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YYLBEE - Update on participation in Vodacom Group's proposed BBBEE transaction and final transaction share price
YeboYethu (RF) Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2008/014734/06)
ISIN: ZAE000218483 Share code: YYLBEE
("YeboYethu")
4 July 2018
UPDATE ON YEBOYETHU'S PARTICIPATION IN VODACOM GROUP'S PROPOSED NEW BROAD-BASED BLACK ECONOMIC EMPOWERMENT OWNERSHIP TRANSACTION, FINAL BEE
TRANSACTION SHARE PRICE AND FURTHER CAUTIONARY
1. Introduction
Shareholders are referred to the announcement released on SENS on Monday 11 June 2018 and published in the South African press on Tuesday 12 June 2018 detailing the BEE
transaction between Vodacom Group Limited ("Vodacom Group") and YeboYethu (the "BEE transaction") a copy of which can be found on the YeboYethu website at
www.yeboyethu.co.za (the "terms announcement").
Unless otherwise indicated by the context, terms defined in the above terms announcement will have the same meanings herein.
As communicated in the terms announcement on 11 June 2018, the BEE transaction was to be priced on 3 July 2018 on the basis of the Vodacom Group share price to be
determined on a 60-day volume weighted average price ("VWAP"). In the terms announcement, the various deal permutations and outcomes for YeboYethu were set out on a range
of Vodacom Group share prices. The BEE transaction was priced on 3 July 2018, being the last practicable date prior to formal JSE Limited ("JSE") approval of the Vodacom Group
and YeboYethu circulars ("pricing date").
Since the terms announcement, the Vodacom Group share price has reduced from above R150 per Vodacom Group share to around R123, broadly in line with the reduction in
value on the overall JSE ALSI and reflecting overall weakness in emerging markets.
The final BEE transaction pricing of R143.35 based on the 60-day VWAP of a Vodacom Group share remains within the range set out in the terms announcement. A comparison of
the final pricing parameters and indicative pricing used for the terms announcement is set out in paragraph 2.7.
As set out in the terms announcement, the YeboYethu, RBH and Thebe Boards have negotiated certain transaction parameters to ensure that YeboYethu retained value for its
current investment in Vodacom SA whilst ensuring that the value received in Vodacom Group was also sufficiently protected.
At the final BEE transaction share price of R143.35:
- The end state percentage holding in Vodacom Group will remain at c.6.23% and YeboYethu will remain the third largest shareholder
- The BEE transaction will now be valued at approximately R16.41bn
- The equity swap ratio of Vodacom SA to Vodacom Group is increased to 73%
- The subscription price discount received by YeboYethu has increased to c. R1.95bn
- The cash dividend is not affected and is marginally increased to c. R3.26bn
- The overall leverage will remain at 60% ensuring the structure is sustainable over the longer term
- The overall structure and steps remain the same without change
All the value parameters are now final except the final split of the YeboYethu gearing amount between third party financiers (class A preference shares) and vendor funding from
Vodacom Group (class B preference shares), which will be determined on the fourth implementation day based on the 5-day VWAP of a Vodacom Group share at that time.
The final BEE transaction parameters are as follows:
60-day VWAP of a Vodacom Group share on pricing date R143.35
Transaction value R16.41 billion
Number of Vodacom Group shares to be issued to YeboYethu 114.45 million
Transaction size 6.23%
Equity swap ratio of Vodacom SA to Vodacom Group 73.0%
Subscription price discount from Vodacom Group R1.95 billion
Equity reinvested by the Vodacom SA BEE shareholders R3.86 billion
Maximum special dividend to be paid to YeboYethu shareholders R3.26 billion (R73.00 per YeboYethu share)
Vodacom ESOP subscription for new YeboYethu ordinary shares R750 million*
5-day VWAP of a Vodacom Group share at pricing date R121.19
Gearing of YeboYethu (third party financing and vendor funding from Vodacom Group) R9.91 billion (60%)
*This amount is rounded up. The exact amount, given the YeboYethu price per share, is R749 999 984.55.
