This share based payment charge has been estimated to equal
R851 million and has been expensed in full. The actual share based payment charge will be
calculated according to market information available as at the actual issue date of the BEE
NHM Shares. This may result in the actual quantum of the share base payment charge
varying materially from the amount reflected in the Financial Effects.
8. Until the BEE Preference Shares are redeemed, Preference Dividends and the liquidity fees
will continue to be accounted for as finance charges and will therefore have a continuing
effect on the Company.
3. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that as a result of the publication of the Financial Effects, caution is no
longer required to be exercised when dealing in the Company’s securities.
4. EXTENSION TO THE 60 DAY RULE
Shareholders are further advised that the Company has received an extension from the JSE, to
the 60 day rule described in paragraph 11.19 of the JSE Listings Requirements and will advise
Shareholders of the dates upon which the Transaction circular is expected to be published in due
course.
Johannesburg
12 December 2014
Corporate advisor, Bookrunner, Sponsor and Debt Sponsor
One Capital
Reporting accountants
Ernst & Young Inc.
Date: 12/12/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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