Acquisition of Property Development Company and Cautionary Announcement
CONDUIT CAPITAL LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/017351/06)
Share code: CND ISIN: ZAE000073128
(“Conduit Capital” or “the Company”)
ACQUISITION OF PROPERTY DEVELOPMENT COMPANY AND CAUTIONARY ANNOUNCEMENT
The Board of directors of Conduit Capital (“the Conduit Capital Board”) would like to advise shareholders
that Constantia Risk and Insurance Holdings Proprietary Limited (“Constantia”), a wholly-owned
subsidiary of the Company, has entered into a binding share sale and subscription agreement
(“Agreement”) with Trustco Property Holdings Proprietary Limited (“Trustco Properties”). Trustco
Properties is a wholly-owned subsidiary of Legal Shield Holdings Limited (“LSH”), which is in turn a
subsidiary of Trustco Group Holdings Limited (“Trustco”). In terms of the Agreement and subject to
certain suspensive conditions, Constantia has agreed to acquire 100% of the issued ordinary shares and
all loan accounts (if any) (“Sale Shares”) of Herboths Property Development Proprietary Limited
(“Herboths”) in consideration for Constantia issuing shares to Trustco Properties (“the Transaction”).
The Transaction requires approval from the Conduit Capital Board and constitutes a Category 1 related
party transaction in terms of section 9.5(b) of the Listings Requirements of JSE Limited (“JSE Listings
Requirements”), which will require approval by ordinary resolution of the shareholders of Conduit Capital
in a general meeting (“Conduit Shareholders Approval”). Conduit Capital will issue a circular convening
a shareholders meeting and containing full details of the Transaction (“Conduit Transaction Circular”) in
The effective date per the agreement is 30 December 2019 or the soonest practical date thereafter and
the closing date of the Transaction shall be the 5th business day after the fulfilment of the suspensive
conditions set out in paragraph 3 below (“Closing Date”).
2. THE TRANSACTION
2.1 Nature of the business of Constantia and Herboths
Constantia is Conduit Capital’s wholly-owned insurance business that operates across
three insurance licences. It offers insurance and risk management solutions, covering
areas such as medical malpractice, primary health insurance and medical gap cover
products, funeral and life insurance, guarantee and indemnity solutions, medical
evacuation insurance, property and casualty, heavy commercial vehicle, small business
and other niche lines.
Constantia’s products are distributed through underwriting management agencies,
administrator managed (binder based) broker distribution, and certain direct broker
relationships. Over the past three years, Conduit Capital has invested significantly in
capacity, skills and infrastructure at Constantia to improve the underwriting, distribution and
innovation capability, thereby building its competitive advantage.
Herboths is the holder of the property described as the remainder of the Farm Herboths
No.485, situated in the Settlement Area of Kapps Farm in the Windhoek District, Khomas
Region, Namibia, measuring 2605.0513 (two thousand six hundred and five point zero five
one three) hectares and to be known as the Herboths Blick Township (“HB Property”).
Trustco Properties is in the process of undertaking a number of activities to develop the
HB Property including planning, registration as a township, subdivision and servicing of the
HB Property via the installation of internal service infrastructure including, water, roads,
sewerage, drainage and electricity connections and ultimately the sale of the residential
and business erven to third party purchasers (“HB Development”).
On 7 October 2019, the Need and Desirability for Township establishment on the
HB Development was approved in terms of Section 5(5) (a) (i) of the Townships and
Division of Land Ordinance (Ordinance No. 11 of 1963), of Namibia as amended.
Shareholders are encouraged to read Volume Two of Trustco’s 2019 Integrated Annual
Report (https://www.tgh.na/iar-2019-financial/) as well as the Trustco announcement dated
11 February 2020, which provides more detail about this development.
2.2 Rationale for the Transaction
2.2.1 Trustco Properties is one of the largest private land developers in Namibia. It is the
business of Trustco Properties to develop properties and sell the developed properties to
third parties. In terms of the Transaction, Trustco Properties will sell the property at a market
related value of NAD 1 000 000 000 (one billion Namibia Dollars), in the ordinary course of
2.2.2 Through the Transaction, Constantia’s net equity value and solvency capital increases
substantially, thereby enabling Constantia to consolidate its existing business, grow
premium volume significantly, and pursue new organic and inorganic growth opportunities.
2.2.3 The Transaction will further create opportunities for the businesses of LSH and Constantia
to leverage each other’s respective skills, asset bases and mutually beneficial growth
2.3 Purchase Consideration
Subject to any adjustment made to the Purchase Consideration as set out in paragraph 2.4 below,
the purchase consideration payable by Constantia to Trustco Properties in respect of the Sale
Shares is an amount of R1 000 000 000 (one billion Rand) (“Purchase Consideration”). The
Purchase Consideration will be settled as follows:
2.3.1 Constantia shall pay R50 000 000 (fifty million Rand) in cash (“Cash Consideration”) as
126.96.36.199 R20 000 000 (twenty million Rand) on or about the date hereof; and
188.8.131.52 the balance of the Cash Consideration within 90 days from the date of signature of
the Agreement (“Signature Date”).
At any time before the Closing Date, the Cash Consideration constitutes a refundable deposit
that will become non-refundable and become part of the payment of the Purchase
Consideration on the Closing Date.
