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Specific repurchase and specific issue for cash of Nedbank Group ordinary shares
Nedbank Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
(‘Nedbank Group’ or ‘the Company’)
SPECIFIC REPURCHASE AND SPECIFIC ISSUE FOR CASH OF NEDBANK GROUP ORDINARY SHARES
1. Background
Nedbank Group’s South African broad-based black economic empowerment (‘BEE’) transaction
introduced in 2005 included over 500 000 direct and indirect beneficiaries (‘the BEE Transaction’).
The BEE Transaction was aligned and implemented in collaboration with Old Mutual Group’s BEE
transaction. The BEE Transaction facilitated broad-based black ownership equating to 11.5% of
the then value of Nedbank Group’s South African businesses. The objective was to create
sustainable value for a broad base of diverse beneficiaries, including strategic black business
partners, employees, non-executive directors, clients and community interest groups affiliated
with the Company. Nedbank Group's strong financial performance over the ensuing nine-year
period, has benefitted its BEE stakeholders by an estimated R8.2 billion, based on current market
prices. Valuing this benefit at the time that shares became unrestricted, during the lifetime of the
BEE schemes, the aggregate value created for the BEE stakeholders would be R5.5 billion.
The introduction of broad-based black ownership into the Company in 2005 was effected by way
of the issue of Nedbank Group ordinary shares (‘shares’) to black stakeholders including, inter
alia, black business partners, being the Brimstone-Mtha Financial Services Trust (‘the Brimstone
Trust’) and the WIPHOLD Financial Services Number Two Trust (‘the WIPHOLD Trust’)
(collectively, ‘the BBP Trusts’), the Nedbank Custodial Retail Trust, formerly the Nedbank Eyethu
Retail Trust (‘Retail Trust’) and the Nedbank Eyethu Community Trust (‘Community Trust’)
(collectively, ‘the Trusts’).
This announcement outlines various transactions that will result in the rationalisation of the
Trusts in accordance with the constitutional documents of the Trusts. The rationalisation will
include winding up existing schemes that have reached their maturity dates and will result in the
realisation of value for various BEE stakeholders. It should be noted that certain schemes such as
the Nedbank Eyethu Corporate Scheme Trust and the AKA-Nedbank Eyethu Trust have previously
matured.
Post the rationalisation it is estimated that the empowerment shareholding of the black business
partners will be approximately 1,7% of the value of Nedbank Group’s South African businesses
and the remaining BEE trusts, being the Community Trust, Nedbank Eyethu Evergreen Trust, the
Nedbank Eyethu Black Management Trust (‘the BMT’) and the Nedbank Eyethu Black Executive
Trust (‘the BET’), will have approximately 1,7% of the value of Nedbank Group’s South African
businesses. In addition to the 3.4% attributable to the aforementioned trusts, Nedbank Group
has direct and indirect black shareholdings through pension funds, staff schemes, individuals and
other entities.
2. Specific Repurchase
As part of the process of terminating components of the original BEE Transaction, Nedbank
Group will repurchase a number of shares held by the Trusts, based on formulas that were
originally agreed upon as part of the BEE Transaction (‘the Specific Repurchase’).
This will result in the Specific Repurchase of 8 916 159 shares from the Trusts as described below.
2.1 Terms of the Specific Repurchase
The Specific Repurchase will take place on or about 2 March 2015 as follows:
2.1.1 The repurchase from the Brimstone Trust of:
2.1.1.1 1 909 357 shares at a price of R1,87 per share at a total amount of
R3 570 498; and
2.1.1.2 891 501 shares at a total amount of R1,00 for all 891 501 shares.
2.1.2 The repurchase from the WIPHOLD Trust of:
2.1.2.1 1 906 057 shares at a price of R1,87 per share at a total amount of
R3 564 327; and
2.1.2.2 894 775 shares at a total amount of R1,00 for all 894 775 shares.
2.1.3 The repurchase of 1 041 078 shares at a price of R1,00 per share from the
Community Trust at a total amount of R1 041 078.
