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CARGO CARRIERS LIMITED - Offer to Acquire all of the Issued Shares of Cargo, Proposed Delisting & Withdrawal of Cautionary Announcement

Release Date: 17/10/2018 11:52
Code(s): CRG     PDF:  
 
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Offer to Acquire all of the Issued Shares of Cargo, Proposed Delisting & Withdrawal of Cautionary Announcement

CARGO CARRIERS LIMITED                              CARGO CARRIERS HOLDINGS PROPRIETARY LIMITED
(Incorporated in the Republic of South Africa)      (Incorporated in the Republic of South Africa)
(Registration number: 1959/003254/06)               (Registration number: 1969/012377/07)
(Share code: CRG)                                   ("CCH")
(ISIN: ZAE000001764)
("Cargo")

FIRM INTENTION ANNOUNCEMENT IN RESPECT OF AN OFFER TO ACQUIRE ALL OF THE
ISSUED ORDINARY SHARES OF CARGO ("FIRM INTENTION ANNOUNCEMENT"),
PROPOSED DELISTING OF CARGO AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
                              

1.      Introduction

        The board of directors of Cargo ("Cargo Board") is pleased to announce that Cargo has
        received an offer from CCH to acquire 100% of the remaining issued ordinary share capital of
        Cargo not already held by CCH ("Offer Shares"), excluding the shares held by New Seasons
        Investments Holdings Proprietary Limited ("New Seasons"), treasury shares and any shares
        held by persons related to CCH ("the Offer"). CCH currently holds 61.11% of the issued
        shares of Cargo.

2.      Mechanics of the Offer

        The Offer will be implemented by way of:

2.1            a scheme of arrangement ("Scheme") in terms of section 114 of the Companies Act,
               2008, as amended, ("Companies Act") and paragraph 1.17(b) of the Listings
               Requirements ("Listings Requirements") of the securities exchange operated by JSE
               Limited ("JSE"), to be proposed by the Cargo Board between Cargo and the holders of
               the Offer Shares ("Cargo Shareholders"); alternatively, if the Scheme fails,

2.2            a general offer by CCH to the holders of the Offer Shares in terms of section 117(1)(c)(v)
               of the Companies Act and paragraph 1.15(c) of the Listings Requirements ("Standby
               Offer"),

        in each case subject to the requirement that the listing of the issued ordinary shares of Cargo
        on the JSE be terminated ("Proposed Transaction").

3.      Implementation agreement

        Cargo, acting through its independent board comprised of its independent non-executive
        directors who act independently as contemplated in the Regulations issued pursuant to the
        Companies Act ("Cargo Independent Board") and CCH have concluded a written
        implementation agreement on 16 October 2018 in relation to the Proposed Transaction
        (“Implementation Agreement”). The Implementation Agreement contains provisions relating
        to the implementation of the Proposed Transaction and certain undertakings by Cargo,
        including terms regarding the conduct of Cargo in the interim period between the dates of this
        Firm Intention Announcement and the implementation of the Proposed Transaction. The
        Cargo Independent Board is comprised of Ms SP Mzimela, Ms A Gcabashe, Mr V Raseroka,
        Mr SF Nomvalo and Ms N Medupe.
                                                                                                  

4.      Salient terms of the Offer

4.1           Purchase consideration

4.1.1               Cargo Shareholders will, if the Scheme becomes operative, or if the Scheme
                    does not become operative to the extent that the Cargo Shareholders accept the
                    Standby Offer, be entitled to receive R20.927 per Offer Share (calculated
                    as R21.00 per Offer Share less the interim dividend declared on 16 October 2018
                    of R0.073 per Offer Share), which amount will be adjusted downwards by the
                    amount of any other dividends declared after 16 October 2018 and paid prior to
                    the operative date of the Scheme (or payable to persons who were Cargo
                    Shareholders as at a record date preceding the operative date of the Scheme)
                    ("Consideration"); provided that the Consideration paid to each Cargo
                    Shareholder shall be rounded down to the nearest whole cent.

