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Update Regarding The Unbundling Of Gameco
Niveus Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/005744/06)
Share code: NIV
ISIN: ZAE000169553
(“Niveus” or the “Company”)
UPDATE REGARDING THE UNBUNDLING OF GAMECO
1. INTRODUCTION
Shareholders are referred to the Stock Exchange News Service announcements released by Niveus
on 14 March 2017, 11 May 2017 and 29 May 2017 (“Initial Announcements”), relating to inter alia
the unbundling by Niveus of its interests in its gaming businesses, currently held via its wholly-owned
subsidiary, Niveus Invest 19 Limited (“Gameco”)(“Unbundling”) and certain transactions conditional
upon the implementation of the Unbundling (“Proposed Transactions”).
Shareholders are hereby advised that Tsogo has completed a due diligence investigation in respect
of Gameco. While Niveus has not received positive confirmation about the outcome of the due
diligence investigation, the transaction is no longer subject thereto. In addition, shareholders are
hereby advised that Niveus, Hosken Consolidated Investments Limited (“HCI”) and Tsogo Sun
Holdings Limited (“Tsogo”) have entered into an agreement, which records the terms of the Proposed
Transactions and which is subject to various conditions precedent (“Agreement”).
Given that certain of the terms of the Proposed Transactions as announced in the Initial
Announcements have changed (although in principle the transaction remains the same), the
Company is of the view that it is prudent to publish the full terms of the Unbundling and the Proposed
Transactions in one announcement, as set out below.
2. OVERVIEW OF GAMECO
All of the South African gaming interests of Niveus (other than its sports betting and lottery interests)
are housed in Gameco Group and its subsidiaries and includes the following major businesses:
2.1. Vukani Gaming - Vukani Gaming and its subsidiaries are mainly engaged in offering limited
payout machine (“LPM”) gaming services and manages more than 5 500 LPMs at third-party sites
throughout Southern Africa; and
2.2. Galaxy Gaming - Galaxy Gaming operates licensed bingo centres. Bingo is offered through
electronic bingo terminals (“EBT”) and paper bingo games at Galaxy Gaming’s licensed bingo
centres. Galaxy Gaming and its subsidiaries operate 2 351 EBTs and 174 slot machines.
3. UNBUNDLING
3.1. As explained in the previous announcements, subject to the Unbundling Conditions Precedent
stipulated below, Niveus intends to distribute up to a maximum of 431,250,094 Gameco shares
(comprising up to 93.75% of the total issued Gameco shares in the issued share capital of
Gameco) to Niveus shareholders, by way of a distribution in specie pro rata to their respective
shareholding in Niveus on the Unbundling record date, in the ratio of 3.619 Gameco shares for
every 1 Niveus share held by any such shareholder on the Unbundling record date.
3.2. The Unbundling is subject to the fulfilment or waiver by the Company (to the extent legally
permissible) of the following conditions precedent (“Unbundling Conditions Precedent”) by no
later than 30 September 2017 (or such later date as the Company, HCI and Niveus agree to)
(“Long Stop Date”):
3.2.1. the board of directors of the Company approves the Unbundling in accordance with section
46 of the Companies Act, No. 71 of the 2008 (“Companies Act”) and the Listings
Requirements of the JSE (“Listings Requirements”);
3.2.2. the Takeover Regulation Panel (“TRP”) issues a compliance certificate, in accordance with
section 121(b) of the Companies Act, to the Company in respect of the Unbundling;
3.2.3. the shareholders of the Company approve the Unbundling in terms of section 5.85 of the
Listings Requirements and sections 112 and 115 of the Companies Act, by the requisite
majority of Shareholders at a general meeting voting in favour of the resolutions approving
the Unbundling, provided that this condition shall not be fulfilled if shareholders holding, in
aggregate, 2.5% or more of the issued shares in the Company (or such other number as the
Board may determine), vote against the special resolution approving the Unbundling and
exercise their appraisal rights by giving notice objecting to such special resolution in
accordance with section 164(3) of the Companies Act; and
3.2.4. the conditions precedent to the Tsogo Transaction are fulfilled or waived (to the extent legally
permissible) and the Agreement becomes unconditional in accordance with its terms, save for
any Transaction Conditions Precedent requiring that the Unbundling Conditions Precedent
are fulfilled.
