Wrap Text
Firm Intention Offer to Acquire the Entire Issued Share Capital of Verimark
Verimark Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1998/006957/06
JSE share code: VMK
ISIN number: ZAE000068011
("Verimark" or "the Company")
Van Straaten Family Trust (“VFT”) via a special purpose
vehicle, established for the sole purpose to satisfy the
requirements of the Transaction, being
K2018535347 (South Africa) Proprietary Limited
Incorporated in the Republic of South Africa
Registration number: 2018/535347/07
(“the Offeror”)
JOINT ANNOUNCEMENT OF THE FIRM INTENTION OFFER BY THE OFFEROR
TO ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL OF VERIMARK, BY WAY
OF A SCHEME OF ARRANGEMENT OR SUBSTITUTE OFFER AND WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1 Verimark shareholders are referred to the cautionary
announcement released on SENS on 22 October 2018
(“Cautionary Announcement”) and are hereby notified of the
Offeror’s firm intention to make an offer (“Firm Offer”)
to acquire all the ordinary shares in Verimark (“Ordinary
Shares”), other than any Ordinary Shares held by VFT, its
concert party, Prime Rentals CC and any subsidiaries of
Verimark (“Treasury Shares”) (collectively the “Ineligible
Shares”). It is proposed that the Firm Offer be
implemented by way of a scheme of arrangement (“the
Scheme”) in terms of section 114 of the Companies Act, 71
of 2008 as amended (“the Companies Act”) or failing that,
followed by a general offer in terms of section
117(1)(c)(v) of the Companies Act (“the Substitute
Offer”), with the Ordinary Shares to be so acquired being
referred to hereafter as “Scheme Shares” (the Scheme and
the Substitute offer, collectively as “the Transaction”).
The amount payable in terms of the Scheme will be a cash
consideration of R1.50 per Scheme Share (“Scheme
Consideration”).
1.2 Verimark shareholders are further advised that the board
of directors of Verimark (“Verimark Board”) has
established an independent board (“Independent Board”) for
the purposes of evaluating the terms and conditions of the
Transaction and to provide the opinion as required by the
Companies Regulations, 2011 (“the Companies Regulations”)
promulgated in terms of the Companies Act.
1.3 The purpose of this announcement is to advise Verimark
shareholders of the terms and conditions of the
Transaction.
2. RATIONALE FOR THE OFFER
2.1 Rationale for the Offeror
The Offeror believes that the shareholders of Verimark
are not deriving the benefits associated with a public
listed company due to:
- Verimark’s volatile earnings history which, due to its
dependence on imports, is hugely affected by exchange
rate fluctuations. During the last 5 years earnings
fluctuated between 31.9 cents per share and 8 cents per
share. This followed a similar cyclical pattern of the
prior 5 years of a high of 31.5 cents per share and a low
of -3.4 cents per share.
- Verimark’s disappointing share price performance, which
since listing in 2005 at a price of R2.50 per share, has
fallen to a low of R0.33 per share. Prior to the
Cautionary Announcement, the shares were trading at R1.00
per share with a current 30-day volume weighted average
price (“VWAP”) of R1.04.
- Verimark’s low market capitalisation, lack of analyst
coverage and institutional support. At a market
capitalisation of approximately R101 million prior to the
Cautionary Announcement, Verimark falls below the radar
of the institutional investors and gets virtually no
analyst coverage. It is unlikely that this situation will
improve in future.
- The Company’s lack of liquidity over the last 5 years,
which has averaged only 9% of issued shares traded per
annum and over the last year only 4% (excluding share buy
backs).
- Verimark’s reliance on organic growth and inability to
use its scrip to fund acquisitive growth. The lack of
inorganic strategy and the use of highly rated scrip to
finance acquisitions, negate an important rationale to
remain listed.
As a result, the Offeror believes that the disadvantages of
a continued listing outweigh the advantages and that the
delisting of Verimark from the JSE will positively impact
the business both from a cost saving and operational focus
perspective. It is also VFT’s and the Offeror’s opinion that
Verimark’s current operations are adequately capitalised and
in no need of an equity capital raise in the foreseeable
future.
Furthermore, considering that the Offeror and its concert
parties already own a 71% interest in Verimark (excluding
Treasury Shares), the Scheme will provide a mechanism
through which the holders of Scheme Shares are able to
realise their investment in a historically illiquid share at
an attractive premium to historical market prices.
