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Northam acquires Zambezi Platinum preference shares
NORTHAM PLATINUM LIMITED
Incorporated in the Republic of South Africa
(Registration number 1977/003282/06)
Share code: NHM ISIN: ZAE000030912
Debt issuer code: NHMI
Bond code: NHM002 Bond ISIN: ZAG000129024
Bond code: NHM003 Bond ISIN: ZAG000129032
(“Northam”)
NORTHAM ACQUIRES ZAMBEZI PLATINUM PREFERENCE SHARES
1. INTRODUCTION
Northam hereby advises shareholders of the acquisition of 4 043 018 preference shares (preference
shares) in Zambezi Platinum (RF) Limited (Zambezi) from Coronation Asset Management Proprietary
Limited acting as investment manager on behalf of its clients (Coronation), (acquisition).
The acquisition was effected on 31 October 2016 at R49.468 per preference share, for a total cash
value of R200 million, and constitutes approximately 2.5% of the total preference shares in issue.
The preference shares were issued by Zambezi in 2015 in terms of Northam’s black economic
empowerment transaction (Northam BEE transaction), which raised Northam’s empowerment equity
levels to 31.4%.
Northam chief executive Paul Dunne said today:
“The preference shares offer an attractive yield whilst acting as a partial hedge against any potential
financial liability which could arise in respect of the guarantee that Northam provided to the holders of
preference shares in terms of the Northam BEE transaction.”
2. RATIONALE
Northam considers the preference shares to be a high-yield instrument with a credit risk profile that
matches that of Northam. Accordingly, an investment in the preference shares provides the following
benefits:
- the preference shares generate a high return without the introduction of significant additional third
party risk for Northam;
- Northam may access future liquidity through the disposal of the preference shares in the future;
- should Zambezi elect to redeem the preference shares using Northam ordinary shares, Northam
will benefit from the discount that shall be applied to the Northam ordinary shares for purposes
of the redemption calculations;
- the acquisition partially hedges Northam against the potential future liability which could become
payable pursuant to the guarantee provided by Northam to preference shareholders in respect
of the preference shares (guarantee); and
- the net finance charges and liability included in Northam’s consolidated financial statements in
relation to the preference shares will be reduced when setting off these preference shares held
as an asset.
3. PURCHASE CONSIDERATION
The price paid of R49.468 per preference share was calculated as the redemption value of a
preference share as at 31 October 2016, being an amount equal to the issue price of R41.00 plus the
accrued dividends at that date. The aggregate value of the acquisition was R200 million and was
funded from Northam’s cash reserves.
4. DETAILS OF ZAMBEZI AND THE PREFERENCE SHARES
Zambezi was incorporated as a special purpose vehicle for purposes of facilitating the Northam BEE
transaction, the primary purpose of which is to (i) hold the Northam ordinary shares it acquired as part
of the Northam BEE transaction (BEE shares) for the benefit of historically disadvantaged South
African participants and (ii) issue the preference shares. Zambezi is a ring-fenced entity and does not
conduct any operational business activities, with its only investment being the BEE shares.
The preference shares, which were issued at R41.00 per share, are cumulative, redeemable
preference shares which accrue dividends daily at an effective rate equal to the prime interest rate
plus 3.5% compounded annually and are redeemable on 18 May 2025. The preference shares are
secured by the BEE shares held by Zambezi and payments to their holders are guaranteed by
Northam.
The preference shares may be redeemed, at Zambezi’s election, in cash and / or through the
distribution of the BEE shares held by Zambezi in Northam. In the event that the preference shares
are redeemed through the distribution of the BEE shares, the settlement value of the BEE shares shall
be calculated at the 30 day volume weighted average price of a Northam ordinary share, as at the
date preceding the settlement date, less 10%.
If payment under the guarantee is required, Northam may, at its election, settle the associated liability
using cash and / or new Northam ordinary shares.
5. SMALL RELATED PARTY TRANSACTION AND FAIRNESS OPINION
Coronation is deemed to be a material shareholder of Northam in that it is able to exercise voting
control on behalf of its clients over shares constituting an approximate 29.68% interest in Northam,
and is therefore considered a related party in terms of paragraph 10.1(b)(i) of the JSE Limited Listings
Requirements (Listings Requirements). Accordingly, the acquisition is classified as a small related
party transaction in terms of paragraph 10.7 of the Listings Requirements.
The acquisition is not subject to shareholder approval, provided an independent professional expert
has confirmed that the terms of the acquisition are fair as far as Northam’s shareholders are
concerned. Northam appointed KPMG Services Proprietary Limited as an independent expert to
provide an opinion on the fairness of the acquisition.
In accordance with paragraph 10.7(b) of the Listings Requirements, and the fairness opinion, the
board hereby confirms its opinion on the fairness of the acquisition for Northam shareholders. A copy
of the fairness opinion is available for inspection at Northam’s registered office, being Building 4, 1st
Floor, Maxwell Office Park, Magwa Crescent West, Waterfall City, Jukskei View, for a period of 28
days from the date of this announcement.
Johannesburg
1 November 2016
Corporate Advisor, Sponsor and Debt Sponsor
One Capital
Independent Expert
KPMG Services Proprietary Limited
Date: 01/11/2016 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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