Wrap Text
Joint firm intention announcement, proposed delisting and withdrawal of cautionary announcement
SOVEREIGN FOOD INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1995/003990/06
JSE Code: SOV
ISIN Number: ZAE000009221
(“Sovereign” or the “Company”)
JOINT FIRM INTENTION ANNOUNCEMENT IN RESPECT OF AN OFFER TO ACQUIRE ALL OR A PORTION OF THE ISSUED
ORDINARY SHARES IN SOVEREIGN, EXCLUDING SHARES HELD BY SOVEREIGN’S SUBSIDIARIES, PROPOSED DELISTING
AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders of Sovereign (“Sovereign Shareholders”) are advised that on 10 August 2017,
Sovereign entered into an implementation agreement (“Implementation Agreement”) with
Capitalworks Private Equity SP GP Proprietary Limited (“Capitalworks”), acting in its capacity as
the general partner of the Special Purpose Acquisition Partnership II, and a special purpose
vehicle, Gallus Holdings Limited (“Bidco”), in terms of which Bidco will make two separate but
concurrent offers to acquire all or a portion of the issued ordinary shares in Sovereign (“Sovereign
Shares”), excluding the Sovereign Shares held by Sovereign’s subsidiaries (“Offer Shares”),
(collectively, the “Offer”).
The Offer will be implemented by way of:
• a scheme of arrangement in terms of section 114(1) read with section 115 of the Companies
Act, No. 71 of 2008, as amended (“Companies Act”) and paragraph 1.16(b) of the JSE
Limited Listings Requirements (“Listings Requirements”), between Sovereign and
Sovereign Shareholders (“Scheme”); and
• a general offer by Bidco to the holders of the Offer Shares (“Eligible Shareholders”) in terms
of section 117(1)(c)(v) of the Companies Act and paragraph 1.14(c) of the Listings
Requirements, subject to the Scheme not becoming operative (“General Offer”).
The Scheme and the General Offer will be proposed concurrently on the basis that the General
Offer will only be implemented if the Scheme does not become operative.
The consideration for each Offer Share will be settled either:
• in cash, at a price of R12.00 per Offer Share, plus, in the event that the cash consideration is
not paid by 1 January 2018, interest thereon at 7% nominal annual compounded monthly in
arrears, calculated from 1 January 2018 to the date on which the cash consideration together
with accrued interest is paid (both days inclusive) (“Cash Consideration”); or
• through the issue by Bidco of a linked share (“Bidco Linked Share”), comprising 1 Bidco
ordinary share (“Bidco Ord”) and 1 Bidco preference share (“Bidco Pref”), priced at R12.00
per Offer Share (“Share Consideration”),
(collectively the “Offer Consideration”). Further details of the Offer Consideration are set out in
paragraph 5.3 below.
Simultaneously with the Offer, the delisting of all the Sovereign Shares from the main board of the
securities exchange operated by the JSE Limited (“JSE”) will be proposed to Sovereign
Shareholders (“Delisting”).
The Scheme and the General Offer will be subject to the fulfilment or waiver of the conditions
precedent as set out in paragraph 6 below.
As of the date of this announcement, irrevocable undertakings in support of the Offer representing
50.85% of the Offer Shares, have been obtained. The Independent Board (as defined in paragraph
10 below) and the board of directors of Sovereign (“Sovereign Board”) are in unanimous support
of the Offer and the Delisting (collectively or individually as the context may require,
the “Transaction”) (as more fully set out in paragraph 10 below).
2. Rationale for the Transaction
Capitalworks and the Independent Board believe that the following benefits can be achieved
through implementation of the Transaction:
• Sovereign and the Reinvesting Shareholders (as defined in paragraph 5.4 below) will benefit
from the support of Capitalworks, through Bidco, as a key anchor shareholder.
