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Mpact concludes broad-based black economic empowerment (“B-BBEE”) transaction
MPACT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2004/025229/06)
JSE code: MPT ISIN: ZAE000156501
("Mpact" or "the Company" or "the Group")
MPACT CONCLUDES BROAD-BASED BLACK ECONOMIC EMPOWERMENT ("B-BBEE")
TRANSACTION
1. Introduction
1.1 Shareholders are referred to the announcement on the Stock
Exchange News Service of the JSE Limited ("SENS") on 4 March
2015 ("First Announcement"). Unless indicated otherwise below,
the defined terms in the First Announcement shall bear the
same meaning in this announcement.
1.2 In terms of the First Announcement, shareholders were inter
alia advised that:
1.2.1 the Board resolved to pursue a proposed B-BBEE ownership
transaction through its wholly-owned subsidiary Mpact
Operations ("B-BBEE Transaction") which holds the Group's
South African businesses;
1.2.2 a broad-based trust to be known as the Mpact Foundation Trust
will, through its wholly-owned subsidiary being Mpact
Foundation (RF) Proprietary Limited, act as the B-BBEE
partner to the B-BBEE Transaction and will subscribe for 10%
of the ordinary issued shares in Mpact Operations ("B-BBEE
Shares"); and
1.2.3 the B-BBEE Transaction is being pursued following the
successful implementation of the Group Restructure on 1
January 2015.
2. Conclusion of subscription agreements and fulfilment of conditions precedent
2.1 Further to the above, the Board is pleased to advise that:
2.1.1 Mpact Limited acted as founder ("Founder") for the
establishment of the Mpact Foundation Trust and that the
Mpact Foundation Trust has been duly established at the
Master's Office with registration number IT 000752/2015(G)
("Mpact Foundation Trust");
2.1.2 Mpact Foundation (RF) Proprietary Limited has been duly
incorporated with the Companies and Intellectual Property
Commission ("CIPC") with registration number 2015/108830/07
("Mpact Foundation (RF) Proprietary Limited");
2.1.3 Confirmation was received from CIPC that Mpact Operations has
adopted a new memorandum of incorporation which was required
to facilitate the Preference Share Subscription and the B-
BBEE Subscription as detailed below; and
2.1.4 the appropriate subscription agreements relating to the
Preference Share Subscription and the B-BBEE Subscription
were duly concluded and have become unconditional.
3. Objectives and rationale
3.1 Following the successful exit of Mpact Limited's previous B-
BBEE partner, Shanduka Packaging Proprietary Limited, in 2012,
the B-BBEE Transaction is the second empowerment transaction
implemented by Mpact Limited and has been structured to meet
the following objectives:
3.1.1 pursue true empowerment aimed at empowering previously
disadvantaged stakeholders with a focus on broad-based
groupings;
3.1.2 create a sustainable funding structure which is not reliant
on external bank funding, share price appreciation or
dividend payments;
3.1.3 materially improve Mpact Operations Group's B-BBEE ownership
credentials;
3.1.4 complement existing B-BBEE initiatives; and
3.1.5 preserve existing value for current shareholders.
4. Identity of the B-BBEE partner and its beneficiaries
4.1 The Mpact Foundation Trust, through its wholly-owned
subsidiary, Mpact Foundation (RF) Proprietary Limited, will
act as the B-BBEE partner to the B-BBEE Transaction.
4.2 In terms of the trust deed of the Mpact Foundation Trust, the
Founder is responsible for the appointment of the relevant
trustees of which at least 50% are to be independent from the
Mpact Foundation Trust, at least 50% are to be black people
and at least 25% are to be black women.
4.3 The beneficiaries of the Mpact Foundation Trust include
amongst other:
4.3.1 Mpact Operations Group employees and their families;
4.3.2 emerging entrepreneurs, suppliers and customers directly or
indirectly involved in the packaging and/or recycling
sectors;
4.3.3 primary, secondary and tertiary education initiatives;
4.3.4 other individual(s), group(s) of people or entity/ies that
operate within the communities in which the Mpact Operations
Group operates or are identified by the trustees from time to
time.
4.4 In addition to the above and as required by the applicable B-
BBEE legislation, at least 85% of distributions to further the
Mpact Foundation Trust's objectives are to be used to benefit
black people of which at least 40% shall be black women.
