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AFROCENTRIC INVESTMENT CORP LIMITED - Exercise of call option and redemption of preference shares

Release Date: 01/11/2013 07:05
Code(s): ACT ACTP     PDF:  
Wrap Text
Exercise of call option and redemption of preference shares

AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/000570/06)
JSE Code: ACT, ACTP
ISIN: ZAE000078416, ZAE000082269
(“AfroCentric” or “the Company”)

EXERCISE OF CALL OPTIONS AND REDEMPTION AND DELISTING OF 16
638 000 REDEEMABLE PREFERENCE SHARES OF R0.91 EACH IN THE
ISSUED CAPITAL OF THE COMPANY

1. INTRODUCTION
AfroCentric Preference Shareholders are referred to a circular
that was mailed to them on Monday, 28 October 2013 (“the
Circular”) wherein:

-   Certificated Preference Shareholders who elect not to
    dematerialise their preference shares were reminded that
    their Call Options will lapse with effect from the close of
    trading on Tuesday, 31 December 2013 should they not
    exercise their Call Options by 12h00 on Friday, 15 November
    2013; and
-   Dematerialised Preference Shareholders were reminded that
    their Call Options will lapse with effect from close of
    trading on Tuesday, 31 December 2013 should they not
    exercise their Call Options by 12h00 on Tuesday, 31
    December 2013.

2. EXERCISE OF CALL OPTIONS
AfroCentric Preference Shareholders who wish to exercise the
Call Option may do so either in whole or in part.

Certificated Preference Shareholders who wish to exercise the
Call Option must by not later than 12h00 on 15 November 2013
complete and return the form of exercise and surrender
included in the Circular.

Dematerialised Preference Shareholders who wish to exercise
the Call Option must by not later than 12h00 on 31 December
2013 instruct their CSDP or Broker in accordance with the
terms of the agreement between such shareholder and their CSDP
or Broker.

Certificated Preference Shareholders who dematerialise their
AfroCentric Preference Shares will have until not later than
12h00 on Tuesday, 31 December 2013 to make an election.
Applications have been made to the JSE Limited (“JSE”) for:

-    the listing of the New Ordinary Shares to be issued
     pursuant to the exercise of the Call Options; and
-    the delisting of all of the AfroCentric Preference Shares
     in issue.


3.   LAPSE AND REDEMPTION OF THE REDEMABLE PREFERENCE SHARES
The rights attaching to the Preference Share provide, inter
alia, that a Preference Shareholder is entitled to exercise
the Call Option for the New Ordinary Shares to be issued by
the Company.

The Preference Shares will be redeemed by the issue of a
number of New Ordinary Shares that is equal to 15% of the
Ordinary Shares in issue after the issue of the New Ordinary
Shares. (Based on the projected issued Ordinary Shares of 398
million Ordinary Shares, the exchange ratio is 4.2194 Ordinary
Shares per Preference Share in issue). The number of 398
million Ordinary Shares is based on the 270 million Ordinary
Shares currently in issue, plus 100,805,395 Contingent
Ordinary Shares and 27 million Ordinary Shares to be issued in
terms of the Executive Share Awards in accordance with the
2008 Acquisition Agreement for the acquisition of Lethimvula
Investments Limited (“Lethimvula”).

If any Preference Shareholders do not elect to exercise their
Call Option timeously, then the rights of the Preference
Shareholder concerned shall automatically lapse with effect
from close of trading on Tuesday, 31 December 2013, in which
event no rights of whatever nature will attach to the
Preference Shareholder concerned, other than to have the
relevant Redeemable Preference Shares redeemed against payment
of the Redemption Price therefore, being R0.91 per Preference
Share.

AfroCentric has sufficient funds to redeem the Preference
Shares.

4. ISSUE OF NEW ORDINARY SHARES AND PAYMENTS OF REDEMPTION
PRICE
The issue of the New Ordinary Shares shall be effected by a
redemption of the Redeemable Preference Shares in respect of
which the Call Option was exercised.

Payment of the Redemption Price to Certificated AfroCentric
Shareholders who have exercised the Call Option in part or who
have not exercised their Call Option timeously shall be
effected in Rand by AfroCentric at the risk of the relevant
Certificated AfroCentric Shareholder either by cheque sent by
ordinary post to the address of each Certificated AfroCentric
Shareholder as recorded in the AfroCentric Register or by
electronic funds transfer to such bank account nominated in
writing by any holder of AfroCentric Preference Shares for
such purpose.

Payment in respect of AfroCentric Preference Shareholders
whose AfroCentric Preference Shares have been Dematerialised
will be made to the relevant CSDP or Broker.


No payment is required to be made by any Preference
Shareholder to the Company in respect of the exercise of the
Call Option, the issue of New Ordinary Shares or the
redemption of any Preference Shares.