4.1.2               The Consideration represents a premium of:

4.1.2.1                   82.13% to the closing price of Cargo Shares on the JSE as at
                          31 January 2018, being the last business day immediately prior to the date
                          of the first cautionary announcement;

4.1.2.2                   39.33% to the closing price of Cargo Shares on the JSE as at 15
                          October 2018, being the last business day immediately prior to the date of
                          this Firm Intention Announcement;

4.1.2.3                   39.33% to the volume weighted average price ("VWAP") of Cargo Shares
                          on the JSE for the 30 days up to 15 October 2018; and

4.1.2.4                   59.66% to the VWAP of Cargo Shares on the JSE for the 180 days up to
                          15 October 2018.

4.2           Scheme

4.2.1               In the event the Scheme becomes operative, the listing of all the issued ordinary
                    shares of Cargo ("Cargo Shares") on the JSE will be terminated and each Cargo
                    Shareholder, excluding those shareholders that validly exercise their appraisal
                    rights in accordance with section 164 of the Companies Act as a consequence of
                    the approval of the Scheme and whose shareholder rights have not been
                    reinstated as envisaged in sections 164(9) and 164(10) of the Companies Act or
                    who have not been ordered by the court to withdraw their demands in terms of
                    section 164(15)(v)(aa) of the Companies Act ("Scheme Participants"), will be
                    deemed to have disposed of all of their Offer Shares for the Consideration, such
                    that CCH will own all of the Offer Shares previously held by the Scheme
                    Participants.

4.2.2               The Scheme is subject to the fulfilment or waiver of the suspensive conditions set
                    out in paragraph 7.

4.3           Standby Offer

4.3.1               In the event that the Scheme fails, CCH will make a general offer to all Cargo
                    Shareholders whereby each Cargo Shareholder will be entitled to elect whether
                    or not to dispose of all (and not only a part) of their Offer Shares to CCH for the
                    Consideration.
                                                                                                     

4.3.2                If Cargo Shareholders wish to dispose of all of their Offer Shares in terms of the
                     Standby Offer, they will be required to accept the Standby Offer and tender such
                     Offer Shares to CCH.

4.3.3                Cargo Shareholders who do not wish to accept the Standby Offer in respect of all
                     of the Offer Shares held by them will continue to hold their Offer Shares, as
                     unlisted shares.

4.3.4                The Standby Offer will be subject to the fulfilment or waiver of the suspensive
                     conditions set out in paragraph 8.

5.      Rationale for the Proposed Transaction

5.1           The primary rationale for the Proposed Transaction is the intention to delist Cargo and
              provide the company with the flexibility required to introduce sustainable broad-based
              black economic ownership structures.

5.2           CCH is of the view that it is unsustainable for Cargo to maintain its listing on the JSE
              and delisting will result in substantial cost and management time savings.

5.3           The Cargo Shares are currently not readily tradeable on the JSE and the Proposed
              Transaction will provide a liquidity opportunity for shareholders at an attractive premium.
              In the past, trades in even small volumes, have driven share prices down.

5.4           The JSE free float requirement remains a challenge and the introduction of additional
              broad-based black economic ownership structures will exacerbate this.

6.      Conditions to posting of the circular

        The posting of the circular to Cargo Shareholders is subject to the fulfilment or waiver (in whole
        or in part) of the following suspensive conditions by 30 November 2018:

6.1           the Cargo Board and the Independent Board unanimously recommending to the Cargo
              Shareholders, without qualification, that they vote in favour of the Scheme;

6.2           the requisite approvals being received from the JSE, the Takeover Regulation Panel
              ("TRP") and the Financial Surveillance Department of the South African Reserve Bank
              (in each case to the extent necessary) for the posting of the circular in respect of the
              Proposed Transaction;

6.3           as of the date of the fulfilment or waiver of the last of the conditions in paragraphs 6.1
              and 6.2:

6.3.1                none of the irrevocable voting undertakings received from Cargo Shareholders
                     as referred to in paragraph 9 ceasing for any reason to be enforceable by CCH;
                     and

6.3.2                the independent expert having issued its report in terms of section 114(3) of the
                     Companies Act (read with the Regulations of the Companies Act) confirming that
                     the Consideration offered (or proposed to be offered) to Cargo Shareholders is
                     fair and reasonable and such opinion not being withdrawn or adversely amended.

