Wrap Text
Acquisition of Fairheads by a subsidiary of Vunani
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
(“Vunani” or “the Vunani Group”)
ACQUISITION OF FAIRHEADS BY A SUBSIDIARY OF VUNANI
1. BACKGROUND INFORMATION
A sale of shares agreement, dated 10 March 2015 (“the Agreement”), has been entered into by
Mandlalux Proprietary Limited (“the Purchaser”), a subsidiary of Vunani (detailed in paragraph 5
below), to acquire 100% of the shares (“the Sold Shares”) of Fairheads International Holdings (SA)
Proprietary Limited (“Fairheads”) for a total purchase consideration of R210 million (“Purchase
Consideration”) (“the Transaction”).
In terms of the Agreement the Key Management (detailed in paragraph 4 below) will receive 30% of
the issued share capital of the Purchaser as part of the Purchase Consideration.
The Agreement contains legal warranties and indemnities which are considered normal in respect of
a transaction of this nature.
2. DESCRIPTION OF THE BUSINESS CONDUCTED BY FAIRHEADS
Fairheads is an investment holding company, currently holding two wholly owned subsidiaries,
Fairheads Benefit Services Proprietary Limited (“FBS”) through which its business is being
conducted and Fairheads Corporate Services Proprietary Limited, a dormant entity.
FBS is a provider of administration services to beneficiary funds and umbrella trusts for retirement
funds and a registered pension funds administrator in terms of section 13B of the Pension Funds
Act, 24 of 1956.
Beneficiary funds are typically funds established in order to retain and manage money due as a
death benefit under a retirement fund product. Administration services involve managing these
monetary funds on behalf of the dependants of deceased retirement fund members.
FBS provides services to some 107 000 dependants with assets under administration of
R7.8 billion.
3. RATIONALE FOR THE TRANSACTION
The acquisition of Fairheads represents an opportunity for Vunani to enter a new market and allows
Vunani to grow and diversify its existing service offering within the financial services sector.
Although Fairheads operates in an industry where Vunani currently has no exposure, Vunani will be
able to add value and assist in the growth of Fairheads via Vunani’s current relationships,
empowerment status and client base all of which are anticipated to strengthen Fairheads’ position in
the market and allow it to penetrate into new funds.
Fairheads’ revenue is annuity in nature and represents an excellent acquisition opportunity for
Vunani and its shareholders. It is a leader in its industry and with Key Management remaining
significant shareholders, continuity is ensured at Fairheads’ post the Transaction.
4. THE SELLERS
The sellers are the current shareholders of Fairheads, namely R Krepelka, M Brown, G Gould, M
Vilabril, T Clark (“Key Management”), P King, R Cowie, T Fairhead, Trustees for the time being of
the Mafuta Family Trust, Z Israel, N Overmeyer, A Ebing, A Links, D Hurford, O Meoa, J Brown and
T Vogler (collectively, “the Sellers”).
5. PURCHASE CONSIDERATION
Vunani Capital Proprietary Limited, a wholly owned subsidiary of Vunani, has established a wholly
owned company, Mandlamart Proprietary Limited (“Mandlamart”), which in turn has established the
Purchaser. The Purchaser shall raise bank funding and issue the Consideration Shares to the Key
Management.
The Purchase Consideration in respect of the Sold Shares shall be settled as follows:
5.1 A First Cash Payment – an amount of R141 million payable on the Effective Date to the
Sellers in the proportion set out in the Agreement.
5.2 A Second Cash Payment – a cash payment of a maximum amount of R30 million, based on
a formula set out in the Agreement.
5.3 A Milestone Payment – a cash amount of R24 million payable to those Sellers who are to
receive the Consideration Shares (the issue of shares to the Key Management), subject to
those Sellers still being shareholders of the Purchaser on the second anniversary of the
Effective Date.
5.4 Consideration Shares – constituting 30% of the issued shares of the Purchaser and valued
at R15 million to be allotted and issued, on the Effective Date, to Key Management in the
proportion set out in the Agreement and which, once allotted, shall be credited as having
been fully paid by the allottee in question.
