Wrap Text
Employee Share Participation Plan
CARGO CARRIERS LIMITED
(Registration Number 1959/003254/06)
Share code: CRG
ISIN: ZAE000001764
("Cargo Carriers" or "the Company" or “the Group”)
EMPLOYEE SHARE PARTICIPATION PLAN
1. INTRODUCTION
Shareholders of the Company are advised that Cargo Carriers has entered into an agreement which
provides for the implementation of an employee share participation transaction through the creation and
funding of a special purpose vehicle, EmployeeCo (Pty) Ltd (“EmployeeCo”) through which eligible
employees of the Group (“EmployeeCo Participants”) will be able to collectively acquire an indirect 5%
shareholding in Cargo Carriers ("EmployeeCo Transaction").
2. THE EMPLOYEECO TRANSACTION
2.1 Introduction and rationale
The Company is well diversified and mature in the industries in which it operates. Innovation and
investment in technology and a deep understanding of our clients’ business requirements facilitates the
continued provision of cost effective and appropriate logistics services. The Company’s current low
gearing and access to funding positions it favourably to grow during the current challenging economic
environment. The next step in achieving the Company’s business and growth aspirations is the
empowerment of employees through sharing in the economic value created by the Company. The
employee share participation transaction detailed in this announcement aims to achieve this objective.
The Board is of the opinion that the employee share ownership plan will:
- offer a realistic opportunity to create substantial value for the employees of Cargo Carriers;
- foster an ownership culture which is expected to enhance the commitment of employees to Cargo
Carriers and keep them focused on achieving the Group’s growth targets; and
- align the interests of employees with those of the shareholders of Cargo Carriers.
2.2 Terms of the Agreement
Cargo Carriers and EmployeeCo have entered into a reciprocal subscription agreement (“EmployeeCo
Reciprocal Subscription Agreement”) in terms of which EmployeeCo will subscribe for 1 052 632 ordinary
shares in Cargo Carriers (“EmployeeCo Cargo Subscription Shares”) at a price of R11.63 per share
(“EmployeeCo Cargo Subscription Price”), being an aggregate amount of R12 246 594 (“EmployeeCo
Specific Issue”).
To enable EmployeeCo to fund its acquisition of the EmployeeCo Cargo Subscription Shares, in terms of
the EmployeeCo Reciprocal Subscription Agreement, Cargo Carriers will subscribe for 100
non-convertible, cumulative, redeemable, participating preference shares (“EmployeeCo Preference
Subscription Shares”) and 1 000 “B” ordinary shares in EmployeeCo (“EmployeeCo “B” Subscription
Shares) for an aggregate amount of R12 246 594 (“EmployeeCo Subscription Price”), subject to the
suspensive conditions set out in paragraph 2.4 below.
Upon the implementation of the transaction, the EmployeeCo Cargo Subscription Shares will be listed on
the Johannesburg Stock Exchange (“JSE”), will rank pari passu in all respects with the existing Cargo
Carriers ordinary shares in issue and will constitute 5% of all the issued ordinary shares in Cargo Carriers.
In terms of the JSE Listings Requirements, the EmployeeCo Specific Issue is an issue of shares for cash at a
16% discount to the 30 day VWAP as at 8 March 2016, being the signature date of the EmployeeCo
Reciprocal Subscription Agreement. As the EmployeeCo Cargo Subscription Shares, which are the subject
of the EmployeeCo Specific Issue, are subject to certain restrictions, they are deemed to be issued to
‘non-public’ shareholders.
2.3 Effective Date
The effective date of the EmployeeCo Transaction shall be the first business day following the day on
which the suspensive conditions set out in paragraph 2.4 below have been fulfilled or waived (“Effective
Date”).
