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Update regarding the Transactions; posting of New Circular; Notice of General Meeting and withdrawal of cautionary
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, REVISED REPURCHASE AND THE NEW
EXECUTIVE REMUNERATION POLICY; POSTING OF THE NEW CIRCULAR; NOTICE OF GENERAL
MEETING AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Unless otherwise indicated, capitalised words and terms contained in this announcement shall bear the same
meanings ascribed thereto in the circular to Sovereign shareholders dated 24 February 2016 (“Circular”) and
the SENS announcement published by Sovereign on 31 May 2016 (“Announcement”).
1. INTRODUCTION
Shareholders are referred to the Announcement whereby Shareholders were advised of Sovereign’s
proposal to implement the Revised Repurchase, the BEE Transaction and the New Executive
Remuneration Policy, on substantially the same terms as those set out in the Circular, save that the
Revocation will not be proposed (collectively, the “Transactions”).
2. POSTING OF THE NEW CIRCULAR
Shareholders are advised that the New Circular has been posted to Shareholders today, 24 June 2016.
The New Circular is also available on the Company’s website: www.sovereignfoods.co.za.
To obtain a thorough understanding of the Transactions, Shareholders are advised to refer to the full
terms and conditions pertaining thereto, as set out in the New Circular.
3. GENERAL MEETING
The general meeting of Shareholders will be held at the Sun International Boardwalk Hotel, Beach Road,
Summerstrand, Port Elizabeth at 10h00 on 25 July 2016, to consider and, if deemed fit, approve the
ordinary resolutions and special resolutions (“Resolutions”) set out in the notice of general meeting
(“Notice”), forming part of the New Circular, with or without modification (including any adjournment or
postponement thereof) (“General Meeting”).
As stated in the Announcement, those Shareholders who were Dissenting Shareholders have had their
rights in respect of their Shares reinstated and such Shareholders are therefore entitled to attend and vote
at the General Meeting and to participate in the Revised Repurchase.
4. CONDITIONS PRECEDENT
The Transactions are subject to the fulfilment of the following conditions precedent, or waiver thereof by
Sovereign (to the extent legally possible), by no later than 17h00 on 1 August 2016 or such later date as
Sovereign may in its sole discretion determine (subject to the approval of the JSE, if required):
- Shareholders pass all of the Resolutions set out in the Notice; and
- in respect of the BEE Transaction and the New Executive Remuneration Policy, the Transaction
Agreements become unconditionally operative in accordance with their terms.
Should all of the conditions precedent not be fulfilled or waived by Sovereign (to the extent legally possible),
as the case may be, then the Transactions will not be implemented and shall be of no force or effect.
The Transactions are proposed on the basis that the Resolutions required to approve the Revised
Repurchase, the BEE Transaction and the New Executive Remuneration Policy will be inter-conditional, but
the BEE Transaction and the New Executive Remuneration Policy, once approved, will not be conditional
on the number of Tenders received in terms of the Revised Repurchase nor the completion of the Revised
Repurchase.
5. PRO FORMA FINANCIAL INFORMATION
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 Sovereign Share.
The summary pro forma financial effects have been prepared to illustrate the impact of the Transactions,
assuming all the Revised Repurchase Shares are acquired by Sovereign in terms of the Revised
Repurchase, on the audited, published financial information of Sovereign for the year ended
29 February 2016, had the Transactions occurred on 1 March 2015 for purposes of the statement of
comprehensive income and on 29 February 2016 for purposes of the statement of financial position.
For the avoidance of doubt, the summary pro forma financial effects account for the cumulative once-off
transaction costs incurred by Sovereign should the Transactions be implemented. The cumulative once-
off transaction costs include transaction costs incurred and recognised in the audited, published financial
information of Sovereign for the year ended 29 February 2016 and the estimated incremental once-off
transaction costs associated with the distribution of the New Circular and the implementation of the
Transactions.
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 information of Sovereign for the year ended 29 February 2016.
