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Disposal of Legal Shield Holdings, Obtaining Majority Interest in Conduit Capital and Withdrawal of Cautionary
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
Registered as an external company in South Africa
(External registration number 2009/002634/10)
NSX share code: TUC
JSE share code: TTO
OTCQX share code: TSCHY
ISIN Number: NA000A0RF067
(“Trustco” or “the Company”)
DISPOSAL OF LEGAL SHIELD HOLDINGS LIMITED BY TRUSTCO GROUP HOLDINGS LIMITED TO
CONDUIT CAPITAL LIMITED, OBTAINING MAJORITY INTEREST IN CONDUIT CAPITAL LIMITED AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Trustco shareholders (“Shareholders”) are referred to the announcement released on SENS on
Monday, 9 December 2019 in respect of the acquisition by Legal Shield Holdings Limited (“LSH”) of
Constantia Risk and Insurance Holdings Limited (“Constantia”) and Conduit Ventures Proprietary
Limited from Conduit Capital Limited (“Conduit”) (“Constantia Transaction”).
Shareholders are further referred to the cautionary announcement released on SENS on Tuesday, 11
February 2020 and the renewal of such cautionary announcement released on Monday, 16 March
2020 wherein Shareholders were advised that the structure of the Constantia Transaction was being
reviewed.
The review of the structure of the Constantia Transaction has been completed and Shareholders are
hereby advised that the parties have entered into a binding term sheet (“Term Sheet”) in terms of
which Conduit shall acquire 100% of the issued ordinary share capital (“LSH Ordinary Shares”) of LSH
from Trustco and Riskowitz Value Fund LLP (“RVF”)(collectively “the Sellers”) for a total consideration
of R10 437 484 200 (“Purchase Consideration”) (“LSH Disposal”).
Subsequent to the proposed acquisition of the Banking and Finance segment by the Insurance and its
Investments segment as announced on SENS on 28 October 2019, Trustco would own 83.5% of the
LSH Ordinary Shares, with the balance of 16.5% being owned by RVF.
As per the Term Sheet, upon fulfilment or waiver of the conditions precedent, as defined in paragraph
8 below (“Conditions Precedent”) , the binding term sheet entered into in respect of the Constantia
Transaction will be deemed to have been cancelled and terminated and accordingly will be incapable
of being implemented.
2. Description of the business conducted by LSH
LSH is a diversified financial services provider in Namibia with a client base of more than 280,000
clients comprising of individuals and small businesses. Subsidiaries of LSH currently hold both a short
and long term insurance licence, and a commercial banking licence which (subject to regulatory
approval, refer to the announcement released on 28 October 2019 regarding the proposed acquisition
of the Banking and Finance segment by the Insurance and its Investments segment) which will enable
the subsidiaries of LSH to provide a full spectrum of services across the financial services value chain
in Namibia. The subsidiaries of LSH also owns over 4,000 hectares of high-quality real estate assets in
Namibia (before the disposal of the Herboths development as announced on SENS on 11 February
2020).
3. Net Assets and Profits of LSH
The book value of the consolidated net assets of LSH at 30 September 2019 was NAD 2.0 billion. The
loss after tax attributable to the net assets of LSH for the six months ended 30 September 2019 was
NAD 84.8 million.
The above financial information has been extracted from the unaudited results of LSH for the six
months ended 30 September 2019 which were prepared in terms of International Financial Reporting
Standards.
4. Rationale for the LSH Disposal
The rationale for the LSH Disposal is that:
• Trustco will increase its customer base and market presence in South Africa, whilst expanding
its product offerings in both Namibia as well as South Africa;
• The combined asset base of LSH and Conduit will facilitate new growth opportunities and
strengthen the financial position of the combined group;
• The nature of LSH and Conduit’s business is such that significant cross-skilling and product
synergies exist that can be leveraged by the combined group to have a competitive advantage
over its competitors.
5. Settlement of the Purchase Consideration and nomination by Sellers
The Purchase Consideration shall be settled via the issuance of 20 874 968 400 ordinary shares in
Conduit (“Consideration Shares”) at a price of R0.50 per Consideration Share which represents the
Conduit share price as at 5 March 2020. Trustco will receive 83.5% of such Consideration Shares.