2. BEE transaction steps
The BEE transaction will be implemented through a series of interlinked and inter-conditional steps as outlined below. The values based on the final BEE transaction share price of
R143.35 are as follows:
2.1 Step 1: first implementation day: unwind of the existing Vodacom SA BEE transaction
Step 1 A: Implementation of the NVF structure
Vodacom SA will repurchase 114 744 844 Vocacom SA A shares (31 813 785 from RBH, 13 634 479 from Thebe, and 69 296 580 from YeboYethu (30 298 842 of the "public A shares", and 38 997 738 of
the "ESOP A shares" (as such terms are defined in Vodacom SA's memorandum of incorporation))) from the Vodacom SA BEE shareholders for a nominal
consideration (R0.00001 per Vodacom SA A share, and R1 147.45 in aggregate) pursuant to the Vodacom SA NVF transaction terms ("Vodacom SA repurchase"), upon which the
remaining Vodacom SA A shares will rank pari passu with the Vodacom SA ordinary shares in all respects and will be unencumbered consistent with the terms of issue thereof. It is
anticipated that post the Vodacom SA repurchase, the Vodacom SA BEE shareholders will collectively hold 185 255 156 Vodacom SA shares, or approximately 3.95% of Vodacom
SA.
Step 1 B: Conversion and partial repurchase of YeboYethu N shares
Following implementation of the Vodacom SA repurchase, the 12 000 000 YeboYethu N shares in issue will automatically convert according to their terms of issue and at the same
time 3 318 908 of those shares shall be repurchased by YeboYethu for a nominal amount (R0.00001 per share, and R33.19 in aggregate) based on the existing YeboYethu NVF
transaction terms.
Of the 8 681 092 YeboYethu ordinary shares held by the YeboYethu ESOP, which remain after the conversion and repurchase described above, up to a maximum of 3 298 516 will,
as set out in step 4 (paragraph 2.4), be sold to the Vodacom ESOP, and the remaining 5 382 576 YeboYethu ordinary shares will be transferred, together with the proceeds received
by the YeboYethu ESOP from its sale to the Vodacom ESOP, to the existing vested beneficiaries of the YeboYethu ESOP in accordance with the terms of the YeboYethu ESOP trust
deed and scheme rules, whereafter the YeboYethu ESOP will be wound-up.
2.2 Step 2: first implementation day: consolidation of Vodacom SA BEE shareholders' interests in Vodacom SA in a single vehicle
Each of RBH and Thebe will exchange their Vodacom SA shares for new YeboYethu ordinary shares in terms of asset-for-share transactions, thereby consolidating all of the
Vodacom SA BEE shareholders' interests into a single vehicle, being YeboYethu.
RBH will sell its 55 126 215 Vodacom SA A shares and 7.56 million Vodacom SA ordinary shares (valued at R2 410 284 967) to YeboYethu, and in return YeboYethu will issue
15 115 295 new YeboYethu ordinary shares to RBH in consideration.
Thebe will sell its 23 625 521 Vodacom SA A shares and 3.24 million Vodacom SA ordinary shares (valued at R1 032 979 282) to YeboYethu, and in return YeboYethu will issue
6 477 984 new YeboYethu ordinary shares to Thebe in consideration.
The sales by each of RBH and Thebe, and the issue of new ordinary shares in YeboYethu, will be done simultaneously and at fair market value.
2.3 Step 3: second implementation day: YeboYethu declares a special dividend (distribution)
YeboYethu will declare a special dividend of up to a maximum of R3 261 189 876 or, in all cases, R73.00 per YeboYethu ordinary share, on the second implementation day, subject
to YeboYethu meeting a solvency and liquidity test as contemplated by section 46 of the Companies Act, 2008, as amended. The special dividend represents a significant liquidity
event and equates to 2.9 times the YeboYethu shareholders' original equity contribution. Vodacom Group currently has no intention to settle the BEE transaction in cash.
