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Voluntary Transaction and Cautionary Announcement
AFRICAN PHOENIX INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1946/021193/06)
Ordinary share code: AXL ISIN: ZAE000221370
Hybrid instrument code: AXLP ISIN: ZAE000221388
(“API” or “the Company”)
VOLUNTARY TRANSACTION AND CAUTIONARY ANNOUNCEMENT
1. Overview
1.1. API is an investment holding company with 1 427 005 272 ordinary shares with a par value
of R0.025 per share (“Ordinary Shares”) and 13 523 029 non-redeemable, non-
cumulative, non-participating preference shares with a par value of R0.01 per share
(“Preference Shares”) listed on the securities exchange (“JSE”) operated by the JSE
Limited. The Preference Shares are, in terms of section 20 of the JSE Listings
Requirements (“Listings Requirements”), listed on the JSE as hybrid financial instruments.
1.2. API wishes to advise holders of Ordinary Shares (“Ordinary Shareholders”) and holders
of Preference Shares (“Preference Shareholders”) (collectively “Shareholders”) that it
proposes to implement certain strategic transactions, the details of which are set out
below. The transactions are subject to obtaining all necessary approvals from
Shareholders and regulatory authorities, including the JSE Limited (which is currently
formally considering certain structuring elements of the transactions).
2. Proposed Transactions
2.1. API has been in confidential discussions with certain of its major Shareholders to obtain
support to implement certain proposed strategic transactions that include:
2.1.1. a voluntary repurchase of up to all of API's Preference Shares from the Preference
Shareholders (“Repurchase”) in terms of sections 48, 114 and 115 of the
Companies Act, 2008 as amended (“Companies Act”). The consideration payable
to the Preference Shareholders is proposed to be left outstanding on loan account,
which loan claim will be settled in cash (“Repurchase Consideration”). Preference
Shareholders may also elect to retain their Preference Shares;
2.1.2. the acquisition by API of a limited partnership interest in a private equity fund to be
established as a South African en commandite partnership, to be known as the
“API Capital Fund” (“API Fund”), through the contribution of cash only to the API
Fund. The API Fund will be managed by a black-owned fund manager (“BFM”), in
accordance with the Codes of Good Practice on Broad-Based Black Economic
Empowerment issued under the Broad-Based Black Economic Empowerment Act,
2003 as amended. The API Fund will be established through API (as a limited
partner of the API Fund) entering into a limited partnership agreement (“Partnership
Agreement”) with the BFM (as the general partner of the API Fund) (“BFM
Structure”);
2.1.3. amendments to API's memorandum of incorporation (“MOI”) to (i) create a new
class of unlisted, non-voting, non-participating convertible ordinary shares (“Class
B Shares”) which Class B Shares are to be issued to the management team of the
BFM for purposes of settling performance participation entitlements of the
management team (see paragraph 4 below); and (ii) re-classify the Ordinary
Shares as “Class A Shares” in order to distinguish the existing Ordinary Shares
from the Class B Shares. The re-classification of the Ordinary Shares as Class A
Shares will not vary or amend the rights or the terms of the Class A Shares
(collectively the “MOI Amendments”); and
2.1.4. the proposed change of JSE classification of API to an “investment entity” (“Re-
Classification”) pursuant to section 15 of the Listings Requirements and the
adoption of a new investment policy for API, which new investment policy will be
approved by the Shareholders as part of the Proposed Transactions, resulting in
the Company, subject to the requisite approvals being obtained from the JSE
Limited, being classified under the “Investment Companies” sub-sector of the
FTSE Global Classification System.
2.2. The Repurchase, the BFM Structure, the MOI Amendments and the Re-Classification are
collectively referred to hereinafter as the “Proposed Transactions”.
3. Repurchase Consideration
It is currently anticipated that the Repurchase Consideration will be an amount of R37.00 per
Preference Share, but such Repurchase Consideration (i) is subject to final determination by
the API board of directors; and (ii) will be informed by the findings of an independent expert's
opinion as envisaged in section 114 of the Companies Act and which is required to be prepared
in relation to the Repurchase. The independent expert's opinion will be included in a circular to
be issued by API in due course.
