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Internalisation of Management Agreement and Withdrawal of Cautionary Announcement
Zeder Investments Limited
(Incorporated in the Republic of South Africa)
Registration number: 2006/019240/06
Share code: ZED
ISIN code: ZAE000088431
(“Zeder”)
INTERNALISATION OF MANAGEMENT AGREEMENT AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the joint announcement released by
Zeder and PSG Group Limited (“PSG”) on 24 June 2016 (“Initial
Announcement”), advising that Zeder and PSG have agreed that the
existing management agreement and function, in terms of which a
wholly-owned subsidiary of PSG provides investment, management,
financial and other services to Zeder Investments Corporate
Services Proprietary Limited (“ZICS”), a wholly-owned subsidiary
of Zeder, so as to enable ZICS to procure the provision of
management and other services to Zeder’s subsidiaries and
investees (“Management Agreement”), be internalised by Zeder
against the issue of 207 661 758 new Zeder ordinary shares
(“Issue Shares”) to PSG Corporate Services Proprietary Limited
(“PSGCS”) (“Internalisation”), such shares to be issued at an
issue price equal to the volume weighted average price at which
Zeder shares traded on the JSE for the 30 trading days prior to
the date of fulfilment or, where applicable, waiver of the last
outstanding condition precedent to the Internalisation.
2. RATIONALE FOR THE INTERNALISATION
2.1. The Internalisation should result in a significant improvement
in Zeder’s future profitability and cash flows and,
potentially, its market rating following the associated
management fee cost savings.
2.2. Zeder’s future cash flows will be available for investments,
servicing debt and paying dividends. In this regard, it is
estimated that Zeder should be able to raise up to an additional
approximately R1 billion in debt given its current cash flows
from underlying investments and following the significant
improvement in cash flows as a result of the substantial saving
in management fees. By providing Zeder with more certainty
regarding future cash flows, the Internalisation will improve
Zeder’s ability to deploy capital into investments.
2.3. PSG will remain a significant shareholder in Zeder and the
existing PSG representatives will continue to be involved in
both Zeder’s executive committee and its board to help determine
strategy and help make investment decisions for at least the
next five years. A nominal fee of R5 million per annum,
escalating annually at a rate equal to the consumer price index,
will apply in respect of services rendered in this regard.
2.4. Following the Internalisation, the current management team of
Zeder will be employed by the Zeder group and their direct and
other operating costs will be for the Zeder group’s account
going forward. It is anticipated that Zeder’s net head office
operating costs (taking into account management and director
fee income) following the Internalisation will amount to
approximately R12 million per annum.
3. INDEPENDENT BOARD, INDEPENDENT EXPERT REPORT
3.1. An independent board has been constituted by Zeder to consider
the Internalisation and the Waiver of the Mandatory Offer (as
defined in paragraph 4.2 below) and to advise shareholders of
their opinion in relation to the Internalisation and the Waiver
of the Mandatory Offer. The independent board has, in turn,
appointed Ernst & Young as an independent expert to provide the
independent board with external advice and to prepare a report,
indicating whether the Internalisation and the Waiver of the
Mandatory Offer would be fair and reasonable to Zeder
shareholders.
3.2. Having considered the terms and conditions of the
Internalisation and the Waiver of the Mandatory Offer and based
on the conditions set out in its report, a copy of which is
included in the circular to shareholders, the independent
expert has concluded that the terms and conditions of the
Internalisation and the Waiver of the Mandatory Offer are both
fair and reasonable to Zeder shareholders.
3.3. The independent board, taking into account the report of the
independent expert, has considered the terms and conditions of
the Internalisation and the Waiver of the Mandatory Offer and
the members of the independent board are unanimously of the
opinion that the terms and conditions thereof are fair and
reasonable to Zeder shareholders.
4. SHAREHOLDER APPROVAL, WAIVER OF THE MANDATORY OFFER
4.1. The Internalisation constitutes a category 2 related party
transaction for Zeder in terms of the JSE Listings Requirements
and, accordingly, requires shareholder approval by way of an
ordinary resolution.
4.2. Should the Internalisation be implemented, the issue of the
Issue Shares to PSGCS will result in PSG’s current effective
shareholding in Zeder of approximately 34.5% increasing to
approximately 42.4% of Zeder’s issued ordinary share capital,
triggering the need for a mandatory offer by PSG to the
remaining Zeder shareholders (“Mandatory Offer”), unless same
is waived by Zeder shareholders by way of an ordinary resolution
in accordance with the Companies Regulations, 2011 (“Waiver of
the Mandatory Offer”).