• Eligible Shareholders will be afforded an opportunity to realise their investment in Sovereign,
considering the limited tradability of Sovereign Shares in recent months, through an
exit / partial exit at:
- a premium to the volume weighted average price (“VWAP”) at which a Sovereign Share
traded on the JSE for the 30 trading days up to and including (i) 27 July 2017, being the
last trading day prior to the publication of the Cautionary Announcement (as defined in
paragraph 5.3 below) and (ii) 8 August 2017, being the last trading day prior to the
publication of this announcement; and
- a 33.3% premium to the cash consideration offered by Country Bird Holdings Proprietary
Limited (“CBH”) of R9.00 per Sovereign Share, cum any dividends paid from the date
of the firm intention announcement published by CBH on 6 July 2016, in terms of the
conditional offer by CBH to acquire the entire ordinary share capital of Sovereign other
than those Sovereign Shares already held by CBH and its concert parties and the
Sovereign Shares held by Sovereign subsidiaries, which offer subsequently lapsed on
14 September 2016.
• Reinvesting Shareholders will be provided with an attractive yield in the form of the Bidco
Prefs, as part settlement of the Share Consideration.
• The costs associated with maintaining a listing on the JSE will be eliminated.
3. Information about Capitalworks
The Capitalworks group is a leading mid-market private equity business. The Capitalworks group
operates on an independent basis and has approximately USD500 million of private equity funds
under its management from leading international and domestic investors. Investors include
domestic and international institutional investors, commercial banks, insurance companies,
pension funds, family offices and high net worth individuals.
The Capitalworks group invests in a diversified range of equity investments in mid-market
companies operating principally in South Africa on behalf of its investors. The philosophy of the
Capitalworks group is centred on building exceptional businesses through partnering with leading
entrepreneurs and management teams. The Capitalworks group generates value for its
stakeholders over the medium to long-term by investing in niche opportunities. The active
involvement, strategic input, operational support and extensive relationships of the team of the
Capitalworks group are directed, as appropriate, towards maximising the potential of its investee
businesses and thereby benefiting all stakeholders.
4. Information about Bidco
Bidco is a newly incorporated public company and has not conducted any business since its
incorporation. It is a special purpose vehicle through which the Offer will be implemented and its
primary purpose will be to house the Offer Shares acquired pursuant to the Offer for the benefit of
Bidco’s shareholders. Post implementation of the Transaction, it is proposed that Bidco will be
converted into a private company.
5. Salient terms of the Offer
The Scheme and the General Offer each constitute an “affected transaction” as defined in
sections 117(1)(c)(iii) and 117(1)(c)(v) of the Companies Act respectively, and, as such, the Offer
is regulated by the Companies Act and the Companies Regulations, 2011 (“Regulations”).
The salient terms and conditions of the Offer and other information pertaining to the Offer are set
out below.
5.1. Scheme
The Scheme will be proposed by the Sovereign Board, between Sovereign and Sovereign
Shareholders.
In the event the Scheme becomes operative, the listing of all the Sovereign Shares on the
JSE will be terminated and each Eligible Shareholder, excluding those Eligible Shareholders
who validly exercise their appraisal rights in accordance with section 164 of the Companies
Act (“Appraisal Rights”) as a consequence of the approval of the Scheme
(“Dissenting Shareholders”) and whose shareholder rights have not been reinstated as
envisaged in sections 164(9) and 164(10) of the Companies Act or who have not been
ordered by the court to withdraw their demands in terms of section 164(15)(c)(v)(aa) of the
Companies Act (“Scheme Participants”), will be deemed to have disposed of all of their
Offer Shares at the Offer Consideration, such that Bidco will own all of the Offer Shares
previously held by the Scheme Participants.
The Scheme will be subject to the fulfilment or waiver of the conditions precedent set out in
paragraph 6.1 below.
5.2. General Offer
Simultaneously with the Scheme, Bidco will make a separate but concurrent general offer
to all Eligible Shareholders, whereby each Eligible Shareholder will be entitled to elect
whether or not to dispose of all or a portion of their Offer Shares to Bidco at the Offer
Consideration.
Implementation of the General Offer will be conditional on, inter alia, the Scheme not
becoming operative. In the event that the Scheme does become operative, the General Offer
will lapse and be of no force and effect.
If Eligible Shareholders wish to dispose of all or a portion of their Offer Shares in terms of
the General Offer, they will be required to accept the General Offer and tender such Offer
Shares to Bidco (“Tender”).
