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Terms Announcement Regarding Various Transactions
ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
Debt Issuer Code: ECSP
(“Ecsponent” or “the Company”)
TERMS ANNOUNCEMENT REGARDING THE ACQUISITIONS AND DISPOSALS OF
INVESTMENTS, AN UNDERWRITING AGREEMENT, ASSET ACQUISITION AND CONCLUSION
OF AN INVESTMENT MANAGEMENT AGREEMENT
1. INTRODUCTION
Shareholders are referred to the announcement released on the Stock Exchange News
Services (“SENS”) dated 22 May 2018, wherein shareholders were advised that the board of
directors of the Company (“the Board”) had undertaken a strategy of investing in assets that
will provide the Ecsponent group (“Group”) with medium to long-term capital growth, and
specifically transactions that will, inter alia:
- position the Group for future value-enhancing investment opportunities;
- create an efficient and professional management structure for the Group’s equity
investments;
- improve the balance sheet concentration exposure;
- provide a balance between the Group’s short-term cash generative assets and longer-
term growth assets; and
- increase the Group’s equity holding in assets considered to have high growth potential.
In furtherance of this strategy, the Board is pleased to advise that:
a) Ecsponent Treasury Services Proprietary Limited (“Ecsponent Treasury Services”),
a wholly owned subsidiary of Ecsponent, has entered into an acquisition agreement to
subscribe for 100% of the issued ordinary shares (“Acquisition Shares”) of Pink
Orchid Limited (“Pink Orchid”), an investment holding company yet to be incorporated,
from Purple Orchid Limited (“Purple Orchid”), a wholly owned subsidiary of Ecsponent
Capital (RF) Limited (“Capital”), a related party, for a total consideration of R280 million
(“the Pink Orchid Acquisition”);
b) Ecsponent has entered into a subscription agreement (“Subscription Agreement”)
with Invest Solar Africa Limited (“Invest Solar Africa”), a related party, in terms of
which the Company has agreed to subscribe for a maximum of 40 000 000 shares in
Invest Solar Africa at a subscription price of BWP1.00 (one Botswana Pula) per share,
pursuant to a private placement of such shares (“Private Placement”);
c) Ecsponent has entered into an underwriting agreement with Invest Solar Africa, in
terms of which Ecsponent has agreed to underwrite and subscribe for all the shares in
Invest Solar Africa which are not taken up during the initial public offering of Invest
Solar Africa pursuant to the listing of its ordinary shares on the Venture Capital Board
of the Botswana Stock Exchange (“BSE”) (“Underwriting Agreement”);
d) Ecsponent has entered into an investment management agreement (“Investment
Management Agreement”) with MHMK Capital Botswana Limited (“MHMK Capital”),
a related party, which is controlled by George Manyere, a material shareholder and a
non-executive director of the Company, in terms of which MHMK Capital will manage
the portfolio of assets and investments owned by Ecsponent Limited incorporated in
Botswana (“ECS Botswana”) a wholly owned subsidiary of the Company;
e) Return on Innovation Proprietary Limited (“ROI”), a wholly-owned subsidiary of
Ecsponent has entered into an agreement with GetBucks Proprietary Limited
(“GetBucks SA”), in terms of which ROI has agreed to purchase specified loan claims
from GetBucks SA (“Asset Acquisition”); and
f) Ecsponent has disposed of its 50% equity holding in Cryo-Save South Africa
Proprietary Limited and Salveo Swiss Technologies Ltd to Go Life International for R10
million.
(collectively “the Transactions”).
2. RATIONALE FOR THE TRANSACTIONS
In line with the Company’s strategy to develop and expand its operations into the rest of Africa
and to invest in entrepreneurs and companies with proven track records for building
diversified, well-managed and high growth opportunities, the Group has identified the
Transactions as a gateway, which will present new opportunities for the Group including, inter
alia:
- procurement of in-country local currency funding for Botswana operations, thereby
reducing foreign currency risk and exposure;
- enabling the Group to increase its market share in the targeted small to medium
enterprises (SMEs) and enterprise development credit sectors
- enabling the Group to further develop commercially beneficial relationships with large
corporates;
- providing access to asset management and/or collective investment scheme licenses in
South Africa and Botswana in order to enhance its investment services offering; and
- providing the Group with an offshore hard-currency investment; and
- improve the Group’s investment rate of return and increase cash flow through
deployment of new funding model.