4. THE PROPOSED TRANSACTIONS
In terms of the Agreement, the Proposed Transactions will be implemented as follows:
4.1. Subject to the fulfilment (or waiver, to the extent legally permissible) of the Tsogo Transaction
Conditions Precedent (as defined below) and following the Unbundling, the following transactions,
which aim to consolidate all of HCI’s gaming interests (other than its sports betting and lottery
interests) in Tsogo, will be implemented in terms of the following inter-conditional transaction
steps:
4.1.1. the HCI disposal, in terms of which HCI will dispose of all Gameco shares (acquired by HCI
pursuant to the Unbundling and the Assignment (as defined below)) to Tsogo, being
233,659,638 Gameco shares comprising approximately 50.8% of the issued share capital of
Gameco, in exchange for the issue by Tsogo to HCI of 81,272,918 Tsogo shares, in the ratio
of 1 Tsogo share for every 2.875 Gameco shares purchased from HCI (“HCI Disposal”);
4.1.2. the Tsogo minority offer, in terms of which Tsogo will make a voluntary offer to the Gameco
minority shareholders in compliance with the Companies Act and the Companies Regulations,
2011 (“Companies Regulations”), to acquire all of the Gameco shares held by the Gameco
minority shareholders (“Tsogo Minority Offer”), pursuant to the Unbundling, being
234,554,748 Gameco shares, in exchange for a consideration comprising:
4.1.2.1. 20% in Tsogo shares (in the ratio of 1 Tsogo share for every 2.875 Gameco shares); and
4.1.2.2. 80% in cash (at R 9.739 per Gameco share); and
The effective value received by Minority Shareholders, before deducting withholding tax of
those shareholders who are not exempt from dividend withholding tax, is R35,57 per Niveus
share if shareholders elect to sell their Gameco shares pursuant to the Tsogo Minority Offer.
R28,20 will be received in cash per Niveus share and R5,75 will effectively be received in
Tsogo shares on the basis that Tsogo shares are valued at R22,85 (being the closing price of
Tsogo shares on the JSE at close of trade on 26 June 2017). The balance of the R35,57 will
be received by Niveus itself and will be applied as described in paragraph 4.1.3.1 below.
4.1.3. the Niveus transaction, comprising of (“Niveus Transaction”):
4.1.3.1. the Niveus Disposal, in terms of which Niveus will dispose to Tsogo of all the Gameco
shares held by it after the implementation of the Unbundling and the Assignment (as
defined below), by accepting the Tsogo Minority Offer in respect of such Gameco shares
which will be at least 20,535,720 Gameco shares (“Niveus Disposal”). The consideration
which Niveus will receive from Tsogo in terms of the Niveus Disposal, will be at least
R160,000,000 in cash and 1 428 571 Tsogo shares. The cash amount may increase to
the extent that certain shareholders exercise their appraisal rights or to the extent that
Niveus retains Gameco shares in order to settle withholding tax obligations of those
shareholders who are not exempt from dividend withholding tax. The Niveus Disposal
consideration will be used to strengthen the Niveus balance sheet and pay down debt.
Tsogo shares received by Niveus in terms of the Niveus Disposal will be retained for the
foreseeable future;
4.1.3.2. the clawback, in terms of which Niveus will grant Tsogo the right to claw back an amount
equal to the value of 10 000 000 Tsogo Shares ("Clawback Shares") in the event that no
EBTs are legally operating in the KwaZulu Natal Province prior to or on 31 March 2020.
The clawback value shall be calculated using the 30 day volume weighted average trading
price of Tsogo Shares on the JSE as at 31 March 2020, subject to certain adjustments as
will be detailed in the circular to shareholders (“Clawback Amount”). Should the
Clawback Amount become due and payable, the claim will be settled by Niveus (or HCI
pursuant to implementation of the Assignment (defined below)) delivering that number of
Tsogo shares as will equal the value of the Clawback Amount (“Clawback”).