2.4 Suspensive conditions to the EmployeeCo Reciprocal Subscription Agreement
The EmployeeCo Reciprocal Subscription Agreement is subject to the fulfilment or waiver on or before
30 June 2016 of the following suspensive conditions:
- the adoption by way of a special resolution by the shareholders of EmployeeCo, and filing at the
Companies and Intellectual Property Commission, of the EmployeeCo memorandum of
incorporation (“EmployeeCo MOI”);
- the Board and Cargo Carriers shareholders passing the resolutions required to approve the
EmployeeCo Specific Issue and the resolutions required in terms of sections 44 and/or 45 of the
Companies Act to approve any financial assistance which may be provided by Cargo Carriers to
EmployeeCo in connection with the EmployeeCo Specific Issue; and
- the conclusion and implementation of individual subscription agreements between EmployeeCo,
on the one hand and EmployeeCo Participants, on the other hand as contemplated in paragraph
2.6 below ("the EmployeeCo Ordinary Shares Subscription Agreements").
2.5 Financing of the EmployeeCo Specific Issue
In terms of the EmployeeCo Reciprocal Subscription Agreement, Cargo Carriers has agreed, subject to the
fulfilment or waiver of the suspensive conditions set out in paragraph 2.4 above, to provide financial
assistance to fund the EmployeeCo Specific Issue, as follows:
- Cargo Carriers has undertaken to subscribe for the EmployeeCo Preference Subscription Shares
and to subscribe for the EmployeeCo “B” Subscription Shares on the Effective Date for the
EmployeeCo Subscription Price;
- On the Effective Date, the obligation of Cargo Carriers in respect of payment of the EmployeeCo
Subscription Price shall be settled by setting the amount off in the books of account of
EmployeeCo against EmployeeCo’s obligation in respect of the EmployeeCo Cargo Subscription
Price;
- The EmployeeCo Preference Shares will have certain preferential rights, including the right to a
cumulative preference dividend calculated with reference to the distributions received by
EmployeeCo from Cargo Carriers during each dividend period less any operating costs, limited to
administrative costs, of EmployeeCo during the relevant dividend period, which dividend shall
reduce on a sliding scale over a five year period;
- EmployeeCo shall be entitled, but not obliged, to redeem the EmployeeCo Preference
Subscription Shares at any time after payment in full of any accrued dividends, subject to
compliance with the Companies Act, 2008 and provided that it passes the solvency and liquidity
test in section 4 of the Companies Act, 2008; and
- After a period of five years from the Effective Date, Cargo Carriers shall be entitled to require
EmployeeCo to redeem the EmployeeCo Preference Subscription Shares.
2.6 EmployeeCo Ordinary Shares Subscription
In terms of the EmployeeCo Ordinary Shares Subscription Agreements, EmployeeCo Participants shall
initially, in aggregate, subscribe for approximately 100 000 "A" ordinary shares with no par value in
EmployeeCo for a subscription price of R0.01 per share (“EmployeeCo “A” Ordinary Shares”), which "A"
ordinary shares will have the same voting rights and rights to dividends as the EmployeeCo "B"
Subscription Shares, but will be subject to different transfer restrictions, as set out below:
- EmployeeCo Participants will not be able to dispose of or otherwise deal with their EmployeeCo
“A” Ordinary Shares during the first 60 months from the date of issue. Thereafter they will be
entitled, over a 36-month period and in tranches of up to one third in each of the 12 months
within the 36-month period, to, inter alia, put their EmployeeCo “A” Ordinary Shares to
EmployeeCo. The purchase consideration payable by EmployeeCo for any EmployeeCo “A”
Ordinary Shares put to it, shall be settled by the transfer by EmployeeCo of a portion of the
EmployeeCo Cargo Subscription Shares to the EmployeeCo Participant exercising the put option
in accordance with a pre-determined valuation model, as detailed in the EmployeeCo MOI.
- the EmployeeCo "B" shareholder may at any time sell any “B” Subscription Shares, but only to a
then current employee of Cargo Carriers or to a trust or other entity nominated to hold such
shares or interest on behalf of any number of employees of Cargo Carriers; and
- EmployeeCo Participants may not sell any of their EmployeeCo "A" Ordinary Shares to third
parties unless such sale and third party is approved by the board of directors of EmployeeCo and
the "B" shareholder.
3. FINANCIAL INFORMATION
The table below sets out the pro forma financial effects of the EmployeeCo Transaction on Cargo Carriers’
basic earnings per share, diluted earnings per share, headline earnings per share, diluted headline
earnings per share, net asset value per share and tangible net asset value per share.
