HUDACO INDUSTRIES LIMITED - Settlement of legal proceedings against Bravura Equity Services, Cadiz Holdings and certain associates

Settlement of legal proceedings against Bravura Equity Services, Cadiz Holdings and certain associates

HUDACO INDUSTRIES LIMITED
(“Hudaco” or the “Company”)
Incorporated in the Republic of South Africa
Registration number 1985/004617/06
Share code: HDC & ISIN: ZAE000003273

SETTLEMENT OF LEGAL PROCEEDINGS AGAINST BRAVURA EQUITY SERVICES, CADIZ HOLDINGS AND
CERTAIN ASSOCIATES

In exchange for the payment of a total amount of R35 million on 4 September 2020, in settlement of
a damages claim instituted by the Hudaco group (“Hudaco”) to recover tax paid by Hudaco, Hudaco
has agreed to settle its legal proceedings against Bravura Equity Services Proprietary Limited (“BES”),
Cadiz Holdings Limited, certain other entities in the BES and Cadiz groups, as well as certain BES
executives and former executives of Cadiz (“the defendants”).

Hudaco instituted the legal proceedings in November 2015 with the aim of recovering as much as
possible of the payment made by Hudaco to SARS in the amount of R312 million, in settlement of a
challenge under the general anti-avoidance rule, and pertaining to the financing arrangements for
Hudaco’s 2007 empowerment transaction. The Hudaco board firmly believed that Hudaco had been
wronged, and that from an ethical perspective to seek redress was the right thing to do. A
comprehensive explanation of the basis for the claim was set out in an announcement released by
Hudaco on SENS on 10 November 2015.

Having earnestly pursued the litigation and having engaged in extensive negotiations with the
defendants, the Hudaco board has concluded that it has become expedient to settle the claim, albeit
for very much less than the amount claimed, in the context of the following:
     • Hudaco is satisfied that its original ethical objectives in launching the action have been
       achieved.
     • The defendants have impressed upon Hudaco that they are not in a position to make a larger
       payment. Therefore, even if Hudaco were to succeed in its action, any award made by the
       court would probably prove irrecoverable. In this context, Hudaco is cognizant of the fact that
       the entities against which the action has been brought are no longer operating.
     • The management time that would be required to run the case would be very considerable,
       particularly as the matter is highly complex. Three months have been set down for court time
       alone, excluding preparation time. The board believes that management time can be better
       spent focusing on Hudaco’s core business, especially in light of the prevailing economic
       conditions and the challenges posed by the Covid-19 pandemic.
     • The repudiation by Bravura’s insurers of the professional indemnity claim by BES, BES group
       companies and BES executives.
     • Normal legal risk in a highly complex matter of this nature.
     • The considerable legal costs (estimated at an additional R15 million) that would be incurred
       in running the case to its conclusion, potentially without return for the reasons outlined
       above.

After careful consideration of all relevant factors, the board is of the opinion that, under the
circumstances, rather than to pursue what is now a 13 year old matter with limited prospects of
recovery, it is preferable to accept the settlement and avoid the legal costs, thereby leaving the group
R50 million better off.

It is important to note that Hudaco’s BEE shareholders were not affected in any way by the settlement
with SARS and that Hudaco’s BEE credentials remain in place.

EDENVALE
31 August 2020


Sponsor: Nedbank Corporate and Investment Banking

Date: 31-08-2020 08:15:00
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