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Acquisition Of A Viable Asset And Withdrawal Of Cautionary Announcement
Gaia Infrastructure Capital Limited
(previously Gaia Capital Proprietary Limited)
Incorporated in the Republic of South Africa
Registration number 2015/115237/06
Share Code: GAI
ISIN ZAE000210555
“Gaia” or “the Company”
ACQUISITION OF A VIABLE ASSET AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
1.1. Gaia is pleased to announce that it has entered into a heads
of agreement (“HOA”) with TriAlpha Specialised Investment
Trust III and certain of its subsidiary companies (“TriAlpha”)
to acquire, through Gaia’s wholly owned subsidiary Gaia
Financial Services, an effective see-through economic interest
of 25.2% in Dorper Wind Farm (RF) Proprietary Limited (“Dorper
Wind Farm”) (“the Proposed Transaction”).
1.2. Dorper Wind Farm is a fully operational wind farm located in
the Eastern Cape, with a contracted generating capacity of
approximately 98MW which forms part of the Renewable Energy
Independent Power Producer Procurement Program managed by the
Department of Energy of the Republic of South Africa (“DOE”).
1.3. TriAlpha, through a special purpose vehicle (“Newco”), owns a
30% economic interest in Dorper Wind Farm.
1.4. In terms of the Proposed Transaction, Gaia will acquire an
effective economic interest of 84.2% of TriAlpha's 30%
economic interest in Dorper Wind Farm, through an equity
subscription and convertible loan as set out in 1.6 below.
1.5. In addition, Gaia will also be granted an option ("Option")
to acquire interests in three additional renewable energy
projects in which TriAlpha currently holds minority interests
(“Energy Assets”), as more fully set out in 1.9 below.
1.6. The Proposed Transaction will be implemented through a series
of steps, which include the following:
1.6.1. An investment by Gaia in Newco for an aggregate cash
consideration of R501 million, which will result in
Gaia holding an effective economic interest of 84.2%
in Newco. The investment of R501 million will consist
of:
1.6.1.1. a subscription for ordinary shares in Newco
(“Newco Shares”) at a subscription
consideration of R265.0 million; and
1.6.1.2. the advance of a convertible loan (“Gaia
Loan”) in an amount of R236.0 million. The
Gaia Loan:
1.6.1.2.1. bears interest at a rate linked
to distributions which a
shareholder, holding ordinary
shares in the capital of Newco,
would receive from time to time;
and
1.6.1.2.2. is convertible into Newco Shares
by no later than 31 July 2017 at
the instance of Gaia. The
conversion of the Gaia Loan will
be subject to all required
regulatory and contractual
consents being obtained. If the
Gaia Loan is converted, the
repurchase of Newco Shares from
TriAlpha as detailed in 1.8.1.1
(“Repurchase”)must also be
effected. Gaia will, after the
conversion of the Gaia Loan and
implementation of the Repurchase
hold 84.2% of the issued shares
in Newco.
1.7. The effective date of the Proposed Transaction is 1 August
2016 (“Effective Date”) and the closing date (“Closing Date”)
will be the fifth business day after the fulfilment or waiver,
as the case may be, of the last condition precedent detailed
in the transaction agreements to be concluded to give effect
to the Proposed Transaction (“Definitive Agreements”).
1.8. After the Closing Date, Newco will advance and distribute R501
million to TriAlpha in the form of a loan (the “Newco Loan”)
and a dividend of R100 million (the “Distribution”).
1.8.1. The Newco Loan shall be in the amount of R401 million
and shall at the instance of Gaia, be:
1.8.1.1. set-off against the consideration payable by
Newco pursuant to a repurchase of Newco
shares held by TriAlpha (“Repurchase”); or
1.8.1.2. settled in cash, if Gaia elects to exercise
the Option, which cash will then be applied
by Newco in fulfilment of its obligations
pursuant to the acquisition of the Energy
Assets.
1.8.2. The Newco Loan shall:
1.8.2.1. bear interest at 13% per annum from the date
that the loan was made until settled in full,
if neither the Repurchase nor the Option is
implemented; and
1.8.2.2. be interest free if it is settled pursuant
to 1.8.1.1 or 1.8.1.2 above.