The Sellers will in proportion to their LSH Shareholding nominate Conduit shareholders (“Nominated
Shareholders”), which hold Conduit shares as at a future record date which date is still to be
determined (“Nomination Record Date”) to subscribe for 1 974 463 276 Consideration Shares
(“Nominated Consideration Shares”) in the Sellers’ place. No consideration will be payable by the
Nominated Shareholders to the Sellers for such Nominated Consideration Shares.
This is being done so that, immediately pursuant to implementation of the LSH Disposal and, on the
assumption that all Nominated Shareholders accept the nomination, the Nominated Shareholders will
hold 12.7% of the issued Conduit Capital ordinary shares, which would be the position were the
Nominated Consideration Shares to have been issued at a deemed price of R0.87 (eighty seven cents)
per Conduit Capital ordinary share, which represents a 10% discount to the 30 day volume weighted
average price of a Conduit Capital ordinary share as at 9 December 2019. Any Nominated
Consideration Shares in relation to which the nomination is not accepted will be retained by the
Sellers.
The number of Nominated Consideration Shares each Nominated Shareholder will be eligible to
subscribe for will be determined based on their shareholding in Conduit as at the Nomination Record
Date.
Should a Nominated Shareholder elect to not subscribe for or not provide a response as to whether
they wish to take up the nomination provided by the Sellers in respect of their portion of the
Nominated Consideration Shares, such Nominated Consideration Shares will be issued to the Sellers
in proportion to their shareholding in LSH.
Pursuant to the above and on the assumption, all Nominated Consideration Shares are subscribed for
by the Nominated Shareholders, Trustco will own 72.9% of Conduit.
Trustco will have the right to convert any of its loan accounts in LSH (held, in LSH or by any subsidiary
of LSH) to equity in Conduit Capital at a conversion price of R0.50 (fifty cents) per Conduit Capital
ordinary share at their discretion. Trustco shall be entitled to exercise this right within 24 (twenty-
four) months after fulfilment of the Conditions Precedent.
6. Effective date and closing date
The effective date of the LSH Disposal shall be 1 April 2020 or the soonest practical date thereafter.
The closing date (“Closing Date”) of the LSH Disposal shall be the 3rd business day after the fulfilment
of the Conditions Precedent set out in paragraph 8 below.
7. Application of the Purchase Consideration
The Purchase Consideration shall be settled entirely by the issuance of the Consideration Shares. Such
Consideration Shares will be retained by the Sellers.
8. Conditions Precedent
The LSH Disposal is subject to the fulfilment of the following Conditions Precedent:
• by 31 August 2020, all regulatory approvals which are necessary for the implementation of the
Transaction shall have been obtained, either unconditionally or subject to such conditions as
may have been approved in writing by the Parties. This includes inter alia all and any necessary
approvals from the JSE, Competition Commission/Tribunal, Takeover Regulation Panel,
Financial Surveillance Department of SARB, Financial Sector Conduct Authority, Prudential
Authority, Bank of Namibia and other Namibian Regulatory approvals.
• by 30 June 2020, Conduit having obtained all requisite shareholder approvals in general meeting
to proceed with the Transaction (“Conduit Shareholder Approvals CP”).
• by 30 June 2020, TGH having obtained all requisite Shareholder approvals in general meeting
to proceed with the Transaction (“TGH Shareholder Approvals CP”).
• by 30 June 2020, the independent holders of more than 50% of the voting rights attaching to all
issued Conduit ordinary shares agree, by way of an ordinary resolution, to waive the benefit of,
and entitlement to, a mandatory offer for their Conduit ordinary shares from each Seller and its
concert parties;
• by 30 April 2020, neither TGH nor Conduit, each having conducted its legal, accounting and
operational due diligence on the other party, has notified the other party in writing that the
results thereof are unsatisfactory; provided that each shall only be entitled to deliver notice in
writing that the results thereof are unsatisfactory if it uncovers any of the following in relation
to the other party on or after the date on which this Term Sheet is entered into:
- material accounting irregularities or misstatements;
- material non-compliance with laws or regulatory requirements not disclosed to the other
party prior to the date on which this Term Sheet is entered into;
- material litigation or arbitration proceedings not disclosed to the other party prior to the
date on which this Term Sheet is entered into; and/or
- material tax liabilities incurred, but not disclosed to the other party, prior to the date on
which this Term Sheet is entered into.