3. TERMS OF THE PINK ORCHID ACQUISITION
3.1. Overview of Pink Orchid
Pink Orchid will be an investment holding company, holding the following material investments
at the effective date (as defined in paragraphs 3.3 below), either directly, or indirectly through
its Botswana based, wholly-owned subsidiary, Fodnort Proprietary Limited:
- 16.55% of the issued ordinary share capital of MyBucks S.A. (“MyBucks”), a financial
technology company listed on the Frankfurt Stock Exchange;
- 58% of the issued ordinary share capital of Invest Solar Africa, a renewable energy
company focused on the development and financing of renewable energy projects in
Africa;
- 51% of the issued ordinary share capital of Energy Systems Group Proprietary Limited,
a company with a renewable energy infrastructure, and a supplier and implementation
expert in Botswana (“Energy Systems”);
- 40% of the issued ordinary share capital of MHMK Capital, a private equity investment
management and advisory company in Botswana; and
- 34.95% of the issued ordinary share capital of GetBucks Zimbabwe Micro Finance Bank
Limited (“GetBucks”), a technology driven, a deposit-taking and money lending
microfinance institution incorporated in Zimbabwe and listed on the Zimbabwe Stock
Exchange, offering a range of products from micro-finance loans, a mortgage loans,
SME banking products and saving and money market accounts.
In addition to the above investments, Pink Orchid has certain net loan payables expected to
equal circa R478 million.
3.2. Consideration
Ecsponent Treasury Services will acquire the Acquisition Shares for a total purchase
consideration of R280 million, which consideration will be set-off against a loan liability due by
Capital to Ecsponent Treasury Services.
3.3. Conditions Precedent and Effective Date
The Pink Orchid Acquisition agreement is subject to the fulfilment or waiver of the following
conditions precedent (“the Conditions”) on or before 31 August 2018, or such later date as
notified by Ecsponent Treasury Services in writing, upon providing at least 5 (five) business
days’ notice:
i. the incorporation of Pink Orchid;
ii. approval by the shareholders of Pink Orchid;
iii. approval by the board of directors of Capital;
iv. approval by the shareholders of Capital;
v. obtaining shareholder approval from the requisite majority of shareholders of Ecsponent
at a general meeting, to the extent required by the JSE;
vi. providing the JSE with a fairness opinion from an independent professional expert
acceptable to the JSE, confirming whether the terms of the Pink Orchid are fair as far
as the shareholders of Ecsponent, other than the related party, are concerned; and
vii. approval by the JSE and other regulatory bodies to the extent necessary.
The effective date of the Pink Orchid Acquisition will be the close of business on the last
business day of the month in which the last of the Conditions has been fulfilled, or waived, as
the case may be.
3.4. Conditions Subsequent
The agreement giving effect to the Pink Orchid Acquisition agreement is subject to the
fulfilment or waiver of the following conditions subsequent on or before 30 September 2018,
or such later date as notified by Ecsponent Treasury Services in writing, but no later than 6
months following the effective date:
i. approval by the South African Reserve Bank, to the extent necessary;
ii. Pink Orchid having delivered to Ecsponent Treasury Services the share certificates in
respect of the Acquisition Shares, accompanied by share transfer forms currently dated
and executed in blank by the registered holder thereof, so as to enable the Acquisition
Shares to be registered in the name of Ecsponent Treasury Services, or a sworn affidavit
if the original share certificate is lost; and
iii. Purple Orchid procuring its board representatives’ resignation from the board of directors
of Pink Orchid, if any.
3.5. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in the agreement giving effect to the Pink Orchid Acquisition.
3.6. Financial information of Pink Orchid
Pink Orchid is not yet incorporated and accordingly has no profits or losses, assets or
liabilities.
The historic financial information of its material investments that it will hold on the effective
date is summarised below:
Investment Financial Net profit / (loss) Net asset Source of financial
name period end after tax value information
GetBucks 6 months USD2.58m USD15.5m Unaudited interim historic
ended 30 (being R35.4m) (being financial information of
December R213m) GetBucks for the 6 months
2017 period ended 30 December
2017, prepared in
accordance with International
Financial Reporting
Standards (“IFRS”), the
Companies Act (Chapter
24:03) of Zimbabwe and the
Microfinance Act of
Zimbabwe. Management is
satisfied with the quality of
those management
accounts.