2.2 Rationale for holders of Scheme Shares
2.2.1 The Scheme Consideration of R1.50 per Scheme Share,
represents a premium of 50% to the 30-day VWAP of
Verimark of R1.00 per Ordinary Share, as at 22 October
2018.
2.2.2 The Transaction will provide Verimark shareholders
with an opportunity to dispose of their Scheme Shares
at a substantial premium, accordingly the Independent
Board believes that it is in the interest of Verimark
and the Verimark shareholders that they be given an
opportunity to consider the Transaction.
3. MECHANICS OF THE SCHEME
3.1 The Scheme will constitute an “affected transaction” as
defined in section 117(1)(c) of the Companies Act. It
will be implemented in accordance with the Companies
Act, the Companies Regulations (which include the
takeover regulations prescribed by the Minister of Trade
and Industry in terms of section 120 of the Companies
Act (“Takeover Regulations”)) and will be regulated by
the Takeover Regulation Panel (“TRP”).
3.2 The Scheme will be implemented by way of a scheme of
arrangement in terms of sections 114 and 115 of the
Companies Act to be proposed by the Verimark Board
between Verimark and the Verimark shareholders (other
than the holders of the Ineligible Shares).
3.3 If the Scheme becomes operative, the delisting of the
Company’s shares from the JSE will occur and all
Verimark shareholders, excluding those Verimark
shareholders that validly exercise their appraisal
rights in accordance with section 164 of the Companies
Act ("Appraisal Rights") 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) and/or 164(15)(c)(v)(aa) 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, will be deemed to have disposed of all of
their Scheme Shares to the Offeror in exchange for the
Scheme Consideration.
4. MATERIAL TERMS OF THE OFFER
The Offer will be made on the basis that –
4.1 the Offeror will acquire all of the Scheme Shares, being
29 508 033 Ordinary Shares;
4.2 following the implementation of the Scheme, Verimark
will be delisted from the JSE Limited (“JSE”) and wholly
owned by the Offeror and its concert parties; and
4.3 upon implementation of the Scheme, holders of Scheme
Shares will receive the scheme consideration of R1.50
(one rand and fifty cents) (“the Scheme Consideration”)
for every 1 (one) Scheme Share disposed of in terms of
the Scheme.
5. THE SCHEME CONDITIONS
5.1 The Scheme will be subject to (and will become operative
on the relevant operative date upon) the fulfilment of the
following conditions precedent (“Scheme Conditions”):
5.1.1 that the Scheme be approved by the requisite majority of
holders of Scheme Shares by no later than 28 February
2019 (being presently the “Long Stop Date”), as
contemplated in section 115(2)(a) of the Companies Act,
and, in the event of the provisions of section
115(2)(c) becoming applicable –
5.1.1.1 by no later than the Long Stop Date, the High
Court of South Africa approves the implementation
of such resolution; and
5.1.1.2 if applicable, Verimark not treating the
aforesaid resolution as a nullity as contemplated
in section 115(5)(b) of the Companies Act;
5.1.2 to the extent that Verimark shareholders exercise their
Appraisal Rights, either:
5.1.2.1 Verimark shareholders holding no more than 10% of
all of the Scheme Shares give notice objecting to
the Scheme as contemplated in section 164(3) of
the Companies Act and vote against the
Transaction Resolution at the Scheme Meeting; or
5.1.2.2 if Verimark shareholders do give notice objecting
to the Scheme as contemplated in section 164(3)
of the Companies Act and vote against the
Transaction Resolution at the Scheme Meeting in
respect of more than 10% of all the Scheme
Shares, such Verimark 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 more than 10% of
all the Scheme Shares within the time periods
permitted in terms of the Companies Act;
5.1.3 by no later than 28 February 2019 that, the approval of
the JSE, the TRP and South African Reserve Bank on an
unconditional basis or, to the extent that any such
Regulatory Consents are subject to any obligation,
undertaking, condition or qualification, the party/ies
adversely affected by the obligation, undertaking,
condition or qualification confirms in writing to the
other/s that the obligation, undertaking, condition or
qualification is acceptable to it or them, which
confirmation shall not be unreasonably withheld or
delayed.
5.1.4 subject to paragraph 5.2, in the event that the Scheme
Conditions are not fulfilled or waived in a timely
manner and the Scheme is terminated as contemplated in
paragraph 7, then the Scheme will not become operative
and shall be of no force or effect.
5.2 The Scheme Condition in paragraph 5.1.2 may be waived by
the Offeror upon written notice to Verimark, prior to the
date for fulfilment of the relevant Scheme Condition.
