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Termination by Adcock of the existing BEE transaction, implementation of a new BEE transaction and cautionary
Adcock Ingram Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2007/016236/06)
Share code: AIP ISIN: 000123436
(“Adcock” or “the Company”)
Termination by Adcock of the existing BEE transaction, implementation of a new BEE transaction
and cautionary announcement
1. Termination by Adcock of the existing BEE transaction (“Adcock BEE Termination”)
1.1 Introduction
Adcock shareholders are referred to the announcement dated 16 March 2010 wherein it was
announced that Adcock had concluded transaction agreements with certain BBBEE groups
(“the BEE Participants”) that would facilitate the acquisition of an effective 13% of Adcock’s
issued share capital post the transaction by the BEE Participants (“the Existing Adcock BEE
Transaction”).
Given the significant challenges Adcock has faced in recent times and the resultant depressed
share price, the Adcock A ordinary shares (““A” Shares”) and Adcock B ordinary shares (““B”
Shares”) held by the BEE Participants in terms of the Existing Adcock BEE Transaction are
unlikely to realise any value. In order to create meaningful participation for the BEE
Participants going forward, the Adcock board of directors (“the Board”) has resolved to
terminate the Existing Adcock BEE Transaction (“Adcock BEE Termination”) and replace it
with a new, more sustainable BEE ownership transaction in accordance with the terms set out
in 2 below.
1.2 Mechanics of the Adcock BEE Termination
The Adcock BEE Termination will be implemented by way of a buy-back at nominal value and
cancellation of all the “A” Shares and “B” Shares.
Adcock is committed to facilitating economic value transfer to the BEE Participants and
recognises their contribution to the Company over the tenure of the Existing Adcock BEE
Transaction. As part of the Adcock BEE Termination, the Adcock ordinary shares acquired by
the BEE Participants using the proceeds of Adcock dividends will no longer be subject to the
call option held by the Company as set out in the terms under the Existing Adcock BEE
Transaction. Accordingly the “A” Share shareholders and the “B” Share shareholders will
retain their respective 1,883,000 and 688,000 Adcock ordinary shares (collectively, “Dividend
Shares”).
The BEE Participants have entered into an agreement with The Bidvest Group Limited
(“Bidvest”) to sell the Dividend Shares at a price of R52.00 in cash (“Offer Price”). This sale
requires such shares to be released from the restrictions contained in the Existing Adcock
BEE Transaction. The Board has consented to such release subject to:
- Adcock shareholders approving the cancellation of the Existing Adcock BEE
Transaction and accordingly enabling the release of the Dividend Shares; and
- Bidvest making an offer (“Bidvest Offer”) at the Offer Price to all Adcock ordinary
shareholders.
1.3 Conditions precedent to the Adcock BEE Termination
The Adcock BEE Termination is subject to the fulfillment of the following conditions precedent:
- the requisite regulatory approvals and/or consents and/or rulings as may be required
including from the JSE Limited (“JSE”) and the takeover regulation panel (“TRP”) and
any other relevant authority;
- the requisite approval from “A” Share shareholders and “B” Share shareholders at
respective meetings of such shareholders, who have undertaken to vote in favour of
the resolutions necessary to implement the Adcock BEE Termination;
- the approval of the cancellation of the Existing Adcock BEE Transaction by Adcock
ordinary shareholders; and
- such other conditions as are normal and usual for a transaction of this nature.
2. The New Adcock BEE Transaction
2.1 Introduction
Following the Adcock BEE Termination, Adcock ordinary shareholders will facilitate the
introduction of a 15% to 30% BEE shareholding through a new entity to be established (“BEE
Co”), currently valued at between R1.286 billion and R2.572 billion (based on the closing price of an Adcock
ordinary share of R50.00 as at 20 February 2015) (“New Adcock BEE Transaction”).
2.2 Rationale for the New Adcock BEE Transaction
Adcock reinforces its commitment to BBBEE which is a South African imperative. The New
Adcock BEE Transaction positions the Company for improved participation in private and
public sector opportunities, thereby providing an enhanced platform for growth.
The national imperative for social and economic transformation is essential to stimulate growth
in the economy, expand market access to all South Africans and, in the long term, promote
South African competitiveness.
The New Adcock BEE Transaction will not result in any encumbrance on the Adcock balance
sheet and enables Adcock to continue to build on its BEE track record.
BEE Co will be committed to adding meaningful value to Adcock. The New Adcock BEE
Transaction will enhance Adcock’s BEE ownership profile and strengthen Adcock’s position to
secure new business.
2.3 Salient features of the New Adcock BEE Transaction
BEE Co will, subject to the fulfillment of certain conditions, propose a scheme of arrangement
in terms of section 114 of the Companies Act, 71 of 2008 between Adcock and its
shareholders (“the Scheme”). In terms of the Scheme, BEE Co will, with effect from on or
about May 2015, acquire between 15% and 30% of the issued ordinary share capital of
Adcock ex all distributions until on or about May 2019 (“the Acquired Adcock Shares”) pro
rata from all the Adcock ordinary shareholders (“the Scheme Vendors”). Should the Scheme
be implemented, the Scheme Vendors will be required to dispose of, at their own election, a
minimum of 15% and up to a maximum of 30% of their Adcock ordinary shares in exchange
for Newco Securities (as defined below) (the “Scheme Consideration”). As a further term of
the Scheme, Adcock will grant the right to all Scheme Vendors to acquire approximately 8
million new Adcock ordinary shares (“Adcock Options”) at a strike price of R72 per Adcock
Option in or about May 2019. The Adcock Options will be issued to Scheme Vendors in
proportion to their Adcock ordinary shares disposed of in terms of the Scheme.
