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BUSINESS CONNEXION GROUP LIMITED - Proposed delisting of the BCX "A" shares, repurchase of certain BCX "A" shares and withdrawal of cautionary

Release Date: 05/06/2013 17:15
Code(s): BCX BCA     PDF:  
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Proposed delisting of the BCX "A" shares, repurchase of certain BCX "A" shares and withdrawal of cautionary

Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
JSE code: BCX        ISIN: ZAE000054631
JSE code: BCA        ISIN: ZAE000156154
("BCX" or "the Company")

PROPOSED DELISTING OF THE BCX "A" SHARES, REPURCHASE
OF CERTAIN BCX "A" SHARES AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT

1. INTRODUCTION

   Shareholders of BCX ("Shareholders") are referred to the cautionary announcement published
   on the Stock Exchange News Service on 9 May 2013 ("Cautionary Announcement"), wherein
   Shareholders were advised that the Company is seeking a delisting ("Delisting") of its issued "A"
   ordinary shares (""A" Shares") from the exchange ("Exchange") operated by the JSE Limited ("JSE").

   The Delisting will be preceded by an offer by BCX to repurchase up to 25 033 334 "A" Shares
   ("Repurchase"), as set out in the Cautionary Announcement and on terms further set out in this
   announcement.

   This announcement inter alia sets out the proposed mechanisms pertaining to the Repurchase, the
   rationale for this approach, as well as the pricing parameters relevant to each of these mechanisms.

2. PROPOSED ALTERNATIVE REPURCHASE MECHANISMS

   2.1  Background information to the Repurchase and the two alternative mechanisms

        The "A" Shares, as a separate class of shares, were purposefully created by BCX with the
        predominant aim to achieve BCX's black economic empowerment ("BEE") initiatives.

        As such, the "A" Shares were created at a time when the transaction through which BCX acquired
        shares and claims in certain underlying subsidiaries of UCS Group Limited ("UCS") had not been
        envisaged. The concomitant issue of 25 033 334 "A" Shares to UCS ("UCS "A" Shares"), although
        necessary at the time to allow BCX to conclude the transaction with UCS ("UCS Transaction"),
        conflicted with the original purpose of the "A" Shares.

        BCX therefore aims to acquire all of the UCS "A" Shares, in addition to complying with the
        undertaking to the JSE to implement the Delisting ("JSE Undertaking"), as more fully set out in
        the Cautionary Announcement.

        The Repurchase is therefore aimed exclusively at the holders of the UCS "A" Shares ("Eligible
        Shareholders").

        In order to implement a compulsory acquisition of all the UCS "A" Shares from Eligible
        Shareholders, Eligible Shareholders will have to pass a special resolution to approve a scheme
        of arrangement ("Scheme"), as more fully set out below. As such, a relatively small number of
        Eligible Shareholders will be able to prevent the implementation of the Scheme.

        Furthermore, in order for BCX to implement the Delisting in compliance with the JSE
        Undertaking, an unconditional offer has to be made to the Eligible Shareholders, in compliance
        with the JSE Listings Requirements ("Listings Requirements"). It is therefore not practical for
        BCX to only extend such an offer in terms of the Scheme, in the event that the Scheme does not
        receive the requisite support from Eligible Shareholders.

        The board of directors of BCX ("Board") has therefore resolved to provide Eligible Shareholders
        with the following choice:

        -   to individually sell their UCS "A" Shares back to BCX in terms of a voluntary disposal by each
            Eligible Shareholder of such Eligible Shareholder's UCS "A" Shares, pursuant to a voluntary
            Repurchase offer to be extended by BCX to Eligible Shareholders, however without a
            compulsory acquisition of all the UCS "A" Shares by BCX ("Voluntary Offer"); or
        -   to agree to sell all their UCS "A" Shares to BCX, through a compulsory disposal to and
            acquisition by BCX of all the UCS "A" Shares, pursuant to the Scheme ("Scheme Offer").

        The Voluntary Offer and the Scheme Offer will be mutually exclusive.

        If Eligible Shareholders therefore approve the Scheme Offer, then the Voluntary Offer will not
        become operative. In the absence of the approval of the Scheme Offer, then the Voluntary
        Offer, if approved, will be extended to Eligible Shareholders.

