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REX TRUEFORM GROUP LIMITED - Introduction of shareholders into Ombrecorp and further investments in SA Water Works Holdings (RF) (Pty) Lt

Release Date: 25/02/2019 17:15
Code(s): RTN RTO RTOP     PDF:  
 
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Introduction of shareholders into Ombrecorp and further investments in SA Water Works Holdings (RF) (Pty) Lt

REX TRUEFORM GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/009839/06)
JSE share code: RTO   ISIN: ZAE000250387
JSE share code: RTN   ISIN: ZAE000250395
JSE share code: RTOP  ISIN: ZAE000250403
("Rex Trueform" or "the company")


INTRODUCTION OF NEW SHAREHOLDERS INTO OMBRECORP TRADING (RF) PROPRIETARY LIMITED AND FURTHER INVESTMENT 
IN SA WATER WORKS HOLDING COMPANY (RF) PROPRIETARY LIMITED


1.   INTRODUCTION
     Shareholders are referred to the SENS announcement released by Rex Trueform on 28 September
     2018 (the "28 September announcement"), wherein the company advised that it had, through its
     wholly-owned subsidiary, Ombrecorp Trading (RF) Proprietary Limited (formerly Ombrecorp
     Trading Proprietary Limited) ("OmbreCorp"), subscribed for 33.78% of the issued share capital of
     SA Water Works Holding Company (RF) Proprietary Limited (formerly SA Water Works Holding
     Company Proprietary Limited) ("SAWW"), which company acquired, through a wholly-owned
     subsidiary, 73.425% of the ordinary issued shares in the share capital of Sembcorp Siza Water (RF)
     Proprietary Limited ("Sembcorp Siza") (the "Sembcorp Siza acquisition"). In the same
     announcement, the company stated its intention to introduce additional third party shareholders into
     Ombrecorp (with Rex Trueform retaining a majority stake), and the intended acquisition of
     Silulumanzi (RF) Proprietary Limited (formerly Sembcorp Silulumanzi (RF) Proprietary Limited)
     ("Silulumanzi") by SAWW via its wholly-owned subsidiary, SA Water Works (RF) Proprietary
     Limited (formerly SA Water Works Proprietary Limited) (the "SAWW subsidiary").

2.   INTRODUCTION OF THE NEW OMBRECORP SHAREHOLDERS
     A subscription agreement (the "subscription agreement") has been signed between Rex Trueform,
     Ombrecorp, The Community Chest of the Western Cape (the "Community Chest"), Cornerstone
     Institute (RF) NPC ("Cornerstone"), Desmond Tutu HIV Foundation NPC ("Desmond Tutu HIV
     Foundation"), the Trustees for the time being of the District Six Museum Foundation Trust ("District
     Six Museum Foundation") and the Trustees for the time being of the Wheatfield Estate Foundation
     Trust ("Wheatfield") (collectively the "new Ombrecorp shareholders") whereby Rex Trueform and
     each of the new Ombrecorp shareholders will subscribe for new shares in Ombrecorp at a value of R1
     per share, as the value of the assets of Ombrecorp approximates the value of its liabilities (the "new
     Ombrecorp shares"), as follows:

     Subscriber                                            Shareholding in Ombrecorp after the issue of
                                                                           the new Ombrecorp shares (%)
     Community Chest                                                                                  6
     Cornerstone                                                                                     15
     Desmond Tutu HIV Foundation                                                                      6
     District Six Museum Foundation                                                                   6
     Wheatfield                                                                                      15
     Rex Trueform                                                                                    52

     Rex Trueform's shareholding in Ombrecorp will be diluted from 100% to 52% due to the introduction
     of the new Ombrecorp shareholders into Ombrecorp. Salient details of the new Ombrecorp
     shareholders are as follows:

     Community Chest
     Community Chest manages social investment funds on behalf of corporate donors and foundations
     and is an inclusive development thought leader with a 90 year track record of delivery. Projects
     designed and managed on behalf of public and private sector entities are focused on Education,
     Income Generation, Health and Community Development. The Community Chest supports over 300
     community based organisations annually and has a fulltime team of 36 employees as well as a
     network of field associates in the pursuit of delivering to the strategic development frameworks of 
     the National Development Plan and the Sustainable Development Goals.