7.      Conditions to the Scheme

        The Scheme will be subject to the fulfilment, or waiver (in whole or in part), of the following
        suspensive conditions by no later than the date which falls 120 days after the date of this Firm
        Intention Announcement:
                                                                                             

7.1     the passing of a resolution, as contemplated in section 115(2) of the Companies Act, in
        terms of which Cargo Shareholders approve the Scheme by the requisite majority of
        Cargo Shareholders ("Scheme Resolution");

7.2     the passing of the resolution in terms of which the listing of all Cargo Shares is
        terminated on the main board of the JSE by the requisite majority of Cargo Shareholders
        as contemplated in the JSE Listing Requirements ("Delisting Resolution");

7.3     if required by section 115(3) of the Companies Act, the approval of the Scheme
        Resolution shall have been approved by a court. In order to establish whether such
        approval is required if less than 15% of the votes exercised on the Scheme Resolution
        were opposed to the Scheme Resolution, Cargo shall not implement the Scheme
        Resolution until either a period of ten business days has elapsed since the vote without
        any Cargo Shareholder who opposed the Scheme Resolution applying for leave to apply
        to a court for a review of the Proposed Transaction or, if any such application is made
        by such a Cargo Shareholder, such application is unsuccessful. If such approval of a
        court is required, Cargo shall, at the reasonable cost and expense of CCH, seek such
        approval and shall not treat the Scheme Resolution as a nullity, as contemplated in
        section 115(5)(b) of the Companies Act unless requested to do so by CCH;

7.4     Cargo Shareholders not having exercised appraisal rights by giving valid demands to
        this effect to Cargo, in terms of section 164(7) of the Companies Act, in respect of more
        than 5% of the Cargo Shares within 30 business days following the shareholders'
        meeting of Cargo convened to pass the Scheme Resolution and the delisting, provided
        that, in the event that any Cargo Shareholders give notice objecting to the Scheme, as
        contemplated in section 164(3) of the Companies Act, and all or some of those Cargo
        Shareholders vote against the resolution proposed at the Shareholders' Meeting to
        approve the Scheme, but do so in respect of no more than 5% of the Cargo Shares this
        condition shall be deemed to have been fulfilled at the time of the shareholders' meeting;

7.5     the receipt of all unconditional approvals, consents or waivers from South African
        governmental and other South African regulatory authorities necessary for the
        implementation of the Proposed Transaction ("Consents") (or if such Consent is
        conditional, such conditions being satisfactory to the party/parties on whom such
        condition is imposed of which party/parties is affected thereby and for which purpose a
        condition imposed on Cargo shall be deemed to be imposed on both parties), including
        from:

7.5.1         the TRP (in terms of a compliance certificate to be issued in terms of the
              Companies Act); and

7.5.2         the Financial Surveillance Department of the South African Reserve Bank, or its
              duly authorised agent;

7.6     by the date upon which all conditions to the Scheme, other than the condition in this
        paragraph 7.6, are fulfilled or waived, as the case may be, an adverse effect, fact or
        circumstance which is or might reasonably be expected (alone or together with any
        other such adverse effect, fact or circumstance) to be material with regard to the
        operations, continued existence, business, condition, assets and liabilities of Cargo and
        its subsidiaries has not occurred. For the purposes of this paragraph, to be material, the
        adverse effect, fact or circumstance must:

7.6.1         have (or be reasonably expected to have) an adverse effect upon Cargo's annual
              profit after tax of not less than R5 000 000;

7.6.2         constitute a change in the laws of South Africa which has (or may reasonably be
              expected to have) a material adverse effect upon the Scheme such that the
              effective direct or indirect cost to CCH of the Scheme would increase by 15% or more; or                                                                               

7.6.3         consist of a fall in the JSE All Share index by 20% or more compared with such
              index as at the last trading day of September 2018.

8.      Conditions to the Standby Offer

        The Standby Offer will be subject to the fulfilment or waiver (in whole or in part) of the same
        suspensive conditions as the Scheme as listed in paragraphs 7.2, 7.5 and 7.6.

