S112 Related party divestment by GAM of LFS Assets, partial withdrawal and renewal of cautionary announcement
GLOBAL ASSET MANAGEMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/003192/06)
Share Code: GAM ISIN: ZAE000173498
("Global" or “the Company” or “the Group”)
SECTION 112 RELATED PARTY DIVESTMENT BY GLOBAL OF LFS ASSETS PROPRIETARY
LIMITED (“LFS”), PARTIAL WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the detailed cautionary announcement dated
18 December 2018 regarding the potential divestment by Global of LFS, and
the renewal of cautionary announcement dated 29 January 2019 (“Renewal of
Shareholders are advised that LFS, a wholly-owned subsidiary of Global, has
entered into a subscription agreement (“Subscription Agreement”) with Main
Street 1236 Proprietary Limited (“Main Street”) in terms of which it has been
agreed that LFS will issue, and Main Street will subscribe for, 198 000 LFS shares
(representing 99% of LFS’s total issued share capital) (“Subscription Shares”),
and that Main Street will become the controlling shareholder in LFS, with Global
holding a small nominal shareholding in LFS (“the Transaction”).
2. Effective date
The effective date of the Transaction is 1 February 2019 (“Effective Date”).
3. Terms of the Transaction
3.1 The consideration for the Subscription Shares is R67.2 million, payable in
cash by Main Street to LFS by no later than 1 May 2019.
3.2 The normal warranties are in place for a transaction of this nature.
3.3 The Subscription Agreement includes a provision in terms of which Global
has provided certain restraint of trade undertakings in favour of Main
Street for a period of three years from the Effective Date.
4. Description of Main Street
Main Street is a Black Economic Empowerment investment holding company,
duly incorporated under the laws of the Republic of South Africa. The
shareholders of Main Street are the current management team of LFS
(including Mr MCC van Ettinger) and Praxley Private Equity Proprietary Limited.
As stated in paragraph 9 below, Main Street is a related party to Global in
terms of the JSE Listings Requirements by virtue of the fact that Mr MCC van
Ettinger is also a director of Main Street as well as Global.
5. Nature of business of LFS
LFS is an asset finance company, focussing on offering flexible, customised and
structured asset finance and leasing solutions through the acquisition of
material handling and other equipment which is rented to end users under
long term operating rental contracts.
6. Rationale for the Transaction
The Transaction is in line with the Group’s long-term strategy to focus on its
renewable energy business.
7. Application of proceeds
The proceeds from the Transaction will be used to fund the Group’s waste
plastics to energy plant following the successful pilot plant and receipt of all
8. Conditions precedent
8.1 The Transaction is subject to the following outstanding conditions precedent:
8.1.1 by no later than 30 April 2019, the necessary regulatory approvals are
obtained which may include but shall not be limited to the JSE and the
Takeover Regulation Panel, and the relevant consents being obtained in
terms of the Competition Act, No. 89 of 1998, as amended (to the extent
8.1.2 by no later than 28 February 2019, a shareholders’ agreement is
concluded between the shareholders of Main Street;
8.1.3 by no later than 31 March 2019, all loan agreements pursuant to an
acquisition finance facility accorded to Main Street having been
8.1.4 by no later than 28 February 2019, Global having obtained irrevocable
guarantees from its shareholders approving the entering into of the
Subscription Agreement, the Transaction and all other agreements and
transactions contemplated in the Subscription Agreement;
8.1.5 by no later than 28 February 2019, obtaining all necessary consents in
respect of LFS’s material contracts in accordance with the requirements
of such agreements;
8.1.6 by no later than 28 February 2019, LFS concluding new employment
contracts with Messrs. MCC van Ettinger and D Chifunyise on terms
acceptable to Main Street and LFS, subject only to the condition that
the Subscription Agreement becomes unconditional;
8.1.7 no material adverse change, as defined in the Subscription Agreement,
occurs before 30 March 2019 and Main Street not notify LFS of such
material adverse change before that date; and
8.1.8 by no later than 28 February 2019, LFS has procured the approval from its
financing partners in term of the change in shareholding and the
payment of any dividends in accordance with the Subscription
8.2 The parties may, by agreement in writing, extend the dates referred to in
paragraph 8.1 above for fulfilment of any of the aforementioned conditions
9. Classification of the Transaction
The Transaction is classified as a Category 1 transaction in terms of the JSE
Listings Requirements. Additionally, Main Street is a related party to Global in
terms of paragraph 10.1(b)(vii) of the JSE Listings Requirements by virtue of the
fact that Mr MCC van Ettinger is a director of Main Street as well as Global. Mr
MCC van Ettinger will also be a shareholder in Main Street. The Transaction is
therefore considered to be a related party transaction in terms of paragraph
10.1(a) of the JSE Listings Requirements and consequently will require an
opinion from an independent professional expert acceptable to the JSE
regarding the fairness of the terms of the Transaction to Global shareholders.
Additionally, the Transaction is deemed to constitute a disposal of the greater
part of the undertaking or assets of Global in terms of section 112 of the
Companies Act, No. 71 of 2008 (“Companies Act”), and as such, constitutes an
“affected transaction” as defined in section 117(1)(c)(i) of the Companies Act.
The Transaction will consequently be regulated by the Companies Act and the
Accordingly, shareholder approval of the Transaction will be required in terms
of the JSE Listings Requirements and the Takeover Regulations, and a circular
containing details of the Transaction will be distributed to shareholders within
the applicable regulatory timeframes.
Shareholders are advised that there may be uncertainty as to whether or not
the JSE will allow the Company’s listing to continue following the Transaction.
However, shareholders are referred to paragraph 11 below regarding the
10. Financial information
The value of the net assets, pre the impairment at Group level as noted below,
that are the subject of the Transaction as at 30 November 2018, being the last
financial yearend of LFS, approximates R111.1 million. The profit after tax
attributable to such net assets for the 12 months ended 30 November 2018
approximates R3.6 million.
The financial information was prepared in accordance with full IFRS and
extracted from the draft Consolidated Annual Financial Statements of the
Group for the year ended 30 November 2018. The financial information is
subject to the outcome of the audit, which is currently being finalised by
Crowe, the Group’s auditors. The results of LFS will be reflected as discontinued
operations, including an impairment of approximates R43.3 million, in the group
results of Global, which results are expected to be published on or about
28 February 2019.
11. Partial withdrawal of cautionary announcement and renewal of Cautionary
Shareholders are referred to the Renewal of Cautionary Announcement and
are advised that, following publication of this announcement, caution, as it
relates to the Transaction, is no longer required to be exercised by shareholders
when dealing in the Company’s securities.
However, the Company remains under cautionary in respect of the Proposed
Delisting, as referred to in the Renewal of Cautionary Announcement and
shareholders are therefore advised to continue to exercise caution when
dealing in the Company’s securities until a further announcement in respect of
the Proposed Delisting is made and the cautionary in this regard is withdrawn.
By order of the Board
19 February 2019
Arbor Capital Sponsors Proprietary Limited
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