Eligible Shareholders who do not wish to accept the General Offer in respect of any of their
Offer Shares will continue to hold their Offer Shares (“Remaining Shareholders”), subject to
the Scheme not becoming operative and the provisions of section 124(1) of the
Companies Act as set out below.
The General Offer will be subject to the fulfilment or waiver of the conditions precedent set
out in paragraph 6.2 below.
If the Scheme does not become operative and the General Offer becomes wholly
unconditional and is implemented, then the listing of all the Sovereign Shares on the JSE
will be terminated and each Eligible Shareholder that has accepted the General Offer and
Tendered Offer Shares held by them (“General Offer Participants”) will receive the Offer
Consideration for the Offer Shares Tendered and disposed of, such that Bidco will acquire
all of the Offer Shares Tendered by the General Offer Participants. In this instance, the
Remaining Shareholders will remain Sovereign Shareholders in the unlisted entity, and the
tradability of their Sovereign Shares will be limited.
In the event that the General Offer is implemented and is accepted by General Offer
Participants holding at least 90% of the Offer Shares, Bidco may, at its election, invoke the
provisions of section 124(1) of the Companies Act, to compulsorily acquire all of the Offer
Shares held by the Remaining Shareholders.
5.3. Offer Consideration
The consideration that will be offered per Offer Share in terms of the Offer will be:
• the Cash Consideration; or
• the Share Consideration, settled through the issue by Bidco of a Bidco Linked Share,
comprising:
- 1 Bidco Ord, priced at R0.001; and
- 1 Bidco Pref, priced at R11.999. The Bidco Prefs will be cumulative redeemable
non-participating preference shares with a nominal annual compounded monthly
coupon rate equal to the prevailing South African prime interest rate from time to
time (“Prime Rate”) and will be redeemable on the 10th anniversary of the issue
date.
In the event that the Scheme becomes operative, the Scheme Participants, alternatively, if
the General Offer is implemented, the General Offer Participants (collectively or individually
as the context may require, the “Offer Participants”), will be entitled to elect to receive either
the Cash Consideration or the Share Consideration, or a combination thereof in respect of
their Offer Shares (“Election” or “Elect”). The Election of the Share Consideration will be
subject to the Deemed Cash Election (as detailed in paragraph 5.4 below).
The Share Consideration will be issued in certificated form only and will not be listed on the
JSE or any other securities exchange. In the circumstances, the shares comprising the
Share Consideration will have limited tradability.
The table below illustrates the Offer Consideration premium:
Prior to the
Cautionary
Announcement Offer Consideration
(27 July 2017) premium
Market price (Note 1) R12.00 0.0%
30 day VWAP (Note 2) R10.05 19.4%
As at Offer Consideration
(8 August 2017) premium
Market price (Note 3) R11.75 2.1%
30 day VWAP (Note 4) R10.09 18.9%
Notes:
1. The “market price” represents the closing price of Sovereign Shares on the JSE on
27 July 2017, being the last trading day prior to the publication of the cautionary
announcement published on the Stock Exchange News Service operated by the
JSE (“SENS”) on 28 July 2017 (“Cautionary Announcement”).
2. The “30 day VWAP” represents the VWAP at which a Sovereign Share traded on
the JSE for the 30 trading days up to and including 27 July 2017, being the last
trading day prior to the publication of the Cautionary Announcement.
3. The “market price” represents the closing price of Sovereign Shares on the JSE on
8 August 2017.
4. The “30 day VWAP” represents the VWAP at which a Sovereign Share traded on
the JSE for the 30 trading days up to and including 8 August 2017.
The tax implications of the Offer are dependent on the individual circumstances of the Offer
Participant concerned and the tax jurisdiction applicable to such Offer Participant. It is
recommended that the Offer Participants seek appropriate professional advice in this regard.
