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MASTER PLASTICS LIMITED - Joint Announcement of a Firm Intention to make an Offer

Release Date: 07/11/2018 17:23
Code(s): MAP     PDF:  
 
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Joint Announcement of a Firm Intention to make an Offer

MASTER PLASTICS LIMITED                               METIER CAPITAL GROWTH FUND II GP
Incorporated in the Republic of South Africa                 PROPRIETARY LIMITED
(Registration number 2016/323930/06)             Incorporated in the Republic of South Africa
Share code: MAP   ISIN: ZAE000242921                (Registration number 2014/232895/07)
("Master Plastics" or "Company")             (In its capacity as ultimate general partner of the
                                                   Metier Capital Growth Fund II Partnership)
                                                           ("MCGF II Partnership")

                                                              MCGF II INVESTMENTS
                                                     Incorporated in the Republic of Mauritius
                                                            (Company number 138321)
                                                            ("MCGF II Investments")


JOINT ANNOUNCEMENT OF A FIRM INTENTION BY MCGF II PARTNERSHIP AND MCGF II INVESTMENTS TO MAKE AN OFFER
TO ACQUIRE ALL THE ISSUED ORDINARY SHARES OF MASTER PLASTICS (OTHER THAN CERTAIN EXCLUDED SHARES)


1   INTRODUCTION
    MCGF II Partnership and MCGF II Investments (collectively, the "Offerors") and the Company are
    pleased to announce that the Company, the Offerors and Manley Diedloff, the current Chief
    Executive Officer of the Company ("Diedloff"), have concluded a written offer and implementation
    agreement ("Implementation Agreement") dated 7 November 2018 ("Signature Date") in terms of
    which the Offerors made a firm offer ("Offer") to acquire all of the issued ordinary shares in the
    Company ("Shares"), excluding those Shares held by Diedloff, being a total of 104,933,212 Shares
    ("Scheme Shares").
      
    The Offer will be implemented by way of a scheme of arrangement ("Scheme"), between the
    Company and the holders of its Shares ("Shareholders"), in terms of section 114 of the
    Companies Act, No. 71 of 2008 ("Companies Act").
      
    The amount payable in terms of the Scheme will be a cash consideration of R2.00 per Scheme
    Share ("Scheme Consideration"). Further details of the Scheme Consideration are set out in
    paragraph 4.2 below.
      
    The board of directors of the Company ("Board") has convened an independent board
    ("Independent Board") as required by the Companies Regulations, 2011 ("Companies
    Regulations"), which comprises Thabo Mokgatlha, Sibongile Masinga, Craig McDougall and
    Günter Steffens, for purposes of evaluating and advising Shareholders whether the Scheme and
    the Scheme Consideration are fair and reasonable to Shareholders.
      
    The Shares will be delisted from the alternative exchange of the JSE ("AltX") pursuant to the
    implementation of the Scheme ("Delisting").
      
    The purpose of this joint firm intention announcement ("Firm Intention Announcement") is to
    advise Shareholders of the terms and conditions of the Scheme.

2   BACKGROUND TO THE COMPANY AND THE OFFERORS
      
    Master Plastics, which is involved in the manufacture and provision of specific products and
    solutions to customers operating in the agricultural, food, produce, dairy and general industrial
    markets, was created through a series of "asset-for-share" transactions during the period from
    31 January 2017 to 28 February 2017 whilst it still formed part of Astrapak Limited ("Astrapak")
    which was formerly listed on the Main Board of the JSE. Master Plastics was unbundled to
    shareholders of Astrapak by way of a distribution in specie in terms of section 46 of the Companies
    Act and section 46 of the Income Tax Act, No. 58 of 1962 and listed on AltX on 24 May 2017.
    
    The Offerors are private equity funds which make long-term investments into medium-to-large
    businesses in South Africa and selectively in sub-Saharan Africa.
    
    The Offerors enjoy a reputation as leading private equity funds, and bring extensive experience,
    expertise and a strong track record of transaction execution and portfolio company management.

