Wrap Text
Update regarding Proposed Transactions & NED Fee Policy, posting of Transaction Circular & notice of General Meeting
SOVEREIGN FOOD INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
Registration Number: 1995/003990/06
JSE Code: SOV
ISIN Number: ZAE000009221
(“Sovereign” or the “Company”)
UPDATE REGARDING THE PROPOSED BEE TRANSACTION, SHARE REPURCHASE, CHANGES TO THE EXECUTIVE AND NON-EXECUTIVE REMUNERATION POLICIES; POSTING
OF THE TRANSACTION CIRCULAR AND NOTICE OF GENERAL MEETING
1. INTRODUCTION
Shareholders are referred to the announcement published on SENS on Monday, 12 October 2015
(“Announcement”) regarding the proposed implementation of:
- an acquisition of approximately 10% of the issued Shares in Sovereign from Shareholders
other than members of the Company's executive committee, the Sovereign Food
Investments Limited Share Trust (“ESOP Trust”) and Crown Chickens Proprietary Limited
(collectively, the “Participating Shareholders”), by way of a joint offer by Sovereign and the
ESOP Trust (“Offer”) to Participating Shareholders, at a cash consideration of R8.50 per
Share (“Offer Consideration”);
- a sustainable, long-term broad based black economic empowerment transaction;
- changes to the Company’s short and long-term incentive scheme policies applicable to
Sovereign’s executive committee; and
- a new non-executive director fee policy.
Unless otherwise indicated, capitalised words and terms contained in this announcement shall
bear the same meaning ascribed thereto in the Announcement.
2. CASH CONFIRMATION
As previously stated in the Announcement, the proposal of the Scheme (pertaining to the
Repurchase) was subject to the Company first securing a cash confirmation to the satisfaction of
the Panel.
In compliance with regulations 111(4) and 111(5) of the Regulations, ABSA Bank Limited has
issued a guarantee to the Panel, in a form and substance acceptable to the Panel, to satisfy the
Offer Consideration payable by Sovereign and the ESOP Trust in respect of the Acquisition
Shares acquired pursuant to the Share Acquisition.
Accordingly, the Board will proceed to propose the Scheme.
3. POSTING OF THE TRANSACTION CIRCULAR
Shareholders are advised that the Transaction Circular will be posted to Shareholders today,
11 December 2015. The Transaction Circular is also available on the Company’s website:
www.sovereignfoods.co.za.
To obtain a thorough understanding of the Proposed Transactions and the NED Fee Policy,
Shareholders are advised to refer to the full terms and conditions pertaining thereto, as set out in
the Transaction Circular.
4. BOARD AND INDEPENDENT BOARD OPINION AND RECOMMENDATION
The Board, having considered the reports provided by Mazars Corporate Finance Proprietary
Limited (“Mazars”), has carefully considered the terms, conditions and rationale for the Proposed
Transactions and is of the opinion that the Proposed Transactions are fair in so far as
Shareholders are concerned, and accordingly recommends that Shareholders vote in favour of
the resolutions pertaining to the Proposed Transactions to be proposed at the General Meeting.
The Independent Board, having considered the reports provided by Mazars, is unanimously of the
opinion that the terms and conditions of the Repurchase and the Redemption Repurchase are fair
and reasonable in so far as the Shareholders are concerned, and accordingly recommends that
Shareholders vote in favour of the resolutions pertaining to the Repurchase and the Redemption
Repurchase to be proposed at the General Meeting.
Mazars’ reports are included in the Transaction Circular.
5. REVISED PRO FORMA FINANCIAL INFORMATION
The summary pro forma financial information as included in the Announcement illustrated the
impact of the Proposed Transactions and the introduction of the NED Fee Policy (collectively, the
“Transactions”) on the audited, consolidated financial statements of Sovereign for the year ended
28 February 2015.
Following the publication on SENS of the unaudited financial results of Sovereign for the six months
ended 31 August 2015, revised pro forma financial information is required to be presented, to
illustrate the effect of the Transactions on the most recent published results of Sovereign.
