STELLAR CAPITAL PARTNERS LIMITED - Category 1 disposal of investment in Amecor and withdrawal of cautionary announcement

Category 1 disposal of investment in Amecor and withdrawal of cautionary announcement

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


CATEGORY 1 DISPOSAL OF INVESTMENT IN AMECOR AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT


1. Introduction

Shareholders are referred to the cautionary announcement
published on the Stock Exchange News Service on 18 June 2018
(and to the renewals thereof on 27 July 2018, 10 September
2018, 19 October 2018 and 30 November 2018) regarding the
proposed disposal by the Company of the entire issued share
capital of its investee company, Amalgamated Electronic
Corporation Limited (“Amecor”).

The Stellar Capital board of directors is pleased to announce
that the Company has entered into a sale and purchase
agreement (“Disposal Agreement”) with First Carlyle Growth V
(“Carlyle”) through its wholly-owned subsidiary, K2018615178
(South Africa) Proprietary Limited (which is a special purpose
entity) (“the Purchaser”) for the disposal of the entire
issued share capital of Amecor (“Disposal”).

The effective date of the Disposal will be the closing date
thereof, which is expected to be on or about 31 March 2019
(“Closing Date”).

2. Consideration for the Disposal

The cash proceeds payable to Stellar Capital, as a result of
the Disposal, will be R413 million. The cash proceeds will
escalate by 10% per annum in the event that the Closing Date
is delayed beyond 31 March 2019. In addition, Stellar Capital
will be entitled to pre-Closing Date dividends, amounting to
R31 million in respect of the financial period 1 July 2018 to
the Closing Date.

3. Rationale for the Disposal

Stellar Capital received a number of unsolicited expressions
of interest to acquire Amecor at attractive valuations earlier
this year and decided to undertake a formal disposal process
in respect of its 100% interest in Amecor.
The Disposal will result in a capital profit of R144 million
for Stellar Capital, which represents a significant return on
capital deployed, in addition to R90 million of dividends
received during the holding period (29 months).

Stellar Capital will utilise the proceeds of the Disposal to
redeem its preference shares and to optimise its capital
structure going forward.

4. Nature of the business of Amecor

Amecor offers a range of exclusive technologies relating to
security, electronics and networks. Amecor’s core activities
comprise of:

      •  The manufacture and supply of sophisticated security
         transmission technology and applications;

      •  A national distribution arm providing country-wide
         access to Amecor’s vast array of security and electronic
         products; and

      •  A licenced Radio Frequency and GSM global network for
         data transmission and off-site equipment and/or security
         control.

5. Conditions Precedent to the Disposal

The Disposal is subject to the fulfilment or waiver (where
applicable) of the following outstanding conditions precedent:

5.1   That the Purchaser obtains warranty and indemnity
      insurance (refer to paragraph 6 below);
5.2   Certain due diligence items identified and notified by
      Stellar Capital to the Purchaser prior to the signature
      date being rectified to the satisfaction of the
      Purchaser, acting reasonably;
5.3   A mortgage bond registered over a property owned by the
      Amecor group (and in respect of which there is no
      outstanding liabilities) being cancelled;
5.4   The Purchaser entering into finance agreements to procure
      borrowings to partially finance the Disposal
      consideration;
5.5   Change of control consents and cession and transfer being
      received from certain customers and suppliers;
5.6   The Purchaser obtaining approval for certain radio
      frequency spectrum and class electronics communications
      networks licences from the Independent Communications
      Authority of South Africa;
5.7   The Purchaser procuring all approvals from the Financial
      Surveillance Department of the South African Reserve Bank
      under its Exchange Control Regulations, to the extent
      required for the implementation of the Disposal;
5.8   In terms section 119(6) of the Companies Act, 71 of 2008
      (“Act”), the Purchaser being granted exemption by the
      Takeover Regulation Panel from compliance with Parts B
      and C of Chapter 5 of the Act and the Takeover
      Regulations, 2011; and
5.9   The Disposal being unconditionally approved by any
      relevant competition and/or anti-trust authorities in
      South Africa or elsewhere, or conditionally approved on
      terms and conditions acceptable to each of the Purchaser
      and Stellar Capital.

6. Warranties and indemnities

The Disposal is subject to warranties and indemnities that are
normal for a transaction of this nature. The obtaining of a
warranty and indemnity insurance policy by the Purchaser,
which is a condition precedent to the Disposal, shall provide
for limited recourse to Stellar Capital in respect of any
warranty claims.

7. Net assets and profits of Amecor

The consolidated value of the net assets of the Amecor group
as at 31 March 2018 amounted to R120 million (one hundred and
twenty million rand). The profit after tax for the year ended
31 March 2018 attributable to the Amecor group was R42 million
(forty-two million rand).

This audited historical financial information for Amecor was
prepared in accordance with International Financial Reporting
Standards.

8. Categorisation

The Disposal has 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.

9. Withdrawal of cautionary announcement

In light of the information contained in this announcement, it
is no longer necessary for shareholders to exercise caution
when dealing in their Stellar Capital shares and the
cautionary and renewal of cautionary announcements released by
the Company are accordingly hereby withdrawn.

10. Further announcement

Stellar Capital shareholders will be notified once the last of
the conditions precedent to the Disposal have been fulfilled
or waived (as applicable).

Cape Town

14 December 2018

Financial adviser and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Legal adviser
Cliffe Dekker Hofmeyr

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