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HUGE GROUP LIMITED - Publication of circular and notice of General Meeting

Release Date: 25/10/2019 15:39
Code(s): HUG     PDF:  
 
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Publication of circular and notice of General Meeting

HUGE GROUP LIMITED
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
(“Huge” or “the Company”)


PUBLICATION OF CIRCULAR AND NOTICE OF GENERAL MEETING

1.    PUBLICATION OF CIRCULAR

      Huge takes pleasure in announcing that it has distributed a circular to its
      shareholders (the Circular) which includes a Form of Proxy in respect of the
      effective disposal of a 16.29% interest in Huge Connect Proprietary Limited (Huge
      Connect), a wholly owned subsidiary company of Huge, to a B-BBEE investor,
      through its subscription for ordinary shares in Huge Connect (the Proposed
      Transaction). Copies of the Circular are available for inspection during normal
      business hours at the premises of Huge at Unit 6, 1 Melrose Boulevard, Melrose
      Arch, Johannesburg and on the website at www.hugegroup.com/circulars.

      The Circular contains information on the background to and reasons for the
      Proposed Transaction, detailed information on Huge and the actions to be
      taken by shareholders. Key sections of the Circular have been set out below.

2.    THE PROPROSED TRANSACTION

      On 29 August 2019, Huge announced that it had entered into an
      Implementation Agreement (the Implementation Agreement) with Windfall 111
      Properties Proprietary Limited (Windfall), an associate of Mr Vincent Mokholo,
      who is a non-executive director of the Company, and a related party to Huge.

      The Implementation Agreement contemplates the conclusion of various
      transaction agreements, including a Preference Share Subscription Agreement
      between Huge and Huge Connect, an Ordinary Share Subscription Agreement
      (the Subscription Agreement) between Huge Connect and Windfall and a
      Shareholders Agreement between Huge, Windfall and Huge Connect (the
      Transaction Agreements).

      In terms of the Preference Share Subscription Agreement, Huge will subscribe for
      1 000 preference shares in Huge Connect for a subscription price of R457 075
      000.

      Thereafter, Huge Connect will declare an ordinary dividend of R457 075 000 to
      the holders of the ordinary shares in Huge Connect, being Huge. The obligation
      of Huge Connect to effect payment of the ordinary dividend will be discharged
      in toto by set-off against the obligation of Huge to effect payment of the
      preference shares subscription price.

      Thereafter, and in terms of the Subscription Agreement, Windfall will subscribe
      (the Subscription) for 36 ordinary no par value shares (the Subscription Shares) in
      the issued ordinary capital of Huge Connect, such that after the Subscription,
      Windfall will own 16.29% of the issued share capital of Huge Connect.

      The Implementation Agreement and the Subscription Agreement are subject to
     various suspensive conditions which are customary for transactions of this nature.

3.   BACKGROUND INFORMATION

     Huge Connect is a telecommunications services company with a focus on
     growing its payment connectivity services. It was established in 2004 and
     provides connectivity to the card payment terminals of merchants, payment
     services providers and the commercial banks in South Africa by making use of
     secure, managed, dual SIM connectivity over GSM data networks. It has over 32
     000 merchants as customers. The Company has also expanded into other
     markets for payment connectivity, including connectivity for ATMs, integrated
     points of sale, medical/script verifications, telemetry applications, micro-lending
     applications and cash vaults.

     Huge is committed to transforming the businesses in which it invests by
     empowering these businesses in terms of the Codes of Good Practice on Broad-
     Based Black Economic Empowerment, as read with the Amended Information
     and Communication Technology Sector Code (the B-BBEE Codes), published by
     the Minister of Trade and Industry under section 9 of the Broad-Based Black
     Economic Empowerment Act, 2003 (the B-BBEE Act). In addition, the payment
     services providers and commercial banks, who are customers of Huge Connect,
     all have preferential procurement requirements, which require their suppliers to
     be empowered in terms of the B-BBEE Codes and the B-BBEE Act. The Proposed
     Transaction will empower historically disadvantaged individuals and it will also
     ensure that Huge Connect remains competitive in its chosen market segment.

     Windfall is a 100% black-owned company, which is 40% owned by Mr Vincent
     Mokholo, a non-executive director of Huge, and 60% owned by his wife, Mrs
     Sylvia Mokholo.