2.1.4 The repurchase of 2 273 391 shares at a price of R1,00 for all the shares from the
Retail Trust at a total amount of R1,00.
After the Specific Repurchase, the shares will be delisted, cancelled and reinstated as
authorised, but unissued, shares.
The Specific Repurchase represents 1,79% of shares currently in issue (being 499 257 807
shares).
The Specific Repurchase will reduce the number of treasury shares by 8 916 159 shares to
24 698 730 shares.
2.2 Shareholder approvals for the Specific Repurchase
In terms of the JSE Limited (‘JSE’) Listings Requirements and section 48 of the Companies
Act, 71 of 2008 (‘the Companies Act’), the Specific Repurchase was approved by
shareholders at the general meetings of Nedbank Group held on 22 July 2005 and 13 May
2008 respectively and ratified on 3 May 2013.
2.3 Statement by the board of directors of Nedbank Group (‘the Board’)
After considering the effect of the Specific Repurchase, the Board is of the opinion that:
2.3.1 The Company and the group are in a position to repay their debt in the ordinary
course of business for a period of 12 months after the date of the Specific
Repurchase.
2.3.2 The Company’s and the group’s assets at fair value will be in excess of the
liabilities of the Company and the group for a period of 12 months after the date
of the Specific Repurchase. For this purpose, the assets and liabilities have been
recognised and measured in accordance with the accounting policies used in the
latest audited consolidated annual financial statements.
2.3.3 The share capital and reserves of the Company and the group are adequate for
ordinary business purposes for a period of 12 months after the Specific
Repurchase.
2.3.4 The working capital of the Company and the group will be adequate for ordinary
business purposes for a period of 12 months after the Specific Repurchase.
The Board further acknowledges that it has applied the solvency and liquidity test as set
out in section 4 of the Companies Act and has reasonably concluded that Nedbank Group
will satisfy the solvency and liquidity test immediately after the Specific Repurchase.
2.4 Source of funds
The Specific Repurchase will be funded from existing cash resources and no external
borrowings will be utilised.
3. Specific Issue
In terms of the BEE Transaction, the Community Trust was granted a right to subscribe for shares
following the Specific Repurchase to give it the ability to maintain its shareholding in the
Company (‘the Trust’s Subscription Right’) and the trustees of the Community Trust have elected
to subscribe for a total of 738 207 shares for cash (‘the Specific Issue’).
3.1 Terms of the Specific Issue
The Company will issue 738 207 shares at a price of R239,77 per share, being the 30 day
volume weighted average price of shares on 30 December 2014, at a total amount of
R176 999 892 to the Community Trust in terms of the Trust’s Subscription Right.
3.2 Shareholder approvals for the Specific Issue
In terms of the JSE Listings Requirements, the Specific Issue was approved by shareholders
at the general meetings of Nedbank Group held on 22 July 2005 and ratified on 3 May
2013.
3.3 Intended use of funds
Nedbank Group will use the proceeds of the Specific Issue in the normal course of business.
4. Impact of the Specific Repurchase and the Specific Issue on financial information
4.1 The Specific Repurchase is a non-adjusting post balance sheet event as it has no significant
impact on the consolidated financial position of Nedbank Group other than:
4.1.1 After the Specific Repurchase the number of issued shares will reduce by 8 916 159
shares to 490 341 648 shares.
4.1.2 Prior to the Specific Repurchase, the BBP Trusts held 12 450 103 shares which were
reported as treasury shares. A total of 5 601 690 of these shares will be repurchased
from the BBP Trusts and the remaining 6 848 413 shares in the BBP Trusts after the
Specific Repurchase will be de-recognised as treasury shares.
4.1.3 Prior to the Specific Repurchase, the impact of the potential dilution of the shares from
the shares held by the BBP Trusts was estimated on an annual basis in the diluted
earnings per share calculation. After the Specific Repurchase there will no longer be a
future dilutive effect arising from the shares held by the BBP Trusts.