5.4. Deemed Cash Election
In the event that:
• Offer Participants Elect to receive the Share Consideration (“Reinvesting
Shareholders”) in respect of a number of Offer Shares that would result in
Capitalworks acquiring less than 85% of the total issued ordinary shares in Bidco
following the implementation of the Offer (“Minimum Post Offer Shareholding”), then
the number of Offer Shares in respect of which Reinvesting Shareholders have Elected
to receive the Share Consideration will be reduced pro rata (based on the Share
Consideration Elections) and such Reinvesting Shareholders will be deemed to have
Elected the Cash Consideration in respect of the balance of the Offer Shares, such that
Capitalworks will acquire the Minimum Post Offer Shareholding;
• an Offer Participant fails to or does not make a valid Election in respect of the Offer
Consideration, such Offer Participant shall be deemed to have Elected the Cash
Consideration; or
• Sovereign Shareholders are resident or located outside of South Africa, such Sovereign
Shareholders shall be deemed to have Elected the Cash Consideration, subject to
certain exceptions to be set out in the Circular (as envisaged in paragraph 12 below),
(collectively, the “Deemed Cash Election”).
5.5. Funding the Cash Consideration
In order to enable Bidco to settle the Cash Consideration payable to the Offer Participants,
Capitalworks will capitalise Bidco by:
• advancing a loan in the amount of up to R175 million (“Loan”); and
• subscribing for Bidco Ords and Bidco Prefs, at an aggregate subscription price of
R12.00 for every Bidco Linked Share (“Capitalworks Subscription”).
The Loan and the Capitalworks Subscription will be funded from Capitalworks’ existing cash
resources.
5.6. Cash guarantee
In accordance with Regulations 111(4) and 111(5), FirstRand Bank Limited, acting through
its Rand Merchant Bank Division, has issued a bank guarantee to the Takeover Regulation
Panel (“TRP”) for the maximum Cash Consideration payable to Offer Participants,
amounting to R898 079 420. This amount was derived by taking into account the Cash
Consideration and 74 297 900 Offer Shares, being the maximum number of Offer Shares in
respect of which the Cash Consideration may be Elected. In this regard, certain Sovereign
Shareholders have provided irrevocable undertakings to Elect to receive the Share
Consideration in respect of their Offer Shares. Further details of such irrevocable
undertakings are set out in paragraph 9 below.
5.7. Confirmation of sufficient securities to settle the Share Consideration
Capitalworks confirms that Bidco has sufficient authorised but unissued Bidco Ords and
Bidco Prefs available to settle the Share Consideration to Offer Participants.
6. Conditions precedent
6.1. Scheme
Implementation of the Scheme will be subject to the fulfilment or waiver of, inter alia, the
following salient conditions precedent (“Scheme Conditions”):
6.1.1. the approval of the Scheme by way of special resolution (“Scheme Resolution”),
adopted by the requisite majority of Sovereign Shareholders at the general
meeting of the Sovereign Shareholders convened for purposes of considering and,
if deemed fit, approving the resolutions required to approve the Transaction
(“General Meeting”) or any postponement or adjournment thereof, as
contemplated in section 115(2)(a) of the Companies Act, and, in the event of the
provisions of section 115(2)(c) of the Companies Act becoming applicable:
6.1.1.1. either (i) the High Court of South Africa approving the implementation
of the Scheme Resolution and no appeal or review being timeously
lodged or, if timeously lodged, the appeal or review is not successful or
(ii) the provisions of section 115(2)(c) cease to be applicable; and
6.1.1.2. if applicable, the Company not treating the Scheme Resolution as a
nullity as contemplated in section 115(5)(b) of the Companies Act;
6.1.2. with regards to Sovereign Shareholders exercising their Appraisal Rights (if any),
either:
6.1.2.1. no Sovereign Shareholder gives notice objecting to the Scheme
Resolution as contemplated in section 164(3) of the Companies Act,
alternatively Sovereign Shareholders give notice objecting to the
Scheme Resolution as contemplated in section 164(3) of the
Companies Act and vote against the Scheme Resolution at the General
Meeting, in respect of 1% or less of all of the Offer Shares; or
6.1.2.2. if Sovereign Shareholders do give notice objecting to the Scheme
Resolution and vote against the Scheme Resolution in respect of more
than 1% of all of the Offer Shares, then Dissenting Shareholders do not
exercise Appraisal Rights, by giving valid demands in terms of sections
164(5) to 164(8) of the Companies Act, in respect of more than 1% of
all the Offer Shares; and
6.1.3. the receipt of all approvals, consents or waivers from those South African
regulatory authorities as may be necessary to implement the Scheme and
Delisting.