Invest Solar 7 months BWP0 BWP100 Unaudited and unreviewed
ended 31 (being R0) 3 (being historic financial information
December R131) for the 7 months ended 31
2017 2 December 2017, prepared in
accordance with IFRS.
Management is satisfied with
the quality of those
management accounts.
Energy 31 December BWP1.24m (being BWP2.24m Unaudited and unreviewed
Systems 2017 R1.62m) (being historic financial information
R2.93m) for the 7 months ended 31
December 2017, prepared in
accordance with IFRS.
Management is satisfied with
the quality of those
management accounts.
MyBucks 6 months (€2.74m) (being - €7.46m Unaudited historic
ended 30 R43.76m1) of which (R119.14m) condensed interim financial
December a loss of €2.14m (excluding information of MyBucks for
2017 (being R34.18m1) non-controlling the six months ended 31
related to continuing interest) December 2017, prepared in
operations. accordance with IFRS as
adopted by the European
Union. Management is
satisfied with the quality of
those management accounts.
MHMK 31 December BWP0 (being R0)(2) BWP100- Unaudited and unreviewed
2017 (2) (being R131) management accounts at 31
December 2017, prepared in
accordance with IFRS.
Management is satisfied with
the quality of those management
accounts.
1. Based on the Rand to Euro, Rand to US Dollar (USD) or Rand to Botswana Pula
(BWP) exchange rates, applicable on the date immediately preceding this
announcement.
2. These entities have recently been incorporated and remain dormant at the last
financial year end.
4. TERMS OF THE SUBSCRIPTION AGREEMENT
4.1. Description of Invest Solar Africa
Invest Solar Africa is a renewable energy company focused on developing and financing
income generating renewable energy projects in selected markets within Africa, with a vision
to being the leading developer of renewable energy projects in these markets.
Invest Solar Africa is pursuing its listing on the BSE by way of both the Private Placement and
an initial public offering (“IPO”) (“Listing”).
Ecsponent has agreed to subscribe for a maximum of 40 million shares in Invest Solar Africa
at a subscription price of BWP1.00 (one Botswana Pula) per share, in respect of the Private
Placement.
4.2. Consideration
The total consideration payable by Ecsponent to Invest Solar Africa in respect of the Private
Placement will be an amount of BWP40 million (R52.4 million at the exchange rate at the date
of this announcement), being a subscription price of BWP1 per subscription share, payable in
cash.
4.3. Effective Date
The effective date of the Private Placement is as soon as reasonably practicable following
Ecsponent receiving approval from its shareholders for its subscription for shares pursuant to
the terms of the JSE Listing Requirements (“JSE LR”).
4.4. Conditions Subsequent
The Private Placement is subject to Invest Solar Africa listing on the BSE within six months of
obtaining informal approval from the BSE or such later date as Ecsponent and Invest Solar
Africa may agree.
Should the Listing not proceed, the Subscription Agreement will be deemed to have been
terminated by mutual consent.
4.5. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in Subscription Agreement.
5. TERMS OF THE UNDERWRITING AGREEMENT
5.1. Introduction
Invest Solar Africa has appointed Ecsponent to underwrite the IPO and Ecsponent has agreed
in terms thereof to fully underwrite and subscribe for all the shares not taken up during the
IPO, which could accordingly result in Ecsponent acquire a further maximum of 30 000 000
Invest Solar Shares.
5.2. Consideration
The maximum subscription price payable by Ecsponent in terms of the Underwriting
Agreement, will be BWP30 000 000 (R39.3 million at the exchange rate at the date of this
announcement), being for the subscription of a maximum of 30 million shares at a subscription
price of BWP1 per Invest Solar Share.
Ecsponent shall be entitled to a fee of BWP0.9 million (R1.2 million at the exchange rate at
the date of this announcement) in respect of the Underwriting Agreement.
5.3. Conditions Precedent and Effective Date
The Underwriting Agreement is subject to the fulfilment or waiver of the following condition
precedent:
- approval of the BSE, Registrar of Companies or any other regulatory authorities in
respect of the IPO; and
- approval by the shareholders of ECS Botswana and the Company pursuant to, so far as
applicable, the terms of each such company’s constitutional documents, applicable laws
by which each is bound and governed and the requirements of the JSE LR.
