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Detailed terms of the Proposed Transaction with the Shoprite Deferred Shares and a withdrawal of cautionary
SHOPRITE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration no. 1936/007721/06
ISIN: ZAE000012084
JSE share code: SHP
NSX share code: SRH
LuSE share code: SHOPRITE
(“Shoprite Holdings” or “the Company”)
DETAILED TERMS OF THE PROPOSED TRANSACTION WITH THE SHOPRITE
DEFERRED SHARES AND A WITHDRAWAL OF CAUTIONARY (INCORPORATING A
FIRM INTENTION ANNOUNCEMENT IN TERMS OF REGULATION 101 OF THE
REGULATIONS ISSUED UNDER THE COMPANIES ACT, ACT 71 OF 2008)
1. Introduction
Shoprite Holdings’ ordinary shareholders (“Shareholders”) are referred to the
cautionary announcement released on the stock exchange news service operated by
the JSE Limited (“JSE”) (“SENS”) on 26 February 2019 and subsequent renewal of
the cautionary announcement released on SENS on 9 April 2019, relating to the
Company’s consideration of a potential acquisition and cancellation of all the Shoprite
Holdings deferred shares (“Deferred Shares”) comprising of 264,969,112 Deferred
Shares and 32.3% of the votes in Shoprite Holdings in issue (the “Proposed
Transaction”), being the Deferred Shares in issue other than the Additional Deferred
Shares referred to hereunder.
On 18 April 2019, Shoprite Holdings entered into a tripartite agreement with Thibault
Square Financial Services Proprietary Limited (“Thibault”) and Titan Premier
Investments Proprietary Limited (“Titan”) on the salient terms detailed below
(“Transaction Agreement”).
The directors of the Shoprite Holdings board, excluding Dr Wiese and his alternate
director JD Wiese (“Board”), being cognisant of the actual and potential conflicts
between the position of Thibault, Titan and their related and inter-related parties
(“Titan Group”) and Shoprite Holdings in relation to the Proposed Transaction, has
taken due care to ensure that its independence has been and will remain in place for
the duration of the Proposed Transaction.
The Proposed Transaction is subject to the suspensive conditions set out in
paragraph 3, which includes the adoption of the special resolutions by the requisite
number of Shareholders, other than the Titan Group (the Shareholders other than
the Titan Group are hereinafter referred to as the “Minority Shareholders”) in terms
of the Companies Act No 71 of 2008, as amended (“Companies Act”) and in terms
of the Listings Requirements of the JSE (the “Listings Requirements”).
2. Rationale of the Proposed Transaction
The Board is of the view that the Proposed Transaction will have the following
benefits for the Company and its Shareholders:
- simplify the Company’s voting share structure and align the Company with
international best corporate governance practice;
- all shares in the Company post implementation of the Proposed Transaction
will have equal economic and voting rights. Voting interest of Minority
Shareholders, will increase from c.57.7% to c.82.2% (representing an equal
proportion to Shareholders’ economic rights in the Company post the
implementation of the Proposed Transaction);
- together with being a simpler and more equitable shareholding structure, the
post transaction single class of ordinary shares is believed to be more
appealing to institutional investors and may therefore have a positive impact
on the demand for the Company’s shares; and
- the cancellation of the Deferred Shares removes uncertainty around a future
sale of Thibault and thus a transfer of significant influence over Shoprite
Holdings to a third party.
3. Key terms of the Transaction Agreement
The Proposed Transaction will be implemented through the specific issue of
20,000,000 new Shoprite Holdings ordinary shares (“Consideration Shares”) to Titan
in exchange for the agreement by Titan to acquire the Shoprite Holdings ordinary
shares held by Thibault (“Disposal Ordinary Shares”) and causing the acquisition and
cancellation of the Deferred Shares by Shoprite Holdings. The issuance of the
Consideration Shares will result in an economic dilution to Shareholders of c.3.5%.
The Proposed Transaction will be categorised as a small related party transaction in
terms of the Listings Requirements.
Shoprite Holdings is already entitled to acquire 40,652,489 Deferred Shares
(“Additional Deferred Shares”) as explained below. The acquisition by Titan of the
Disposal Ordinary Shares will, in accordance with the terms of Shoprite Holdings’
memorandum of incorporation, result therein that Shoprite Holdings will also acquire
and cancel the Deferred Shares (other than the Additional Deferred Shares)
(“Transaction Deferred Shares”) for a nominal consideration of 0.1 cent per share.
The total consideration to be paid to acquire all the Transaction Deferred Shares is
approximately R265,000.
The acquisition by Shoprite Holdings of all of the Deferred Shares, pursuant to
section 48 of the Companies Act, is subject to the provisions of sections 114 and 115
of the Companies Act and therefore treated as a scheme of arrangement.