9.      Undertakings

        CCH has received irrevocable undertakings to vote in favour of the resolutions required to
        approve the Proposed Transaction, including the Scheme Resolutions and the Delisting
        Resolution, from the following Cargo Shareholders holding or controlling 1 949 901 of the Offer
        Shares, representing an aggregate of 9.26% of the Cargo Shares and 42.90% of the Offer
        Shares:

          Cargo Shareholder                                   Number of Scheme Shares
          Allan Hurwitz                                                      1 379 000
          Alan Shkudsky                                                        348 203
          Roger Downard and his related persons:
              • GLD Investments Proprietary Limited                            101 010
              • RMMC Investments CC                                             45 130
              • Roger Downard                                                   75 518
              • Meydown Investments CC                                           1 040
          Total                                                              1 949 901

10.     Shareholdings in Cargo

10.1          CCH holds 12 865 837 Cargo Shares equal to 61.11% of all Cargo Shares. CCH
              confirms that it is the ultimate proposed purchaser of the Offer Shares.

10.2          The following holders of Cargo Shares are either acting in concert with CCH or hold
              treasury shares or are directors, or persons related to CCH or its directors, as
              contemplated in section 2 of the Companies Act:

                 Shareholder                            Number of Cargo            Shareholding
                                                           Shares held                 Interest
                 New Seasons                                 2 861 032                   13.59%
                 Garth Bolton                                   87 388                    0.41%
                 Murray Bolton                                  50 372                    0.24%
                 Glynnis Nassif                                 19 677                    0.09%
                 Stan Chilvers                                  11 169                    0.05%
                 Karen Organ                                     1 000                   0.004%
                 Jean Bolton Family Trust                       19 508                    0.09%
                 Cargo Carriers Limited                        593 710                    2.82%
                 Employees Share Incentive Trust
                 (treasury shares)
                 Total                                       3 643 856                   17.31%

11.    Management

       CCH intends to retain Cargo’s existing senior management.                                                                                               

12.    Cash confirmation to the TRP

       Webber Wentzel has, on behalf of CCH, delivered a cash escrow confirmation in compliance
       with the TRP requirements to the TRP for an amount of R95 070 084, in compliance with
       Regulations 111(4) and (5) of the Companies Regulations, 2011, which is sufficient for the
       purpose of fully satisfying the Consideration payable in terms of the Proposed Transaction.

13.    Termination of Cargo listing

       Following implementation of the Scheme, or the Standby Offer if the Scheme fails, application
       will be made to the JSE to terminate the listing of the Cargo Shares on the JSE.

14.    Recommendation and fairness opinion

14.1         The Independent Board intends, based on the information currently available to it, to
             make a unanimous recommendation to Cargo Shareholders to vote in favour of the
             resolution to be proposed at the shareholders meeting to approve the Scheme, as well
             as the Delisting Resolution, provided that the Independent Board receives an opinion
             from the independent expert to the effect that the Consideration is fair and reasonable.

14.2         The Independent Board has appointed Mazars Corporate Finance Proprietary Limited,
             an independent advisor acceptable to the TRP, to review the terms of the Proposed
             Transaction, and to provide a fair and reasonable opinion as required in terms of section
             114(3) of the Companies Act and Regulation 90 of the Companies Regulations, 2011.

15.    Documentation

       Further details of the Proposed Transaction will be included in a circular which will be sent to
       Cargo Shareholders, subject to all the requisite approvals being received as contemplated in
       paragraph 6. It is estimated that the circular will be posted to Cargo Shareholders on or about
       9 November 2018, which will include the notice of the shareholders' meeting to be held for the
       purpose, inter alia, of considering and, if deemed fit, passing the Scheme Resolution and the
       Delisting Resolution.

16.    Withdrawal of cautionary announcement

       Following the release of this Firm Attention Announcement, the cautionary announcement
       originally published by Cargo on 1 February 2018, and which was last renewed on
       6 September 2018 is hereby withdrawn and caution is no longer required to be exercised by
       the Cargo Shareholders when dealing in their Cargo Shares.

17.    Responsibility statement

       The Independent Board and CCH each accept responsibility for the information contained in
       this announcement and, to the best of their respective knowledge and belief, confirm that the
       information is true and this announcement does not omit anything likely to affect the
       importance of the information included.
                                                                                

Corporate advisor to Cargo                Corporate advisor to CCH
PricewaterhouseCoopers Corporate          Nodus Capital (Pty) Limited
Finance (Pty) Limited

Legal advisor to Cargo                    Legal advisor to CCH
PricewaterhouseCoopers Legal (Pty)        Webber Wentzel
Limited

JSE Sponsor                               Independent expert to Cargo
Arbor Capital Sponsors (Pty) Limited      Mazars Corporate Finance (Pty) Limited

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