The summary pro forma financial effects set out below are the responsibility of the Directors 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.
After the
post
balance After the After the
Before the sheet % Revised BEE % After the Overall %
Transactions adjustment change Repurchase % change Transaction change Transactions % change change
Pro Pro
Actual Pro forma forma Pro forma Pro forma Pro forma forma Pro forma Pro forma Pro forma
Notes 1 2 3 4 5 6 7 8 9 10
Earnings per Share (cents) 108.3 108.3 0.0% 111.5 2.9% 84.3 (24.4%) 79.7 (5.4%) (26.4%)
Diluted earnings per Share (cents) 108.3 108.3 0.0% 111.5 2.9% 84.3 (24.4%) 79.7 (5.4%) (26.4%)
Headline earnings per Share (cents) 108.4 108.4 0.0% 111.6 2.9% 84.5 (24.3%) 79.9 (5.4%) (26.3%)
Diluted headline earnings per Share (cents) 108.4 108.4 0.0% 111.6 2.9% 84.5 (24.3%) 79.9 (5.4%) (26.3%)
Net asset value per Share (cents) 1 018.2 1 006.0 (1.2%) 1 013.4 0.7% 1 040.2 2.6% 1 035.6 (0.4%) 1.7%
Net tangible asset value per Share (cents) 1 018.2 1 006.0 (1.2%) 1 013.4 0.7% 1 040.2 2.6% 1 035.6 (0.4%) 1.7%
Number of Shares in issue 76 222 266 76 222 266 72 411 153 97 046 539 97 046 539
Number of treasury Shares in issue 1 559 800 1 559 800 1 559 800 27 495 981 27 495 981
Number of Shares in issue less treasury Shares 74 662 466 74 662 466 70 851 353 69 550 558 69 550 558
Weighted average number of Shares in issue 75 218 838 75 218 838 71 131 059 69 830 264 69 830 264
Notes:
1. The “Before the Transactions” basic earnings, headline earnings, diluted earnings and diluted headline earnings per Sovereign Share have been extracted
without adjustment from the audited, published financial information of Sovereign for the year ended 29 February 2016. The “Before the Transactions” net asset
value and net tangible asset value per Sovereign Share have been calculated from the financial information presented in the audited, published financial
information of Sovereign as at 29 February 2016.
2. The financial information included in the “After the post balance sheet adjustment” column has been prepared based on Sovereign’s audited, published financial
information for the year ended 29 February 2016 and taking into account the following:
a. The re-allocation of a prepayment of once-off transaction costs, amounting to R9 081 140, which were accounted for as a current asset in the audited,
published financial information of Sovereign for the year ended 29 February 2016 and which will be deducted from equity on completion of the Transactions.
b. There are no other post balance sheet events that require adjustment to the pro forma financial information.
3. The percentage change is measured as the difference between the “After the post balance sheet adjustment” 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 Revised Repurchase” column has been prepared based on Sovereign’s audited, published financial
information for the year ended 29 February 2016 and taking into account those adjustments set out in point 2 above and the following:
a. The repurchase of 3 811 113 Shares, namely the Revised Repurchase Shares, at a price of R8.50 per Share.
b. Payment of once-off incremental transaction costs attributable to the Revised Repurchase amounting to R607 349.
c. Net finance costs incurred amounting to R2 475 136 in respect of the net cash amount paid relating to the Revised Repurchase, which adjustment is
expected to have a continuing effect on the financial information of Sovereign.
d. Recognition of taxation at a rate of 28%, amounting to R693 038 for purposes of the pro forma statement of comprehensive income.
e. Once-off recognition of securities transfer tax of R80 986 in relation to the Revised Repurchase Shares, at a rate of 0.25%.
5. The percentage change is measured as the difference between the “After the Revised Repurchase” column and the “After the post balance sheet adjustment”
column as a percentage of the “After the post balance sheet adjustment” column.