The table below sets out the summary pro forma financial effects of the Transactions on Sovereign’s
basic earnings, headline earnings, diluted earnings, diluted headline earnings, net asset value and
net tangible asset value per Share, both inclusive and exclusive of once-off costs. Once-off costs
include a BEE share based payment charge in terms of IFRS 2: Share-based payment and
transaction costs.
The summary pro forma financial effects have been prepared to illustrate the impact of the
Transactions on the unaudited, published financial information of Sovereign for the six months
ended 31 August 2015, had the Transactions occurred on 1 March 2015 for purposes of the
statement of comprehensive income and on 31 August 2015 for purposes of the statement of
financial position.
The summary pro forma financial effects have been prepared using the accounting policies that
comply with International Financial Reporting Standards and that are consistent with those applied
in the audited, published financial statements of Sovereign for the year ended 28 February 2015.
The summary pro forma financial effects set out below are the responsibility of the directors of
Sovereign and have been prepared for illustrative purposes only and because of their nature may
not fairly present the financial position, changes in equity and results of operations or cash flows of
Sovereign after the Transactions.
Before the After the % After the % After the % Overall %
Transactions Repurchase change Proposed change Transactions change change
and ESOP Transactions
Acquisition
Actual Pro forma Pro Pro forma Pro Pro forma Pro Pro forma
forma forma forma
Notes 1,9 2 3 4 5 6 7 8
Excluding once-off costs
Earnings per Share (cents) 89.6 97.6 8.9% 99.9 2.4% 100.9 1.0% 12.6%
Diluted earnings per Share (cents) 89.6 97.6 8.9% 99.9 2.4% 100.9 1.0% 12.6%
Headline earnings per Share (cents) 89.7 97.7 8.9% 100.0 2.4% 101.0 1.0% 12.6%
Diluted headline earnings per Share (cents) 89.7 97.7 8.9% 100.0 2.4% 101.0 1.0% 12.6%
Net asset value per Share (cents) 1 000.7 1 017.1 1.6% 1 051.0 3.4% 1 052.0 0.1% 5.1%
Net tangible asset value per Share (cents) 1 000.7 1 017.1 1.6% 1 051.0 3.4% 1 052.0 0.1% 5.1%
Including once-off costs
Earnings per Share (cents) 89.6 96.4 7.5% 67.0 (30.5%) 67.6 0.8% (24.6%)
Diluted earnings per Share (cents) 89.6 96.4 7.5% 67.0 (30.5%) 67.6 0.8% (24.6%)
Headline earnings per Share (cents) 89.7 96.4 7.5% 67.1 (30.4%) 67.6 0.8% (24.6%)
Diluted headline earnings per Share (cents) 89.7 96.4 7.5% 67.1 (30.4%) 67.6 0.8% (24.6%)
Net asset value per Share (cents) 1 000.7 1 013.2 1.2% 1 025.2 1.2% 1 025.8 0.1% 2.5%
Net tangible asset value per Share (cents) 1 000.7 1 013.2 1.2% 1 025.2 1.2% 1 025.8 0.1% 2.5%
Number of Shares in issue 76 222 266 69 636 098 94 271 484 94 271 484
Number of Shares in issue less treasury Shares 74 662 466 67 326 298 66 025 503 66 025 503
Weighted average number of Shares in issue 75 218 838 67 882 670 66 581 875 66 581 875
Notes:
1. The “Before the Transactions” basic earnings, headline earnings, diluted earnings, diluted headline
earnings per Share have been extracted without adjustment from the unaudited, published financial
information of Sovereign for the six months ended 31 August 2015. The “Before the Transactions” net
asset value and net tangible asset value per Share have been calculated from the financial information
presented in the unaudited, published financial information of Sovereign as at 31 August 2015.
