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EXXARO RESOURCES LIMITED - EXX: Proforma Financial Effects/Updated Timing of the Implementation of Replacement BEE Transaction And Withdrawal

Release Date: 17/10/2017 11:54
Code(s): EXX     PDF:  
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EXX: Proforma Financial Effects/Updated Timing of the Implementation of  Replacement BEE Transaction And Withdrawal

Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN: ZAE000084992
ADR code: EXXAY
(“Exxaro” or the “Company”)

PRO FORMA FINANCIAL EFFECTS AND UPDATED TIMING OF THE IMPLEMENTATION OF THE
REPLACEMENT BEE TRANSACTION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

Unless otherwise defined, all capitalised terms have the same meaning as defined in the cautionary
announcements released by Exxaro on 18 September 2017 and 5 October 2017.

1.     INTRODUCTION

1.1.   Exxaro shareholders are referred to the renewal of cautionary announcement released on the
       SENS on Monday, 18 September 2017, relating to the Replacement BEE Transaction, and again
       renewed on Thursday, 5 October 2017, which addressed the outcome of the MS333 Election
       Process (together, the “Previous Announcements”).

1.2.   The Election Process has now been concluded, and accordingly Exxaro is in a position to disclose
       the pro forma financial effects of the Replacement BEE Transaction. This is addressed in
       paragraph 2 below.

2.     PRO FORMA FINANCIAL EFFECTS OF THE REPLACEMENT BEE TRANSACTION

2.1.   The pro forma financial effects of the Replacement BEE Transaction, as set out in paragraph 2.6
       on, inter alia, Exxaro’s net asset value per share, tangible net asset value per share, basic
       earnings/(loss) per share, diluted earnings/(loss) per share, headline earnings/(loss) per share and
       diluted headline earnings/(loss) per share are based on the most recently published reviewed
       condensed group interim financial statements for the six-month period ended 30 June 2017, which
       are in compliance with International Financial Reporting Standards (“IFRS”).
2.2.   The pro forma condensed group Statement of Comprehensive Income, the pro forma condensed
       group Statement of Financial Position and the pro forma Reconciliation of group Headline Earnings
       (collectively, the “Pro Forma Financial Information”) and the accompanying report of the
       Independent Reporting Accountant, PricewaterhouseCoopers Incorporated, will be included in the
       Circular addressing the Replacement BEE Transaction, which is expected to be posted to Exxaro
       shareholders on or about Monday, 23 October 2017.
2.3.   The Pro Forma Financial Information is the responsibility of the Board of Directors of Exxaro and
       was prepared for illustrative purposes only and may not, because of its nature, fairly present
       Exxaro’s financial position, changes in equity and results of operations or cash flows. It does not
       purport to be indicative of what the condensed group financial results would have been, had the
       Replacement BEE Transaction been implemented on a different date.
2.4.   The Pro Forma Financial Information has been prepared to illustrate the impact of the Replacement
       BEE Transaction on the condensed group interim financial statements of Exxaro for the six-month
       period ended 30 June 2017, had the Replacement BEE Transaction occurred on 1 January 2017
       for purposes of the condensed group Statement of Comprehensive Income as well as the
       Reconciliation of group Headline Earnings and on 30 June 2017 for purposes of the condensed
       group Statement of Financial Position.
2.5.   The main accounting impact of the BEE Replacement Transaction is summarised as follows:
        2.5.1.   In terms of IFRS 10: Consolidated Financial Statements, Exxaro controls NewBEECo and
                 as such NewBEECo will be consolidated by Exxaro. The resultant main impact of
                 consolidating NewBEECo is:
                 a. the shares held by NewBEECo in Exxaro are accounted for as treasury shares; and
                 b. the Third Party Funding is consolidated onto the pro forma Statement of Financial
                    Position.
        2.5.2.   In addition, an IFRS 2: Share based payment expense of R2 969 million is recognised in
                 the pro forma Statement of Comprehensive Income as a once-off charge and will not
                 have a continuing effect on the group Statement of Comprehensive Income. The share-
                 based payment expense has been calculated:
                 a. on the basis that the Specific Issue results in an option to be granted to BEE SPV and
                    the IDC, with their equity contributions (the MS333 Reinvestment and the IDC
                    Reinvestment), treated as a premium paid by BEE SPV and the IDC for this option;
                    and
                 b. with reference to the requirements of IFRS 2 and the South African Institute of
                    Chartered Accountants (“SAICA”) Financial Reporting Guide 2 Accounting for BEE
                    Transactions. Since these options are not tradable, IFRS 2 requires the fair value of
                    these instruments to be calculated using a suitable, market-consistent valuation
                    model. A Monte Carlo simulation model was used with information available as at 22
                    September 2017 and will be revised on implementation of the Replacement BEE
                    Transaction. The valuation is based on approximately 22% of Exxaro’s issued
                    ordinary share capital being held by NewBEECo for the benefit of BEE SPV and IDC
                    at a spot Exxaro Share price of R119.49 per share, being the closing share price as at
                    22 September 2017.
 2.6.   The pro forma financial effects of the Replacement BEE Transaction are set out in the table below:

                                                             Before              After
                                                                                                  Percentage
                                                             Replacement         Replacement
                                                                                                  change
For the six-month period ended 30 June                       BEE                 BEE
2017                                                         Transaction         Transaction      %

Net asset value per share (1)                   Rand         118                 137              16

Tangible net asset value per share (2)          Rand         117                 132              13

Basic earnings/(loss) per share                 cents        852                 (198)            (123)

Diluted earnings/(loss) per share               cents        852                 (198)            (123)

Headline earnings/(loss) per share              cents        882                 (160)            (118)

Diluted headline earnings/(loss) per share      cents        882                 (160)            (118)

Weighted average number of shares (3)           millions     316                 253              (20)

Diluted weighted average number of shares
(4)                                             millions     316                 253              (20)

Number of shares in issue, net of treasury
shares                                          millions     314                 251              (20)
Notes:
1.     Net asset value per share is calculated by dividing total equity attributable to owners of the parent
       of the group by the total number of Exxaro shares in issue, net of treasury shares.
2.     Tangible net asset value per share is equal to the total equity attributable to owners of the parent of
       the group less the sum of intangible assets, goodwill and deferred tax assets divided by the total
       number of Exxaro shares in issue, net of treasury shares.
3.     The net movement in the weighted average number of shares comprises a reduction of 22 686 572
       shares repurchased in accordance with the Second Repurchase and an increase of 67 221 565
       shares in accordance with the Specific Issue. This is reduced by 107 612 026 shares which are
       accounted for as treasury shares on consolidation.
4.     There has been no movement in the diluted weighted average number of share as the
       Replacement BEE Transaction is anti-dilutive. As a result of the IFRS 2 expense, Exxaro is in a
       loss position, had Exxaro been in a profit position the Replacement BEE Transaction would have
       had a dilutive impact.
3.     REVISED TIMING OF THE REPLACEMENT BEE TRANSACTION

3.1.   Posting of the Circular and notice of General Meeting of Exxaro Shareholders
       3.1.1.   The Circular to Exxaro shareholders containing the details of the Replacement BEE
                Transaction, incorporating a notice of General Meeting and a form of proxy, is expected
                to be posted on or around Monday, 23 October 2017.
       3.1.2.   Exxaro shareholders are advised that the Circular will be immediately available on
                Exxaro’s website: www.exxaro.com.
       3.1.3.   The General Meeting of Exxaro shareholders will be convened, in terms of the notice of
                General Meeting forming part of the Circular, to vote on the Replacement BEE
                Transaction. The General Meeting is expected to be held at Exxaro Corporate Centre,
                Roger Dyason Road, Pretoria West, at 10h00 on or around Monday, 20 November 2017.
3.2.   Revised important dates and times relating to the Replacement BEE Transaction
       Set out below are the revised salient dates and times relating to the approval and implementation
       of the Replacement BEE Transaction:

                                                                             2017

       Record date to be entitled to receive the Circular incorporating      Wednesday, 18 October
       the notice of General Meeting

       Posting of the Circular to Exxaro Shareholders and                    Monday, 23 October
       announcement on SENS on

       Last day to trade in order to be eligible to attend and vote at the   Tuesday, 7 November
       General Meeting

       General Meeting Record Date in order to vote at the General           Friday, 10 November
       Meeting

       For administrative purposes and the sake of good order, it will be Thursday, 16 November
       appreciated if Forms of Proxy be received or lodged by 10h00 on
       Thursday, 16 November 2017. Forms of Proxy may be lodged at
       any time before the commencement of the General Meeting

       General Meeting to be held at 10h00, at the Exxaro Corporate          Monday, 20 November
       Centre, Roger Dyason Road, Pretoria West
       Results of the General Meeting published on SENS                   Monday, 20 November

       Results of the General Meeting published in the South African      Tuesday, 21 November
       press

       If all of the resolutions relating to the Second Repurchase
       and the Specific Issue are passed by the requisite number of
       Exxaro Independent Shareholders at the General Meeting:

     Last day for Exxaro Independent Shareholders who voted             Monday, 27 November
     against the Second Repurchase Scheme to require Exxaro to
     seek court approval for the Second Repurchase Scheme in
     terms of section 115(3)(a) of the Companies Act

     Last day to send notice of adoption of special resolutions to      Monday, 4 December
     dissenting shareholders in accordance of section 164 of the
     Companies Act

     Last day for Exxaro Independent Shareholders who voted         Monday, 4 December
     against the Second Repurchase Scheme to apply to court for
     leave to apply for a review of the Second Repurchase Scheme in
     terms of section 115(3)(b) of the Companies Act

     The following dates assume that no court approval or review
     of the Second Repurchase Scheme is required and will be
     confirmed in the finalisation announcement if the Second
     Repurchase, and as a result the Specific Issue, becomes
     unconditional:

     Expected date for compliance certificate to be received from the   Tuesday, 5 December
     TRP and fulfilment of all conditions precedent related to the
     Replacement BEE Transaction

     Finalisation announcement (when the Replacement BEE           Tuesday 5 December
     Transaction becomes unconditional) expected to be released on
     SENS

     Finalisation announcement published in the press                   Wednesday, 6 December

     Repurchase Implementation Date (including cancellation and         Wednesday, 13 December
     delisting of Second Repurchase Scheme Shares) on or about

     BEE Implementation Date (including Specific Issue Shares           Thursday, 14 December
     issued) on or about

     Notes:
     1.    Exxaro Shareholders will be notified of any material amendments to the important dates and
           times on SENS and in the South African press.
     2.    All times indicated above are South African standard times.
4.   WITHDRAWAL OF CAUTIONARY

     Shareholders are referred to the Previous Announcements and are advised that, due to the pro
     forma financial effects of the Replacement BEE Transaction and updated timing of the
     Replacement BEE Transaction’s implementation now having been disclosed in this announcement,
     caution is no longer required by shareholders when dealing in the Company’s securities.

SE van Loggerenberg
Group Company Secretary
Pretoria
17 October 2017

Merchant bank, financial adviser and transaction sponsor to Exxaro
Rand Merchant Bank, a division of FirstRand Bank Limited

Legal adviser to Exxaro
Norton Rose Fulbright South Africa

Company sponsor to Exxaro
Absa Bank Limited, acting through its corporate and investment bank division

Independent Reporting Accountant and auditor to Exxaro
PricewaterhouseCoopers Incorporated

Date: 17/10/2017 11:54:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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