4.1.3.3. the Assignment, in terms of which Niveus will assign to HCI all of its rights and obligations
in terms of the Clawback, including the potential payment obligation to make payment of
the Clawback Amount to Tsogo, against transfer by Niveus of 8,214,286 Gameco shares
with an aggregate value of R80,000,000 to HCI (“Assignment”).
4.2. For ease of reference, the HCI Disposal, Tsogo Minority Offer and the Niveus Transaction are,
collectively, hereinafter referred to as the “Tsogo Transaction”.
5. RATIONALE FOR THE UNBUNDLING AND PROPOSED TRANSACTIONS
The rationale for the Proposed Transactions is to offer Shareholders the opportunity to separately
retain, dispose of or increase their interest in Gameco without affecting their current interest in the
other assets held by Niveus. The Proposed Transactions grant shareholders more flexibility with
regard to the management of their interests in Niveus and Gameco and a more direct interest in the
Niveus gaming assets. The Tsogo Minority Offer will furthermore grant Shareholders the ability to
dispose of their Gameco Shares for a combination of cash and shares in Tsogo, which will hold the
majority of the Gameco shares pursuant to the HCI Disposal.
6. CONDITIONS PRECEDENT
6.1. The Tsogo Transaction is subject to the fulfilment (or waiver by the parties to the Agreement) of
the following conditions precedent by the Long Stop Date (“Tsogo Transaction Conditions
Precedent”):
6.1.1. the parties to the Proposed Transactions shall have obtained such approvals as may be
legally required in terms of applicable laws from any applicable authority (other than the
Gambling Boards) for the implementation of the Tsogo Transaction, either unconditionally or
if such approval is conditional, subject to such conditions as are acceptable in its sole
discretion to the parties who are affected by the conditions;
6.1.2. irrevocable undertakings, on terms acceptable to Tsogo, shall have been provided by persons
and/or entities who will hold shares in the share capital of Gameco pursuant to the Unbundling
(including HCI and Niveus) in terms of which they irrevocably undertake in favour of Tsogo to
dispose of not less than 345,000,100 shares in the share capital of Gameco (equal to 75% of
the shares in the share capital of Gameco), in the aggregate, to Tsogo in terms of the HCI
Disposal, the Niveus Disposal and the Tsogo Minority Offer;
6.1.3. the shareholders of Tsogo, in a general meeting, approve the Tsogo Transaction as a related
party transaction in accordance with the Listings Requirements and the Companies Act;
6.1.4. the shareholders of Niveus, in a general meeting, shall have approved the Tsogo Transaction,
the Clawback and the Assignment as one or more related party transactions in accordance
with the Listings Requirements;
6.1.5. the Tsogo Transaction shall have been approved by a sub-committee of independent directors
of Tsogo;
6.1.6. the Tsogo Minority Offer circular shall have been finalised in a form acceptable to the parties
and approved by the TRP;
6.1.7. the Northern Cape Gambling Board, established in terms of the Northern Cape Gambling Act
of 2008, shall have waived, in writing, the requirement that the Tsogo Transaction shall have
been approved by it prior to its implementation;
6.1.8. all the requisite directors' approvals in terms of the memorandum of incorporation of Gameco,
for the transfer of the shares in the share capital of Gameco in terms of the HCI Disposal, the
Niveus Disposal and the Tsogo Minority Offer, shall have been obtained in writing;
6.1.9. all the requisite waivers of pre-emptive rights and/or other prior rights (if any) in respect of the
shares in the share capital of Gameco shall have been obtained in writing in respect of the
HCI Disposal, the Niveus Disposal and the Tsogo Minority Offer;
6.1.10. HCI and Niveus shall have concluded an Assignment agreement recording the terms of the
Assignment, and such agreement shall have become unconditional in accordance with its
terms, save for any condition therein requiring that the Agreement becomes unconditional;
and
6.1.11. the Unbundling Conditions shall have been fulfilled or waived (to the extent that they may be
legally waived).