3   RATIONALE FOR THE OFFER
    
    The Offerors believe the following benefits can be achieved through the implementation of the
    Scheme and the Delisting:
    •     improved access to capital to develop Master Plastics' strategic and regional growth plans;
    •     greater manoeuvrability to assess further capital projects and acquisitions in attractive growth
          niches to build scale and diversification;
    •     material cost and management time savings as a result of the removal of associated listing
          costs and processes; and
    •     various benefits associated with private equity ownership, including flexibility for management
          incentivisation and alignment.
    
    The Offerors are further of the view that the Shares are currently not readily tradeable on AltX and
    the Scheme will provide a liquidity opportunity for Shareholders at an attractive premium. In the
    past, trades in even small volumes, have driven share prices down.
    
    Lastly, the intention to delist the Shares will provide the Company with the flexibility required to
    introduce sustainable broad-based black economic ownership structures.
    
    Diedloff, who holds 10.72% of the issued Shares, has extensive knowledge of the Company's
    business and experience within the flexible packaging products industry. Diedloff shares the
    Offerors' view that Master Plastics may better realise its potential in an unlisted environment, with
    access to the further capital and skills that the Offerors are able to contribute.

4   SALIENT TERMS OF THE SCHEME
    
    The Scheme constitutes an "affected transaction" as defined in section 117(1)(c)(iii) of the
    Companies Act, and, as such, the Scheme is regulated by the Companies Act and the Companies
    Regulations.
    
    The salient terms and conditions of the Scheme and other information pertaining to the Scheme
    are set out below.
    
    4.1    Scheme
           
           The Scheme will be proposed by the Board between the Company and its Shareholders.

           In the event the Scheme becomes operative, the listing of the Shares on AltX will be
           terminated and each Shareholder, excluding (i) Diedloff and the Offerors (to the extent that
           they hold any Shares); (ii) the holders of treasury shares (which there should not be); and (iii)
           those Shareholders ("Dissenting Shareholders") that validly exercise their appraisal rights
           in accordance with section 164 of the Companies Act ("Appraisal Rights") and who have
           not had their rights in respect of their Shares re-instated as envisaged in sections 164(9) and
           164(10) of the Companies Act, whether voluntarily or pursuant to a final court order
           ("Scheme Participants"); will be deemed to have disposed of all of their Scheme Shares in
           exchange for the Scheme Consideration, such that the Offerors will own all of the Scheme
           Shares previously held by the Scheme Participants.
                                                                                                    
           Diedloff has agreed with the Company that he will not be a Scheme Participant and will not
           dispose of any of his Shares pursuant to the Scheme.

           Diedloff will be excluded for purposes of both determining whether the applicable quorum
           requirements are satisfied and voting on the special resolution to approve the Scheme
           ("Scheme Resolution"), as contemplated in section 115(2)(a) of the Companies Act.
      
           The Scheme will be subject to the fulfilment or waiver of the conditions precedent set out in
           paragraph 4.3 below.

     4.2   Scheme Consideration
      
           The Scheme Consideration values Master Plastics at R235 million and represents a
           premium of:
      
           4.2.1    42.9% to the Share price of R1.40 as at 3 October 2018, being the business day
                    prior to receipt by the Independent Board of a non-binding expression of interest
                    from the Offerors;
           
           4.2.2    60.0% to the 30-day volume-weighted average trading price per Share of R1.25 up
                    to and including 3 October 2018; and
      
           4.2.3    57.5% to the 90-day volume-weighted average trading price per Share of R1.27 up
                    to and including 3 October 2018.
      
           The tax implications of the Scheme are dependent on the individual circumstances of the
           Scheme Participant concerned and the tax jurisdiction applicable to such Scheme
           Participant. It is recommended that the Scheme Participants seek appropriate advice in this
           regard.

     4.3   Scheme Conditions
           
           4.3.1    The implementation of the Scheme will be subject to the fulfilment or waiver (as the
                    case may be) of the following conditions precedent ("Scheme Conditions"):
               
                    4.3.1.1 by not later than 26 business days after the date upon which the Circular
                            (as defined below) has been posted, the Scheme Resolution is approved
                            by the requisite majority of Shareholders, as contemplated in
                            section 115(2)(a) of the Companies Act, and in the event of the provisions
                            of section 115(2)(c) of the Companies Act becoming applicable:
                       
                            4.3.1.1.1 by no later than 40 business days after the Scheme Resolution is
                                      approved, the court approves the implementation of the Scheme
                                      Resolution; and
                       