4.   RATIONALE FOR THE PROPOSED TRANSACTION

     The Company remains committed to driving transformation in ways that are
     sustainable, credible and of benefit to all its stakeholders. The Proposed
     Transaction is in keeping with this objective and the spirit of transformation and
     constitutes a positive step in aligning Huge Connect’s ownership structure to the
     ownership elements of the B-BBEE Codes. It is envisaged that the implementation
     of the Proposed Transaction will significantly improve Huge Connect’s B-BBEE
     credentials over the long-term, thus ensuring that it will continue to maintain its
     competitive advantage in both the private and public sector.

5.   PURCHASE CONSIDERATION

     The subscription price (the Subscription Consideration) for the Subscription
     Shares is an aggregate amount of R180 000 and will be settled by Windfall in
     cash. The Subscription Consideration will be used for the purposes of working
     capital.

6.   EFFECTIVE DATE OF THE PROPOSED TRANSACTION

     The effective date of the Proposed Transaction will be dependent on the
     fulfilment or waiver, as the case may be, of the conditions precedent set out in
     paragraph 7 below, and is expected to take place by no later than 28 February
      2020.

7.    CONDITIONS PRECEDENT

      The Proposed Transaction is conditional upon:

      a.      the written approval of Futuregrowth Asset Management Proprietary
              Limited, being the lender to Huge in terms of an agreement titled “Term
              Facility Agreement – ZAR200,000,000 Facility”;
      b.      the delivery by Huge, Huge Connect and Windfall (the Parties) of all
              authorising resolutions required by the parties to the Transaction
              Agreements;
      c.      the filing and acceptance of the Huge Connect MOI by the Companies
              and Intellectual Property Commission; and
      d.      the receipt of all shareholder and regulatory approvals legally required
              for the implementation of the transactions contemplated in the
              Transaction Agreements, including the Proposed Transaction, either
              unconditionally or subject to such conditions as are reasonably
              acceptable to Huge, Huge Connect and Windfall.

8.    FINANCIAL INFORMATION

      The net asset value of Huge Connect as at 28 February 2019 was R144.7 million
      and profit after tax for that year was R41.1 million, as per its audited annual
      financial statements (AFS) for the year ended 28 February 2019. The AFS have
      been prepared in accordance with International Financial Reporting Standards
      and the requirements of the Companies Act 71 of 2008.

9.    DETAILS OF THE PURCHASER

      Windfall is an associate of a related party to Huge, being Mr Vincent Mokholo, a
      non-executive director of the Company. Mr Vincent Mokholo holds 40% of the
      issued shares of Windfall and Sylvia Mokholo owns the remaining 60% issued
      shares.

10.   CATEGORISATION

      The Proposed Transaction is a related party transaction in terms of the Listings
      Requirements of the JSE.

      Accordingly, a fairness opinion was obtained in respect of the Proposed
      Transaction. The Company appointed Moore Corporate Services Cape Town
      Proprietary Limited (Moore) as the independent expert who opined on the
      fairness of the Proposed Transaction.
11.   Notice of General Meeting

      Notice is hereby given that the general meeting of shareholders will be
      held on Monday, 25 November at 10h00 at the Mfundo Room, 1st Floor,
      JSE Building, One Exchange Square, Gwen Lane, Sandown,
      Johannesburg.

      The board of directors of the Company determined that, in terms of
      section 62(3)(a), as read with section 59 of the Companies Act 71 of
      2008 (as amended), the record date for purposes of determining which
      shareholders are entitled to receive the notice of annual general
      meeting is Friday, 18 October 2019 and the record date for the purposes
      of determining which shareholders of the Company are entitled to
      participate in and vote at the annual general meeting is Friday, 15
      November 2019. Accordingly, the last day to trade in the Company’s
      shares in order to be recorded in the register of Huge shareholders to be
      entitled to participate in and vote at will be Tuesday, 12 November 2019.

      Shareholders are requested to lodge forms of proxy by 10h00 on
      Thursday, 21 November 2019 but will nevertheless be entitled to lodge
      forms of proxy prior to the proxy exercising such shareholder rights as a
      shareholder at the AGM.


Johannesburg
25 October 2019

Transaction Sponsor
Questco Corporate Advisory (Pty) Ltd

Date: 25/10/2019 03:39:00
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