Despite declaration, the payment of the special dividend will only occur in (and payment will be contingent upon) step 6 (in paragraph 2.6) (and each of the preceding steps) being
implemented.
2.4 Step 4: second implementation day: Vodacom Group employer companies make a contribution to the Vodacom ESOP to enable it to acquire YeboYethu ordinary shares
Vodacom Group, on behalf of itself and the employer companies, will make a capital contribution of an aggregate amount of R1.05 billion to the Vodacom ESOP. The Vodacom
ESOP will, on the second implementation day or as soon thereafter as it may be implemented, use the proceeds to purchase up to a maximum of 3 298 516 YeboYethu ordinary
shares valued at R300 million from the YeboYethu ESOP (and the YeboYethu ESOP beneficiaries insofar as the rights therein have vested), and will use the balance of R750 million
to subscribe for 8 246 289 new YeboYethu ordinary shares for the benefit of vested beneficiaries.
Should any balance of the contribution remain after the sale and subscription above, the Vodacom ESOP will use those funds to acquire YeboYethu ordinary shares in the market
after the implementation of the BEE transaction.
2.5 Step 5: YeboYethu exchanges Vodacom SA shares for new Vodacom Group shares
A new special purpose vehicle, YeboYethu Investment Company (RF) (Proprietary) Limited ("YeboYethu Investment"), has been created for the purpose of holding YeboYethu's
Vodacom Group shares. YeboYethu Investment would be a wholly-owned subsidiary of YeboYethu.
second implementation day
After the implementation of the aforementioned steps and the consolidation of YeboYethu's shareholding in Vodacom SA, YeboYethu will on the next day exchange its Vodacom SA
shares for ordinary shares in the share capital of YeboYethu Investment ("YeboYethu Investment shares"). YeboYethu will sell its 167 255 156 Vodacom SA A shares, valued at
R6 430 960 748, and 18 million Vodacom SA ordinary shares, valued at R692 100 000, to YeboYethu Investment, and in return YeboYethu Investment will issue 7 123 061 new
YeboYethu Investment ordinary shares to YeboYethu in consideration.
third implementation day
After implementation of YeboYethu's exchange of Vodacom SA shares for YeboYethu Investment shares, and on the subsequent day, YeboYethu Investment will exchange its
Vodacom SA shares for new Vodacom Group shares on a fair market value basis of R7 123 060 748. YeboYethu Investment will sell its 167 255 156 Vodacom SA A shares and
18 million Vodacom SA ordinary shares to Vodacom Group and in return Vodacom Group will issue 49 689 995 new Vodacom Group shares in consideration.
2.6 Step 6: fourth implementation day: YeboYethu raises vendor funding and third party financing and subscribes for additional Vodacom Group shares
In aggregate, YeboYethu will raise R9 908 154 034 in subscription proceeds from the issue of the class A preference shares and class B preference shares. The number of class A
preference shares to be issued by YeboYethu, however, will be, with reference to their aggregate subscription price, equal to the lesser of R5 833 333 333 and an aggregate
subscription price which is equal to a 3x share cover ratio as measured against the 5-day VWAP of a Vodacom Group share on the fourth implementation day. The number of class B
preference shares will be equal to that number of class B preference shares which need to be issued, based on their aggregate subscription price, such that the total preference
share funding received by YeboYethu (including the subscription funds received pursuant to the issue of the class A preference shares) is equal to R9 908 154 034.
Accordingly, although the aggregate funding received by YeboYethu from preference share subscription proceeds will remain constant, the split between the class A preference
shares and class B preference shares will be determined with reference to the 5-day VWAP of a Vodacom Group share on the fourth implementation day. For illustrative purposes,
below and later in the announcement, the split of the class A preference shares and class B preference shares is based on an assumed 5-day VWAP of a Vodacom Group share on
the fourth implementation day of R121.19.