     Cornerstone
     Cornerstone, a tertiary education institution, is a non-profit company based in Cape Town, which
     focuses on education and the development of future leaders. There are currently more than 500
     students who are enrolled in both undergraduate and postgraduate programmes in a multiple of
     disciplines, including education, entrepreneurship, psychology, sociology, theology and media studies,
     who are benefitting from Cornerstone’s support.

     Desmond Tutu HIV Foundation
     Desmond Tutu HIV Foundation is a registered non-profit company established in association with the
     Desmond Tutu HIV Centre, an accredited research centre within the Faculty of Health Sciences,
     University of Cape Town. Pairing internationally acclaimed research with community-driven
     development programmes, Desmond Tutu HIV Foundation collaborates with those most at risk to find
     innovative solutions in the prevention and treatment of HIV and related infections. Desmond Tutu
     HIV Foundation strives to improve the health and wellbeing of the communities it serves while
     contributing to local and national health policy.

     District Six Museum Foundation
     District Six Museum Foundation was established in 1989 and launched as a museum in 1994. District
     Six Museum Foundation is committed to telling the stories of forced removals and assisting in the
     reconstitution of the community of District Six and Cape Town by drawing on a heritage of non-
     racialism, non-sexism, and anti-class discrimination.

     Wheatfield
     Wheatfield, a non-profit organisation, aims to empower South Africa's youth by providing financial
     and general support with regard to furthering their education. Over 100 students are assisted each year
     in various study disciplines. In addition, Wheatfield supports various feeding schemes and old age
     homes in the greater Cape Town area.

3.   RATIONALE FOR THE INTRODUCTION OF THE NEW OMBRECORP SHAREHOLDERS
     The credentials of these long-established not-for-profit organisations are important for the corporate
     social investment and transformation imperatives of the company.

4.   INTRODUCTION OF NEW SHAREHOLDER INTO SAWW
     Pursuant to the introduction of a new SAWW shareholder, being SAWW Manco Proprietary Limited
     (formerly K2018080976 South Africa Proprietary Limited) ("SAWW Manco"), Ombrecorp's
     shareholding in SAWW was diluted from 33.78% to 15.16%.

5.   ADDENDUM TO SUBSCRIPTION AGREEMENT
     Shareholders are advised that an addendum to the subscription agreement as set out in the 28 September
     announcement has been signed by the parties thereto, being Ombrecorp, SAWW and 27 Four, with the material 
     amendments to the original subscription agreement being that Ombrecorp no longer has an option with regard 
     to a second subscription for additional shares in SAWW (the "additional SAWW shares"), but now will subscribe 
     for additional SAWW shares and advance further funding to SAWW, in the aggregate amount of R83 673 025. As a 
     consequence of the subscription for the additional SAWW shares by Ombrecorp, Ombrecorp will hold 30% of the issued
     share capital of SAWW (the "Ombrecorp subscription").

6.   FURTHER ACQUISITION BY SAWW
     As was the stated intention in the 28 September announcement, SAWW has acquired, via the SAWW
     subsidiary, [i] 100% of the ordinary issued share capital of SA Water Works Utilities Proprietary
     Limited (formerly Sembcorp Utilities South Africa Proprietary Limited) ("SA Water Works
     Utilities") – which holds 52% of the ordinary issued shares in Silulumanzi - and [ii] 48% of the
     ordinary issued shares in the share capital of Silulumanzi, from Sembcorp Utilities (Netherlands) NV
     (the "Silulumanzi acquisition").

     SA Water Works Utilities has been in existence since 1998 and provides operation and maintenance
     services to Silulumanzi. Silulumanzi conducts a water concession business, operating in the municipal
     boundaries of the City of Mbombela Local Municipality and the greater parts of Nelspruit and, since
     1999, has provided water and water services to residential, commercial and industrial consumers
     pursuant to the concession agreement executed between the City of Mbombela Local Municipality and
     Silulumanzi's predecessors-in-title.