4.1.4 The Specific Repurchase will result in a cash outflow of R8 175 906.
4.2 The Specific Issue has no significant impact on the consolidated financial position of the
Nedbank Group as the Community Trust is consolidated in the accounts of Nedbank Group
and the shares held by the Community Trust are treated as treasury shares. The Specific
Issue will therefore only have the following impact:
4.2.1 The issued shares and treasury shares will increase by 738 207 shares to a total of
491 079 855 shares and 25 436 937 treasury shares, respectively.
4.2.2 The Specific Issue will result in a dilutive effect by a further 738 207 shares, which will
have the net effect of increasing the weighted average diluted shares and reducing the
diluted earnings per share.
4.2.3 The Specific Issue will result in a cash inflow of R176 999 892.
The effect of the Specific Repurchase and the Specific Issue on the shares and diluted shares will
be accounted for in Nedbank Group’s financial results from 2015.
5. Salient dates of the Specific Repurchase and Specific Issue
The salient dates for the Specific Repurchase and the Specific Issue are as follows:
2015
Specific Repurchase of a total of 8 916 159 shares from the Monday, 2 March
Trusts respectively, on or about
Delisting and cancellation of 8 916 159 shares, on or about Monday, 2 March
Specific Issue of a total of 738 207 shares to the
Community Trust, on or about Monday, 2 March
Listing of 738 207 shares, on or about Monday, 2 March
6. Nedbank Group’s ongoing BEE schemes
After the implementation of the Specific Repurchase and the Specific Issue the following residual
ongoing BEE trusts associated with the BEE transaction will remain:
6.1 The Community Trust will hold 2,1 million unencumbered shares which would allow for
distributions of R519 million. The Community Trust will continue to support broad based
BEE initiatives including those mentioned under paragraph 7 below.
6.2 The Nedbank Eyethu Evergreen Trust will hold 0,9 million shares which, after settling
obligations, would allow for distributions of R206 million. This trust will continue to extend
grants to qualifying employees to meet social expenditure needs such as education and
health.
6.3 The BMT and the BET will together hold 0,4 million allocated shares and 2,1 million granted
options. The BMT and BET have the capacity to extend further allocations to black staff to
the extent of R441 million.
7. Intention to continue relationship and commitment to broad based empowerment
The Nedbank Group, Old Mutual Emerging Markets Limited (together ‘the NGL-OMEM
consortium’), Brimstone Investment Corporation Limited (‘Brimstone’), Women’s Investment
Portfolio Holdings Limited (‘WIPHOLD’) and Izingwe Financial Investments (Proprietary) Limited
(‘Izingwe’) (collectively ‘the Parties’) have initiated discussions on the nature of their future
relationships, including ongoing commercial relationships and potential co-investment in BEE
operating businesses.
The Parties have also committed to making a financial contribution and commitment of resources
to regional empowerment and development objectives through the undertaking of the following
initiatives:
7.1 The development of entrepreneurs and job creation in partnership with Brimstone,
initially funded by an endowment of R100 million, of which a third would be contributed by
Brimstone and the balance by the NGL-OMEM consortium.
7.2 The large-scale commercialisation of small-scale agriculture which seeks to address rural
unemployment, income generation and food security sustainability in partnership with
WIPHOLD, initially funded by an endowment of R100 million of which a third would be
contributed by WIPHOLD and the balance by the NGL-OMEM consortium.
7.3 The development of township economies, including the economies of mining communities
in partnership with Izingwe, initially funded by an endowment of R66 million contributed
equally by Izingwe and Nedbank Group.
These initiatives are aligned to the National Development Plan and are aimed at positive
sustainable outcomes to be shared by a broad base of communities.
Sandton
23 February 2015
Investment Bank and Sponsor:
Nedbank Capital
Sponsor to Nedbank Group in South Africa:
Merrill Lynch South Africa (Pty) Ltd
Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd
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