5.3 The Scheme Conditions in paragraphs 5.1.1 and 5.1.3 may be
waived by the Offeror and Verimark upon written agreement,
prior to the date for fulfilment of the relevant Scheme
Condition.
5.4 The dates and times for the fulfilment of the relevant
Scheme Conditions may be extended by written agreement
between the Offeror and Verimark.
6. THE SUBSTITUTE OFFER
It is an express condition of the Scheme that, should the
Scheme fail for any reason other than the termination events
in terms of paragraph 7, then immediately after the failure of
the Scheme:
6.1 The Substitute Offer will be deemed to have been made in
terms of section 117(1)(c)(v) of the Companies Act by the
Offeror to the Verimark shareholders to acquire the Scheme
Shares at an offer price of R1.50 per Share (“the
Substitute Offer Consideration”);
6.2 The Delisting of Verimark from the JSE in terms of
sections 1.14 to 1.16 of the Listings Requirements will
become operative if the ordinary resolution to be proposed
at the Scheme Meeting has been passed by the requisite
majority of eligible Verimark shareholders.
7. TERMINATION EVENTS
The Scheme will terminate forthwith –
7.1 upon written notice by the Offeror to Verimark if the
Independent Board recommends a solicited alternative
proposal to the Verimark shareholders. A “Solicited
Alternative Proposal” means any solicitation or initiation
by Verimark of any expression of interest, enquiry,
proposal or offer regarding certain alternative proposals
in respect of the Scheme Shares and or the Verimark group;
7.2 upon written notice by Verimark to the Offeror if Verimark
has received an alternative proposal which the Independent
Board reasonably determines to be a Superior Proposal, and
the Offeror has not, within 5 business days from the date
on which the terms of the alternative proposal is
communicated to it, made a matching (or superior) offer. A
"Superior Proposal" is, in summary, a proposal from a
third party received by Verimark for the acquisition of
all the Scheme Shares in issue (excluding Treasury Shares
and Scheme Shares held by the third party and/or persons
acting in concert with it), and which is at a
consideration per Scheme Share of greater than the Scheme
Consideration and is considered by the Board, acting in
good faith and after having consulted its advisors, to be
bona fide;
7.3 upon written notice from either Verimark to the Offeror,
or the Offeror to Verimark, if the Scheme is not approved
by the requisite majority of eligible Verimark
shareholders at the Scheme Meeting;
7.4 if any Scheme Condition which may be waived by the Offeror
becomes incapable of fulfilment, and the Offeror notifies
Verimark in writing that the Offeror will not waive that
Scheme Condition;
7.5 upon written notice from either Verimark to the Offeror,
or the Offeror to Verimark, 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 (to the extent permitted);
7.6 subject to paragraph 7.7 below, upon written notice by the
Offeror to Verimark, or Verimark to the Offeror
("Defaulting Party"), given on or before the last day to
trade Scheme Shares on the JSE in order to be recorded in
Verimark's securities register at the close of business on
the record date for the Scheme, if the Defaulting Party
commits a material breach of any provision of the Firm
Offer or the Scheme and fails to remedy such breach within
10 business days of receipt of a written notice by the
Defaulting Party from another party requesting such
remedy. A material breach shall mean any breach by –
7.6.1 the Company of the provisions of paragraph 7.1 relating
to a Solicited Alternative Proposal, if a Solicited
Alternative Proposal is made which was a proximate and
material consequence of a breach of paragraph 7.1; or
7.6.2 any Defaulting Party which would either (i) be such as
to preclude the due fulfilment of any Scheme Condition
or implementation of the Scheme; and/or (ii) result or
is reasonably likely to result in the Offeror, the
Company or the Scheme Participants incurring or
suffering losses, damages, liabilities, costs, claims or
expenses in excess of an amount of R5,000,000.
7.7 No party may terminate the Scheme prior to the last day
to trade Scheme Shares on the JSE in order to be recorded
in Verimark's securities register at the close of
business on the record date for the Scheme.
8. SHAREHOLDING IN VERIMARK AND ACTING AS PRINCIPAL
8.1 The Offeror confirms that its concert parties, VFT,
together with Prime Rentals CC, are the holders of 71% of
the issued share capital in Verimark (excluding Treasury
Shares).
8.2 The Offeror confirms that it is the ultimate prospective
purchaser of the Scheme Shares and that it is acting alone
and not in concert with any party, other than with VFT and
Prime Rentals CC.