2. The financial information included in the “After the Repurchase and ESOP Acquisition” column has
been prepared based on Sovereign’s unaudited, published financial information for the six months
ended 31 August 2015 and taking into account the following:
a. The repurchase of 6 586 168 Shares.
b. The acquisition of 750 000 Shares by the ESOP Trust.
c. Payment of once-off transaction costs attributable to the Repurchase and ESOP Acquisition
amounting to R2 485 589.
d. Net finance costs incurred amounting to R1 602 933 in respect of the net cash amount paid
relating to the Repurchase and ESOP Acquisition, which adjustment is expected to have a
continuing effect on the financial information of Sovereign.
e. Recognition of taxation at a rate of 28%.
f. Once-off recognition of securities transfer tax at a rate of 0.25%.
3. The percentage change is measured as the difference between the “After the Repurchase and ESOP
Acquisition” column and the “Before the Transactions” column as a percentage of the “Before the
Transactions” column.
4. The financial information included in the “After the Proposed Transactions” column has been prepared
based on Sovereign’s unaudited, published financial information for the six months ended 31 August
2015, taking into account those adjustments set out in point 2 above and the following:
a. The acquisition by the BEE Trust of 1 300 795 Contributed Shares from Exco, which Shares will be
recognised as treasury Shares.
b. The subscription by the BEE Trust of 758 031 Exco Funded Shares, which Shares will be
recognised as treasury Shares.
c. The subscription by the BEE Trust of 23 877 355 Notionally Funded Shares, which Shares will be
recognised as treasury Shares, funded through the subscription by Sovereign of 23 877 355
preferent units in the BEE Trust, in terms of the Notional Loan and the consolidation of the BEE
Trust in terms of IFRS 10: Consolidated Financial Statements.
d. Termination of the LTIS in terms of the New Executive Remuneration Policy and the consequent
reversal of costs and an accrual relating thereto in an amount of R2 801 250, arising in terms of
the LTIS awards which vest on 1 March 2016, which adjustment is expected to have a continuing
effect on the financial information of Sovereign.
e. Amendment to the STIS in terms of the New STIS as it relates to Exco by reversing costs and an
accrual relating thereto in an amount of R2 801 250 and recognising costs and an accrual of
R1 834 200 (based on the maximum of 30% of the total cost to company), which adjustments are
expected to have a continuing effect on the financial information of Sovereign.
f. Recognition of a once-off and recurring share based payment charges in terms of IFRS 2: Share-
Based Payments, amortised for the six months ended 31 August 2015. The recurring share based
payment charge will have a continuing effect on the financial information of Sovereign.
g. Payment of once-off transaction costs attributable to the BEE Transaction amounting to
R14 011 803.
h. Once-off payment in cash of a maximum of R500 000 in respect of capital gains tax or income tax
payable by Exco as a result of the disposal of the Contributed Shares.
i. Net finance costs incurred amounting to R323 015 in respect of the net cash amount paid relating
to the BEE Transaction. The net finance costs are expected to have a continuing effect on the
financial information of Sovereign.
j. Recognition of taxation at a rate of 28%.
k. Once-off recognition of securities transfer tax at a rate of 0.25%.
5. The percentage change is measured as the difference between the “After the Proposed Transactions”
column and the “After the Repurchase and ESOP Acquisition” column as a percentage of the “After the
Repurchase and ESOP Acquisition” column.
6. The financial information included in the “After the Transactions” column has been prepared based on
Sovereign’s unaudited, published financial information for the six months ended 31 August 2015, taking
into account those adjustments set out in point 2 and 4 above and the following:
a. Deduction of the fees paid to non-executive directors of an amount of R1 871 000 and the
recognition of an amount paid to non-executive directors of R948 000 in terms of the introduction
of the NED Fee Policy, which adjustments are expected to have a continuing effect on the financial
information of Sovereign.
b. Payment of once-off transaction costs attributable to the introduction of the NED Fee Policy
amounting to R300 000.
c. Net finance costs incurred amounting to R12 000 in respect of the net cash amount paid relating to
the NED Fee Policy. The net finance costs are expected to have a continuing effect on the
financial information of Sovereign.
d. Recognition of taxation at a rate of 28%.