     The total purchase consideration for the Silulumanzi acquisition was R723 753 934, which
     consideration was funded via the issue of preference shares in the SAWW subsidiary with a value of
     R400 000 000 to Nedbank Limited, shareholder loan facilities afforded by certain other SAWW
     shareholders (being 27 Four and SAWW Manco) on commercial terms and at market-related rates,
     and the subscription of further shares in SAWW by such SAWW shareholders, in the aggregate
     amount of R323 753 934.

     As previously advised, Ombrecorp will now, in terms of the Ombrecorp subscription, subscribe for the
     additional SAWW shares and advance further funding to SAWW on normal commercial terms, which
     subscription and funding shall be financed as follows:

     -   Rex Trueform will advance a further shareholder loan on normal commercial terms in the amount
         of R11 673 025 to Ombrecorp (the "Rex loan");
     -   additional funding in the form of a term loan facility of R72 000 000 (the "27 Four funding")
         will be advanced to Ombrecorp by 27 Four Life Limited (previously Prescient Life Limited) ("27
         Four") in terms of a term loan facility agreement entered into between Ombrecorp and 27 Four
         (the "term loan agreement"). The facility provided by 27 Four pursuant to the term loan
         agreement will be secured by a cession and pledge in securitatem debiti by Ombrecorp to 27 Four
         of its shares in, and loan claims against, SAWW, a cession and pledge in securitatem debiti by
         Rex Trueform and the new Ombrecorp shareholders to 27 Four of their shares in, and loan claims
         against, Ombrecorp (the "shareholder cession and pledge"), and a cession and pledge in
         securitatem debiti by Ombrecorp to 27 Four of its bank accounts. 27 Four will furthermore be
         accorded certain payment preferences in relation to the 27 Four funding, and Rex Trueform will
         waive its right to accelerate the repayment of the Rex loan as a result of any event of default
         under the agreement pursuant to which the Rex loan was advanced for as long as there is
         outstanding indebtedness under (and as defined in) the term loan agreement (the "27 Four
         Payment Preferences").

7.   FINANCIAL INFORMATION
     The consolidated profit after tax, total assets and net asset value of the companies acquired by SAWW
     (via the SAWW subsidiary) in terms of the Silulumanzi acquisition are R65 197 104, R301 481 818
     and R196 978 976 respectively, based on the consolidated audited financial statements of SA Water
     Works Utilities and the audited financial statements of Silulumanzi for the financial year ended 31
     December 2017, which financial statements were prepared in accordance with International Financial
     Reporting Standards. SAWW will hold an effective 100% of Silulumanzi.

     The discounted free cash flow generated by the assets acquired by SAWW (via the SAWW
     subsidiary) has a value of R650 000 000, based on a valuation performed by SAWW during
     September 2017, which valuation was based on forecasts and the audited financial statements of SA
     Water Works Utilities and Silulumanzi for the financial year ended 31 December 2016. The total
     purchase consideration of R723 753 934 adjusts the valuation for the net cash as at 31 December
     2017, an interest escalation amount and transaction costs.

8.   NOTIFICATION IN TERMS OF SECTION 45(5) OF THE COMPANIES ACT 71 OF 2008
     Notice is hereby given that, in terms of the provisions of section 45(5) of the Companies Act 71 of
     2008 ("the Companies Act"), and pursuant to the special resolution passed at the annual general
     meeting of Rex Trueform held on 30 November 2018 approving the authority of the board to provide
     direct or indirect financial assistance to, inter alia, subsidiaries of the company, the board has adopted
     resolutions on 12 February 2019 in terms of section 45(2) of the Companies Act authorising the
     company to provide financial assistance to Ombrecorp by way of the company entering into the
     shareholder cession and pledge with 27 Four, and agreeing to the 27 Four Payment Preferences.

     The board resolutions in this regard were adopted in compliance with the provisions of section 45 of
     the Companies Act.

9.   CATEGORISATION
     The Sembcorp Siza acquisition, introduction of new Ombrecorp shareholders and the Ombrecorp
     subscription constitute, in aggregate, a category 2 transaction for Rex Trueform in terms of the JSE
     Listings Requirements and accordingly do not require approval by Rex Trueform shareholders.


25 February 2019


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Date: 25/02/2019 05:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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