                            4.3.1.1.2 if applicable, the Company not treating the Scheme Resolution as
                                      a nullity as contemplated in section 115(5)(b) of the Companies
                                      Act;
                    
                    4.3.1.2 with regards to Shareholders exercising their Appraisal Rights (if any),
                            either:
                       
                            4.3.1.2.1 Shareholders give notice objecting to the Scheme Resolution as
                                      contemplated in section 164(3) of the Companies Act and vote
                                      against the Scheme Resolution in respect of less than 15% of all
                                      of the issued Shares; or
                                                                        
                            4.3.1.2.2 if Shareholders do give notice objecting to the Scheme
                                      Resolution and vote against the Scheme Resolution in respect of
                                      15% or more of all of the issued Shares, then, within the time
                                      period permitted in terms of the Companies Act, Dissenting
                                      Shareholders have not exercised Appraisal Rights, by giving valid
                                      demands in terms of sections 164(5) to 164(8) of the Companies
                                      Act, in respect of 15% or more of the issued Shares;
                   
                    4.3.1.3 by not later than 31 March 2019 ("Long Stop Date"), all regulatory
                            consents are received on an unconditional basis or, to the extent that any
                            such regulatory consents are subject to any condition or qualification, the
                            party/ies adversely affected by the condition or qualification confirms in
                            writing to the other/s that the condition is acceptable to it or them, which
                            confirmation shall not be unreasonably withheld or delayed; and
              
                    4.3.1.4 by not later than the Long Stop Date and only to the extent required,
                            Nedbank Limited or such other counterparty/ies to the Company's or its
                            subsidiaries' debt funding arrangements, have provided their written
                            consents to the change of shareholding or change of control of the
                            Company pursuant to the Scheme, in a form and substance reasonably
                            acceptable to the Offerors.
           
           In the event that the Scheme Conditions are not fulfilled or waived timeously, the Scheme
           will not become operative and shall be of no force or effect.

     4.4   Waiver of Scheme Conditions
     
           The Scheme Conditions in paragraphs 4.3.1.2 and 4.3.1.4 have been stipulated for the
           benefit of the Offerors which will be entitled in their sole discretion to (i) extend the date for
           fulfilment thereof, provided that the Offerors shall not extend the date for fulfilment beyond
           the Long Stop Date without the Company agreeing to such extension by way of a signed
           written agreement; or (ii) waive the fulfilment of such Scheme Conditions, in whole or in part,
           on written notice to the Company.
      
           The Scheme Conditions in paragraphs 4.3.1.1 and 4.3.1.3 are regulatory in nature and may
           not be waived, unless the Offerors and the Company agree in writing to waive the fulfilment
           of the aforesaid Scheme Conditions, in whole or in part, on the basis that any such
           regulatory conditions are no longer (or are not) applicable to the Scheme.

     4.5   Undertakings by the Company
      
           In terms of the Implementation Agreement, the Offerors have received undertakings from the
           Company that, during the period between the Signature Date and the date of implementation
           of the Scheme, the business of the Company and its subsidiaries ("Group") will be carried
           on in all material respects in the normal and ordinary course, and no member of the Group
           will enter into any contract or commitment or do anything which, in any such case, is out of
           the normal and ordinary course of business.
      
           In terms of the Implementation Agreement, the Company has also given certain
           undertakings in relation to the non-solicitation and/or receipt of alternative proposals in
           respect of the Shares and/or the Group.

     4.6   Termination Events
        
           The Scheme will terminate forthwith:
      
           4.6.1   upon written notice by the Offerors to the Company, if the Independent Board
                   recommends an alternative proposal to the Shareholders;
                                                                                                     
           4.6.2   upon written notice by the Company to the Offerors if the Company has received
                   an alternative proposal which the Independent Board reasonably determines to be
                   more favourable to Scheme Participants, and, after affording the Offerors 5 days
                   within which to improve the terms of the Scheme, such alternative proposal
                   continues to be more favourable to Scheme Participants;

           4.6.3   if any Scheme Condition, which may be waived by the Offerors, becomes
                   incapable of fulfilment, and the Offerors notify the Company in writing that the
                   Offerors will not waive that Scheme Condition;