4. BFM Structure
As is customary in private equity structures, it is currently proposed that:
4.1. the BFM will be entitled to receive a management fee (“GP Fee”) of 1.00% per annum of
the API Fund's invested net asset value (“NAV”), provided that the minimum annual fee
will amount to R19 million for the financial year ended 30 September 2019 (and increasing
by inflation for each subsequent financial year); and
4.2. in addition to the GP Fee, the management team of the BFM will be entitled to performance
participation (“Performance Participation”), subject to certain hurdles and requirements
being met. The Performance Participation is to be facilitated through the Class B Shares
to be issued by API to the management team of the BFM in order to incentivise the BFM
to maintain and grow the value of API Fund's investments and the market capitalisation of
API. At the end of each six year performance period, a certain number of Class B Shares
(to be determined in accordance with a formula linked to the value of the Class B Shares)
shall automatically convert in accordance with the terms of the Class B Shares into
Ordinary Shares in API (to be designated as “Class A Shares” at that time), and will be
distributed to the management team of the BFM. The Performance Participation will allow
the holders of the Class B Shares to receive 16% of the amount by which the aggregate
of (i) 75% of the growth in API Fund’s invested NAV and (ii) 25% of the growth in API's
Class A Share price, exceeds the performance hurdle (10% compound annual growth rate
(CAGR) calculated over the six year performance period) through the conversion of the
Class B Shares into Class A Shares.
5. Key objectives of the Proposed Transactions
The key objectives of the Proposed Transactions include the following:
5.1. that the Repurchase of potentially all of the issued Preference Shares will simplify API's
current capital structure;
5.2. the BFM Structure will lead to capital preservation for investments in line with API's
investment holding company classification;
5.3. the establishment of a broad-based black economic empowerment investment platform,
in the form of the API Fund, will provide Shareholders with access to unique investment
opportunities not typically available to public market investors;
5.4. the BFM Structure will allow for funding of a growing pipeline of investments without
negatively impacting on the broad-based economic empowerment status of API and/or its
investee companies; and
5.5. the Proposed Transactions will ensure the long-term alignment of the interests of API, the
BFM and Shareholders.
6. Shareholder support
API has obtained shareholder support from Ordinary and Preference Shareholders to vote in
favour of the Proposed Transactions, jointly constituting 51% of the total issued Ordinary and
Preference shares.
7. Salient dates and shareholder documentation
A detailed transaction announcement, including salient dates and additional information
regarding the shareholder documentation, will be published in due course.
8. Cautionary announcement
Shareholders are advised that, until such time as the structure of the Proposed Transactions
has been finalised and the aforementioned detailed transaction announcement has been
published, which may have a material effect on the price of the Company’s securities, caution
should be exercised by shareholders when dealing in the Company’s securities.
9. Disclaimer
The information contained in this voluntary transaction and cautionary announcement:
9.1. is not for publication, distribution or release, in whole or in part, directly or indirectly, in or
into any jurisdiction where to do so would constitute a violation of the relevant laws of such
jurisdiction;
9.2. does not constitute or form a part of any offer or an invitation or solicitation or
advertisement to purchase and/or subscribe for securities in South Africa, including an
offer to the public for the sale of, or subscription for, or an invitation or the solicitation of
an offer to buy and/or subscribe for, securities as defined in the Companies Act or
otherwise and will not be distributed to any person in South Africa in any manner that could
be construed as an offer to the public as contemplated in the Companies Act. Accordingly,
the information contained in this voluntary transaction and cautionary announcement does
not, nor does it intend to, constitute a "registered prospectus", as contemplated by the
Companies Act and no prospectus has been, or will be, filed with the South African
Companies and Intellectual Property Commission in relation to the Proposed
Transactions; and
9.3. may include forward-looking statements about API, its prospects and/or the Proposed
Transactions, which are based on current expectations and projections about future
events. These statements may include, without limitation, any statements preceded by,
followed by or including words such as "target", "believe", "expect", "aim", "intend", "may",
"anticipate", "estimate", "plan", "project", "will", "can have", "likely", "should", "would",
"could" and other words and terms of similar meaning or the negative thereof. These
forward-looking statements are subject to risks, uncertainties and assumptions about the
Company, its subsidiaries or affiliates and the Proposed Transactions, including, among
other things, the development of API's strategy. In light of these risks, uncertainties and
assumptions, the events in the forward-looking statements may not occur. No
representation or warranty is made that any forward-looking statement will come to pass
and, in particular, no representation or warranty is made that the Proposed Transactions
will be implemented (either wholly or in part). No one undertakes to publicly update or
revise any such forward-looking statement. The information contained in this voluntary
transaction and cautionary announcement is provided as at the date of this voluntary
transaction and cautionary announcement and is subject to change without notice. The
Company expressly disclaims any obligation or undertaking to disseminate any updates
or revisions to any forward-looking statements contained herein to reflect any change in
its expectations with regard thereto or any change in events, conditions or circumstances
on which any of such statements are based.
10. A presentation to shareholders is available on the website of the Company at
www.phoenixinvestments.co.za.
Johannesburg
7 September 2018
Transaction advisor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal advisor
Webber Wentzel
Sponsor
Merchantec Capital
Date: 07/09/2018 04:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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