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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').
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