2.3.2 The issue and allotment of newly issued ordinary shares in Constantia (“Subscription
Shares”) to the value of the Purchase Consideration less the Cash Consideration to Trustco
Properties. For the purposes of the issuance of the Subscription Shares, the parties have
agreed that the current value of the total issued ordinary shares in Constantia is
R2 000 004 232 (two billion four thousand two hundred and thirty-two Rand), which value of
Constantia will increase by the amount of the Purchase Consideration less the Cash
Consideration. Subject to any adjustment made to the Purchase Consideration as set out in
paragraph 2.4, the value of the Subscription Shares to be issued to Trustco Properties shall
be R950 000 000 (nine hundred and fifty million Rand), and result in TrustCo Properties
owning approximately 32.20% of Constantia, post issuance (now valued at R2 950 004 232
(two billion nine hundred and fifty million four thousand two hundred and thirty two Rand)) of
the Subscription Shares.
2.4 Adjustment to the Purchase Consideration
Trustco Properties and Constantia will each obtain a valuation of the HB Property and the HB
Development within 4 (four) weeks of Signature Date. The aforesaid valuations must be prepared
by an accredited valuator in Namibia experienced in the valuation of publicly listed entities in the
real estate sector.
If the value determined for the HB Property and the HB Development in terms of either of the
valuations prepared as aforesaid is less than R950 000 000 (nine hundred and fifty million Rand)
or greater than R1 050 000 000 (one billion and fifty million Rand), the Purchase Consideration will
be increased or decreased (as applicable) to be equal to the average of the values determined in
terms of the two valuations obtained as aforesaid (“Average Property Valuation”); provided
always that either party will have an option to cancel the Agreement by giving 5 (five) days’ notice
to the other party, if the Average Property Valuation is R800 000 000 (eight hundred million Rand)
Under no circumstances will the Subscription Shares to be issued to Trustco Properties in terms of
the Sale and Subscription Agreement exceed 49.9% of the issued share capital of Constantia post
3. SUSPENSIVE CONDITIONS TO THE TRANSACTION
The Transaction is subject to the fulfilment or waiver of the following suspensive conditions on or before
31 March 2020 or such later date as the parties may agree before such date:
3.1 Constantia has taken all required corporate action and obtained all required corporate approval for
the issue and allotment of the Subscription Shares to Trustco Properties as payment in full to Trustco
Properties for the Sale Shares, including approval of the Conduit Capital Board.
3.2 The parties obtain all regulatory approvals required for the execution of the Transaction by both
3.3 The parties and/or their nominees entering into an arm’s length market-related Property Services and
Management Agreement in form and substance acceptable to each of the parties, including to provide
for the payment of a property management fee in an amount equal to 1% of the value of HB Property
and the HB Development, which agreement must be completed within 4 (four) weeks from the
4. FINANCIAL INFORMATION
The audited net asset value of Constantia as at 30 June 2019 was R699 million. The audited loss
after tax attributable to Constantia for the year ended 30 June 2019 was R582 million.
The financial statements were prepared in accordance with International Financial Reporting
Standards and the Companies Act, 2008 (Act 71 of 2008), as amended.
The unaudited net asset value of Herboths as at 30 September 2019 was NAD 137.5 million. The
unaudited profit after tax attributable to Herboths for the six months ended 30 September 2019 was
NAD 0.4 million. The exchange rate of NAD to ZAR is 1:1.
The financial statements were prepared in accordance with International Financial Reporting
The pro forma financial effects of the Transaction will be detailed in the Conduit Transaction Circular.
5. CLASSIFICATION OF THE TRANSACTION AND FURTHER DOCUMENTATION
As set out in section 1 of this announcement, the Transaction constitutes a Category 1 related party
transaction in terms of the JSE Listings Requirements. The Conduit Transaction Circular will contain full
details of the Transaction, including without limitation a notice to convene a general meeting of
shareholders of Conduit Capital in order to consider and, if deemed fit to pass, with or without modification,
the resolutions necessary to approve and implement the Transaction will be issued in due course.
Sean Riskowitz, Chief Executive Officer of Conduit Capital, controls Protea Asset Management
(“Protea”). Protea is the Investment Advisor to the Riskowitz Value Fund LP and other accounts (“RVF”).
RVF is a material shareholder of Conduit Capital. RVF, through its material shareholding in both Trustco
and LSH indirectly controls in excess of 35% of the votes able to be cast at general meetings of LSH and
therefore LSH is considered to be an associate of RVF. As Trustco Properties is a wholly-owned subsidiary
of LSH, it is also considered to be an associate of RVF and a related party to Conduit Capital in terms of
paragraph 10.1(b) of the Listings Requirements. Protea, RVF and their associates will accordingly be
precluded from voting on the Transaction.
6. CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the “Disposal of Assets and Withdrawal of Cautionary Announcement”
released on SENS on 9 December 2019. Given the intention to conclude the Transaction in advance of
implementing the previous transaction contemplated therein and that the Transaction may have an effect
on the terms and structure required to implement the previously announced transaction, shareholders are
advised to exercise caution when dealing in the Company’s securities until a further announcement relating
to the terms and structure of the previous transaction is made.
11 February 2020
Corporate Adviser and Sponsor to Conduit Capital
Legal Adviser to Conduit Capital
Africa Solved Advisory Proprietary Limited
Date: 11-02-2020 04:17:00
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