           4.6.4   if all the Scheme Conditions have not been fulfilled or waived (to the extent
                   permitted) on or before the relevant date/s for fulfilment or waiver;

           4.6.5   upon written notice by the Offerors or the Company to the other of them
                   ("Defaulting Party") if the Defaulting Party commits a breach of any material
                   provision of the Implementation Agreement or the Scheme and fails to remedy
                   such breach within 10 business days of receipt of a notice by the Defaulting Party
                   from the first mentioned party requesting such remedy;

           4.6.6   on the 5th business day after the Offerors give written notice to the Company if a
                   Material Adverse Change occurs. A "Material Adverse Change" means:
                 
                   -   any circumstance, fact or event (including any change in law) but excluding any
                       circumstance, fact or event fairly disclosed by the Group to the Offerors before
                       the Signature Date and/or of which the Offerors were aware on or before the
                       Signature Date ("Event"), actual or which might reasonably be expected to
                       arise which has, or is reasonably likely to have, the effect of being materially
                       adverse with regard to the operations, continued existence, business,
                       condition, assets and/or liabilities of the Group. In this regard, to be material,
                       the Event, at the time of the assessment thereof, must have or must
                       reasonably be likely to:
          
                       o   adversely affect the Group's consolidated earnings before interest, tax,
                           depreciation and amortisation (determined on the same basis as the
                           audited consolidated annual financial statements of the Group as at and in
                           respect of the financial year ended 28 February 2018 were prepared, but
                           excluding any attributable earnings resulting from the business acquisitions
                           and/or combinations concluded by the Company after 31 August 2018) by
                           more than 5% compared to the earnings before interest, tax, depreciation
                           and amortisation of the Group in the 12 months preceding 31 August 2018,
                           calculated based on the interim results for the Group for the period ended
                           31 August 2018 ("Applicable Financials"); or
                       o   result in a loss by the Company (determined on the same basis as the
                           Applicable Financials were prepared) equivalent to 10% or more of the
                           consolidated net asset value of the Group, compared to the consolidated
                           net asset value of the Group as set out in the Applicable Financials. A
                           "Loss" means all liabilities, losses, claims, damages, costs and/or
                           expenses of any nature whatsoever; or
                   -   the JSE All Share Index closing price, or any equivalent or replacement
                       thereof, falls and remains below the JSE All Share Index closing price on the
                       business day prior to the Signature Date, multiplied by 80% (the JSE All Share
                       Index closing price will be as published on the applicable Bloomberg screen
                       (JALSH Index HP)) for 5 or more consecutive trading days at any time after the
                       Signature Date.

5   IRREVOCABLE UNDERTAKINGS
    
    To date, Shareholders who collectively hold or will hold in aggregate 68,427,401 Shares,
    representing 58.22% of all the issued Shares in the Company, have provided irrevocable
    undertakings to vote in favour of the Scheme Resolution at the General Meeting or any
    adjournment thereof.

                                                          Date of                           Percentage
                                                      irrevocable      Shares subject     Shareholding
     Shareholder                                      undertaking       to undertaking            (%)*
     Lereko Metier Capital Growth Fund
     Trust and the LMCGF Parallel Trust I         30 October 2018           38,282,784           32.57
     Steyn Capital Management Proprietary
     Limited                                      31 October 2018           13,298,575           11.31
     Robert van Zyl                               31 October 2018            2,797,936            2.38
     Asymmetry Asset Managers Proprietary
     Limited                                      31 October 2018            2,737,639            2.33
     Pieter Buitendag                             31 October 2018            1,918,161            1.63
     Edge Reformation (RF) Proprietary
     Limited                                      31 October 2018            1,428,877            1.22
     Element Investment Managers
     Proprietary Limited                          1 November 2018            7,963,429            6.78
                                    TOTAL                                   68,427,401           58.22
    * Percentage shareholding has been calculated with reference to all the issued Shares in
      the Company.

6   GUARANTEE
    
    In compliance with regulations 111(4) and 111(5) of the Companies Regulations, the Offerors have
    provided the Takeover Regulation Panel with an irrevocable, unconditional bank guarantee issued
    by The Standard Bank of South Africa Limited ("Standard Bank") for the maximum amount of the
    Scheme Consideration, being an amount of R209,866,424.00 confirming that, in the event that the
    Scheme Consideration is not paid within the relevant time period, Standard Bank agrees to make
    payment of the Scheme Consideration to Computershare Investor Services Proprietary Limited,
    being the Company's transfer secretaries, for the benefit of Scheme Participants.

