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Announcement relating to Proposed Amendments to a Component of PPC’s 2008 Broad-Based Black Economic Empowerment Tra
PPC Ltd
(Incorporated in the Republic of South Africa)
(Registration number: 1892/000667/06)
JSE Share code: PPC
ZSE Alpha code: PPC
ISIN: ZAE000170049
(“PPC” or “the Company”)
ANNOUNCEMENT RELATING TO PROPOSED AMENDMENTS TO A COMPONENT OF
PPC’S 2008 BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION
AND SEPARATE ADDITIONAL SHARE ALLOCATIONS
1. Introduction
1.1 Shareholders of PPC (“Shareholders”) are referred to the
Broad-Based Black Economic Empowerment (“B-BBEE”)
transaction implemented by PPC in December 2008 (“2008
B-BBEE Transaction”) and are advised that PPC has
reached agreement with the strategic black partner
(“SBP”) and community service group (“CSG”) participants
in the 2008 B-BBEE Transaction (collectively, “B-BBEE
Participants”) relating to:
1.1.1 certain amendments to the terms of the 2008 B-
BBEE Transaction insofar as it relates to the B-
BBEE Participants, as further detailed in
paragraph 2.5 below (“Proposed Amendments”); and
1.1.2 as a separate and independent transaction, the
issue of additional PPC ordinary shares to the
B-BBEE Participants, as further detailed in
paragraph 2.6 below (“Additional Share
Allocations”),
(collectively, the “Proposed Transactions”).
1.2 Full details of the Proposed Transactions will be set
out in a circular to the Shareholders (“Circular”) to
be issued on or about 4 November 2016 and which will
provide the full terms of the Proposed Transactions. The
salient dates and times of a general meeting of the
Shareholders (“General Meeting”) to approve the Proposed
Transactions are set out in paragraph 6 below.
2. The 2008 B-BBEE Transaction
2.1 In December 2008, PPC implemented the 2008 B-BBEE
Transaction in terms of which the various participants
(including, amongst others, the B-BBEE Participants)
subscribed for PPC ordinary shares (“PPC Shares”)
representing in aggregate 15.29% of PPC’s then increased
issued share capital, in compliance with the 2009 equity
ownership requirements of the Broad-Based Socio-Economic
Empowerment Charter for the South African Mining
Industry (“Mining Charter”).
2.2 In respect of the 2008 B-BBEE Transaction, each of the
B-BBEE Participants incorporated a ring-fenced special
purpose vehicle to participate in the transaction as
follows:
2.2.1 the SBPs participated through PPC SBP Consortium
Funding SPV Proprietary Limited (“SBP Funding
SPV”), owned by Peu Group Proprietary Limited,
Nozala Investments Proprietary Limited,
Portland Investment Consortium Proprietary
Limited and Capital Edge Cement Consortium
Proprietary Limited; and
2.2.2 the CSGs participated through PPC Broad-Based
Strategic Partnership Funding SPV Proprietary
Limited (“CSG Funding SPV”), owned by Shalamuka
Cement Holding Company Proprietary Limited and
DEC Investment Holding Company Proprietary
Limited,
(the SBP Funding SPV and the CSG Funding SPV collectively
referred to as the “SBP/CSG Funding SPVs”).
2.3 The relevant salient terms of the 2008 B-BBEE
Transaction, insofar as they relate to the Proposed
Amendments, are set out below:
2.3.1 the SBP Funding SPV subscribed for 39,988,926
PPC Shares and the CSG Funding SPV subscribed
for 8,569,056 PPC Shares at their then par value
of R0.10 per PPC Share (being, collectively,
48,557,982 PPC Shares (“Initial Subscription
Shares”)). The Initial Subscription Shares
represented 8.57% of the PPC Shares in issue
after the implementation of the 2008 B-BBEE
Transaction;
2.3.2 the SBPs and CSGs made equity contributions to
the SBP Funding SPV and the CSG Funding SPV of
approximately R60 million and R5 million,
respectively. The SBP/CSG Funding SPVs also
entered into loan agreements with external
lenders, and used the proceeds of these loans
and the balance of their equity contributions
(after transaction costs and the subscription of
shares referred to in paragraph 2.3) to advance
a bullet loan to PPC;
2.3.3 on the final date of the 2008 B-BBEE Transaction
(which is proposed to be amended to be 15
December 2016 pursuant to the Proposed
Amendments) (“Final Date”) PPC has the right to
repurchase the Initial Subscription Shares at
their original subscription price, being R0.10
per PPC Share;
2.3.4 should the 2008 B-BBEE Transaction progress in
the ordinary course:
2.3.1.1 then on the Final Date, the SBP/CSG
Funding SPVs will each be obliged to
subscribe for such number of PPC Shares
as is equal to the number of its Initial
Subscription Shares (“Maturity Date
Subscription Shares”) at the compulsory
subscription price, which as at the
Final Date will be R66.84 (“Compulsory
Subscription Price”); and
2.3.1.2 the SBP/CSG Funding SPVs will be subject
to a lock-in until 30 June 2018, such
that they are not entitled to sell or
encumber their PPC Shares until such
time as they have fulfilled their
obligation to subscribe for the full
number of Maturity Date Subscription
Shares.