By way of example should the Scheme Vendors dispose of the minimum, being 15 Adcock
ordinary shares for every 100 Adcock ordinary shares, they will receive 15 Newco Securities
(as defined below) and approximately 5 Adcock Options (as defined below) for every 15
Adcock ordinary shares disposed of.
A new company (“Newco”) will be established for the specific purpose of owning, managing
and distributing the Scheme Consideration (as defined below). This will be achieved by the
assumption by Newco of the obligation to discharge the Scheme Consideration to the Scheme
Vendors. Accordingly, the Scheme Vendors will have a claim for the Scheme Consideration
(“the Newco Securities”) against Newco which will have a corresponding claim against BEE
Co. The Scheme Consideration due by BEE Co to Newco will be guaranteed by the pledge of
the Acquired Adcock Shares. The Newco Securities will be listed on the main board of the JSE
in the Specialist Securities Sector (Investment Products).
The Scheme to be discharged in or about May 2019, will be determined with reference to the
60 day volume weighted average market price per Adcock ordinary share traded on the JSE
immediately prior to this date, with a minimum price of R52 and a maximum price of R72 per
Adcock ordinary share.
In or about May 2019, BEE Co will settle the Scheme Consideration to Newco for the benefit
of the registered Newco Securities holders at that time, either by cash or through the return of
the relevant number of Acquired Adcock Shares or a combination thereof. The Acquired
Adcock Shares owned by BEE Co after settlement of the Scheme Consideration will be held
for a further period of at least 4 years.
Provision will be made in terms of the Scheme to take account of material adverse market
conditions to protect the interests of Adcock, Newco and BEE Co stakeholders.
As part of their commitment to Adcock, Blue Falcon and the Mpho ea Bophelo Trust
(“Bophelo Trust”) will contribute meaningful capital to the New Adcock BEE Transaction.
The legal agreements required to implement the New Adcock BEE Transaction will contain
conditions normally associated with a transaction of this nature. Further details of the New
Adcock BEE Transaction will be disclosed to shareholders in due course.
2.4 BEE Co shareholders
The shareholders of BEE Co will include existing BEE Participants (Blue Falcon and Bophelo
Trust) and Community Investment Holdings Proprietary Limited (“CIH”).
2.5 Details of BEE Co shareholders
2.5.1 Blue Falcon
Blue Falcon comprises Kagiso, Kurisani and Mookodi:
- Kagiso is a pre-eminent empowerment business grouping in South Africa, formed in
December 1993 by the Kagiso Trust as a vehicle for generating long-term
sustainable financial support for the Kagiso Trust. Kagiso invests and manages
capital for the Kagiso Trust, promotes the advancement of black executives and
participates in the transformation of the South African economy;
- Kurisani, the investment arm of loveLife, is a broad based empowerment trust which
benefits loveLife and specifically the previously disadvantaged youth passing
through its programmes. loveLife is South Africa’s national HIV / AIDS prevention
campaign for young people and provides services and outreach programmes to
protect and develop young people across South Africa; and
- Mookodi has been established as an investment vehicle whose beneficiaries are
more than 100 black medical doctors and other medical professionals. The trustees
of Mookodi are Fundiswa Roji and Dr. Molefi Molefi.
2.5.2 Bophelo Trust
The Bophelo Trust is a broad-based employee share ownership scheme whose
beneficiaries comprise qualifying Adcock employees.
2.5.3 CIH
CIH was established in 1995 by Dr Anna Mokgokong and Joe Madungandaba. It is the
largest fully compliant BEE company operating in South Africa’s pharmaceutical sector.
The company is 100% black-owned, with operations in South Africa and sub-Saharan
Africa, has a proven track record and holds significant interests in the Healthcare,
Technology & Telecommunication, Logistics, Mining and Power and Energy sectors.
2.6 Conditions precedent to the New Adcock BEE Transaction
The proposed Scheme and its implementation are conditional on the fulfillment of a number of
conditions precedent including requisite regulatory approvals and/or consents and/or rulings
as may be required including from the JSE, the TRP and any other relevant authority as well
as shareholder approvals.
3. Cautionary announcement
A further announcement regarding the proposed transactions set out in this announcement,
including the financial effects, will be released on SENS in due course. Accordingly Adcock
ordinary shareholders are advised to exercise caution when dealing in their Adcock ordinary
shares.
Johannesburg
23 February 2015
Investment Bank, Financial Advisor and Transaction Sponsor to Adcock
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal Advisor to Adcock
Fluxmans Attorneys
Investment Bank, Financial Advisor and Sponsor to Bidvest
Investec Bank Limited
Legal Advisor to Bidvest
Edward Nathan Sonnenbergs Inc.
Date: 23/02/2015 08:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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