7. EFFECTIVE DATE
The Unbundling will be implemented after the Unbundling Conditions are fulfilled or waived (as the
case may be), which is anticipated as being Monday, 18 September 2017.
The Tsogo Transaction is anticipated to be implemented after the Tsogo Transaction Conditions
Precedent are fulfilled or waived (as the case may be), as follows:
7.1. the Tsogo Minority Offer will be submitted to Gameco shareholders on the date that is 5 business
days after the completion of the Unbundling;
7.2. the HCI Transaction and the Niveus Disposal will be implemented on the first Friday after the
Tsogo Minority Offer being submitted to Gameco shareholders;
7.3. the Assignment is anticipated to be implemented on the last business day immediately before the
implementation of the HCI Transaction.
8. SIGNIFICANT OTHER TERMS OF THE PROPOSED TRANSACTIONS
8.1. Following the Tsogo Minority Offer, in the event that:
8.1.1. 20% or more of the issued share capital of Gameco is held by Gameco minority shareholders
other than Tsogo on the first business day after the Tsogo Minority Offer closing date, Tsogo
has irrevocably undertaken to and in favour of HCI and Niveus to make application to the JSE
to list the Gameco Shares on the main board of the JSE, within a period of 12 months from
such date; and
8.1.2. 90% or more of the Gameco Shares which are the subject of the Tsogo Minority Offer, is
acquired by Tsogo in terms of the Tsogo Minority Offer, Tsogo intends to invoke the provisions
of section 124 of the Companies Act to acquire the remaining Gameco shares which are the
subject of the Tsogo Minority Offer on mutatis mutandis the same terms and conditions as the
Tsogo Minority Offer.
8.2. The Agreement contains warranties and representations by Niveus and HCI in favour of Tsogo,
which are standard and appropriate for transactions of this nature.
9. FINANCIAL INFORMATION
9.1. The value of the net assets of Gameco as at signature date of the Agreement is R3 980 355 651.
9.2. The pro forma unaudited profit after tax of Gameco for the year ending 31 March 2017 was R226
879 000.
10. INDEPENDENT BOARD
10.1. In accordance with the Companies Regulations, the board of Niveus will appoint an independent
board comprising of independent non-executive directors of Niveus (“Independent Board”). The
Independent Board will appoint an independent expert to compile a report(s) on the Unbundling
and the Niveus Transaction.
10.2. The report(s) of the independent expert will be contained in the circular that will be sent to
shareholders.
11. CLASSIFICATION
11.1. The Unbundling is regarded as a specific payment to Shareholders in terms of section 5.85 of the
Listings Requirements and accordingly requires the approval of the Shareholders by way of an
ordinary resolution.
11.2. The board of directors of the Company has elected to treat the Unbundling as a disposal of the
greater part of the assets or undertaking of Niveus in terms of section 112 of the Companies Act
and will therefore obtain the approval of the TRP and the approval of the Shareholders by way of
a special resolution, in compliance with the provisions of section 115 of the Companies Act.
11.3. HCI is a “material shareholder” and the holding company of Niveus, as it holds 50.8% of the total
issued shares of Niveus. Furthermore, Tsogo is an “associate” of HCI, due to the fact that HCI
holds approximately 47.6% of the total issued Tsogo shares. Since HCI and Tsogo are both
related parties of Niveus, the Niveus Transaction will constitute one or more related party
transactions, which require the approval of the shareholders, excluding any related parties and
their associates, by way of an ordinary resolution in accordance with section 10.4(e) of the
Listings Requirements.
12. CIRCULAR
A circular containing the full details of the Proposed Transactions, incorporating a notice convening
the required Niveus general meeting, will be posted to shareholders in due course and the salient
dates and times of the Proposed Transactions, including the date of the general meeting, will be
announced on SENS once the circular has been posted.
Cape Town
27 June 2017
Sponsor: PSG Capital Proprietary Limited
Legal adviser: ENSafrica
Date: 27/06/2017 03:10:00 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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