6.2. General Offer
The General Offer will be subject to the fulfilment or waiver of, inter alia, the following salient
conditions precedent (“General Offer Conditions”):
6.2.1. the Scheme Conditions are not timeously fulfilled or waived;
6.2.2. the approval of the Delisting by way of an ordinary resolution (“Delisting
Resolution”), adopted by the requisite majority of Sovereign Shareholders at the
General Meeting;
6.2.3. Eligible Shareholders accept the General Offer in respect of so many Offer Shares
as will result in Bidco acquiring more than 50% of the Offer Shares; and
6.2.4. the receipt of all approvals, consents or waivers from those South African
regulatory authorities as may be necessary to implement the General Offer and
Delisting.
The Scheme Conditions and the General Offer Conditions envisaged in paragraphs 6.1 and
6.2 above shall collectively hereinafter be referred to as the “Offer Conditions”.
6.3. Waiver of the Scheme Conditions and the General Offer Conditions
Sovereign and Bidco shall be entitled to waive fulfilment of the Offer Conditions envisaged
in paragraphs 6.1.2, 6.2.2 and 6.2.3 by written agreement. The Offer Conditions envisaged
in paragraphs 6.1.1, 6.1.3, 6.2.1 and 6.2.4 shall not be capable of waiver.
7. Termination events
The Scheme and / or the General Offer will terminate with immediate effect, inter alia, upon the
occurrence of the following events:
• If any or all of the Offer Conditions have not been fulfilled or waived on or before the relevant
date/s for fulfilment or waiver.
• Upon written notice by Sovereign, Capitalworks or Bidco to another party (“Defaulting Party”)
if the Defaulting Party commits a breach of certain specified material provisions of the
Implementation Agreement and fails to remedy such breach within 5 business days of receipt
of a notice by the Defaulting Party from another party requesting such remedy.
• Subject to certain requirements, on the 5th business day following a written notice by
Capitalworks or Bidco to Sovereign to such effect in the event that a Material Adverse Change
occurs. A “Material Adverse Change” means:
- any circumstance, fact or event (including any change in law) (“Event”), actual or which
is reasonably likely to arise which, alone or together with any other Event, actual or which
is reasonably likely to arise, which has, or is reasonably likely to have, the effect of being
materially adverse with regard to the operations, continued existence, business,
condition, assets and / or liabilities of Sovereign and its subsidiaries (“Group”). In this
regard, to be material, the Event, at the time of the assessment thereof, must have or
must reasonably be likely to:
- adversely affect the Group’s consolidated earnings before interest, tax, depreciation
and amortisation by more than R20 000 000 compared to the earnings before
interest, tax, depreciation and amortisation of the Group as set out in the
consolidated audited annual financial statements for the Group for the financial year
ended 28 February 2017 (“AFS 2017”); or
- result in a loss by the Group equivalent to 10% or more of the consolidated net asset
value of the Group, compared to the consolidated net asset value of the Group as
set out in the AFS 2017; or
- the JSE All Share Index closing price, or any equivalent or replacement thereof, falls and
remains below the JSE All Share Index closing price on the business day prior to the
signature date of the Implementation Agreement, multiplied by 75% (the JSE All Share
Index closing price will be as published on the applicable Bloomberg screen (JALSH
Index HP)) for 5 or more consecutive trading days at any time after the signature date of
the Implementation Agreement.
8. Delisting
The listing of all the Sovereign Shares on the JSE will be terminated pursuant to:
• the Scheme becoming operative; or
• the Delisting Resolution being approved by the requisite majority of Sovereign Shareholders
at the General Meeting and the General Offer being implemented.
9. Irrevocable Undertakings
As at the date of this announcement Sovereign Shareholders who collectively hold 38 436 744
Sovereign Shares, representing 50.85% of the Offer Shares, and who are, in terms of the
Companies Act, eligible to vote at the General Meeting, have irrevocably undertaken to, inter alia:
• vote in favour of the Scheme Resolution; and
• accept the General Offer (subject to the Scheme not becoming operative).
