STELLAR CAPITAL PARTNERS LIMITED - Category 1 transaction: dilution of investment in Prescient and withdrawal of cautionary announcement

Release Date: 26/07/2018 14:00
Code(s): SCP
Wrap Text
Category 1 transaction: dilution of investment in Prescient and withdrawal of cautionary announcement

Incorporated in the Republic of South Africa
(Registration number: 1998/015580/06) 
Share code: SCP     ISIN: ZAE000198586
(“Stellar Capital”)


1. Introduction and Terms of the Transactions

Shareholders are referred to the cautionary announcement
released on the Stock Exchange News Service (“SENS”) on 18
June 2018 wherein they were advised that Stellar Capital is a
party to negotiations with an empowered entity to invest in
Prescient Holdings (Pty) Ltd (“Prescient”) to further improve
Prescient’s B-BBEE status. It was also disclosed that the
potential investment by the empowered entity could result in a
dilution of Stellar Capital’s shareholding in Prescient.

Stellar Capital is pleased to announce that a binding term
sheet has been concluded which will result in Prescient
becoming an empowered entity with Prescient Empowerment Trust
(Pty)   Ltd  (“PET”)  ultimately  becoming   the  controlling
shareholder of Prescient.  This will be achieved in a series
of transactions:

  i)    repurchases by Prescient of 50% of the shares
        currently   held   by   Stellar   Capital   (“Prescient
        Repurchases”) for cash;
  ii)   Sithega Holding (Pty) Ltd (“Sithega”), led by Mr Thabo
        Dloti, subscribing for additional shares in PET and
        becoming the controlling shareholder in PET;
  iii)  the subscription of additional shares in PET by a
        staff share scheme;
  iv)   the subscription of additional shares in Prescient by
        PET; and
  v)    the exchange of Stellar Capital’s remaining shares in
        Prescient for an instrument in PET that will retain
        Stellar Capital’s effective 19.4% economic interest in
        the issued shares of Prescient,
collectively referred to as the “Transactions”.

The end result of the above mentioned series of transactions
is that Prescient will become 71.5% owned by PET.

The cash proceeds payable to Stellar Capital as a result of
the disposal of half of its shares currently held in Prescient
(per i) above) is approximately R384.5 million. The Prescient
Repurchases of Stellar Capital’s shares together with the
subscription of additional shares for the injection of capital
in Prescient by PET will result in a dilution of Stellar
Capital’s effective investment in Prescient from 49% to 19.4%.
The effective date of the Transactions will be 1 April 2018
and the closing date will be the 3rd business day after all
the relevant Conditions Precedent are fulfilled or waived.

2. Rationale

With empowerment a key focus, Prescient and Stellar Capital
have been searching for a suitable partner for Prescient. We
believe that we have found this partner in Sithega which is
led by Mr. Thabo Dloti, a well-respected executive boasting 25
years’ experience in running asset management and insurance

On conclusion of the Transactions, Sithega will have an
indirect controlling equity stake in Prescient, positioning
Prescient as an eminent black-owned participant in the South
African non-banking financial services market. Sithega will
also actively participate in the Prescient strategy of scaling
up the business.

The Transactions will result in Stellar Capital reducing its
material holding in Prescient for a cash consideration in
excess of its most recent published valuation level. The
proposed Transactions also enables Stellar Capital to retain a
significant economic interest in an empowered Prescient as the
business resets itself for the next step in its growth path.

Stellar Capital will utilise the proceeds of the Prescient
Repurchases to reduce levels of debt as part of the process to
optimise its capital structure.

3. Nature of the Business of Prescient

Prescient is a diversified, global financial services group
with a 20-year track record of providing solutions to its
clients   in  Asset   Management,  Investment  Administration,
Retirement Solutions, Stockbroking and Wealth Management. As
at 31 March 2018 the group had R87 billion client assets under
management (AUM) and more than R350 billion client assets
under administration (AUA), split between asset admin of R246
billion and unit holder admin of R112 billion.

4. Conditions Precedent to the Transactions

The Transactions are subject to the fulfilment or waiver of
the following conditions precedent:

4.1. Approval of the Transactions by the shareholders of
Prescient as may be required;

4.2. Approval of the Prescient Repurchases by the shareholders
of Prescient in terms of section 48(8)(b) read with sections
114 and 115 of the Companies Act 71 of 2008 (“Companies Act”)
as may be required;

4.3. All regulatory approvals being obtained as may be
required in law (including any regulatory approvals required
by the Takeover Regulation Panel, the Competition Authorities,
the Jersey Financial Services Commission and the Central Bank
of Ireland);

4.4. The conclusion between the parties of the appropriate
comprehensive agreements;

4.5. Confirmation from an accredited B-BBEE ratings agency
that Prescient and PET will be black-owned at the conclusion
of the Transactions; and

4.6 Suitable protections being implemented for minority
shareholders in Prescient and PET.

5. Warranties and Indemnities

The Transactions are subject to warranties and indemnities
that are normal for transactions of this nature including a
commitment provided by Sithega that it will maintain BEE
majority shareholding in PET for a minimum period ranging
between five and ten years.

6. Net Assets and profits of Prescient

The value of the net assets of Prescient as at 31 March 2018
amounts to R327.6 million (three hundred twenty-seven million
and six hundred thousand rand). The profit after tax for the
year ended 31 March 2018 attributable to Prescient is R86.9
million (eighty-six million and nine hundred thousand rand).

This unaudited historical financial information for Prescient
was prepared in accordance with International Financial
Reporting Standards.

7. Categorisation

The Transactions relating to Stellar Capital have been
categorised as a category 1 transaction in terms of section
9.5(a) of the JSE Limited Listings Requirements. No circular
or shareholders’ approval are required in terms of Stellar
Capital’s Investment Policy as approved by the JSE Limited and
Stellar Capital shareholders.

8. Withdrawal of cautionary announcement relating to the
potential dilution of shareholding in Prescient

The cautionary announcement released by Stellar Capital on
SENS on 18 June 2018 is hereby withdrawn as it relates to

Shareholders are reminded that the cautionary announcement
released on SENS on 18 June 2018 relating to the disposal
process of Amecor and the cautionary announcement released on
SENS on 9 July 2018 relating to the proposed delisting process
of Torre Industries Limited have not been withdrawn and
accordingly, caution is still required to be exercised by
shareholders when dealing in the securities of Stellar

9. Further announcements

Stellar Capital shareholders will be notified once the last of
the Conditions Precedent have been fulfilled or waived.

Cape Town

26 July 2018

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

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