5. CONDITIONS PRECEDENT
5.1. As detailed in the circular to shareholders, the
Internalisation is subject to the fulfilment, by no later than
31 October 2016, of various conditions precedent, including –
5.1.1. whereas the Internalisation constitutes a related party
transaction by Zeder under the JSE Listings Requirements,
that the Internalisation be approved by Zeder shareholders
in accordance with the JSE Listings Requirements;
5.1.2. that –
5.1.2.1. the requisite majority of Zeder shareholders approve the
Waiver of the Mandatory Offer; and
5.1.2.2. the Takeover Regulation Panel exempts PSG from the need to
make the Mandatory Offer to the remaining Zeder
shareholders;
5.1.3. that, to the extent that any statutory or regulatory approvals
or waivers of the Internalisation (collectively, “Approvals”)
may be required, such Approvals be obtained, such Approvals
to be unconditional or, if not unconditional, such Approvals
to be subject to such conditions as are acceptable to the
party affected thereby (whose acceptance will not be
unreasonably refused or withheld); and
5.1.4. that the board of directors of PSGCS, the direct holding
company of the PSG subsidiary that will provide the services
to ZICS under the Management Agreement, approves or, to the
extent applicable, ratifies the Internalisation.
5.2. The condition precedent in paragraph 5.1.2 may be waived
(wholly, but not only in part) by PSGCS by written notice to
Zeder.
5.3. Unless all the conditions precedent have been fulfilled or (to
the extent possible) waived by not later than 31 October 2016
(or such later date as may be agreed by Zeder and PSGCS), the
Internalisation will never become of any force or effect and
the status quo ante will be restored as near as may be.
5.4. The Internalisation will be implemented on the fifth business
day following the date of fulfilment or, where applicable,
waiver of the last outstanding condition precedent.
6. FURTHER INFORMATION
6.1. The value of the net assets that are the subject of the
Internalisation, as accounted for in the consolidated annual
financial statements of PSG, amount to Rnil, as it has, in
accordance with applicable accounting principles, not been
raised as an asset for accounting purposes. The total management
fee income earned from the Management Agreement during the past
three financial years is set out below –
28 Feb 2014 28 Feb 2015 29 Feb 2016
R'000 R'000 R'000
Base management 59 022 117 757 154 643
fees
Performance 59 022 117 757 -
management fees
Total fees 118 044 235 514 154 643
6.2. The Internalisation will result in Zeder acquiring the entire
issued share capital of the wholly-owned PSG subsidiary that
will provide the services under the Management Agreement. Zeder
confirms that the memorandum of incorporation of this
subsidiary will comply with the provisions of paragraph 10.21
of Schedule 10 of the JSE Listings Requirements.
7. DISTRIBUTION OF CIRCULAR
A circular, containing details of the Internalisation and the
Waiver of the Mandatory Offer, will be distributed to
shareholders today, 28 July 2016. The circular incorporates a
notice convening a general meeting (“Notice of General Meeting”)
of shareholders for purposes of approving the Internalisation,
the Waiver of the Mandatory Offer and related matters. The
circular will also be available on Zeder’s website at
www.zeder.co.za.
8. NOTICE OF GENERAL MEETING OF SHAREHOLDERS
Notice is hereby given that a general meeting of Zeder
shareholders will be held at 11:00 on Monday, 29 August 2016 at
Lanzerac, No. 1 Lanzerac Road, Stellenbosch, Western Cape, at
which meeting Zeder shareholders will be requested to consider
and vote on the resolutions detailed in the Notice of General
Meeting.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to Zeder’s cautionary announcement, as
contained in the Initial Announcement dated 24 June 2016. Whereas
the particulars of Internalisation have now been announced,
caution is no longer required to be exercised by shareholders
when dealing in their securities in Zeder.
Stellenbosch
28 July 2016
PSG Capital: Transaction advisor and sponsor to Zeder and PSG
Ernst & Young: Independent expert
PricewaterhouseCoopers: Independent reporting accountant
Questco: Independent sponsor to Zeder
Date: 28/07/2016 03:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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