6. The financial information included in the “After the BEE Transaction” column has been prepared based on Sovereign’s audited, published financial information for
the year ended 29 February 2016, taking into account those adjustments set out in point 2 and 4 above and the following:
a. The acquisition by the BEE Trust of 1 300 795 Contributed Shares, at a price of R8.50 per Share, which Shares will be recognised as treasury Shares for
accounting purposes.
b. The subscription by the BEE Trust of 758 031 Exco Funded Shares, at a price of R8.50 per Share, which Shares will be recognised as treasury Shares for
accounting purposes.
c. The subscription by the BEE Trust of 23 877 355 Notionally Funded Shares, at a price of R8.50 per Share, which Shares will be recognised as treasury
Shares for accounting purposes, funded through the subscription by Sovereign for 23 877 355 Preferent Units, in terms of the Notional Funding and the
consolidation of the BEE Trust in terms of IFRS 10: Consolidated Financial Statements.
d. Recognition of a once-off share based payment charge of R14 873 070 and a recurring share based payment charge of R5 104 457 for purposes of the pro
forma statement of comprehensive income and R13 985 for purposes of the pro forma statement of financial position, in terms of IFRS 2: Share-Based
Payments, amortised for the year ended 29 February 2016. The recurring share based payment charge will have a continuing effect on the financial
information of Sovereign.
e. Payment of once-off incremental transaction costs attributable to the BEE Transaction amounting to R599 165.
f. Once-off payment in cash of a maximum of R500 000 in respect of capital gains tax or income tax payable by Exco Members as a result of the disposal of
the Contributed Shares.
g. Net finance costs incurred amounting to R398 734 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.
h. Recognition of taxation at a rate of 28%, amounting to R28 354 for purposes of the pro forma statement of comprehensive income and R140 000 for
purposes of the pro forma statement of financial position.
i. Once-off recognition of securities transfer tax of R27 642 in relation to the Contributed Shares, at a rate of 0.25%.
7. The percentage change is measured as the difference between the “After the BEE Transaction” column and the “After the Revised Repurchase” column as a
percentage of the “After the Revised Repurchase” column.
8. The financial information included in the “After the Transactions” column has been prepared based on Sovereign’s audited, published financial information for the
year ended 29 February 2016, taking into account those adjustments set out in point 2, 4 and 6 above and the following:
a. No costs or accruals were recognised in the audited, published financial information for the year ended 29 February 2016, arising in terms of the LTIS
awards which vested on 1 March 2016 or the STIS as it relates to Exco. Accordingly, no costs or accruals can be reversed as a result of the termination of
the LTIS and current STIS.
b. Amendment to the STIS in terms of the New STIS Policy as it relates to Exco by recognising an accrual of R4 320 900, being an illustration of the maximum
potential amount payable, capped at 30% of the total cost to company, which adjustment is expected to have a continuing effect on the financial information
of Sovereign. Payments under the New STIS Policy will be made at the Remuneration Committee’s sole discretion.
c. Payment of once-off incremental transaction costs attributable to the New Executive Remuneration Policy amounting to R85 000.
d. Net finance costs incurred amounting to R6 375 in respect of the net cash amount paid relating to the New Executive Remuneration Policy. The net finance
costs are expected to have a continuing effect on the financial information of Sovereign.
e. Recognition of taxation at a rate of 28%, amounting to R1 211 637 for purposes of the pro forma statement of comprehensive income and R1 209 852 for
purposes of the pro forma statement of financial position.
9. The percentage change is measured as the difference between the “After the Transactions” column and the “After the BEE Transaction” column as a percentage
of the “After the BEE Transaction” column.
10. 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.
The above summary pro forma financial effects have been extracted from the pro forma financial information included in the New Circular, which should be read
along with the independent reporting accountants’ assurance report thereon (“Report”). The Report is included in the New Circular.
6. BOARD OPINION AND RECOMMENDATION
The Board, having considered the independent expert’s reports provided by Mazars Corporate Finance
(“Fairness Opinions”), has deliberated the terms, conditions and rationale for the Transactions and is of
the opinion that the Revised Repurchase and the BEE Transaction are fair in so far as Shareholders are
concerned, and accordingly recommends that Shareholders vote in favour of the Resolutions pertaining to
the Transactions to be proposed at the General Meeting.