5. TAXATION IMPLICATIONS OF THE REDEMPTION
AfroCentric have consulted with their tax expert and in their
opinion there is no tax implication for AfroCentric. There may
be a tax implication on the Preference Shareholder in his
personal capacity upon redemption of the Preference Shares in
exchange for New Ordinary Shares and/or the Redemption Price.
As the Redemption Price will be paid out of contributed tax
capital, the redemption of the Preference Shares in exchange
for New Ordinary Shares and/or the Redemption Price does not
result in a dividend or deemed dividend and consequentially
Dividend Withholding Tax is not payable by a Preference
Shareholder.



6. FINANCIAL EFFECTS
The pro forma financial effects of the exercise of the Call
Option has been prepared for illustrative purposes only to
provide information about how the exercise of the Call Option
will affect the financial position of the AfroCentric
Shareholders, assuming that the Preference Shareholders elect
to exercise the Call Option in respect of 100% of the
Preference Shares in Option 1 and 100% of the Preference
Shareholders’ Preference Shares are redeemed for the
Redemption Price of the Preference Shares in Option 2 by
illustrating the effect thereof on the basic EPS and diluted
basic EPS and HEPS and DHEPS of AfroCentric as if the exercise
of the Call Option had become effective on 1 July 2012 so that
the impact is for a full financial year, and, for the purpose
of NAVPS and NTAVPS of AfroCentric, as if the exercise of the
Call Option became effective on 30 June 2013.

Because of its nature the pro forma financial effects may not
give a fair presentation of AfroCentric’s financial position,
changes in equity, results of operations and performance after
the exercise of the Call Option. The pro forma financial
effects have been compiled using accounting policies that
comply with IFRS and that are consistent with those applied in
the audited consolidated financial statements of AfroCentric
for the 12 months ended 30 June 2013.

The only two subsequent events that have been adjusted to the
pro forma financial effects is the issue of the additional
100,805,395 Contingent Ordinary Shares resulting from the 2008
Acquisition Agreement as well as the 27 million AfroCentric
Ordinary Shares to be issued in respect of the Executive Share
Awards. These Contingent Ordinary Shares are treated as a
subsequent event because they will be issued after year end
(30 June 2013) on 14 November 2013 in terms of the 2008
Acquisition Agreement, but before the redemption of the
Preference Shares.

The Contingent Ordinary Shares are recognised and measured in
terms of IFRS 3 and the Executive Share Awards are measured
and recognised in terms of IFRS 2. The number of New Ordinary
Shares to be issued will be based on the number of Ordinary
Shares in issue on the Final Exercise Date. On the Final
Exercise Date, the Executive Share Awards and the Contingent
Ordinary Shares would have been issued, therefore affecting
the number of New Ordinary Shares to be issued on redemption
of the Preference Shares.

The preparation of the pro forma financial effects and
financial information is the responsibility of AfroCentric’s
directors.

The detailed pro forma financial information and notes thereto
as a result of the redemption of the Preference Shares are set
out below:

OPTION 1: Assumes exercise of the Call Option in respect of
100% of all Preference Shares

           30 June   Subsequent   Prior to   Adjustment   After   %
               2013 audited            Events         redemption                               the
                    results                                                             redemption

                             1                  2                 3               4                 5
Basic EPS            60.75          (18.01)               42.74          (6.63)             36.11       - 15%
                                                                                                               6
(cents)

                             1                  2                 3               4                 5          6
Basic HEPS          48.15           (14.28)               33.87          (5.25)             28.62       -15%
(cents)

                             1                                    3                                 5
Diluted EPS         36.11                     -           36.11                   -         36.11              -
(cents)

                             1                                    3                                 5
Diluted HEPS        28.62                     -           28.62                   -         28.62              -

                             1                  2                 3               4                 5          6
NAVPS              372.46          (117.43)              255.03        (39.53 )           215.50        -15%
(cents)

                             1                  2                 3               4                 5          6
NTAVPS             139.11           (48.23)               90.88         (14.09)             76.79       -15%
(cents)

                             1
Weighted       269,256,170       113 494 1632       382 750   3333    70 202 8294     452 953 162   5
                                                                                                         18%   6

average
number of
shares in
issue

                             1                                    3                                 5
Diluted        452,953,162                    -     452,953,162                   -   452 953 162
shares in                                                                                                  --
issue

                             1                                    3
Number of      270,010,639        127,805,395       397,816,034       70 202 8294     468 018 863   5
                                                                                                         18%   6
                                                2
shares in
issue




     Notes:

1. The financial information in the “30 June 2013 audited
results” column has been prepared based on AfroCentric’s
audited consolidated financial results for the 12 months ended
30 June 2013 in terms of which an unqualified audit opinion
was issued. The diluted Ordinary Shares in issue include the
New Ordinary Shares to be issued pursuant to the potential
exercise of the Call Option, the Contingent Ordinary Share
issue (100,805,395) to Shareholders as well as the 27 million
Executive Share Awards. The Executive Share Awards are
reserved for executives of Lethimvula and are recognised and
measured in terms of IFRS 2 and the Contingent Ordinary Shares
are measured and recognised in terms of IFRS 3. The Contingent
Ordinary Shares and Executive Share Awards are to be issued in
terms of the 2008 Acquisition Agreement and are dilutive as
they will be issued to Shareholders and executives,
respectively, on 14 November 2013 and the new shareholders are
not required to make any cash payments. The New Ordinary
Shares are dilutive as the holders of the Preference Shares
will not be required to make any cash payment for the exercise
of the Call Option.

2. The figures in the “Subsequent Events” Column represent the
effects of the 100,805,395 Contingent Ordinary Shares
(resulting from the 2008 Acquisition Agreement) and 27 million
AfroCentric Ordinary Shares to be issued in respect of the
Executive Share Awards. The transactions are noted as
subsequent events on the basis that they will take place after
year end (30 June 2013), but before redemption of the
Preference Shares. The subsequent events have been included on
the basis that the number of the New Ordinary Shares that are
issuable on the exercise of the Call Options are determined
with reference to the number of Ordinary Shares in issue at
the date of exercise of the Call Options. The number of
Contingent Ordinary Shares is determined in accordance with
the provisions of the 2008 Acquisition Agreement. The number
of Executive Share Awards is based on the number of share
options issued to management of Lethimvula.

3. The figures in the “Prior to redemption” column assume that
the issue of 27 million Ordinary Shares under the Executive
Share Awards and 100,805,395 Contingent Ordinary Shares has
taken place. In terms of IAS 32, the Preference Shares are
already accounted for as equity and accordingly there is no
effect in AfroCentric’s statement of comprehensive income as
there was no expense recognised for the Preference Shares
dividends. The Preference Share dividends have been accounted
for in the statement of changes in equity as they are
distributed out of contributed tax capital. The preference
shares dividend paid for the 30 June 2013 financial year
amounted to R4 958 124.

4. The figures in the “Adjustment” column assume that the
Preference Shares have been redeemed through the exercise of
Call Options for 70,202,829 New Ordinary Shares. In terms of
IAS 32, the Preference Shares are already accounted for as
equity and therefore there is no effect in AfroCentric’s
statement of comprehensive income as there was no expense
recognised for the Preference Shares dividends. In terms of
the rights attaching to the Preference Shares the maximum
number of New Ordinary Shares that can be issued on redemption
of the Preference Shares is 15% of the issued Ordinary Shares
of Afrocentric after the issue of the New Ordinary Shares.

5. The figures in the “After redemption” column assume the
exercise of the Call Option in respect of 100% of the
Preference Shares has occurred. All adjustments are expected
to have a continuing effect.

6. The “Percentage” column is calculated as the difference
between “Prior to the redemption” (Note 3) and the “After the
redemption” (Note 5). This column reflects the effect of the
redemption of the Preference Shares only.



    OPTION 2: Assumes the redemption of 100% of the Preference
    Shares for cash
                   30 June     Subsequent             Prior to       Adjustment        After the            %
                      2013     Events               redemption                        redemption
           audited results

                           1                  2                 3               4                 5         6
Basic              60.75            (18.01)             42.75           -0.16             42.59        -%
EPS
(cents)

                           1                  2                 3               4                 5         6
Basic              48.15            (14.28)             33.87           -0.15             33.72        -%
HEPS
(cents)

                           1                                    3               4                 5         6
Diluted            36.11                      -         36.11            6.48             42.59       18%
EPS
(cents)

                           1                                    3               4                 5         6
Diluted            28.62                      -         28.62            5.10             33.72       18%
HEPS

                           1                  2                 3               4
NAVPS             372.46           (117.43)            255.03          (4.10)             250.935     -2%   6

(cents)

                           1                  2                 3               4                 5         6
NTAVPS            139.11            (48.23)             90.88          (4.10)             86.78       -5%
(cents)

                           1                  2                 3                                 5
Weighted     269,256,170        113,494,163       382,750,333                   -   382,750,333             -
average
number
of
shares
in issue

                           1
Diluted      452,953,162                      -    452,953,1623     (70,202,829     382,750,333   5
                                                                                                            -
shares                                                              ) 4
in issue

                           1                  2                 3                                 5
Number       270,010,639        127,805,395       397,816,034                   -   397,816,034             -
of
shares
in issue




    Notes:

    1. The financial information in the “30 June 2013 audited
    results” column has been prepared based on AfroCentric’s
    audited consolidated financial results for the 12 months ended
    30 June 2013 in terms of which an unqualified audit opinion
    was issued. The diluted Ordinary Shares in issue include the
    Contingent Ordinary Share issue (100,805,395) to Shareholders
    as well as the 27 million Executive Share Awards. The
    Executive Share Awards are reserved for executives of
    Lethimvula and are recognised and measured in terms of IFRS 2.
    The Contingent Ordinary Shares and Executive Share Awards are
    dilutive because they will be issued to Shareholders and
    executives, respectively, on 14 November 2013 and the new
    shareholders are not required to make any cash payments.