7   DELISTING
    
    Following implementation of the Scheme, the listing of all the Shares on AltX will be terminated.

8   ACTING AS PRINCIPAL
    
    The Offerors confirm that they are the ultimate proposed purchasers of all the Scheme Shares and
    that they are not acting as agent or broker for any other party. 

    No party is acting in concert with the Offerors, other than the respective general partners of 
    the Offerors (being Metier Capital Growth Fund II GP Proprietary Limited in its capacity as 
    ultimate general partner of MCGF II Partnership and Metier Mauritius GP as ultimate general 
    partner of MCGF II Investments) and their controlling shareholder (being Metier Investment and 
    Advisory Services Proprietary Limited), who are regarded to be acting in concert in terms of 
    section 117(2) of the Companies Act.  The aforesaid general partners do not hold any beneficial 
    interest in any Shares, while Metier Investment and Advisory Services Proprietary Limited holds 
    an indirect beneficial interest in 2,147,684 Shares, constituting 1.83% of the issued Shares in 
    the Company. These parties will be excluded for purposes of determining whether the applicable 
    quorum requirements are satisfied and from voting on the Scheme Resolution, as contemplated in 
    section 115(4) of the Companies Act.

9   INDEPENDENT BOARD, INDEPENDENT EXPERT AND RECOMMENDATIONS
    
    The Independent Board has appointed Nodus Capital TS Proprietary Limited as the independent
    expert ("Independent Expert"), as required in terms of section 114(2) of the Companies Act and
    the Companies Regulations, to issue an opinion dealing with the matters set out in sections 114(2)
    and 114(3) of the Companies Act and regulations 90 and 110(1) of the Companies Regulations,
    and to express an opinion on whether the Scheme and the Scheme Consideration are fair and
    reasonable to Shareholders ("Independent Expert Report").

    Having regard to the Independent Expert Report (which is in draft form as at the Signature Date),
    the Independent Board is of the opinion that the Scheme and the Scheme Consideration are fair
    and reasonable to Shareholders.
  
    The final Independent Expert Report will be detailed in the Circular referred to in paragraph 10
    below.
      
    The Independent Board intends to recommend in the Circular (as defined below) that Shareholders
    vote in favour of the Scheme Resolution.

10  CIRCULAR AND POSTING DATE
      
    The Company and the Offerors will issue a combined offer circular to Shareholders, as
    contemplated in regulation 102 of the Companies Regulations, setting out the full terms and
    conditions of the Scheme and including the notice convening the general meeting of the
    Shareholders to consider and, if deemed appropriate, approve the Scheme Resolution ("General
    Meeting"), a form of proxy in respect of the General Meeting, and a form of surrender and transfer
    for use by certificated Shareholders ("Circular").
 
    The Circular is expected to be distributed to Shareholders on or about 30 November 2018.
    The salient dates pertaining to the Scheme will be released on SENS and published in the press
    prior to the distribution of the Circular.

11  RESPONSIBILITY STATEMENTS
      
    The Independent Board, collectively and individually, accepts responsibility for the information
    contained in this Firm Intention Announcement to the extent that it relates to the Company. To the
    best of its knowledge and belief, the information contained in this Firm Intention Announcement
    pertaining to the Company is true and nothing has been omitted that is likely to affect the import of
    the information.
    
    The Offerors, collectively and individually, accept responsibility for the information contained in this
    Firm Intention Announcement to the extent that it relates to the Offerors. To the best of their
    knowledge and belief, the information contained in this Firm Intention Announcement pertaining to
    the Offerors is true and nothing has been omitted that is likely to affect the import of the
    information.

Johannesburg
7 November 2018

Corporate Advisor and Transaction Sponsor to the Company
Merchantec Capital

Legal Advisor to the Company
Webber Wentzel

Financial and Corporate Advisor to the Offerors
The Standard Bank of South Africa Limited

Legal Advisor to the Offerors
Cliffe Dekker Hofmeyr Inc.

Independent Expert
Nodus Capital TS Proprietary Limited




                                                                                                            

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