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PURPLE GROUP LIMITED - Share Options Granted To Black Empowered Consortium And Raising Of R25 Million Loan To Settle External Debt

Release Date: 03/09/2018 16:05
Code(s): PPE     PDF:  
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Share Options Granted To Black Empowered Consortium And Raising Of R25 Million Loan To Settle External Debt

Purple Group Limited

(Incorporated in the Republic of South Africa)

(Registration number 1998/013637/06)

Share code: PPE ISIN: ZAE000185526

(“Purple Group” or “the Company”)

    1.   Introduction
         At the annual general meeting of shareholders held on 8 December 2017 (“AGM”), the requisite majority of
         shareholders approved an ordinary resolution authorising the directors to issue up to 140 321 478 ordinary shares or
         issue any options in respect of ordinary shares in the Company, for cash, in accordance with the Listings Requirements
         of the JSE Limited (“JSE”).

         On 31 August 2018, Purple Group entered into a Loan Agreement with a Black Empowered Consortium, led by Bonang
         Mohale (the”Consortium”). Bonang, who is currently the Chief Executive Officer of Business Leadership South Africa,
         recognises the economic and social value that Purple Group (primarily through its interest in EasyEquities) can bring to
         South Africa. Bonang is eager to become an active participant within Purple Group in order to be in a position to
         influence and drive the financial and investment democratisation of previously disadvantaged South Africans which is
         currently evidenced in the EasyEquities business.

    2.   Terms of the Loan
         In terms of the Loan Agreement, the Consortium will advance a loan of R25 million (the “Loan Amount”) to Purple
         Group. The Loan bears interest at 11.5% (NACM), with 30% of monthly accrued interest being cash paid monthly in
         arrears and the remainder being capitalised. The Loan Amount plus capitalised interest (“Loan Outstandings”) are
         repayable on 31 August 2021.

         The Consortium has been granted an option to convert the Loan Outstanding into Purple Group shares at any time on
         or before 31 August 2021, at a price per share of 22.87 cents, which represents a 10% discount to the 30 day weighted
         average traded price of Purple Group shares for the 30 business days preceding 28 August 2018, being the date that
         the conversion option was agreed (“Option”). In the event that the Consortium elects to exercise the Option on 31
         August 2021, the number of Purple Group ordinary shares that will be issued to the Consortium would total 138 835 528
         shares (“Option Shares”), representing 12.9% of the issued capital of Purple Group, post the exercising of the option.

         Application will be made by the Company to the JSE for the listing of the Option Shares upon exercise, if applicable.
         The Option Shares which may have to be issued upon the exercise of the conversion rights under the loan will be issued
         under the general authority which was granted to the Directors pursuant to an ordinary resolution of the Shareholders
         passed at the AGM. The consortium is considered public shareholders in terms of the listings requirements.
     There are no conditions precedent to the transaction.

3.   Rationale
     The Rationale for the above transaction detailed in this announcement was to raise longer term funding to settle
     amounts currently due and payable in respect of the liability owed to the Industrial Development Corporation (“IDC”),
     as disclosed in our Annual Financial Statements for the year ended 31 August 2017 and Interim results for the 6 months
     ended 28 February 2018. Furthermore, the transaction replaces the current IDC repayment profile with a cash
     repayment profile that aligns with the cash generation envisaged for Purple Group over the term of the loan.

     At the same time Purple Group has taken the opportunity to introduce a structure that will (if the option is elected)
     result in a sizeable shareholding in Purple Group being held by an active black empowered shareholder who is
     passionate about the future of the business.

4.   Financial effects of the loan
     The table below sets out the pro forma financial effects of the Convertible Loan on the loss, headline loss, net asset
     value and net tangible asset value per share. The pro forma financial effects have been calculated on Purple Group’s
     results for the six months ended 28 February 2018. The pro forma financial effects are provided for illustrative purposes
     only and because of their nature they may not give a fair reflection of Purple Group’s financial position, changes in
     equity, results of operations or cash flows after the transaction. The pro forma financial effects are the responsibility of
     the Company’s directors. The accounting policies as at 31 August 2017 and 28 February 2018 have been used in the
     preparation of the financial effects.

                                             Before the Loan (1)                 After the Loan                Percentage (%)
      Loss per share (cents)                               (1.89)                         (1.95)                            3.2
      Headline loss per share                              (1.89)                         (1.95)                            3.2
      Net asset value per share                            33.58                          33.52                           (0.2)
      Net tangible asset value                               0.82                           0.76                          (7.3)
      per share (cents)
      Weighted average number                            890 953                        890 953                             0.0
      of shares in issue (000)
      Shares in issue (000)                              898 089                        898 089                             0.0

     1.   Extracted from the published unaudited interim results of Purple Group for the six months ended 28 February
     2.   The loss and headline loss per share in the “After the Loan” column have been based on the following assumptions:
                 a.   That the loan agreement was entered into on 1 September 2017;
                   b.   The weighted number of shares in issue Before and After the Loan was 890 953 000 (which excludes
                        treasury shares);
                   c.   The proceeds received from the general issue was utilised to settle a portion of the IDC liability, resulting
                        in a saving in interest charged of R1 027 805, after tax, for the six month period ended 28 February 2018,
                        which adjustment is of a continuing nature;
                   d.   The interest charge, after tax on the Loan, for the six month period ended 28 February 2018 would
                        amount to R994 468, which adjustment is of a continuing nature; and
                   e.   The once-off transaction costs, mainly comprising advisory fees, associated with raising the loan are
                        estimated at R540 000 after tax.
         3.    Net asset value and net tangible asset value per share in the “After the loan” column have been based on the
               following assumptions:
                   a.   The Loan Agreement was effective on 31 August 2018;
                   b.   The number of shares in issue at 31 August 2018 was 898 089 000 (which excludes treasury shares)
                        before and after the Loan; and
                   c.   Transaction costs of R540 000 after tax have been adjusted.

3 September 2018
Sponsor: Deloitte & Touche Sponsor Services Proprietary Limited

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