    2. The figures in the “Subsequent Events” Column represent the
    effects of the 100,805,395 Contingent Ordinary Shares
    (resulting from the 2008 Acquisition Agreement) and 27 million
    AfroCentric Ordinary Shares to be issued in respect of the
    Executive Share Awards. The transactions are noted as
    subsequent events on the basis that they will take place after
    year end (30 June 2013), but before redemption of the
    Preference Shares.

    3. The figures in the “Prior to the redemption” column assume
    the issue of 27 million Ordinary Shares under the Executive
    Share Awards and 100,805,395 Contingent Ordinary Shares has
    taken place. In terms of IAS 32, the Preference Shares are
    already accounted for as equity and therefore there is no
    effect in AfroCentric’s statement of comprehensive income as
    there was no expense recognised for the Preference Share
    dividends. The Preference Share dividends have been accounted
    for in the statement of changes in equity as they are
    distributed out of contributed tax capital. The preference
    shares dividend paid for the 30 June 2013 financial year
    amounted to R4 958 124.

    4. The figures in the “Adjustment” column assume the
    Preference Shares have been redeemed for cash. The Preference
    Shareholders are assumed to have not exercised the Call Option
    and will receive the Redemption Price in cash on redemption of
    the Preference Shares in the “After the redemption” column.

    5. The figures in the “After redemption” column assume the
    Preference Shares are redeemed for cash. After the redemption
    of the Preference Shares for cash there will no longer be any
    New Ordinary Shares to issue, hence there will be no potential
    dilutive shares in issue. All adjustments are expected to have
    a continuing effect.

    6. The “Percentage” column is calculated as the difference
    between “Prior to the redemption” (Note 3) and the “After the
    redemption” (Note 5). This column reflects the effect of the
    redemption of all of the Preference Shares for cash only.


7.   SALIENT DATES AND TIMES
The salient dates in respect of the Call Option and redemption
of the AfroCentric Preference Shares are set out below.   Any
changes to these dates will be announced on SENS.

                                                      2013/2014
Record date for Preference Shareholders                 Friday,
to receive the circular                              18 October

Post Circular and forms of exercise and                 Monday,
surrender to Preference Shareholders                 28 October

Announce finalisation information
                                                        Friday,
                                                     1 November
Contingent Ordinary Shares and Executive
                                                      Thursday,
Share Awards listed on the JSE                      14 November

Record date for exercise by Certificated                Friday,
Preference Shareholders of Call Option              15 November

Certificated Preference Shareholders
election date at 12h00 to be issued with                Friday,
New Ordinary Shares                                 15 November

Last day to trade for Dematerialised                    Friday,
Preference Shareholders in order to                 20 December
exercise Call Options

Last day to trade for Redemption of                     Friday,
Preference Shares                                   20 December

Preference shares suspended as from                     Monday,
commencement of trade                               23 December

Listing of maximum number of new                    Tuesday, 24
ordinary shares in respect of Preference               December
Shares call option exercised

Record date for exercise by                         Tuesday, 31
Dematerialised Preference Shareholders                 December
of Call Option and redemption of
Preference shares

Dematerialised Preference Shareholders              Tuesday, 31
election date at 12h00 to be issued with               December
New Ordinary Shares

Call Options lapse (17h00)                          Tuesday, 31
                                                       December

Results of election announced on SENS       Friday, 3 January

Issue of New Ordinary Shares                Friday, 3 January

Payment date of Redemption Price            Monday, 6 January

Redeemable Preference Shares delisted at    Monday, 6 January
close of trading


NOTE: Share certificates may not be dematerialised or
rematerialised after 20 December 2013.

8. CIRCULAR

A circular setting out full details relating to the exercise
of call options and the redemption of the Preference Shares,
including a form of exercise and surrender, was posted to
preference shareholders on Monday, 28 October 2013

Johannesburg
1 November 2013

Sponsor
Sasfin Capital, a division of Sasfin Bank Limited

Legal advisor
HR Levin Attorneys, Notaries and Conveyancers

Auditors and Reporting Accountants
SizweNtsalubaGobodo Inc.

Date: 01/11/2013 07:05:00 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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