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OLD MUTUAL PLC - Specific Repurchase and Specific Issue for Cash of Nedbank Group Ordinary Shares

Release Date: 23/02/2015 09:01
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Specific Repurchase and Specific Issue for Cash of Nedbank Group Ordinary Shares

OLD MUTUAL PLC
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSURE CODE: OLOML
Old Mutual plc

Ref 97/15
23 February 2015

SPECIFIC REPURCHASE AND SPECIFIC ISSUE FOR CASH OF NEDBANK GROUP
ORDINARY SHARES

Nedbank Group Limited (“Nedbank Group”), the majority-owned South African banking subsidiary of
Old Mutual plc, released the following announcement today 23 February 2015:

 “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”

Enquiries
External communications
Patrick Bowes                    UK        +44 20 7002 7440

Investor relations
Dominic Lagan                    UK        +44 20 7002 7190
Sizwe Ndlovu                     SA        +27 11 217 1163

Media
William Baldwin-Charles                    +44 20 7002 7133
                                           +44 7834 524833

Notes to Editors

Old Mutual provides investment, savings, insurance and banking services to more than 16 million
customers in Africa, the Americas, Asia and Europe. Originating in South Africa in 1845, Old Mutual
has been listed on the London and Johannesburg Stock Exchanges, among others, since 1999.
In the year ended 31 December 2013, the Group reported adjusted operating profit before tax of £1.6
billion (on an IFRS basis) and had £294 billion of funds under management from core operations.
For further information on Old Mutual plc, please visit the corporate website at www.oldmutual.com

Lead Sponsor to Old Mutual:
Merrill Lynch South Africa (Pty) Limited

Joint Sponsor to Old Mutual:
Nedbank Capital

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