10. Independent Board, Independent Expert Report and recommendations
Sovereign has convened an independent board (“Independent Board”), comprised of
Mr T Pritchard, Mr JA Bester and Mr CP Davies, to consider the Offer and the Offer Consideration.
The Independent Board and the Sovereign Board have appointed BDO Corporate Finance
Proprietary Limited as the independent expert for purposes of preparing an opinion in respect of
the Offer and the Offer Consideration in accordance with Regulation 90, as read with
sections 114(2) and 114(3) of the Companies Act, and paragraph 1.14(d) as read with Schedule 5
of the Listings Requirements (“Independent Expert Report”).
Having regard to the Independent Expert Report:
• the Independent Board and the Sovereign Board are of the opinion that the Offer and the
Offer Consideration are fair and reasonable; and
• the Sovereign Board is of the opinion that the Transaction is fair in so far as the Shareholders
are concerned.
The Independent Expert Report will be included in the Circular (as envisaged in paragraph 12
below).
The Independent Board and the Sovereign Board unanimously recommend that the Sovereign
Shareholders vote in favour of the Scheme Resolution, the Delisting Resolution and that they
accept the General Offer.
11. Pro forma financial information
The table below sets out the pro forma financial effects of the Offer on an Offer Participant who
receives the Share Consideration. The pro forma financial effects have been prepared for
illustrative purposes only in order to provide information on how the Offer may affect the financial
performance and position of an Offer Participant who receives the Share Consideration, by
illustrating the effect thereof on the basic and diluted earnings per share (“EPS”), basic and diluted
headline earnings per share (“HEPS”), net asset value (“NAV”) and tangible net asset value
(“TNAV”) of an Offer Share that an Offer Participant will be exchanging for the EPS, HEPS, NAV
and TNAV per Bidco Linked Share, comprising 1 Bidco Ord and 1 Bidco Pref.
The pro forma financial effects have been prepared to illustrate the effect of the Offer on an Offer
Participant who receives the Share Consideration, had the Offer been implemented on
1 March 2016 for purposes of EPS and HEPS and on 28 February 2017 for purposes of NAV and
TNAV.
The pro forma financial effects set out below are the responsibility of the directors of Sovereign
and Bidco. The pro forma financial effects are provided for illustrative purposes only and because
of their nature, may not fairly represent the financial performance and position of an Offer
Participant after the implementation of the Offer. The pro forma financial effects have been
prepared in accordance with International Financial Reporting Standards (“IFRS”).
The following assumptions have been made for purposes of the presenting the pro forma financial
effects of the Offer:
• Bidco acquires all Offer Shares from Eligible Shareholders.
• Offer Participants Elect to receive the Share Consideration in respect of 12.1% of the total
Offer Shares, resulting in the issue of 9.2 million Bidco Linked Shares to Offer Participants.
• Offer Participants Elect to receive the Cash Consideration in respect of 87.9% of the total
Offer Shares, resulting in a total Cash Consideration payable of R797.2 million to Offer
Participants.
• For purposes of capitalising Bidco in order to enable the settlement of the Cash Consideration
of R797.2 million by Bidco, Capitalworks will provide the Loan, amounting to R175 million to
Bidco and, through the Capitalworks Subscription, Capitalworks will subscribe for 51.9 million
Bidco Linked Shares. The Loan is repayable in 1 year and shall accrue interest at the Prime
Rate.
• Estimated once-off transaction costs amounting to R37 million are expensed, of which
R13 million is payable by Sovereign and R24 million is payable by Bidco. Capitalworks will
provide a loan to Bidco to fund those transaction costs payable by Bidco. This loan is
repayable in 2 years and shall accrue interest at the Prime Rate.
• Bidco will be treated as an investment entity in terms of IFRS 10 and accounts for its
investment in Sovereign at fair value through profit or loss. The fair value of the investment is
considered to be the consideration paid by Bidco for the Offer Shares.
• Bidco Prefs are classified as a debt instrument.
• There are no other post balance sheet events which require adjustment, other than those
detailed herein.
• All adjustments, with the exception of the once-off transaction costs, are expected to have a
continuing effect.