        By virtue of extending the Voluntary Offer, BCX will comply with the Listings Requirements and
        be able to proceed with the Delisting, pursuant to the JSE Undertaking.

        Furthermore, in the event that Eligible Shareholders approve the Scheme Offer, BCX will be
        able to achieve its objective of acquiring all the UCS "A" Shares and thereby ensuring that the
        "A" Shares that remain in issue predominantly reflect BCX's BEE initiatives, in terms of its original
        purpose and intention.

    2.2  Pricing of the two Repurchase mechanisms

         The Voluntary Offer, if approved and in the absence of approval of the Scheme Offer, will be
         extended to Eligible Shareholders at an offer price of 85 cents per "A" Share ("Voluntary Offer
         Price").

         In line with BCX's objective of acquiring all of the UCS "A" Shares and in order to encourage
         Eligible Shareholders to approve the Scheme Offer, the scheme consideration will be extended
         to Eligible Shareholders at a premium of 10 cents per "A" Share, relative to the Voluntary Offer
         Price.

         As such, Eligible Shareholders will receive 95 cents per "A" Share ("Scheme Offer Price") in the
         event that the Scheme Offer receives the requisite approvals.

3. MATERIAL TERMS OF THE PROPOSED TRANSACTIONS

   3.1   The Delisting

         The Delisting is not conditional upon the approval of the Scheme Offer (as further set out
         below), but it is conditional upon the approval of the Voluntary Offer.

         The Delisting is further conditional upon all the "A" Shareholders approving the Delisting by way
         of an ordinary resolution.

         If the Delisting is approved, all the "A" Shares, including the 75 100 000 "A" Shares issued by
         BCX in 2010 to predominantly BEE participants ("BEE "A" Shares"), will be delisted from the
         Exchange.

         In the event that the Delisting becomes unconditional but the Scheme Offer is not approved
         and furthermore in the event that not all Eligible Shareholders sell their "A" Shares to BCX in
         terms of the Voluntary Offer ("Remaining Eligible Shareholders"), then such Remaining
         Eligible Shareholders will hold "A" Shares that are not listed on the Exchange.

         The BEE "A" Shares were not listed prior to the UCS Transaction and will also revert to being
         unlisted shares upon implementation of the Delisting, in terms of its original purpose and
         intention.

3.2  The Scheme Offer

     The Scheme Offer will constitute a compulsory Repurchase, by way of the Scheme and
     pursuant to section 114(1)(c) of the Companies Act, 71 of 2008, as amended ("Companies Act"),
     proposed by the Board between BCX and Eligible Shareholders.

     In terms of the Scheme Offer, if approved, all 25 033 334 "A" Shares held by Eligible Shareholders
     on the operative date of the Scheme ("Scheme Participants") will be compulsorily acquired by
     BCX at the Scheme Offer Price of 95 cents per "A" Share.

     Implementation of the Scheme Offer is conditional upon, inter alia,:

     - the "A" Shareholders approving the Delisting; and
     - approval of the Scheme by way of a special resolution by the Eligible Shareholders as
       contemplated in section 115 of the Companies Act, further details of which are set out
       below.

     The total consideration payable by BCX pursuant to the implementation of the Scheme Offer
     will be funded from BCX's internal cash resources.

3.3  The Voluntary Offer

     The Voluntary Offer is conditional upon the "A" Shareholders approving the Delisting and
     furthermore on the Scheme Offer not becoming operative.

     In terms of the Voluntary Offer, Eligible Shareholders shall, in their own discretion, be entitled
     to elect, in whole or in part, whether or not to accept the Voluntary Offer.

     Eligible Shareholders will therefore be able, for example, to sell none, all or a portion of their
     "A" Shares to BCX and thereafter continue to hold their remaining UCS "A" Shares, following the
     Delisting.

     Eligible Shareholders electing not to accept the Voluntary Offer (ie Remaining Eligible
     Shareholders) will not receive the Voluntary Offer Price and will continue to hold their "A" Shares
     in an unlisted environment, in respect of such "A" Shares so elected, upon implementation of
     the Delisting.