5. Salient features of the B-BBEE Transaction
5.1 In order to facilitate the B-BBEE Transaction and as part of
the Group Restructure, Mpact Limited sold a number of its
South African operating assets to Mpact Operations on 1
January 2015 at book value ("Book Value Sale"). The Book Value
Sale was settled through the assumption of liabilities and the
issuance of a loan by Mpact Limited to Mpact Operations
("Mpact Limited Loan") which, together with existing debt
owing to Mpact Limited, will attract interest at the Prime
Rate (publicly quoted benchmark rate at which private banks
lend out to corporate borrowers) plus 2%.
5.2 Subsequent to the Book Value Sale but prior to the B-BBEE
Subscription:
5.2.1 Mpact Limited subscribed for 32 400 (thirty two thousand four
hundred) cumulative redeemable non-participating preference
shares ("Preference Shares") in Mpact Operations for a
subscription price of R100 000 (one hundred thousand rand)
per Preference Share which attracts a dividend yield at the
Prime Rate plus 2% ("Preference Share Subscription");
5.2.2 the board of directors of Mpact Operations declared and paid
a special distribution to Mpact of R3 520 253 647 (three
billion five hundred and twenty million two hundred and fifty
three thousand six hundred and forty seven rand) ("Special
Distribution") which comprised:
5.2.2.1 a cash dividend in the amount of R3 350 409 647
(three billion three hundred and fifty million four
hundred and nine thousand six hundred and forty seven
rand) declared by Mpact Operations to Mpact Limited;
and
5.2.2.2 a distribution, being a return of capital, in the
amount of R169 844 000 (one hundred and sixty nine
million eight hundred and forty four thousand rand)
made by Mpact Operations to Mpact Limited out of the
"contributed tax capital" (as such term is defined in
section 1 of the Income Tax Act, 58 of 1962) of Mpact
Operations.
5.3 The Special Distribution amount effectively represents the
equity market value of Mpact Operations as at 2 March 2015,
net of the Mpact Limited Loan and other existing debt.
5.4 Both the Preference Share Subscription and the Special
Distribution were implemented in order to:
5.4.1 retain existing value for Mpact Limited shareholders; and
5.4.2 enable Mpact Foundation (RF) Proprietary Limited (on behalf
of the Mpact Foundation Trust) to subscribe for the B-BBEE
Shares at a nominal value and without the need to raise its
own acquisition funding.
5.5 Accordingly, subsequent to the Preference Share Subscription
and the Special Distribution, Mpact Foundation (RF)
Proprietary Limited (on behalf of the Mpact Foundation Trust)
concluded a subscription agreement with Mpact Operations with
effect from 31 March 2015 in terms of which it subscribed for
the B-BBEE Shares for a nominal subscription amount of R2 000
(two thousand rand) ("B-BBEE Subscription").
5.6 As the B-BBEE Subscription is not subject to the fulfilment of
any conditions precedent, the B-BBEE Subscription is therefore
fully effective and Mpact Foundation (RF) Proprietary Limited
(on behalf of the Mpact Foundation Trust) holds an immediate,
unencumbered 10% ownership in the issued ordinary share
capital of Mpact Operations.
6. Financial effects of the B-BBEE Transaction
6.1 Mpact will consolidate the 10% ordinary shares indirectly held
by the Mpact Foundation Trust given that, as the Founder, it
has the responsibility to appoint the trustees.
6.2 Any distributions by the Mpact Foundation Trust to its
beneficiaries shall be included in the consolidated earnings
of Mpact for the purposes of calculating basic earnings per
share ("EPS") in terms of IAS 33 Earnings Per Share.
6.3 There will be no further impact on EPS in the consolidated
financial statements of Mpact arising from the B-BBEE
Transaction.
6.4 The Mpact Limited Loan, Preference Share Subscription and
Special Distribution will eliminate on the consolidation of
Mpact as these are inter-group transactions.
7. Conclusion
7.1 Following the successful implementation of the B-BBEE
Transaction, Mr Bruce Strong, Chief Executive Officer of Mpact
Limited, reiterated as follows:
"The successful conclusion of this B-BBEE Transaction confirms
Mpact and its Board's commitment to broad-based empowerment in
South Africa. We look forward to delivering the benefits that
will flow to the communities within which Mpact operates and
to the previously disadvantaged individuals with whom the
Group interacts in the years to come. As mentioned before, we
view this B-BBEE Transaction as a flagship empowerment
initiative and look forward to not only continue with our
existing B-BBEE projects, but also pursue new empowerment
initiatives that have been identified to make a real
difference in South Africa."
Melrose Arch
1 April 2015
B-BBEE Transaction Sponsor and Corporate Advisor: Bravura Capital
Proprietary Limited
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Tax Advisors: KPMG Services Proprietary Limited
Date: 01/04/2015 02:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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