The Purchase Consideration will be financed as follows:
The Purchaser raising senior debt of R100 million
Subscription of 70% of the ordinary shares of the Purchaser by R35 million
Mandlamart*
Loan from Mandlamart to the Purchaser** R6 million
Sub-Total (First Cash Payment) R141 million
The Second Cash Payment will be funded either through senior R54 million
debt funding or the conversion of that payment into a vendor loan
to be settled out of available cash in the Purchaser
Subscription of 30% of the ordinary shares of the Purchaser by Key R15 million
Management
TOTAL R210 million
*Cash injected by Vunani Capital into Mandlamart for subscription of shares in the
Purchaser
**Loan from Mandlamart to the Purchaser to assist in funding the First Cash Payment
6. FUNDING OF THE TRANSACTION
As mentioned in paragraph 5, a portion of the Purchase Consideration will be funded via senior
debt. In this regard a condition to the Transaction is for the Purchaser to enter into binding
agreements to secure such funding (“Funding Agreements”).
The negotiations regarding the Funding Agreements are at an advanced stage with a commercial
bank. Upon the conclusion and signature of the Funding Agreements a further announcement will
be released on SENS providing salient details of such Funding Agreements.
7. EFFECTIVE DATE
The effective date of the Transaction will be the first business day of the calendar month
immediately following the calendar month during which the fulfilment of the last of the Conditions
Precedent (detailed in paragraph 10 below) occurs.
8. PRE-EFFECTIVE DATE DIVIDEND
A dividend shall be declared as close as possible but prior to the effective date (“Pre-Effective Date
Dividend”). The Pre-Effective Date Dividend shall be comprised of two portions namely:
- the sum of R2.94 per Sold Share, inclusive of dividend withholding tax payable thereon
(“Interim Dividend”); plus
- an amount, which if paid to the Sellers on the last day of the calendar month immediately
preceding the Effective Date, would, immediately following such payment and also taking into
account the payment of the Interim Dividend and the Sellers transaction expenses, result in the
Company’s consolidated assets exceeding its consolidated liabilities on the last day of the
calendar month immediately preceding the Effective Date by an amount equal to the greater of
8/52 of the expenditure of FBS, excluding bonuses and directors emoluments, to be set out in
the audited financial statements of FBS for the year ended 28 February 2015 and R 15 million.
9. NET ASSETS AND PROFITS OF FAIRHEADS
The value of the net assets of Fairheads which are the subject of the Transaction as at 31 August
2014 was R34 103 352. The profit after tax attributable to the net assets that are the subject of the
Transaction for the six months ended 31 August 2014 was R8 969 859.
The value of the net assets of Fairheads and the profit after tax attributable to such net assets has
been extracted from the reviewed results of Fairheads for the six months ended 31 August 2014.
10. CONDITIONS PRECEDENT
The Transaction is subject, inter alia, to the following Conditions Precedent:
- the requisite approval of Vunani shareholders in general meeting;
- the Funding Agreements are entered into in writing and become unconditional according to their
terms;
- the shareholders of the Purchaser approving and adopting the Purchaser’s new MOI and
Shareholders Agreement;
- the approval by the Competition Authorities in terms of the Competition Act; and
- approval in writing for the implementation of the Sale of Shares Agreement from the Registrar
of Pension Funds in accordance with Board Notice 24 of 2002 issued by the Financial Services
Board under section 13B of the Pension Funds Act, 24 of 1956.
11. IRREVOCABLE LETTERS OF UNDERTAKING
For purposes of the general meeting detailed in paragraph 12, Vunani has thus far received
irrevocable letters of undertaking from shareholders holding or representing a total of 76 308 138
shares, equivalent to 66.54% of all shares eligible for voting at the general meeting. All such
shareholders have indicated that they will vote in favour of the Transaction.
12. CLASSIFICATION OF THE TRANSACTION
The Transaction is classified as a Category 1 transaction in terms of the Listing Requirements of the
JSE Limited (“Listings Requirements”). Accordingly a circular prepared in terms of the Listings
Requirements, containing a notice of a general meeting of shareholders, will be dispatched to
shareholders in due course but within the time constraints contained in the Listings Requirements.
Sandton
12 March 2015
Corporate Adviser
Vunani Corporate Finance
Designated Adviser
Grindrod Bank Limited
Legal Adviser to Vunani
Werksmans Inc
Legal Adviser to Fairheads International
Edward Nathan Sonnenbergs Inc
Independent reporting accountants and auditors
KPMG Inc
Date: 12/03/2015 01:10:00 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.
Sharenet Sites 