9. GUARANTEE
In compliance with regulations 111(4) and 111(5) of the
Companies Regulations, the Offeror has provided the TRP with
an irrevocable, unconditional guarantee issued by Investec
Bank Limited ("Bank") for the maximum amount of the Scheme
Consideration which is an amount of ZAR 44,262,049.50, which
guarantee confirms that in the event that the Scheme
Consideration is not paid within the relevant time period, the
Bank agrees to make payment of the Scheme Consideration to the
transfer secretaries in respect of the Scheme or such other
designated payment agent as the TRP may direct in writing, for
the benefit of the Scheme Participants and, as applicable,
Verimark. The guarantee expires on 21 May 2019.
10. IRREVOCABLE UNDERTAKINGS AND IN-PRINCIPLE LETTERS OF
SUPPORT
Irrevocable undertakings have been given to vote in favour of
the Transaction by the following Verimark shareholders who
collectively hold 5 490 649 Scheme Shares, representing 18.61%
of the Scheme Shares:
Shares Percentage
Date of subject to Shareholding
irrevocable irrevocable Of Scheme
Shareholder undertaking undertaking Shares
Standard 22 November 2018 3 699 124 12.54%
Chartered
Ghana Nominees
Daarneoc 21 November 2018 1 791 525 6.07%
Beleggings
Beperk
In addition, in-principle letters of support and intention to
vote in favour of the Transaction have been given by the
following Verimark shareholders who collectively hold
4 349 654 Scheme Shares, representing 14.74% of the Scheme
Shares.
Shares Percentage
subject to Shareholding
Date of letter of letter of Of Scheme
Shareholder support support Shares
Jobre Stassen 22 November 2018 2 899 554 9.83%
Happiness 22 November 2018 1 450 100 4.91%
Trust
11. INDEPENDENT BOARD, OPINION AND RECOMMENDATIONS
11.1 In accordance with the Companies Regulations, the
Independent Board, comprised of independent non-
executive directors, being M Kabi, N Gosa and T
Nzimande, has been appointed by the Verimark Board, to
evaluate the Transaction.
11.2 The Independent Board has appointed Mazars Corporate
Finance as the independent expert (“Independent
Expert”) to provide the Independent Board with external
advice in regard to the Scheme and to make appropriate
recommendations to the Independent Board for the
benefit of Verimark shareholders. Based on the draft
Independent Expert Report, and subject to the final
Independent Expert Report being issued in substantively
the same terms as the draft presented, the Independent
Board is presently of the opinion that the Scheme and
the Scheme Consideration are fair and reasonable to
Shareholders and intends in the Scheme Circular to
recommend that Shareholders vote in favour of the
resolution approving the Scheme.
11.3 The substance of the external advice and the opinion of
the Independent Board on the Scheme will be detailed in
the Scheme Circular.
12. FURTHER DOCUMENTATION AND SALIENT DATES
12.1 Further details of the Scheme will be included in the
Scheme Circular that will be posted to Verimark
shareholders on or about 19 December 2018. The Scheme
Circular will, inter alia, also contain a notice of the
Scheme Meeting, a form of proxy and a form of surrender
and transfer.
12.2 The Scheme will become effective and be implemented
following the fulfilment of the Scheme Conditions as
set out above. The salient dates in relation to the
Scheme will be published in due course.
13. INDEPENDENT BOARD RESPONSIBILITY STATEMENT
The Independent Board accepts responsibility for the
information contained in this announcement which relates to
Verimark and confirms that, to the best of its knowledge and
belief, such information which relates to Verimark is true and
the announcement does not omit anything likely to affect the
importance of such information.
14. OFFEROR RESPONSIBILITY STATEMENT
The Offeror accepts responsibility for the information
contained in this announcement which relates to the Offeror
and confirms that, to the best of its knowledge and belief,
such information which relates to the Offeror is true and the
announcement does not omit anything likely to affect the
importance of such information.
15. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Verimark shareholders are referred to Verimark’s cautionary
announcement released on SENS on 22 October 2018, and are
advised that, whereas the terms of the Transaction have now
been announced, caution is no longer required to be exercised
by Verimark shareholders when dealing in their Verimark
shares.
Johannesburg
23 November 2018
Joint Transaction Advisor and Transactional Sponsor to
Verimark: PSG Capital
Joint Transaction Advisor to Verimark: Khanda Capital
Transaction Advisor to the Offeror and Sponsor to Verimark:
Grindrod Bank
Date: 23/11/2018 03:00:00 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.
Sharenet Sites 