     The Voluntary Offer will be funded from BCX's internal cash resources.

3.4  The Scheme Offer Price and Voluntary Offer Price

     The Scheme Offer Price and Voluntary Offer Price represent the following premiums,
     respectively, to the following traded prices of the "A" Shares on the Exchange:

                                                         Scheme Offer    Voluntary Offer   
                                                     Price (95 cents)   Price (85 cents)   
- premium to the closing price of the "A" Shares                                         
  on the Exchange as at 8 May 2013, being                                                  
  the last business day immediately prior to                                               
  the date of publication of the Cautionary                                                
  Announcement;                                                46.15%             30.77%   

- premium to the volume weighted average price                                           
  ("VWAP") of the "A" Shares on the Exchange                                               
  for the 30 days up to and including the date of                                          
  publication of the Cautionary Announcement;                  45.47%             30.16%   

- premium to the VWAP of the "A" Shares on                                               
  the Exchange for the six months up to and                                                
  including the date of publication of the                                                 
  Cautionary Announcement; and                                 42.66%             27.64%   

- premium to the VWAP of the "A" Shares                                                  
  on the Exchange for the 30 days up to and                                                
  including the date preceding this detailed terms                                         
  announcement.                                                33.94%             19.84%   


4. CONSENTS AND APPROVALS REQUIRED

   The Delisting, the Repurchase, and then either the Voluntary Offer or the Scheme Offer
   ("Proposed Transactions") will be subject to, inter alia, approval by Shareholders of the following
   resolutions (collectively, the "Transaction Resolutions"):

    - approval of the Delisting by the "A" Shareholders by way of an ordinary resolution in terms of
      paragraph 1.14 of the Listings Requirements;

    - approval of the Repurchase (for purposes of the Voluntary Offer or the Scheme Offer) by
      Shareholders, excluding Eligible Shareholders, by way of a special resolution in terms of
      paragraph 5.69(b) of the Listings Requirements;

    - approval of the Repurchase (for purposes of the Voluntary Offer or the Scheme Offer) by
      Shareholders by way of a special resolution in terms of section 48(8) read with sections 114 and
      115 of the Companies Act;

    - approval of the Scheme Offer by Eligible Shareholders, by way of a special resolution in terms
      of section 115 of the Companies Act, provided that, in relation to any objection to the Scheme
      Offer by Eligible Shareholders, no:

       -   Eligible Shareholders give notice objecting to the Scheme Offer as contemplated in section
           164(3) of the Companies Act and vote against the special resolution, in respect of more than
           1% of the ordinary shares in the issued share capital of BCX; or

       -   Eligible Shareholders give notice objecting to the Scheme Offer and vote against the special
           resolution in respect of more than 1% of the ordinary shares in the issued share capital of
           BCX, within 30 business days following the meeting at which the aforesaid special resolution
           was voted upon, and no such Eligible Shareholders have exercised appraisal rights, by giving
           valid demands in terms of sections 164(5) to 164(8) of the Companies Act, in respect of more
           than 1% of all the ordinary shares in the issued share capital of BCX.

5.  CONDITIONS TO THE POSTING OF THE TRANSACTION CIRCULAR

    Full details of the Proposed Transactions will be included in the circular to be posted to Shareholders
    in relation to the Proposed Transactions ("Transaction Circular").

    Posting of the Transaction Circular to Shareholders is subject to the requisite approvals being
    obtained from, inter alia, the JSE and the Takeover Regulation Panel ("TRP") in accordance with
    the requirements of regulation 117 of the Companies Regulations 2011, promulgated under the
    Companies Act ("Takeover Regulations").

6.  UNAUDITED AND UNREVIEWED PRO FORMA FINANCIAL EFFECTS

    The table below sets out the unaudited pro forma financial effects of the Scheme Offer
    ("Financial Effects"), based on the Scheme Offer Price of 95 cents per UCS "A" Share, prepared by
    the Board.