1.9. The HOA provides further for the granting of the Option in
favour of Gaia, in terms of which Gaia has the right to require
that TriAlpha transfers the Energy Assets to Newco. The
implementation of the Option will result in Gaia diversifying
its exposure to Dorper Wind Farm by obtaining exposure to
three additional renewable projects. The transfer of the
Energy Assets will result in Gaia’s effective economic
interest in Dorper Wind Farm being diluted. After the exercise
of the Option and conversion of the Gaia Loan, Newco will hold
a portfolio of assets consisting of the Energy Assets and an
interest in Dorper Wind Farm, and Gaia will hold 34.9% of the
issued shares of Newco. The exercise of the Option will be
subject to obtaining all required regulatory and contractual
consents, including the consent of Gaia shareholders, if
applicable.
2. JSE LISTINGS REQUIREMENTS
2.1. Subject to the approval of the JSE Limited (“JSE”), the
Proposed Transaction will qualify as an acquisition of a viable
asset pursuant to the special purpose acquisition company
(“SPAC”) requirements of the JSE’s listings requirements
(“Listings Requirements”). After the successful conclusion of
the Proposed Transaction and subject to JSE approval, the
Company will be listed as an investment holding company on the
main board of the JSE.
2.2. A circular setting out full details of the Proposed Transaction
will be distributed to Gaia shareholders in due course.
2.3. TriAlpha is a material shareholder of Gaia as defined in terms
of section 10.1(b) of the Listings Requirements. Accordingly,
the Proposed Transaction is categorised as a related party
transaction for Gaia. The circular to shareholders will
therefore be accompanied by a fairness opinion from an
independent expert, commissioned by the independent directors
of Gaia.
3. RATIONALE FOR THE ACQUISITION
3.1. As stated in paragraph 3.2.2 of the Gaia Pre-Listing Statement
issued on 2 November 2015 (“the PLS”), Gaia will, in accordance
with its aim to be a diversified infrastructure investment
company, initially look to invest in renewable energy projects
in South Africa.
3.2. The Proposed Transaction will be in line with Gaia’s investment
policy and focus as set out in the PLS, including its stated
intent to:
3.2.1. invest in operational infrastructure assets;
3.2.2. achieve returns in excess of the target returns of CPI
plus 6%; and
3.2.3. make low risk investments with attractive long-term,
inflation-linked and predictable cash generating
profiles.
4. CONDITIONS PRECEDENT
4.1. The Definitive Agreements will provide for the fulfilment or
waiver, as the case may be, of conditions precedent which are
standard for a transaction of this nature, including that:
4.1.1. all applicable regulatory approvals and consents are
obtained, including :
4.1.1.1. approval from the DOE;
4.1.1.2. approval from the South African competition
authorities;
4.1.1.3. the Takeover Regulations Panel having
granted an exemption from compliance with
the Takeover Regulations (promulgated under
the Companies Act) or alternatively approval
for the Proposed Transaction;
4.1.2. all applicable contractual consents are obtained,
including the approval of any financiers of Dorper
Wind Farm;
4.1.3. to the extent required in terms of the Listings
Requirements and/or Gaia's memorandum of
incorporation, the approval of Gaia’s shareholders for
the Proposed Transaction;
4.1.4. if Gaia elects to conduct a due diligence, such due
diligence is completed to the satisfaction of Gaia in
its sole and absolute discretion; and
4.1.5. the Gaia Board of Directors approving the proposed
transaction.
5. DEFINITIVE AGREEMENTS
The Definitive Agreements will be entered into between Gaia
and TriAlpha, amongst others, and shall incorporate terms,
warranties and conditions that are standard for a transaction
of this nature.
6. FINANCIAL EFFECTS OF THE VIABLE ASSET ACQUISITION
The gross and net asset value of Dorper Wind Farm as at 29
February 2016 amounts to R 1929.9 million and R191.2 million,
respectively. The balance of shareholder loans in Dorper Wind
Farm as at 29 February 2016 amounts to R346.2 million and
Dorper Wind Farm achieved a net profit after tax of R46.1
million for the year ended 29 February 2016.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Gaia shareholders are advised that caution is no longer
required to be exercised by shareholders when dealing in their
Gaia shares.
Cape Town
12 July 2016
Legal advisor
ENSafrica
Financial advisor and Sponsor
PSG Capital
Date: 12/07/2016 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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