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Tax apportionment ratio and cash value for fractional entitlements
EXTRACT GROUP LIMITED
(formerly Eqstra Holdings Limited)
(Incorporated in South Africa)
(Registration number 1998/011672/06)
Share code: EXG ISIN: ZAE000223202
(“eXtract” or the “Company”)
Announcement of (i) the ratio apportionment of expenditure and market value in respect of the
unbundling by eXtract of the enX Consideration Shares; and (ii) the cash value for fractional
entitlements
1. Introduction
eXtract ordinary shareholders (“eXtract Shareholders”) are referred to the announcements
released on the Stock Exchange News Service operated by the JSE Limited (“SENS”) on 30 June
2016, 22 September 2016 and 8 November 2016, relating to the disposal of eXtract’s Fleet
Management and Logistics Division and Industrial Equipment Division to enX Group Limited
(“enX”), together with a recapitalisation of the remaining eXtract business by enX, and the
unbundling of the enX Consideration Shares to eXtract Shareholders.
eXtract Shareholders who will be shareholders on the record date of the Unbundling, being
Friday, 18 November 2016, are referred to the announcement released by eXtract on SENS on
Tuesday, 8 November 2016 to the effect that the unbundling by eXtract of all the issued ordinary
shares in enX held by eXtract at the time of the unbundling to the eXtract Shareholders in
accordance with their effective interests in eXtract (“Unbundling”) had become unconditional.
The Unbundling will be implemented in terms of the provisions of section 46 of the Income Tax
Act No. 58 of 1962 (“Income Tax Act”).
As a result of the Unbundling, eXtract Shareholders will receive enX shares in accordance with
their effective interests in eXtract (“Unbundled enX Shares”).
The purpose of this announcement is to advise eXtract Shareholders, who are eXtract
Shareholders at the time of the Unbundling, of (i) the apportionment ratio in which the
expenditure incurred and the market value of eXtract Shares must be apportioned for South
African tax purposes between the Unbundled enX Shares and the eXtract Shares held at the time
of the Unbundling; and (ii) the cash value in respect of fractional entitlements in relation to the
Unbundled enX Shares.
2. Apportionment of tax cost
2.1 Apportionment tax principle
eXtract Shareholders must allocate a portion of the expenditure and market value attributable
to the eXtract Shares held by them to the Unbundled enX Shares received pursuant to the
Unbundling.
eXtract Shares held as trading stock:
Any eXtract Shareholder holding eXtract Shares as trading stock will be deemed to acquire
its proportional number of Unbundled enX Shares as trading stock. The expenditure, of
which a portion will be allocated to the Unbundled enX Shares, will be the amount
originally taken into account by the eXtract Shareholder in respect of those eXtract Shares
held prior to the Unbundling, as contemplated in section 11(a), section 22(1), or section
22(2) of the Income Tax Act.
The expenditure and market value to be allocated to the Unbundled enX Shares will be
determined by applying the ratio that the market value of the Unbundled enX Shares, as
at the end of the day after the distribution, bears to the sum of the market value, as at the
end of that day, of the Unbundled enX Shares and the eXtract Shares.
The expenditure and market value so allocated to the Unbundled enX Shares will reduce
the expenditure and market value of the eXtract Shares held by the amount allocated to
the Unbundled enX Shares. eXtract Shareholders will be deemed to have incurred the
expenditure allocated to the Unbundled enX Shares on the date on which the expenditure
was incurred in respect of the eXtract Shares.
eXtract Shares held as capital assets:
Any eXtract Shareholder holding eXtract Shares as capital assets will be deemed to have
acquired its proportional number of Unbundled enX Shares as capital assets. The
expenditure incurred in respect of the eXtract Shares, in terms of paragraph 20 of the
Eighth Schedule to the Income Tax Act, and the market value of the eXtract Shares will be
apportioned between the Unbundled enX Shares and the eXtract Shares by applying the
ratio that the market value of the Unbundled enX Shares, as at the end of the day after
that distribution, bears to the sum of the market value, as at the end of that day, of the
Unbundled enX Shares and eXtract Shares. The portion of the expenditure so allocated to
the Unbundled enX Shares will reduce the base cost of the eXtract Shares held. eXtract
Shareholders will be deemed to have incurred any expenditure allocated to the
Unbundled enX Shares on the date on which the expenditure was incurred in respect of
the eXtract Shares.
2.2. Apportionment ratio
eXtract Shareholders are hereby advised that the expenditure and market value of their eXtract
Shares as referred to above must be apportioned in the ratio of 2.05073% to an eXtract Share
and 97.94927%% to an Unbundled enX Share (“Apportionment Ratio”).
The Apportionment Ratio is based on the closing share price of R0.38 per eXtract Share and the
closing share price of R18.15 per enX Share on Wednesday, 16 November 2016.
3. Cash value for fractional entitlements
In implementing the Unbundling, eXtract is required by the JSE to apply the rounding principle
that an eXtract Shareholder becoming entitled to a fraction of an Unbundled enX Share arising
from the Unbundling (“Fractional Entitlement”) will be rounded down to the nearest whole
number, resulting in the allocation of whole Unbundled enX Shares and a cash payment for the
fraction (“Cash Payment”). The Cash Payment results from the sale, on behalf of the eXtract
Shareholder, of the fraction of an Unbundled enX Share to which the eXtract Shareholder
becomes entitled in terms of the Unbundling. The value of such Cash Payment is the volume
weighted average traded price per enX Share less 10% on first day of trade after the last day to
trade in order to participate in the Unbundling, being Wednesday, 16 November 2016.
eXtract Shareholders are advised that the value of an enX Share to be utilised in determining the
Cash Payment due to an eXtract Shareholder in respect of any Fractional Entitlement is
R16.55497. In accordance with the JSE Listings Requirements, this amount has been determined
with reference to the volume weighted average price of an enX Share traded on the JSE on
Wednesday, 16 November 2016 (R18.39441), discounted by 10%.
The receipt of the Cash Payment may have tax implications for eXtract Shareholders, as this will
be treated as a dividend and taxed accordingly at a dividends tax rate of 15% (unless an
exemption, as set out in South African Income Tax legislation, applies), resulting in a net Cash
Payment of R14.07173.
THIS ANNOUNCEMENT IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF THE TAX IMPLICATIONS
OF THE UNBUNDLING. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSIDERED TO BE, LEGAL OR
TAX ADVICE. EQSTRA SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN PROFESSIONAL TAX
ADVISORS ON THE TAXATION CONSEQUENCES OF THE UNBUNDLING IN BOTH SOUTH AFRICA AND
THEIR JURISDICTION OF RESIDENCE AND THE CALCULATION OF THEIR COSTS FOR TAX PURPOSES.
17 November 2016
Johannesburg
Corporate Advisor: Rothschild (South Africa) Proprietary Limited
Transaction Sponsor: Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Legal Advisor: Werksmans Inc.
Date: 17/11/2016 11:45:00 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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