EOH HOLDINGS LIMITED - R1 Billion BEE Equity Transaction and Renewal Of Cautionary Announcement

Release Date: 30/07/2018 08:10
Code(s): EOH
 
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R1 Billion BEE Equity Transaction and Renewal Of Cautionary Announcement

EOH HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/014669/06)
Share code: EOH ISIN: ZAE000071072
(“EOH” or the “Company”)

R1 BILLION BEE EQUITY TRANSACTION AND RENEWAL OF CAUTIONARY ANNOUNCEMENT

Unless otherwise indicated, capitalised words and terms contained in this announcement shall bear the
meanings ascribed thereto in the shareholder update announcement published on SENS on
12 March 2018 (“Announcement”).

1.   INTRODUCTION

     Shareholders are referred to the Announcement and the subsequent announcements published
     on SENS on 26 April 2018, 11 June 2018, 15 June 2018 and 24 July 2018 relating to the
     Transaction to be concluded between EOH and Lebashe, subject to the fulfilment of certain
     conditions precedent.

     Following the Announcement, EOH and Lebashe continued to engage in discussions regarding
     the Transaction and have agreed to revise the terms of the Transaction. EOH wishes to inform
     Shareholders that the Parties have agreed that:

     -   Lebashe will make a R1 billion equity injection into EOH pursuant to the Initial Subscription,
         the Subscription Undertaking (as defined in paragraph 2.2 below) and the A Share Issue;
     -   the issue price of EOH Shares will be at a 10% discount to the prevailing volume weighted
         average prices, calculated as set out further in this announcement; 
     -   EOH will issue 40 million A Shares to Lebashe for a nominal consideration (as further set out in paragraph 2.3 below); and
     -   the hurdle price for the capitalisation issue pertaining to the A Shares is set at R90.00,
     
     (collectively, “BEE Transaction”).

     The Parties believe that the BEE Transaction’s objectives would be best served by:

     -   significantly increasing EOH’s effective black shareholding to above 50%;
     -   increasing the initially proposed Lebashe equity injection from R250 million to R1 billion;
     -   Lebashe’s ability to subscribe for equity using its own financial resources, without any form of
         vendor finance from EOH;
     -   eliminating the need for the previously proposed R3 billion debt funding facility; and
     -   concomitantly adjusting the hurdle price for the capitalisation issue pertaining to the A Shares
         from R112.00 to R90.00, after taking into account the increased equity contribution by
         Lebashe.
     
     As a result, EOH and Lebashe have entered into a landmark BEE transaction within the
     Technology sector, which will make EOH one of the largest, majority black-owned technology
     companies in Africa. This long-term commitment aligns Lebashe’s interests with those of EOH’s
     current and future shareholders.

     The Parties have subsequently entered into binding long-form agreements (superseding the
     Framework Agreement), to revise the initial terms of the Transaction as set out in the
     Announcement.

     Implementation of the BEE Transaction remains subject to conditions precedent customary to a
     transaction of this nature, including Shareholder approval being obtained at a general meeting of
     Shareholders called for that purpose (“General Meeting”).

2.   SALIENT TERMS OF THE BEE TRANSACTION

     2.1.   Initial Subscription

            The Initial Subscription will be implemented by Lebashe subscribing for new EOH Shares
            (“Subscription EOH Shares”) for an aggregate cash consideration of R250 million, at a
            subscription price equal to the volume weighted average price of an EOH Share on the
            exchange operated by the JSE (“VWAP”) less 10%, for the 60 trading days immediately
            preceding the date on which Shareholders pass the resolutions at the General Meeting
            (“Approval Date”).

            In order to secure the BEE ownership credentials which shall accrue to EOH pursuant to
            the Initial Subscription, for a period of five years from the date of the Initial Subscription
            (“Transaction Term”), Lebashe undertakes not to dispose of the Subscription EOH
            Shares (“Lock-in Undertaking”).