2.4 As context for the Proposed Amendments, the 2008 B-BBEE
Transaction was implemented prior to the impact of the
global financial crisis on South Africa, and this,
together with the persistent challenging global and
local market trading environment, has meant that the
performance of PPC has not met expectations.
2.5 Accordingly, in terms of the Proposed Transactions, PPC
and the SBP/CSG Funding SPVs have agreed that on the
Final Date, PPC will repurchase the Initial Subscription
Shares as originally contemplated, but the SBP/CSG
Funding SPVs will be obliged to subscribe, at the
Compulsory Subscription Price, for only such number of
PPC Shares as is equal to the cash they each have
available at that date (“Cash Available”). The relevant
parties have agreed that, upon fulfilment of this
obligation, the remaining provisions of the original
2008 B-BBEE Transaction agreements, concluded by the
SBP/CSG Funding SPVs pursuant to the 2008 B-BBEE
Transaction, will be terminated by mutual consent and
they will hold these PPC Shares free of restrictions.
2.6 Furthermore, as part fulfilment of the broader
objectives of the Mining Charter, PPC and the SBP/CSG
Funding SPVs have agreed that, as a separate and
independent transaction, PPC will issue:
2.6.1.1 to the SBP Funding SPV, additional PPC Shares
equal to 30% of the number of PPC Shares acquired
by the SBP Funding SPV on the basis described in
paragraph 2.5 above; and
2.6.1.2 to the CSG Funding SPV, additional PPC Shares
equal to 8.93% of the number of PPC Shares issued
to the SBP Funding SPV, in terms of paragraph
2.6.1.1,
at a nominal value of R0,01 per PPC Share. These PPC
Shares (collectively, the “Additional Shares”) will be
subject to a 12 month lock-in period. The Company will
obtain continuing B-BBEE benefits in respect of the
Additional Shares during such lock-in period.
2.7 For illustrative purposes, the result for the SBP/CSG
Funding SPVs would be as follows:
2.7.1 if the Proposed Amendments are approved by the
Shareholders, the estimated Cash Available to
the SBP/CSG Funding SPVs as at 25 October 2016
(being the last practicable date prior to the
finalisation of the pro forma financial effects)
would be R1,076 million. The SBP and CSGs will
be obliged to use the R1,076 million to
subscribe for PPC Shares at the Compulsory
Subscription Price, and would therefore
subscribe for 16,091,302 PPC Shares, being 1% of
the current PPC Shares in issue; and
4
2.7.2 as a separate and independent transaction, if
the Additional Share Allocations are approved by
Shareholders, the SBP/CSG Funding SPVs would be
entitled to subscribe for 4,403,439 Additional
Shares at the subscription price of R0.01 per
PPC Share, representing 0.3% of the current PPC
Shares in issue.
2.8 The Proposed Amendments will result in an IFRS 2 charge
of approximately R93 million and the Additional Share
Allocations will result in an IFRS 2 charge of
approximately R28 million.
3. PPC’s B-BBEE credentials
As a consequence of the completion of PPC’s R4 billion rights
offer on 16 September 2016 (“PPC Rights Offer”), PPC’s B-
BBEE ownership credentials have declined. Following maturity
of the 2008 B-BBEE Transaction as described in this
announcement, such credentials will decline further, and
will be below 26%. As a consequence, PPC’s board has approved
a framework for a new B-BBEE transaction to ensure that the
Company achieves a higher B-BBEE shareholding. Certain
further details in relation to such new B-BBEE transaction
will be contained in the Circular.
4. Conditions precedent
4.1. The Proposed Amendments are subject to the fulfilment
or waiver, if applicable, of, amongst others, the
following conditions precedent:
4.1.1 that the relevant resolutions relating to
the Proposed Amendments be approved by the
requisite majority of the Shareholders
present or represented by proxy at the
General Meeting; and
4.1.2 the implementation agreements entered into
between PPC and the SBP/CSG Funding SPVs,
respectively, and which set out the
conditions to and steps for implementing the
Proposed Amendments, becoming unconditional
in accordance with their terms.