The pro forma financial effects have been prepared to illustrate the impact of the EmployeeCo
Transaction on the published unaudited financial information of Cargo Carriers for the six months ended
31 August 2015, had the EmployeeCo Transaction occurred on 1 March 2015 for statement of
comprehensive income purposes and on 31 August 2015 for statement of financial position purposes.
The pro forma financial effects have been prepared using accounting policies that comply with IFRS and
that are consistent with those applied in the unaudited results of Cargo Carriers for the six months ended
31 August 2015.
The pro forma financial effects, which are the responsibility of the directors, are provided for illustrative
purposes only and, because of their pro forma nature may not fairly present Cargo Carriers’ financial
position, changes in equity, results of operations or cash flow nor the effect and impact of the
EmployeeCo Transaction going forward.
Pro forma after
EmployeeCo EmployeeCo
Before Transactions Transaction
Basic earnings per share (cents) 1.09 (0.07) 1.02
Diluted basic earnings per share (cents) 1.09 (0.07) 1.02
Headline earnings per share (cents) 0.93 (0.07) 0.86
Diluted headline earnings per share (cents) 0.93 (0.07) 0.86
Net asset value per share (cents) 2 356.23 (5.48) 2 350.75
Tangible net asset value per share (cents) 2 356.23 (5.48) 2 350.75
Weighted and diluted average number of shares at 19 406 290 - 19 406 290
31 August 2015
Shares in issue at 31 August 2015 20 000 000 - 21 052 632
Notes:
1. The “Before” column is based on the published unaudited financial information of Cargo Carriers for the six
months ended 31 August 2015, as released on SENS on 27 October 2015 (before the transaction).
2. The weighted and diluted average number of shares at 31 August 2015 excludes the 593 710 treasury shares
held by the share incentive trust.
3. The “EmployeeCo Transaction” column relates to the following:
- EmployeeCo will be required to be consolidated by Cargo Carriers in terms of IFRS 10, Consolidated
Financial Statements and the EmployeeCo Cargo Subscription Shares held by EmployeeCo will be classified
as treasury shares for accounting purposes and consequently no effect is reflected for the accrual of
preference dividends between Cargo Carriers and EmployeeCo.
4. Estimated transaction costs of R1 063 405 have been expensed on the Employee Transaction. These costs are
once-off and have been assumed to be non-tax deductible.
5. IFRS 2 costs amounting to R283 104 have been expensed in respect of the EmployeeCo Transaction and are
assumed to be non-tax deductible.
6. Finance income reduction of R27 383 due to the reduction in cash balances as a result of the transaction
costs, was calculated at 5.15% being the yearly average money market rate. This reduction will have a
continuing impact and is considered to reduce taxable income.
4. JSE LISTINGS REQUIREMENTS AND RELATED PARTY IMPLICATIONS
In accordance with paragraph 5.51(f) of the Listings Requirements, if a specific issue of shares for cash is
to a related party and is at a discount to the 30-day VWAP prior to the date the issue is agreed, the board
is required to obtain a fairness opinion from an independent expert confirming whether the issue is fair
insofar as the shareholders of the issuer are concerned.
As one of the executive directors of Cargo Carriers will be an EmployeeCo Participant and the
EmployeeCo Specific Issue is at a 16% discount to the VWAP as at 8 March 2016, the JSE, on a see-
through basis, deems the EmployeeCo Specific Issue to be a specific issue of shares for cash to a related
party at a discount to the 30-day VWAP. Cargo Carriers is accordingly required to obtain a fairness
opinion on the EmployeeCo Specific Issue. A copy of the fairness opinion will be included in the circular
to shareholders referred to in paragraph 5 below.
5. CIRCULAR AND GENERAL MEETING
A circular containing full details of the proposed EmployeeCo Transaction and incorporating a notice of
general meeting is expected to be posted to shareholders in due course.
Johannesburg
10 March 2016
Sponsor Arbor Capital Sponsors Proprietary Limited
Transaction Advisor: Nodus Capital Proprietary Limited
Legal Advisor: Webber Wentzel Attorneys
Independent Reporting Accountant: Ernst & Young Inc.
Independent Expert: Merchantec Proprietary Limited
Date: 10/03/2016 04:22:00 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 