7. The percentage change is measured as the difference between the “After the Transactions” column
and the “After the Proposed Transactions” column as a percentage of the “After the Proposed
Transactions” column.
8. The percentage change is measured as the difference between the “After the Transactions” column
and the “Before the Transactions” column as a percentage of the “Before the Transactions” column.
9. There are no other post balance sheet events that require adjustments and pro forma financial
information.
The financial effect of the Redemption Repurchase has not been included in the above summary
pro forma financial information, however if the Redemption Repurchase were to be implemented
in the future the effect would be a cash payment of a total of R1 for all the Notionally Funded
Shares repurchased by Sovereign and the reduction in the number of Shares in issue by such
number of Notionally Funded Shares repurchased in terms of the Redemption Repurchase.
The summary pro forma financial effects have been reviewed and reported on by the reporting
accountants and auditors of Sovereign.
6. UPDATE ON IRREVOCABLE UNDERTAKINGS
Sovereign is pleased to announce that it has received further irrevocable undertakings from
Shareholders to vote in favour of the resolutions required to approve the Transactions at the
General Meeting (“Resolutions”).
The directors who, directly or indirectly, hold Shares in Sovereign and who are able to vote on the
Resolutions, have undertaken to vote in favour of such Resolutions in respect of such
shareholdings.
In addition to the aforementioned Irrevocables, the following Shareholders holding approximately
56.4% of the Shares exercisable at the General Meeting as at the date of such Shareholders
providing such Irrevocables, have provided irrevocable undertakings to vote in favour of the
Resolutions.
Shareholder Number of Percentage
Shares held at of eligible
the date of Shares
providing the
Irrevocables
Prudential Investment Managers 15 446 776 21.1%
Sanlam Investment Management 9 350 000 12.7%
RECM and Calibre Limited 8 646 024 11.8%
Old Mutual Investment Group 5 572 741 7.6%
Personal Trust International Management Company 2 386 574 3.2%
Total 41 402 115 56.4%
7. GENERAL MEETING
The General Meeting will be held in the Company’s boardroom, 9 Kruis River Road, Uitenhage at
10:00 on Thursday, 14 January 2016, to consider and, if deemed fit, pass the Resolutions set out
in the notice of General Meeting forming part of the Transaction Circular, with or without
modification.
8. SALIENT DATES AND TIMES
2015 / 2016
Record date to determine which Shareholders are entitled to
Friday, 4 December
receive the Transaction Circular on
Posting of the Transaction Circular to Shareholders on Friday, 11 December
Last day to trade in Shares in order to be recorded in the register
and thereby be able to attend, participate and vote at the General Thursday, 31 December
Meeting on
Record date to be eligible to attend, participate in and vote at the
Friday, 8 January
General Meeting on
Forms of proxy to be received by the transfer secretaries by 10:00
Tuesday, 12 January
on
General Meeting to be held at 10:00 on Thursday, 14 January
Results of General Meeting, as well as confirming dates pertinent
Thursday, 14 January
to the Offer and Scheme, published on SENS on
Offer opening date at 09:00 on Friday, 15 January
Expected date of receipt of the compliance certificate from the
Thursday, 11 February
Panel on or about
Finalisation announcement published on SENS on or about Friday, 12 February
Last day to trade in Shares in order to be registered as a
Shareholder in the register at the Offer and Scheme record date, Friday, 19 February
on or about
Shares trade “ex” the right to participate in the Offer and Scheme,
Monday, 22 February
on or about
Expected date for the closing of the Offer at 12:00 on or about Friday, 26 February
Offer and Scheme record date, being the expected date by which
a Shareholder must be recorded as such in the register in order to Friday, 26 February
be entitled to participate in the Offer and Scheme, on or about
Expected date on which the Share Acquisition will be
implemented in terms of the Offer and the Offer Consideration will Monday, 29 February
be paid to the relevant Participating Shareholders, on or about
Expected date on which the Share Acquisition will be
implemented in terms of the expropriation provisions of the
Tuesday, 1 March
Scheme and the date on which the Offer Consideration will be
paid to the Participating Shareholders, on or about
Notes:
1. All of the above dates and times are subject to change, with the approval of the JSE Limited
and the Panel, if required. The dates have been determined based on certain assumptions
regarding the date by which certain regulatory approvals will have been obtained and that
Shareholders will not exercise their rights in terms of section 115(3) of the Companies Act.