YeboYethu will issue class B preference shares to Vodacom Group and raise R5 284 707 866. The class B preference shares will be unsecured. YeboYethu will use the subscription
proceeds received pursuant to (i) the subscription by Vodacom ESOP (as set out in step 4 at paragraph 2.4 above) and (ii) the issue of the class B preference shares, to (a) fund the
payment of the special dividend (as set out in step 3 at paragraph 2.3 above) and transaction costs amounting to R64 million and (b) subscribe for 2 709 310 (at an issue price of
R1 000 per share) additional YeboYethu Investment shares.
YeboYethu Investment will use the subscription proceeds received from YeboYethu above to subscribe for 23 927 991 new Vodacom Group shares (representing 1.30% of Vodacom
Group shares, post the BEE transaction), valued at R3 430 077 652, at a discount of R720 767 619.
In addition, YeboYethu will issue class A preference shares to third party funders and raise R4 623 446 168. The class A share cover preference shares will be secured through
YeboYethu Investment issuing a guarantee and a pledge of the Vodacom Group shares held by it to the third party funders. YeboYethu will use the entire subscription proceeds
received pursuant to the issue of the class A share cover preference shares, to subscribe for 4 623 446 (at an issue price of R1 000 per share) additional YeboYethu Investment
shares.
YeboYethu Investment will use the entire subscription proceeds received from YeboYethu above to subscribe for 40 833 194 new Vodacom Group shares (representing 2.22% of
Vodacom Group shares, post the BEE transaction), valued at R5 853 438 396, at a discount of R1 229 992 228.
The Vodacom Group share price is a material input in calculating the financial effects of the transaction. Since the terms announcement, dated 11 June 2018, markets across the
globe have been impacted by significant share price volatility. This has been driven by global factors including increased international trade uncertainty from tariff interventions
mainly by the USA and China. Emerging markets have been particularly affected. International funds withdrew from riskier assets, creating negative pressure on emerging market
economies and currencies. The impact of this can be clearly seen in the resultant volatile share prices across the South African market.
The table below illustrates what the split of the YeboYethu gearing amounts will be between the class A preference shares and class B preference shares based on various assumed
5-day VWAP's of a Vodacom Group share on the fourth implementation day and is provided for illustrative purposes only.
Class A
5-day VWAP of a share cover Class B
Vodacom Group preference shares preference shares Total
share on the fourth from third party from YeboYethu
implementation day funders Vodacom Group gearing
(Rand) (R'm) (R'm) (R'm)
150.00 5 723 4 185 9 908
140.00 5 341 4 567 9 908
130.00 4 959 4 949 9 908
121.19 4 623 5 285 9 908
120.00 4 578 5 330 9 908
110.00 4 196 5 712 9 908
100.00 3 815 6 093 9 908
2.7 Comparison of transaction parameters to terms announcement
The table below shows a comparison of the key pricing parameters of the BEE transaction between the terms announcement and this pricing announcement. The overall gearing
of the BEE transaction structure does not increase (remains at 60%) but the BEE equity reinvestment and Vodacom discount ratios change. The discount from Vodacom increases
from R1.75 billion to R1.95 billion (R200 million increase). As a result of the smaller deal size (R16.4 billion vs. R17.5 billion) and the proportional increase in the facilitation from
Vodacom, the equity reinvestment from BEE investors decreases from R4.50 billion to R3.86 billion (R638 million decrease) and the overall funding required reduces from
R10.50 billion to R9.91 billion (R592 million decrease).