    The Financial Effects have been prepared for illustrative purposes only in order to provide
    information about how the Scheme Offer might have affected BCX ordinary shareholders, had the
    Scheme Offer been implemented on the dates indicated in the notes below. As a result of their
    nature, the Financial Effects may not fairly present the financial position or the effect on earnings
    of BCX after the implementation of the Scheme. The preparation of the Financial Effects is the
    responsibility of the Board.

    The Financial Effects have been prepared using accounting policies that comply with IFRS and are
    consistent with those applied in the published reviewed condensed consolidated interim results
    of BCX for the six months ended 28 February 2013 ("Interim Results") and the annual financial
    statements as at 31 August 2012.
                                                                         Pro forma
                                     Interim                               Interim   Percentage   
                                     Results (1) Adjustments (2)           Results   change (%)   
NAV(3) per BCX ordinary share                                                                      
(cents)                                521.6           (2.4)                 519.2         0.46   
Net tangible NAV per BCX ordinary                                                                
share (cents)                          319.3           (2.5)                 316.8         0.78   
Headline earnings per BCX                                                                        
ordinary share (cents)                  19.1           (2.4)                  16.7        12.57   
Diluted headline earnings per BCX                                                                
ordinary share (cents)                  19.0           (2.4)                  16.6        12.63   
Basic earnings per BCX ordinary                                                                  
share (cents)                           19.6           (2.5)                  17.1        12.76   
Diluted basic earnings per BCX                                                                   
ordinary share (cents)                  19.5           (2.5)                  17.0        12.82   
Weighted average number of BCX                                                                   
ordinary shares ('000)               400 446                               400 446                
Diluted weighted average number                                                                  
of BCX ordinary shares ('000)        402 660                               402 660                

Notes:

1. The financial information has been based on BCX's reviewed interim financial results for the six months ended
   28 February 2013.
2. On the assumption that the Scheme becomes operative on 1 September 2012 for statement of comprehensive
   income and 28 February 2013 for statement of financial position purposes.
3. Net asset value.
4. Transaction costs of R2.5 million have been taken into account. The transaction cost will have no continuing
   effect on the Company.
5. The BEE "A" Shares are legally issued but are not taken into account for accounting purposes as the substance
   of the "A" Shares is that BCX has granted a share option which is accounted for as an equity-settled share-based
   payment in terms of IFRS2 (Share-based Payment), ie they are still held by BCX pending their transfer to the
   participants in the "A" Share transaction at 31 August 2015 upon expiry of the Lock-in Provisions.
6. The UCS "A" Shares are treated as a liability for accounting purposes.
7. The UCS "A" Shares are bought back at a price of 95 cents per UCS "A" Share.
8. The settlement of the Scheme Offer Price will be through cash, in the statement of financial position of BCX.
9. The financial effects of the Voluntary Offer Price based on full acceptances of the Voluntary Offer will be
   detailed in the Transaction Circular.

7.  CASH GUARANTEE

    FirstRand Bank Limited has provided the TRP, on behalf of BCX, with an irrevocable and unconditional
    bank guarantee in favour of the Eligible Shareholders to satisfy, in full, the Scheme Offer Price in
    relation to the Scheme Offer, in a form and substance acceptable to the Board and which complies
    with regulations 111(4) and 111(5) of the Takeover Regulations.

8.  BOARD RECOMMENDATION AND FAIRNESS OPINIONS

    In accordance with paragraph 1.14(d) of the Listings Requirements and section 114(2) of the
    Companies Act, the Board has appointed an independent advisor ("Independent Expert")
    acceptable to the JSE and the TRP to provide the Board with external advice in relation to the
    Scheme Offer and the Voluntary Offer and to make appropriate recommendations to the Board
    for the benefit of Shareholders. The Independent Expert's report will be included in the Transaction
    Circular.

9.  RESPONSIBILITY STATEMENT

    The Board accepts responsibility for the information contained in this announcement. To the best
    of the Board's 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.

10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

    Shareholders are referred to the Cautionary Announcement and are advised that they are no longer
    required to exercise caution when dealing in the Company's securities.

Sandton
5 June 2013

Corporate advisor, transaction sponsor and JSE sponsor: One Capital

Legal advisor: Edward Nathan Sonnenbergs Inc
Date: 05/06/2013 05:15:00 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, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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