The Proposed Transaction will be subject to standard warranties and the
Consideration Shares will be subject to a 180-day lock-up period.
The Proposed Transaction is subject to, inter alia, the following suspensive
conditions:
- to be met by no later than 31 May 2019:
- the Company has not received written notices from Minority Shareholders
who in aggregate hold more than 15% of the total issued Ordinary Shares
held by the Minority Shareholders, indicating that they will not vote in
favour of the required special resolution, post engagement with Minority
Shareholders.
- to be met by no later than 30 September 2019:
- the Board and the independent board constituted in terms of the
Companies Act comprising of Mr EC Kieswetter, Mr JF Basson, Dr ATM
Mokgokong, Ms AM le Roux, Mr JA Rock and Prof SA Zinn (“Independent
Board”), have adopted the resolutions required to implement the Proposed
Transaction;
- the Board has received an independent expert report in terms of section
114(3) of the Companies Act that is acceptable to the Board;
- the Board and/or the Independent Board has received an opinion from an
independent expert that reflects that the Proposed Transaction is both fair
and reasonable;
- the JSE and Takeover Regulation Panel (“TRP”) have provided the required
approvals or exemptions in order to implement the Proposed Transaction;
- the financial institutions that hold any form of encumbrance over the
Disposal Ordinary Shares have in writing unconditionally agreed to release
the Disposal Ordinary Shares from those encumbrances to enable the
Disposal Ordinary Shares to be transferred to Titan;
- Thibault has delivered a certificate signed by the auditors of Thibault to the
Company in terms whereof its auditors certify that immediately after the
Disposal Ordinary Shares have been transferred and the Consideration
Shares have been issued, the fair market value of the assets of Thibault
will exceed the aggregate amount of the liabilities of Thibault;
- the required resolutions have been adopted by the requisite number of
Minority Shareholders, at a general meeting of Shareholders (“General
Meeting”);
- Shareholders not holding more than 2% of all Shoprite Holdings’ issued
Ordinary Shares have exercised appraisal rights in terms of section 164 of
the Companies Act; and
- Shareholders have not exercised their rights in terms of section 115(3) of
the Companies Act or if Shareholders do exercise those rights, the court
has finally approved the special resolutions and the Proposed Transaction
or finally rejected an application to review the special resolutions and the
Proposed Transaction, as the case may be.
Some of those conditions that are not of a regulatory nature may be waived by the
Company or jointly by the parties hereto.
Additional Deferred Shares
Unrelated to the Proposed Transaction, in December 2017 Thibault sold a number
of Ordinary Shares held by it at the time. The effect thereof was that Shoprite
Holdings became entitled to acquire the Additional Deferred Shares, in accordance
with the terms of Shoprite Holdings’ memorandum of incorporation. On fulfillment
of the above suspensive conditions the Company will accordingly acquire and cancel
all the Transaction Deferred Shares as well as the Additional Deferred Shares held
by Thibault. The effect thereof will be that on completion of those acquisitions
Shoprite Holdings will have no more issued Deferred Shares. The Additional
Deferred Shares have not been included in any of the voting percentages calculated
in this announcement as the rights to exercise any voting rights in respect of the
Additional Deferred Shares have lapsed and Thibault has undertaken not to exercise
any voting rights in respect of these shares prior to the cancellation thereof.
The approvals required to implement the Proposed Transaction, as detailed above,
will therefore also include approvals for the acquisition and cancellation of the
Additional Deferred Shares.
Effective date
The effective date of the Proposed Transaction is expected to be when all the
suspensive conditions have been met, which is expected to be on or before
30 September 2019.
4. Process
Board
The following process was followed by Shoprite Holdings to ensure its
independence:
- the Board appointed an independent committee to negotiate and evaluate the
benefits of the Proposed Transaction for Shoprite Holdings and its
Shareholders;
- the Board independently evaluated the Proposed Transaction without the
presence of the Titan Group, its appointed directors and its financial advisors;
and
- the Board appointed independent financial advisors.
Independent expert
The Board has appointed Ernst and Young Advisory Services Proprietary Limited
(“EY”) as the independent expert, as required in terms of the Listings Requirements
and Companies Act.
EY has furnished a draft opinion to the Board that considers the Proposed Transaction
to be both fair and reasonable to Shareholders (the “Draft Independent Expert
Opinion”). The Draft Independent Expert Opinion is subject to the limitations and
conditions, normal for a transaction of this nature, to be set out in the final opinion
and subject to the required regulatory approvals.
5. Impact of the Proposed Transaction on the economic and voting interest of
Shareholders
Following the issuance of the Consideration Shares the total voting interest of
Minority Shareholders will increase from c.57.7% to c.82.2%, while their economic
interest will dilute by c.3.5% (calculated using the total Ordinary Shares in issue less
treasury shares of 35,436,572, which are shares owned by Shoprite Holdings’ main
trading subsidiary, Shoprite Checkers (Pty) Ltd).