After the Offer
Before Bidco Bidco Bidco Percentage
the Offer Adjusted Ord Pref Linked change
Share
Actual Pro forma Pro forma Pro forma Pro forma
Basic EPS (47.70) (65.39) (206.88) 132.23 (74.65) (57%)
(cents)
Diluted EPS (47.70) (65.39) (206.88) 132.23 (74.65) (57%)
(cents)
Basic HEPS (46.50) (64.20) (206.88) 132.23 (74.65) (61%)
(cents)
Diluted HEPS (46.50) (64.20) (206.88) 132.23 (74.65) (61%)
(cents)
NAV per share 971.80 954.20 (38.67) 1 199.90 1 161.23 19%
(cents)
TNAV per share 971.80 954.20 (38.67) 1 199.90 1 161.23 19%
(cents)
Weighted 74 358 74 363 61 004 61 004 61 004 (18%)
average number
of shares in issue
(‘000)
Number of 76 222 76 222 61 004 61 004 61 004 (20%)
shares in issue
(‘000)
Notes:
1. The financial information in the “Before the Offer” column has been derived from Sovereign’s
audited consolidated annual financial statements for the year ended 28 February 2017.
2. The “Adjusted” column has been derived from Sovereign’s audited consolidated annual
financial statements for the year ended 28 February 2017 and adjusted for:
2.1. once-off transaction costs attributable to the Offer and which are payable by Sovereign.
The total cumulative once-off transaction costs payable by Sovereign amount to
R13 million;
2.2. the acquisition of 175 940 Sovereign Shares by the ESOP for R2 million post the
Company year end of 28 February 2017, with the last acquisition taking place on
27 July 2017;
2.3. interest lost as a result of the acquisition of Sovereign Shares by the ESOP amounting
to R0.1 million calculated using an interest rate of 7.65%; and
2.4. the tax saving on the interest lost amounting to R0.04 million calculated using a tax rate
of 28%,
all of which, with the exception of the once-off transaction costs, are expected to have a
continuing effect.
3. The financial information included in the “After the Offer” columns have been derived by taking
the Bidco pro forma financial effects pursuant to the Offer (based on Bidco’s unaudited
financial statements as at incorporation, adjusted for the Offer) and multiplying these results
by the exchange ratio of 1 Bidco Linked Share for every 1 Offer Share, to provide the pro forma
financial effects of the Offer on an Offer Participant who receives the Share
Consideration. The individual components of the Bidco Linked Share, being the Bidco Ord
and the Bidco Pref, have been presented separately and then aggregated.
3.1. The financial information included in the “Bidco Ord” column has been derived by
utilising the number and weighted number of Bidco ordinary shares in issue.
3.2. The financial information included in the “Bidco Pref” column is not presented in terms
of IFRS and has been presented for illustrative purposes only and to provide Sovereign
Shareholders with additional information. The EPS and HEPS have been calculated by
dividing the finance charge accrual on the Bidco Prefs by the weighted average number
of Bidco Prefs in issue. The NAV and TNAV reflects the issue price of the Bidco Pref.
3.3. The financial information included in the “Bidco Linked Share” column is not presented
in terms of IFRS and has been presented for illustrative purposes only and to provide
Sovereign Shareholders with additional information. This column represents the
aggregate of the “Bidco Ord” and “Bidco Pref” columns. The number and weighted
average number of shares in issue represents the Bidco Linked Shares only.
4. The “Percentage change” column compares the “Bidco Linked Share” column included in the
“After the Offer” column with the “Before the Offer” column.
The pro forma financial effects have not been reviewed or reported on by the reporting accountants
and auditors of Sovereign. Following the review by the reporting accountants and auditors of
Sovereign, if there are any material adjustments required to these published pro forma financial
effects, a subsequent announcement will be published on SENS including the revised pro forma
financial effects.
12. Circular and Prospectus
Sovereign and Bidco will issue a combined offer circular to Sovereign Shareholders, as
contemplated in Regulations 102 and 106, setting out the full terms and conditions of the Scheme
and the General Offer and including the notice convening the General Meeting (“Circular”). The
Circular will be accompanied by a prospectus to be issued by Bidco in accordance with section 99
of the Companies Act and registered with the Companies and Intellectual Property Commission,
the purpose of which is to give Sovereign Shareholders information regarding Bidco for purposes
of the Offer (“Prospectus”).