Any change in the dates and times will be released on SENS.
2. All times given in this announcement are local times in South Africa.
3. Shareholders should note that as transactions in shares are settled in the electronic
settlement system used by Strate Proprietary Limited, settlement of trades takes place 5
business days after such trade, therefore:
a. persons who acquire Shares after the last day to trade in order to be eligible to vote at
the General Meeting, namely, Thursday, 31 December 2015, will not be entitled to vote
thereat, but may, nevertheless, provided the Repurchase is approved and they acquire
the Shares on or prior to the last day to trade in respect of the Offer and Scheme,
expected to be Friday, 19 February 2016 (“Offer and Scheme LDT”), participate in the
Offer and Scheme; and
b. persons who acquire Shares after the Offer and Scheme LDT will not be entitled to
participate in the Offer and thus will not be entitled to receive payment of the Offer
Consideration.
4. A Shareholder may appoint a proxy to represent the Shareholder at the General Meeting by
completing the form of proxy attached to the Transaction Circular in accordance with the
instructions contained therein and delivering it to the transfer secretaries by no later than 48
hours before the General Meeting. Should the form of proxy not be delivered to the transfer
secretaries by this time, the Shareholder will be entitled to furnish the form of proxy to the
chairman of the General Meeting before the appointed proxy exercises any of the shareholder
rights at the General Meeting (or any adjournment or postponement thereof).
5. If the General Meeting is adjourned or postponed, forms of proxy submitted for the initial
General Meeting will remain valid in respect of any such adjournment or postponement.
6. Dematerialised Shareholders, other than those with "own name" registration, must provide
their CSDP or broker with their instructions as to how they wish their Shares to be voted at
the General Meeting by the cut-off time stipulated in their respective custody agreements.
7. Shareholders who wish to exercise their appraisal rights in terms of section 164 of the
Companies Act, are referred to the Transaction Circular for details of their appraisal rights and
the timing for the exercise of their appraisal rights.
8. No dematerialisation or rematerialisation of Shares may take place between the Offer and
Scheme LDT and the Offer and Scheme record date.
9. Shareholders should exercise caution when dealing in Shares between the Offer and Scheme
LDT and the Offer and Scheme record date.
9. RESPONSIBILITY STATEMENT
Each member of the Independent Board and the Board, collectively and individually, accepts full
responsibility for the accuracy of the information given in this announcement and the
Announcement (collectively, the “Transaction Announcements”) and certifies that to the best of
his knowledge and belief there are no facts that have been omitted that would make any
statement in the Transaction Announcements false or misleading and that all reasonable
enquiries to ascertain such facts have been made and that the Transaction Announcements
contain all information required by law and the Listings Requirements.
Port Elizabeth
11 December 2015
Corporate advisor and Sponsor
One Capital
Attorneys to Sovereign
Cliffe Dekker Hofmeyr Inc.
Independent auditors and reporting accountants
Deloitte & Touche
Independent Expert
Mazars
Date: 11/12/2015 01:17:00 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 