The voting interest of the Titan Group will decrease from c.42.3% to c.17.8% and
its economic interest will increase from c.14.8% to c.17.8%.
6. Potential financial impact of the Proposed Transaction
The Proposed Transaction is expected to result in a potential once-off reduction in
earnings and headline earnings of c.R3.3 billion, based on a 30-day-volume-
weighted-average-price of R165.35 per share as at 17 April 2019, for indicative
purposes, in Shoprite Holdings’ results for the financial year in which the Proposed
Transaction is approved. The once-off reduction in earnings is mainly as a result of
the recognition of Shoprite Holdings’ commitment to issue the Consideration Shares
(as referred to above) and will not have an impact on Shoprite Holdings’ cash
resources.
In addition, the total Ordinary Shares in issue will increase from 591,338,502 to
611,338,502 post the issuance of the Consideration Shares, which will affect the
earnings and headline earnings per share calculations.
Other than as explained above, the Proposed Transaction is not expected to have
any direct material impact on the future earnings or cash flow of Shoprite Holdings.
Shareholders are advised that the above potential financial impact and statements
contained in this announcement have not been reviewed by Shoprite Holdings’
auditors or a reporting accountant, are provided for illustrative purposes only and
are the responsibility of the Board.
Further details on the financial impact of the Proposed Transaction will be provided
in a circular to be posted to Shareholders.
7. Shoprite Holdings share capital
Shoprite Holdings currently has sufficient authorised but unissued Ordinary Shares
to issue the Consideration Shares.
8. Cash confirmation provided to the TRP
Shoprite Holdings delivered to the TRP a confirmation from Werksmans Attorneys
confirming that Werksmans Attorneys holds an amount equal to the cash
consideration required to be paid to acquire all the Deferred Shares, other than the
Additional Deferred Shares, in trust for Shoprite Holdings (in conformity with
Regulation 111(4) of the Regulations in terms of the Companies Act) (“Cash
Confirmation”). The Cash Confirmation is for a nominal amount of approximately
R265,000.
9. Intention of Titan post the Proposed Transaction
Immediately post the Proposed Transaction, the Titan Group will remain Shoprite
Holdings’ largest shareholder. The Titan Group has indicated to Shoprite Holdings
that its intention is to remain a long-term Shareholder. In addition, Dr Wiese has
indicated his intention post the Proposed Transaction to remain as chairman of the
board of directors of Shoprite Holdings.
10. Notice of General Meeting
A circular incorporating a notice of General Meeting to be held on or about
25 June 2019 containing further information in relation to the Proposed Transaction
will be posted to Shareholders on or about 27 May 2019, subject to the outcome of
engagement with Shoprite Holdings’ major Minority Shareholders.
11. Responsibility statement
The Independent Board accepts responsibility for the information contained in this
announcement. To the best of its knowledge and belief, the information contained in
this announcement is true and nothing has been omitted which is likely to affect the
importance of the information.
12. Shareholder rights
Dissenting shareholders
A Shareholder who is entitled to vote at the General Meeting is entitled to seek relief
in terms of section 164 of the Companies Act if that Shareholder notified Shoprite
Holdings in advance in writing of its intention to oppose the special resolution to be
put to Shareholders in terms of sections 48, 114 and 115 of the Companies Act to
approve the acquisition of the Deferred Shares ("Scheme Resolution"), was present
at the General Meeting and voted against the special resolution. A copy of section
164 will be included in the circular to be posted to Shareholders. In this regard
Shareholders are also referred to the suspensive conditions above.
Court approval
Shareholders are advised that in terms of section 115(3) of the Companies Act,
despite the Scheme Resolution having been adopted, Shoprite Holdings may not
proceed to implement that resolution without the approval of a court if the resolution
was opposed by at least 15% of the voting rights that were exercised on that
resolution and, within five business days after the vote, any person who voted
against the resolution requires Shoprite Holdings to seek court approval; or the
court, on an application within 10 business days after the vote by any person who
voted against the resolution, grants that person leave to apply to a court for a review
of the transaction in accordance with section 115(3). In this regard Shareholders are
also referred to the suspensive conditions above.
13. Cautionary withdrawal
Shareholders are advised that following the release of full details of the Proposed
Transaction, Shareholders no longer need to exercise caution when dealing in their
Ordinary Shares.
PG DU PREEZ
Company Secretary
On behalf of the board of directors of Shoprite Holdings
Date issued: 18 April 2019
Financial Advisor and Transaction Sponsor to Shoprite Holdings: Investec Bank Limited
Financial Advisor to Titan and Thibault: Rand Merchant Bank, a division of FirstRand
Bank Limited
Date: 18/04/2019 12:53:00 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,
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