The Fairness Opinions are included in the New Circular.
7. SALIENT DATES AND TIMES
2016
Record date to determine which Shareholders are entitled to receive the New Friday, 10 June
Circular on
Posting of the New Circular to Shareholders Friday, 24 June
Notice of posting of the New Circular and the Notice published on SENS on Friday, 24 June
Notice of posting of the New Circular and the Notice published in the press on Monday, 27 June
Last day to trade in Shares in order to be recorded in the register and thereby Tuesday, 12 July
be able to attend, participate and vote at the General Meeting on
Record date to be eligible to attend, participate in and vote at the General Friday, 15 July
Meeting on
Forms of proxy to be received by the Transfer Secretaries by 10:00 on Thursday, 21 July
General Meeting to be held at 10:00 on Monday, 25 July
Results of General Meeting, as well as confirming dates pertinent to the Monday, 25 July
Revised Repurchase, published on SENS on
Finalisation announcement published on SENS on Monday, 25 July
Finalisation announcement published in the press on Tuesday, 26 July
Revised Repurchase opening date at 09:00 on Tuesday, 26 July
Last day to trade in Shares in order to be registered as a Shareholder in the Tuesday, 23 August
register at the Revised Repurchase record date (“Revised Repurchase
LDT”), on
Shares trade “ex” the right to participate in the Revised Repurchase on Wednesday, 24 August
Expected date for the closing of the Revised Repurchase at 12:00 on Friday, 26 August
Revised Repurchase record date, being the date by which a Shareholder must Friday, 26 August
be recorded as such in the register in order to be entitled to participate in the
Revised Repurchase (“Revised Repurchase Record Date”), on
Expected date on which the Revised Repurchase will be implemented and the Monday, 29 August
date on which the Revised Repurchase Consideration will be paid to the
relevant Participating Shareholders, on
Expected cancellation of listing of the Revised Repurchase Shares, acquired in Tuesday, 30 August
terms of the Revised Repurchase, from the commencement of trading on the
Exchange on
Notes:
1. All of the dates and times are subject to change, with the approval of the JSE, if required. Any
change in the dates and times will be released on SENS.
2. All times given in the New Circular are local times in South Africa.
3. Shareholders should note that transactions in shares are settled in the electronic settlement system
used by Strate. Up until 11 July 2016, settlement of trades will take place 5 Business Days after such
trade. With effect from 11 July 2016 settlement of trades will take place 3 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, Tuesday, 12 July 2016, will not be entitled to vote thereat, but may,
nevertheless, provided the Revised Repurchase is approved and they acquire the Shares on or
prior to the Revised Repurchase LDT, expected to be Tuesday, 23 August 2016, participate in
the Revised Repurchase.
b. Persons who acquire Shares after the Revised Repurchase LDT will not be entitled to participate
in the Revised Repurchase and thus will not be entitled to receive payment of the Revised
Repurchase 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 New 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 the time
stipulated, 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, the form 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. No dematerialisation or rematerialisation of Shares may take place between the Revised Repurchase
LDT and the Revised Repurchase Record Date.
8. Shareholders should exercise caution when dealing in Shares between the Revised Repurchase
LDT and the Revised Repurchase Record Date.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that caution is no longer required to be exercised when dealing in the
Company’s Shares.
9. RESPONSIBILITY STATEMENT
Each member of the Board, collectively and individually, accepts full responsibility for the accuracy of the
information given in this announcement 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 this announcement false or
misleading and that all reasonable enquiries to ascertain such facts have been made and that this
announcement contains all information required by law and the Listings Requirements.
Port Elizabeth
24 June 2016
Corporate advisor and sponsor
One Capital
Attorneys to Sovereign
Cliffe Dekker Hofmeyr Inc.
Date: 24/06/2016 03:50:00 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.
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