For the above purposes, “material” means sufficiently serious (qualitatively and quantitively)
as would lead a reasonable person in the position of TGH or Conduit (as the case may be) to
(i) not wish to implement the Transaction or (ii) wish to implement the Transaction on
materially different terms and conditions than those set out in this Term Sheet; and
• by 30 June 2020 implementation of the acquisition by LSH of the Financial Services Companies.
Conduit and the Sellers shall be entitled, on one or more occasions, to agree in writing to (i)
extend the outside date for fulfilment of any of the Conditions Precedent, or (ii) if and to the
extent permissible in law, waive fulfilment of any of the Conditions Precedent. This Term Sheet
shall cease to be of force and effect if any Condition Precedent is neither fulfilled nor waived by
the outside date allowed for its fulfilment; provided that the provisions of the following
paragraphs shall survive such termination: Breakage Fee; Confidentiality; Costs; Governing Law.
9. Breakage Fee
If the Term Sheet ceases to be of force and effect solely by reason of the Conduit Shareholder Approval
CP or TGH Shareholders Approval CP not being fulfilled by the outside date allowed for their fulfilment,
then the party in breach shall be liable to pay a breakage fee of ZAR50 million plus value-added tax
(or similar applicable tax) to the other party, payable within 10 business days of written demand.
The Parties will ensure that the general meetings of TGH and Conduit are convened to be held at the
same time and date. If both the Conduit Shareholder Approval CP and the TGH Shareholder Approval
CP fail, no breakage fee shall be payable by TGH or Conduit.
10. Classification of the LSH Disposal
Related party transaction
Sean Riskowitz controls Protea Asset Management (“Protea”). Protea is the Investment Advisor to the
Riskowitz Value Fund LP and other accounts (“RVF”).
RVF and its associates are material shareholders of Trustco owning approximately 24% of the issued
share capital of Trustco and thus considered to be a related party to Trustco in terms of paragraph
10.1(b) (i) of the Listings Requirements of the JSE Limited ("JSE Listings Requirements").
RVF, the proposed acquisition of the Banking and Finance segment mentioned above, will own 16.5%
of LSH.
Due to the material shareholding of RVF in both Trustco and LSH, LSH is considered to be an associate
of RVF.
RVF and its associates jointly manage and control more than 35% of Conduit meaning RVF and its
associates are thus considered to be related parties to Conduit in terms of paragraph 10.1(b)(i) of the
JSE Listings Requirements as they are a material shareholder of Conduit.
LSH and Conduit are therefore considered to be associates of a material shareholder in terms of
10.1(b)(vi) of the JSE Listings Requirements. Therefore, the LSH Disposal is considered to be a category
1 related party transaction in terms of section 10 and paragraph 9.5(a) of the JSE Listings Requirements
requiring a fairness opinion to be prepared by an independent expert and the approval of
Shareholders via an ordinary resolution, excluding any related parties. Accordingly, RVF and their
associates will be precluded from voting on the Transaction.
A circular containing the full details of the LSH Disposal, incorporating a notice convening the required
general meeting of Shareholders, a copy of the fairness opinion and any other required
documentation, will be distributed to Shareholders in due course.
The salient dates and times of the LSH Disposal, including the date of the general meeting of
Shareholders, will be announced in due course.
11. Pyramid Structure
Shareholders are further advised that should this Transaction be implemented, Trustco would end up
in a pyramid structure as set out in Section 14 of the JSE Listings Requirements. Trustco is currently
reviewing alternatives to resolve this pyramid structure.
12. Withdrawal of Cautionary Announcement
As the review of the structure of the Constantia Transaction has been completed and published on
SENS, Shareholders are advised that they are no longer required to exercise caution when dealing in
the Company's securities.
Converted at the ZAR/NAD exchange rate of 1.00 on 18 March 2020.
27 March 2020
Komada Holdings (Pty) Ltd
Company Secretary
Trustco Group Holdings Limited
JSE Sponsor
Vunani Corporate Finance - Johannesburg
NSX Sponsor
Simonis Storm Securities Proprietary Limited – Windhoek
OTCQX Sponsor
J.P Galda & Co – New York
Date: 27-03-2020 01:00:00
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