4.2. The Additional Share Allocations are subject to the
fulfilment or waiver, if applicable, of, amongst
others, the following conditions precedent:
4.2.1 that the relevant resolutions relating to
the Proposed Transactions be approved by the
requisite majority of the Shareholders
present or represented by proxy at the
General Meeting; and
4.2.2 the subscription agreements for Additional
Shares entered into between PPC and the
SBP/CSG Funding SPVs, respectively, in
relation to the Additional Share
Allocations, becoming unconditional in
accordance with their terms.
5. Pro forma financial effects
5.1 Pro Forma information for the quarter ended 30 June 2016
A B1 B2 B3 C D E F G
Proposed
Approved
Amendments to 2008
Transactions
B-BBEE Transaction
Before Before
the the
Propos Proposed
ed Amendmen
Amendm ts to Post
ents 2008 B- Propo
to BBEE sed
2008 Transact Amend
B-BBEE ion Addi ments
Transa Liqui after tion to
ction dity taking al 2008
and and PPC effect Prop Shar B-
Approv Guara Righ 3Q of Trans osed e BBEE
ed ntee ts Acqu Approved % actio Amen Allo Trans %
Transa Facil Offe isit Transact chang n dmen cati actio change
ctions ity r ion ions e Costs ts ons n (G/C)
Earning
s per
share
(cents) 17 (17) 6 - 6 (64%) (1) (6) (2) (3) (150%)
Diluted
earning
s per
share
(cents) 16 (16) 6 - 6 (63%) (1) (6) (2) (3) (150%)
Headlin
e
earning
s per 17 (17) 6 - 6 (64%) (1) (6) (2) (3) (150%)
6
share
(cents)
Diluted
headlin
e
earning
s per
share
(cents) 16 (16) 6 - 6 (63%) (1) (6) (2) (3) (150%)
NAV per
share (137
(cents) 588 - ) 3 454 (23%) (1) - - 453 -
TNAV
per
share
(cents) 400 - (14) 3 389 (2%) (1) - - 388 -
Number
of
shares
in
issue,
net of
shares
deemed
to be
treasur
y
shares
in
terms
of IFRS
(millio 1,00
n) 528 - 0 18 1,546 193% - - 4 1,550 -
Weighte
d
average
number
of
shares
(millio 1,00
n) 528 - 0 18 1,546 193% - - 4 1,550 -
Weighte
d
average
diluted
number
of
shares
(millio 1,00
n) 534 - 0 18 1,552 191% - - 4 1,556 -
Notes:
1. Column A has been derived from PPC's reviewed consolidated
results for the quarter ended 30 June 2016 which are
unmodified from previously presented.
2. Columns B1, B2 and B3 illustrates the impacts of the
Liquidity and Guarantee Facility Agreement, PPC Rights
Offer and 3Q Acquisition (“Approved Transactions”) which
were finalised during July 2016, September 2016 and July
2016 respectively. Further details of these transactions
are included in events after the reporting date section in
the Company’s reviewed results for the quarter ended June
2016 and will also be contained in the Circular.
3. Column D illustrates the impact of the estimated
transaction costs of R11 million and R8 million after
taxation (the “Transaction Costs”). The Transaction Costs
are non-recurring and have been expensed to the statement
of comprehensive income. The Transaction Costs will be
settled from cash emanating from the PPC Rights Offer.
4. Column E illustrates the impact of the Proposed Amendments,
which reflects a once-off non-taxable IFRS 2 charge of R93
million in terms of IFRS 2 (Share Based Payments) as a
result of the modifications to the terms of the 2008 B-BBEE
Transaction agreements.
5. Column F illustrates the impact of the subscription of
4,403,439 PPC Shares by the SBP/CSG Funding SPVs at a
nominal value (Additional Share Allocations), which
triggers an IFRS 2 charge in terms of IFRS 2 (Share Based
Payments). The once-off, non-taxable IFRS 2 charge amounts
to R28 million.
6. Other than the Approved Transactions, there are no other
events that occurred after the reporting date that may have
a material impact on the PPC Group's reported results or
the pro forma results for the quarter ended 30 June 2016
for purposes of understanding the Proposed Transactions.