The effective date of the Underwriting Agreement is within 2 days (not including weekends or
public Holidays) of 17 October 2018 whereby if Invest Solar has not received valid applications
for all of the new ordinary shares, Invest Solar shall notify Ecsponent of the number of
uncommitted shares. In such eventuality, Ecsponent shall be liable to purchase and subscribe
for those uncommitted shares.
5.4. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in the Underwriting Agreement.
6. TERMS OF THE INVESTMENT MANAGEMENT AGREEMENT
6.1. Overview of MHMK Capital and ECS Botswana
MHMK Capital is a privately held Africa-focused private equity investment and advisory firm
that manages and provides advice on investments across multiple sectors. MHMK Capital is
setting up to hold a significant portfolio of assets and has a pipeline of deals in several sectors
and countries which will assist in achieving the objectives of the Group. As at the date of this
announcement, MHMK Capital has invested in excess of US$700 million in sub-Saharan
Africa and manages a portfolio of investments in excess of US$300 million.
MHMK Capital is managed by Mr. George Manyere and Mr. Walter Kambwanji who serve as
the Chief Executive Officer and the Chief Financial Officer of MHMK Capital respectively.
George is a Chartered Accountant (Zimbabwe) and a holder of a Bachelor and Honours
degree in Accounting Science from the University of South Africa and a Certificate in Theory
of Accounting from the Institute of Chartered Accountants Zimbabwe. George is a director of
several companies, including some which are listed on the Frankfurt Stock Exchange, JSE
and Zimbabwe Stock Exchange and previously served as an investment professional with the
International Finance Corporation, headquartered in Washington DC.
Walter is a Chartered Accountant (Zimbabwe) and holds a Bachelor of Accounting Science
degree from the University of South Africa and a Postgraduate Diploma in Applied Accounting
from the University of Zimbabwe. Walter has significant experience in finance and operations
in Zimbabwe and internationally.
ECS Botswana serves as a local investment holding company for the Group. The operations
of ECS Botswana mirror those in South Africa. Capital is raised in country through institutional
sources only.
6.2. Management fees
MHMK Capital will be entitled to an annual management fee equal to 2% (two percent) of the
value of the total assets of ECS Botswana, as it appears in the most recent audited financial
accounts of ECS Botswana.
Ecsponent and ECS Botswana will be jointly and severally liable for the payment of the fee
due to MHMK Capital.
6.3. Conditions Precedent
The Investment Management Agreement is subject to the following conditions precedent, on
or before 30 June 2018, or such later date as may be agreed between the parties:
- approval by the shareholders of Ecsponent (excluding the related party and its
associates) at a general meeting; and
- approval by the South African Reserve Bank and other regulatory authorities as required.
The effective date of the Investment Management Agreement will be the close of business on
the last business day of the month in which the last of the conditions precedent thereto has
been fulfilled, or waived, as the case may be.
6.4. Duration
The MHMK Management Agreement will be for a term of 10 years, following which it will be
renewable by the mutual consent of the parties on a yearly basis on the anniversary of the
effective date.
The MHMK Management Agreement may be terminated by 3 months’ written notice from
either party or the occurrence and non-remediation of certain events that constitute a breach
of the terms of Investment Management Agreement.
6.5. Financial information of ECS Botswana
ECS Botswana reported gross assets of BWP246.3 million (R322.7 million at the exchange
rate at the date of this announcement), net assets of BWP1.4 million (R1.8 million at the
exchange rate at the date of this announcement) and net profit after tax of BWP1.5 (R2 million
at the exchange rate at the date of this announcement) for the 15 months ended 31 March
2017, being the last financial year-end of ECS Botswana.
The above financial information is based on ECS Botswana’s audited Annual Financial
Statements for the financial year ended 31 March 2017, which have been compiled in
accordance with IFRS.
7. TERMS OF THE ASSET ACQUISITION
7.1. Introduction
GetBucks SA, a financial technology company that embraces technology as a means to
provide financial products and services to the low and middle-income consumer segment,
predominantly in emerging markets of Sub-Saharan Africa, has agreed to sell certain of its
loan claims to ROI, as set out in the Asset Acquisition. The loan claims constitute all of
GetBucks SA’s rights under any loan agreements it may have entered into, including its rights
to, inter alia, claim payment of:
- the principal amount lent and advanced by GetBucks to any borrowers;
- interest accruing on outstanding amounts; and
- any other permitted fees and charges,
(“Specified Loan Claims”).