Pricing
announcement Terms announcement
Step Description @R143.35 (assuming R152.50)
1A Aggregate Vodacom SA A shares repurchased from YeboYethu, RBH and Thebe 114 744 844 110 902 035
Aggregate Vodacom SA shares held between YeboYethu, RBH and Thebe after 185 255 156 189 097 965
the repurchase
Aggregate % shareholding in Vodacom SA held between YeboYethu, RBH and Thebe after 3.95% 4.03%
the repurchase
1B YeboYethu N shares automatically converted and simultaneously repurchased 3 318 908 3 154 468
Aggregate remaining YeboYethu ordinary shares after the repurchase and conversion of 8 681 092 8 845 532
YeboYethu N shares
2 Number of Vodacom SA shares to be exchanged by RBH for new YeboYethu ordinary shares 55 126 215 Vodacom SA A shares 56 191 660 Vodacom SA A shares
and 7.56 million Vodacom SA and 7.56 million Vodacom SA
ordinary shares in return for ordinary shares in return for
15 115 295 YeboYethu ordinary 15 115 065 YeboYethu ordinary
shares shares
Number of Vodacom SA shares to be exchanged by Thebe for new YeboYethu ordinary shares 23 625 521 Vodacom SA A shares 24 082 140 Vodacom SA A shares
and 3.24 million Vodacom SA and 3.24 million Vodacom SA
ordinary shares in return for ordinary shares in return for
6 477 984 YeboYethu ordinary 6 477 885 YeboYethu ordinary
shares shares
3 YeboYethu special dividend Up to a maximum of Up to a maximum of
R3 261 189 876, in all cases or R3 016 419 627, in all cases or
R73.00 per YeboYethu ordinary R67.28 per YeboYethu ordinary
share share
4 Vodacom Group capital contribution to the Vodacom ESOP R1.05 billion R1.05 billion
Acquisition amount in respect of YeboYethu shares acquired by the Vodacom ESOP from the Up to a maximum of R300 million Up to a maximum of R300 million
YeboYethu ESOP
Number of YeboYethu shares acquired by the Vodacom ESOP from the YeboYethu ESOP Up to a maximum of 3 298 516 Up to a maximum of 2 988 919
Subscription amount for YeboYethu shares by the Vodacom ESOP R750 million R750 million
Number of YeboYethu shares subscribed for by the Vodacom ESOP 8 246 289 7 472 297
5 Number of Vodacom SA shares held by YeboYethu post RBH and Thebe's sale of their 167 255 156 Vodacom SA A 171 097 965 Vodacom SA A
shares in Vodacom SA to YeboYethu shares and 18 million shares and 18 million
Vodacom SA ordinary shares Vodacom SA ordinary shares
Number of YeboYethu Investment shares to be issued to YeboYethu in exchange for the 7 123 061 7 516 420
Vodacom SA shares
Number of Vodacom SA shares held by YeboYethu Investment 167 255 156 Vodacom SA A 171 097 965 Vodacom SA A
shares and 18 million shares and 18 million
Vodacom SA ordinary shares Vodacom SA ordinary shares
Number of Vodacom Group shares to be issued to YeboYethu Investment in exchange for 49 689 995 49 287 998
Vodacom SA shares
6A class B preference shares R5 284 707 866 R4 732 666 667
Number of Vodacom Group shares subscribed for utilising a portion of the proceeds of 23 927 991 19 084 628
the class B preference shares
Vodacom Group discount R720 767 619 R510 158 659
6B class A preference shares R4 623 446 168 R5 833 333 333
Number of Vodacom Group shares subscribed for utilising the proceeds of class A preference 40 833 194 46 381 473
shares
Vodacom Group discount R1 229 992 228 R1 239 841 341
Step 1-6B Total number of Vodacom Group shares issued to YeboYethu 114 451 180 114 754 099
Step 1-6B Percentage of Vodacom Group shares owned by YeboYethu 6.23% 6.25%
3. YeboYethu sources of funding
The table below sets out the sources of funding to discharge the payment obligations in terms of the BEE transaction. The values reflected below are based on the final
BEE transaction share price of R143.35.