     2.2.   Subscription Undertaking

            Lebashe has undertaken to subscribe for additional new EOH Shares (not subject to the
            Lock-in Undertaking), for an aggregate cash consideration of R750 million
            (“Subscription Undertaking”), as follows:

             -   on the date of the Initial Subscription (“Implementation Date”), in addition to the Initial
                 Subscription, Lebashe will subscribe for new EOH Shares for an aggregate cash
                 consideration of R250 million, at a subscription price equal to the 30 Day VWAP less
                 10%, immediately preceding the Approval Date;
             -   within 6 months of the Implementation Date, Lebashe will subscribe for new EOH
                 Shares for an aggregate cash consideration of R250 million, at a subscription price
                 equal to the 30 Day VWAP less 10%, immediately preceding the date of the issue of
                 such EOH Shares; and
             -   within 12 months of the Implementation Date, Lebashe will subscribe for new EOH
                 Shares for an aggregate cash consideration of R250 million, at a subscription price
                 equal to the 30 Day VWAP less 10%, immediately preceding the date of the issue of
                 such EOH Shares.

     2.3.   A Share Issue

            EOH will create the A Shares for purposes of the BEE Transaction. On the Implementation
            Date, EOH will implement the A Share Issue, in terms of which 40 million A Shares will be
            issued to Lebashe for a nominal aggregate subscription price of R1.00.

            During the Transaction Term, each A Share shall rank pari passu with an EOH Share in
            respect of voting rights and will receive cash dividends in an amount equal to 15% of cash
            dividends paid by EOH in respect of an EOH Share.

            In order to secure the BEE ownership credentials which shall accrue to EOH pursuant to
            the A Share Issue, for the duration of the Transaction Term, Lebashe will not be entitled
            to dispose of the A Shares acquired pursuant to the A Share Issue.
             
            At the end of the Transaction Term, EOH will issue a number of EOH Shares to Lebashe
            by way of a capitalisation issue ("Capitalisation Share Issue"), whereafter the A Shares
            held by Lebashe will be redeemed for an aggregate nominal consideration of R1.00. The
            number of EOH Shares to be issued pursuant to the Capitalisation Share Issue will be
            determined in accordance with the following formula (“Revised A Share Formula”):


                                                   [B x (C + D)]
                                        A    =
                                                         E
             where:

                A        =     number of EOH Shares to be issued in respect of all A Shares held by
                               Lebashe;
                B        =     number of A Shares held by Lebashe on the business day immediately
                               succeeding the end of the Transaction Term (“Maturity Date”);
                C        =     the 30 Day VWAP immediately prior to the Maturity Date less R90.00,
                               provided that if “C” is less than zero then “C” shall be deemed to be equal
                               to zero;
                D        =     an amount equal to 85% of any dividend declared and paid by EOH in
                               respect of an EOH Share throughout the Transaction Term;
                E        =     the 30 Day VWAP immediately prior to the Maturity Date.


3.   FURTHER INFORMATION

     The announcement published on SENS on 15 June 2018, stated that the BEE Transaction circular
     is expected to be posted to Shareholders by no later than 10 August 2018 (“Posting Date”). In
     light of the revised terms of the BEE Transaction and the impact this will have on the finalisation
     of the BEE Transaction circular, the Posting Date may change in which event Shareholders will be
     informed of the revised Posting Date.

4.   RENEWAL OF CAUTIONARY ANNOUNCEMENT

     Shareholders are advised that the pro forma financial effects of the BEE Transaction are still being
     finalised in view of the Parties having revised the key terms of the initial Transaction, as set out in
     this announcement. Accordingly, Shareholders are advised to continue exercising caution when
     dealing in the Company’s securities until a further announcement is made in this regard.

Johannesburg
30 July 2018

Corporate Advisor and Transaction Sponsor to EOH on the BEE Transaction
One Capital

Attorneys to EOH on the BEE Transaction
Cliffe Dekker Hofmeyr Inc.

Date: 30/07/2018 08:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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