5.2 Pro Forma information for the six months ended 31 March 2016
A B1 B2 B3 C D E F G
Proposed Amendments to
Approved
2008 B-BBEE
Transactions
Transaction
Before
the
Propos
ed
Before Amendm
the ents
Propose to
d 2008 Post
Amendme B-BBEE Propo
nts to Transa sed
2008 B- ction Amend
BBEE after ments
Transac Liqui taking to
tion dity effect 2008
and and PPC of Additi B-
Approve Guara Righ 3Q Approv Trans Propos onal BBEE %
d ntee ts Acqu ed actio ed Share Trans chang
Transac Facil Offe isit Transa % n Amendm Alloca actio e
tions ity r ion ctions change Costs ents tions n (G/C)
Earning
s per (26%)
share
(cents) 70 (26) (16) - 28 (64%) (1) (6) (1) 20
Diluted
earning (26%)
s per
share
(cents) 69 (26) (16) - 27 (59%) (1) (6) (1) 19
Headlin
e (36%)
earning
s per
share
(cents) 53 (26) (5) - 22 (59%) (1) (6) (1) 14
Diluted
headlin
e (38%)
earning
s per
share
(cents) 52 (26) (5) - 21 (60%) (1) (6) (1) 13
NAV per
share (127 -
(cents) 573 - ) 3 449 (21%) (1) - - 448
TNAV
per -
share
(cents) 380 - - 3 383 1% (1) - - 382
9
Number
of
shares
in -
issue,
net of
shares
deemed
to be
treasur
y
shares
in
terms
of IFRS
(millio 1,00
n) 528 - 0 18 1,546 193% - - 4 1,550
Weighte
d
average
number -
of
shares
(millio 1,00
n) 526 - 0 18 1,544 193% - - 4 1,548
Weighte
d
average
diluted
number -
of
shares
(millio 1,00
n) 534 - 0 18 1,552 191% - - 4 1,556
Notes:
1. Column A has been derived from PPC's audited consolidated
results for the six months ended 31 March 2016 which are
unmodified from previously presented.
2. Columns B1, B2 and B3 illustrates the impacts of the
finalisation of the Liquidity and Guarantee Facility
Agreement, PPC Rights Offer and 3Q Acquisition (“Approved
Transactions”) which were finalised during June 2016,
September 2016 and July 2016 respectively. Further details
of these transactions are included in the events after the
reporting date section in the Company’s audited results for
the six months ended March 2016 and will also be contained
in the Circular.
3. Column D illustrates the impact of the estimated
transaction costs of R11 million and R8 million after
taxation (the “Transaction Costs”). The Transaction Costs
are non-recurring and have been expensed to the statement
of comprehensive income. The Transaction Costs will be
settled from cash emanating from the PPC Rights Offer.
4. Column E illustrates the impact of the Proposed Amendments,
which reflects a once-off non-taxable IFRS 2 charge of R93
million in terms of IFRS 2 (Share Based Payments) as a
result of the modifications to the terms of the 2008 B-BBEE
Transaction Agreements.
5. Column F illustrates the impact of the subscription of
4,403,439 PPC Shares by the SBP/ CSG Funding SPVs at a
nominal value (Additional Share Allocations), which
triggers an IFRS 2 charge in terms of IFRS 2 (Share Based
Payments). The once-off, non-taxable IFRS 2 charge amounts
to R28 million.
6. Other than the Approved Transactions, there are no other
events that occurred after the reporting date that may have
a material impact on the PPC Group's reported results or
the pro forma results for the six months year ended 31
March 2016 for purposes of understanding the Transactions.
6. Salient dates and times
The salient dates and times in relation to the posting date
of the Circular and the General Meeting are set out below:
2016
Record date to determine which Shareholders
are eligible to receive the Circular, Friday, 28
including the notice of General Meeting and October
form of proxy (yellow)
Circular, including notice of General Friday, 4
Meeting and form of proxy (yellow), posted November
to Shareholders on or about
Last day to trade in order to be entitled Tuesday, 22
to participate in and vote at the General November
Meeting
Last day and time to give notice to Thursday, 24
participate in the General Meeting November
electronically by 12:00 on
Record date to be entitled to participate Friday, 25
in and vote at the General Meeting November
Last day to lodge forms of proxy (yellow) Thursday, 1
for the General Meeting by 12:00 on December
Monday, 5
General meeting to be held at 12:00 on Monday, 5
December
Results of the General Meeting released on Monday, 5
SENS and on the Zimbabwean Stock Exchange December
News Service on
Results of the General Meeting to be Tuesday, 6
published in the South African press on December
Notes:
1. All times shown in this SENS announcement are South African
local times.
2. These dates and times are subject to change. Any changes
will be released on SENS, the Stock Exchange News Service
in Zimbabwe and published in the South African press.
Johannesburg
28 October 2016
Investment Bank and Transaction Sponsor
The Standard Bank of South Africa Limited
Legal advisors
Bowmans
Tax advisors
Cliffe Dekker Hofmeyr
Independent reporting accountants
Deloitte & Touche
Company Sponsor:
Merrill Lynch South Africa (Pty) Limited
12
Date: 28/10/2016 12:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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