7.2. Consideration
The amount payable by ROI to GetBucks SA in respect of the Specified Loan Claims is an
amount of R120 million.
7.3. Conditions Precedent and Effective Date
The Asset Acquisition is subject to the fulfilment or waiver of the following conditions precedent
on or before the effective date:
- approval by the boards of directors of each of GetBucks SA and ROI in writing;
- approval by way of special resolution by the shareholders of GetBucks SA in general
meeting (in accordance with sections 112 and 115 of the Companies Act 71 of 2008, as
amended) to the extent that the Specified Loan Claims constitute all or the greater part
of the assets of GetBucks SA at the effective date;
- delivery of the Specified Loan Claims to ROI; and
- payment of the purchase price of R120 million by ROI to GetBucks.
The effective date of the Asset Acquisition is 29 June 2018.
7.4. Other significant terms
Further terms, conditions and warranties that are usual for a transaction of this nature are
contained in the Asset Acquisition.
7.5. Financial information of GetBucks SA
GetBucks SA reported gross assets of R405.2 million, net assets of R44.1 million and net loss
after tax of R10.7 million for the 12 months ended 30 June 2017, being the last financial year-
end of GetBucks SA.
The above financial information is based on GetBucks SA audited Annual Financial
Statements for the financial year ended 30 June 2017, which have been compiled in
accordance with IFRS.
8. DISPOSAL OF INVESTMENTS IN BIOTECHNOLOGY AND ACQUISITION OF SHARES IN
GO LIFE INTERNATIONAL
The Company has disposed of its 50% equity holding in Cryo-Save South Africa (Pty) Ltd and
Salveo Swiss Technologies Ltd to Go Life International for R10 million on 25 June 2018.
This transaction is not categorisable per the JSE LR.
9. CATEGORISATION AND APPROVALS REQUIRED
In terms of the JSE LR:
- the Pink Orchid Acquisition is, on a stand-alone basis, a category 1 transaction and,
notwithstanding that at the current market capitalisation and when aggregated with other
transactions relating to the same assets and parties within the 12 months preceding this
announcement, it would not constitute a reverse take-over, the Company has elected to take
a conservative view based on its market capitalisation over preceding months and categorise
it accordingly;
- the Subscription Agreement and the Underwriting Agreement are, on a stand-alone basis
and when aggregated with other transactions relating to the same assets and parties within
the 12 months preceding this announcement, category 2 transactions;
- the Investment Management Agreement is, on a stand-alone basis a category 1 transaction;
and
- the Asset Acquisition is, on a stand-alone basis, a category 2 transaction.
In addition to the above, the Pink Orchid Acquisition, Subscription, Underwriting and the
Investment Management Agreement constitute related party transactions in terms of
paragraph 10.1(b)(vii) of the Listings Requirements, as:
- Capital, being an associate of the vendor of the Pink Orchid Acquisition, was a major
shareholder in Ecsponent in the previous 12 months;
- G Manyere is a director and controlling shareholder of Invest Solar and a director and major
shareholder of Ecsponent; and
- MHMK Capital, being a party to the Investment Management Agreement, is an associate of
G Manyere, a director and major shareholder of Ecsponent.
Accordingly, the Pink Orchid Acquisition, Subscription, Underwriting and the Investment
Management Agreement are subject to the approval of shareholders by way of an ordinary
resolution, requiring the approval of 50% + 1 vote of those shareholders present in person or
represented by proxy, excluding any related parties and their associates. In addition, as the
Pink Orchid Acquisition is classified as a reverse take-over in terms of the Listings
Requirements, shareholders are advised that the Company will require confirmation from the
JSE that it is satisfied that the Company continues to qualify for listing on the Main Board of
the JSE as if it is a new listing. Shareholders are hereby made aware of the uncertainty of
whether or not the JSE will allow Ecsponent’s listing to continue following the Pink Orchid
Acquisition.
10. CIRCULAR TO SHAREHOLDERS
A circular, setting out all the details of the Pink Orchid Acquisition, Subscription, Underwriting
and the Investment Management Agreement and incorporating revised listing particulars, the
requisite fairness opinions and a notice of a general meeting, will be distributed to
shareholders of the Company in due course.
Pretoria
29 June 2018
Sponsor and Corporate Advisor
Questco Corporate Advisory (Pty) Ltd
and
Questco Proprietary Limited
Date: 29/06/2018 03:44:00 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.