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B-BBEE transaction and withdrawal of cautionary
BSI Steel Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/023164/06)
JSE share code: BSS ISIN: ZAE000125134
(“BSI” or “the Company”)
ANNOUNCEMENT REGARDING BSI’s BROAD-BASED BLACK ECONOMIC
EMPOWERMENT (“B-BBEE”) TRANSACTION AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
BSI shareholders (“Shareholders”) are referred to the cautionary announcement
published on 18 May 2017 (“Cautionary Announcement”), wherein they were advised
that the Company was in discussions with B-BBEE investors regarding the disposal of a
majority stake in Isilo Steel (Proprietary) Limited (“Isilo Steel”), a wholly-owned
subsidiary of BSI (“B-BBEE Transaction”).
Shareholders are advised that BSI and its wholly owned subsidiary Isilo Steel have now
entered into a series of transactions (“Transactions”) to give effect to the B-BBEE
Transaction. In terms of the Transactions, Isilo Investments (RF) Proprietary Limited
(“Isilo Investments”) (held 51% as to Tutuni Investments 14 (Proprietary) Limited
(“Tutuni”) and 49% as to Thuthuka Trust) will acquire an effective 51.12% in Isilo Steel.
This will result in Isilo Steel being 51% Black Owned (as defined in the B-BBEE Codes
of Good Practice (“Codes”)) and 30% Black Women owned (as defined in the Codes).
2. THE TRANSACTIONS
2.1 The Transactions
The material aspects of the Transactions that give effect to the B-BBEE
Transaction are:
- the sale of BSI’s High Volume Strategic Clients division (“High Volume
Business”) to Isilo Steel; and
- the subscription by Isilo Investments for a 51.12% interest in Isilo Steel
(“Subscription”) for R32 299 000.
This results in BSI disposing of a 51.12% interest in Isilo Steel (effectively the
High Volume Business) to Isilo Investments.
In order to finance the Subscription, BSI has subscribed for, and Isilo
Investments has issued to BSI, one cumulative redeemable non-participating
preference share (“Preference Share”) for a subscription price of
R32 299 000 (“Preference Share Subscription Price”). The coupon rate on
the Preference Share will be the prime rate less 2% and the Preference
Share will be redeemed by way of dividends. The final redemption amount of
the Preference Share will be determined by adjusting the Preference Share
Subscription Price according to a formula based on net profits after tax
earned by Isilo Steel up until and including the year ending 31 March 2020,
which amount is limited to R75 000 000.
2.2 Nature of Isilo Steel’s business
The High Volume Business targets managed-risk “blue chip” volume users of
steel and related products.
2.3 Rationale for the B-BBEE Transaction
The Transactions have been entered into in accordance with BSI’s commitment
to transformation in South Africa and in order to facilitate its B-BBEE objectives.
2.4 Conditions precedent and effective date
The conditions precedent to the transactions have been fulfilled and the
transactions are effective from 15 June 2017 (“Effective Date”).
2.5 Other significant terms of the Transactions
Isilo Steel has warranted that with effect from the Effective Date, it will be and
remain 51% Black Owned and 30% Black Women Owned.
Isilo Investments may not sell its shares in Isilo Steel for a period of three years.
3. THE NET ASSETS AND PROFITS ATTRIBUTABLE TO THE TRANSACTIONS
The value of the net assets that are the subject of the Transactions as at 30 September
2016 (at the time the High Volume Division was a division of BSI and was subsequently
sold to Isilo Steel as a consequence of the Transactions), being BSI’s most recent
interim period, was R 42 330 404. The profit after tax attributable to the net assets that
are the subject of the Transactions for the six months ended 30 September 2016 was
R 3 928 686.
4. CATEGORISATION OF THE TRANSACTIONS
In terms of paragraph 3.35 of the JSE Limited Listings Requirements (“Listings
Requirements”), an issue of shares for cash in a subsidiary of an issuer must be
categorised in accordance with the provisions of section 9 of the Listings Requirements.
The Transactions therefore give rise to a Category 2 transaction as contemplated in
Section 9. Further to this, Tutuni is a related party as contemplated in Section 10 of the
Listings Requirements as Mr BM Khoza’s (a director of BSI) family trust, is a 50%
shareholder of Tutuni. This announcement has, therefore, been made in compliance
with section 9 regarding a Category 2 transaction and paragraph 21.11(c) of the Listings
Requirements with regard to the related party transaction. In terms of paragraph
21.11(c), all transactions with related parties must be announced irrespective of the size
of the transaction.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the Cautionary Announcement published on the Stock
Exchange News Service on 18 May 2017. Further to the information set out in this
announcement regarding the Transactions, caution is no longer required to be exercised
by Shareholders when dealing in their BSI securities.
Johannesburg
19 June 2017
Designated Adviser and Corporate Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
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