Sources of funding Rm %
Economic value of Vodacom Group discount of subscription price 1 951 11.8
Equity contribution - Vodacom SA BEE shareholders (including YeboYethu shareholders) 3 862 23.4
Equity contribution by employer companies - Vodacom ESOP 750 4.6
Class A share cover preference shares from third party funders 4 623 28.1
Class B preference shares from Vodacom Group* 5 285 32.1
Total 16 471 100
Uses of funding Rm %
Acquisition of Vodacom Group shares 16 407 99.6
Transaction costs 64 0.4
Total 16 471 100
*Total Vodacom ESOP contribution of R1 050 million, where up to a maximum of R300 million is utilised to acquire shares from the YeboYethu ESOP and R750 million is utilised to
subscribe for new YeboYethu shares. The balance of the contribution to the Vodacom ESOP will be used by the Vodacom ESOP following the final implementation date to acquire
YeboYethu ordinary shares in the market.
4. Pro forma financial effects
It is intended that the pro forma financial effects based on the final pricing information will be included in the circular to be posted to YeboYethu shareholders on or about Monday
16 July 2018.
5. Salient dates and times
2018
Record date for shareholders to be recorded on the register to receive a copy of the circular Friday 6 July
Circular incorporating notice of general meeting posted to shareholders and announced on SENS, on or about Monday 16 July
Last day to trade in order to be eligible to attend and vote at the general meeting Monday 6 August
Record date for attending and voting at the general meeting Friday 10 August
Recommended day to lodge forms of proxy in respect of the general meeting by 11:00 Thursday 16 August
General meeting of shareholders to be held immediately after the conclusion of the annual general meeting at approximately 11:00 at Vodacom World,
082 Vodacom Boulevard, Midrand for the purpose of considering and, if deemed fit, approving, with or without modification, the resolutions proposed
thereat Friday 17 August
Results of general meeting released on SENS Friday 17 August
Estimated date of fulfilment of the general transaction conditions (on or about) Friday 7 September
First implementation day (on or about) (if there are no appraisal rights exercised by YeboYethu shareholders) Monday 10 September
Dissenting shareholder salient dates
Last date on which shareholders who voted against the s112 disposal resolution can require YeboYethu to seek court approval for the s112 disposal in
terms of section 115(3)(a) of the Act (if applicable), on Friday 24 August
Last date on which shareholders who voted against the s112 disposal resolution can make application to court in terms of section 115(3)(b) of the Act
(if applicable), on Friday 31 August
Last date for YeboYethu to send notice of adoption of the s112 disposal resolution in terms of section 164(4) of the Act to shareholders who provided
written notice of objection of and subsequently voted against the s112 disposal resolution, on Friday 31 August
Expected last date for dissenting shareholders to exercise their appraisal rights, on or about Friday 21 September
First implementation day (on or about) Tuesday 25 September
6. Further documentation
A circular containing details of the BEE transaction and a notice of general meeting will be posted to YeboYethu shareholders on or about Monday 16 July 2018.
7. Further cautionary announcement
As set out in paragraph 4, as the pro forma financial effects will be included in the circular to shareholders, YeboYethu shareholders are advised to continue to exercise caution
when dealing in their YeboYethu shares until the circular has been issued. The circular will be available, once issued, on the YeboYethu website, www.yeboyethu.co.za and an
announcement will be made on SENS to that effect.
Midrand
4 July 2018
Financial adviser, co-funder and transaction sponsor to YeboYethu
Absa Corporate and Investment Bank, a division of Absa Bank Limited
Financial adviser to Vodacom Group, debt arranger and co-funder to YeboYethu and transaction sponsor to Vodacom Group
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal and tax adviser to Vodacom Group and YeboYethu
Cliffe Dekker Hofmeyr Inc.
Legal adviser to the debt arranger and co-funders
Allen & Overy (South Africa) LLP
Independent expert to Vodacom SA
Ernst & Young
Independent expert to YeboYethu
BDO Corporate Finance (Pty) Ltd
Reporting accountants
PricewaterhouseCoopers Inc.
Co-funder
Nedbank Corporate (a division of Nedbank Limited)
Date: 04/07/2018 05:21:00 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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