The Circular, accompanied by the Prospectus, is expected to be posted on or about
7 September 2017.
Shareholders are advised to refer to the Circular and the Prospectus for the full terms and
conditions of the Transaction.
13. Other important information
Further details relating to the Transaction and the related salient dates and times will be published
on SENS in due course.
14. Withdrawal of Cautionary Announcement
Further to the Cautionary Announcement dated 28 July 2017, Shareholders are advised that
caution is no longer required to be exercised when dealing in the Company’s securities.
15. The Independent Board and Sovereign Board responsibility statement
The Independent Board and Sovereign Board (to the extent that the information relates to
Sovereign) collectively and individually accept responsibility for the information contained in this
announcement and certify that, to the best of their knowledge and belief, the information contained
in this announcement relating to Sovereign is true and this announcement does not omit anything
that is likely to affect the import of such information.
16. Capitalworks and Bidco board responsibility statement
Capitalworks and the board of directors of Bidco (to the extent that the information relates to
Capitalworks and Bidco) collectively and individually accept responsibility for the information
contained in this announcement and certify that, to the best of their knowledge and belief, the
information contained in this announcement relating to Capitalworks and Bidco is true and this
announcement does not omit anything that is likely to affect the import of such information.
Port Elizabeth, Johannesburg
10 August 2017
Corporate advisor to Sovereign and the Independent Board
One Capital Advisory Proprietary Limited
Transaction sponsor to Sovereign
One Capital Sponsor Services Proprietary Limited
Attorneys to Sovereign and the Independent Board
Cliffe Dekker Hofmeyr Inc.
Corporate advisor to Capitalworks and Bidco
One Capital Advisory Proprietary Limited
Attorneys to Capitalworks and Bidco
Cliffe Dekker Hofmeyr Inc.
EU and U.S. Attorneys
Allen & Overy LLP
Independent expert
BDO Corporate Finance Proprietary Limited
Auditors and reporting accountant to Sovereign and Bidco
Deloitte & Touche
Independent sponsor to Sovereign
Deloitte & Touche Sponsor Services Proprietary Limited
Disclaimer
This announcement shall not constitute an offer to sell or the solicitation of an offer to buy securities,
nor shall there be any sale of the securities described herein, in any jurisdiction, in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the securities laws of
such jurisdiction or without an exemption from the registration or qualification requirements under the
securities laws of such jurisdiction.
The distribution of this announcement in certain jurisdictions may be restricted by applicable law and
therefore persons in such jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such restrictions.
Forward-looking statements
The statements contained in this announcement that are not historical facts are “forward-looking”
statements. These forward-looking statements are subject to a number of substantial risks and
uncertainties, many of which are beyond the Company’s, Bidco's and Capitalworks’ control and actual
results and developments may differ materially from those expressed or implied by these statements
for a variety of factors. These forward-looking statements are statements based on the Company’s,
Bidco's and Capitalworks’ current intentions, beliefs and expectations about among other things, the
Company’s results of operations, financial condition, prospects, growth, strategies and the industry in
which the Company operates. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that may or may not occur
in the future. Many of these risks and uncertainties relate to factors that are beyond the Company’s,
Bidco's and Capitalworks’ ability to control or estimate precisely, such as changes in taxation, future
market conditions, currency fluctuations, the actions of governmental regulators and other risk
factors. Such risks and uncertainties could cause actual results to vary materially from the future results
indicated, expressed or implied in such forward-looking statements. The forward-looking statements
contained in this announcement speak only as of the date of this announcement and the Company,
Bidco and Capitalworks undertake no duty to update any of them publicly in light of new information or
future events, except to the extent required by applicable law or the Listings Requirements.
No statement in this announcement is intended as a profit forecast or a profit estimate and no statement
in this announcement should be interpreted to mean that earnings per Sovereign Share for the current
or future financial years would necessarily match or exceed the historical published earnings per
Sovereign Share. Prices and values of, and income from, shares may go down as well as up and an
investor may not get back the amount invested. It should be noted that past performance is no guide to
future performance. Persons needing advice should consult an independent financial adviser.
Date: 10/08/2017 01:13:00 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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