Wrap Text
Distribution of RMH ordinary shares to Remgro shareholders
REMGRO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/006415/06)
ISIN: ZAE000026480
Share code: REM
("Remgro")
ANNOUNCEMENT REGARDING THE DISTRIBUTION OF RMB HOLDINGS LIMITED ("RMH") ORDINARY
SHARES ("RMH SHARES") TO HOLDERS OF REMGRO NO PAR VALUE ORDINARY SHARES AND REMGRO
UNLISTED NO PAR VALUE B ORDINARY SHARES("REMGRO SHAREHOLDERS").
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN OR INTO AUSTRALIA, CANADA, JAPAN, THE UNITED STATES OF AMERICA OR ANY
JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT OR WOULD REQUIRE
FURTHER ACTION TO DO SO. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF ANY
OFFER TO SELL OR ISSUE OR INVITATION TO PURCHASE OR SUBSCRIBE FOR, OR ANY SOLICITATION
OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES. THE SECURITIES REFERRED
TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, EXCEPT PURSUANT
TO AN APPLICABLE EXEMPTION FROM REGISTRATION. NO PUBLIC OFFERING OF SECURITIES IS
BEING MADE IN AUSTRALIA, CANADA, JAPAN, THE UNITED STATES OR ELSEWHERE.
1. Introduction
Remgro Shareholders are referred to the cautionary announcements released on
the Stock Exchange News Service ("SENS") on 19 November 2019, 7 January 2020
and 18 February 2020 relating, inter alia, to the in-principle decision by
Remgro to pursue the distribution, in full or in part, of its shareholding in
RMH and FirstRand Limited ("FirstRand") to Remgro Shareholders. Concurrently
with Remgro's cautionary announcements, RMH proposed the distribution by RMH
of its FirstRand shares to its shareholders ("RMH Unbundling") as part of a
restructuring of the RMH portfolio of assets and liabilities.
Remgro Shareholders are further referred to the cautionary announcement
released on SENS on 31 March 2020 in terms of which Remgro Shareholders were
advised that the board of directors of Remgro ("Board") had resolved to proceed
with the distribution of Remgro's 28.2% interest in RMH to Remgro Shareholders
(the "Remgro Unbundling"), but to retain Remgro's 3.9% direct interest in
FirstRand.
Remgro Shareholders are also referred to the terms announcement released by
RMH concurrently with this announcement in which RMH has advised RMH
shareholders that it intends distributing its entire shareholding in FirstRand
to RMH shareholders by way of a distribution in specie. Following the
implementation of the RMH Unbundling, RMH will remain listed, with its property
portfolio as its sole remaining asset.
The purpose of this announcement is to provide Remgro Shareholders with
detailed information regarding the implementation of the Remgro Unbundling.
2. Rationale
Remgro constantly evaluates the optimal composition of its investment portfolio
to ensure that it remains an attractive and appropriately rated permanent
capital investment vehicle for investors. It is important to Remgro to ensure
that the portfolio composition is shaped by a long-term perspective on
shareholder value creation. Key considerations in this context include the
level of maturity, independence and the size of an investment relative to the
size of the overall Remgro portfolio.
As RMH has developed into a large, mature, independently run business of scale
with an overweight contribution to the Remgro portfolio, Remgro is of the
opinion that the Remgro Unbundling will unlock significant value for Remgro
Shareholders. The Remgro Unbundling also presents an opportunity to rebalance
the maturity of Remgro's remaining investment portfolio, as well as the
relative contribution of the remaining portfolio investments to enable greater
impact and shareholder value creation.
The Remgro Unbundling has significant benefits for Remgro Shareholders,
including, inter alia:
- Reducing the underlying discount to net asset value that the Remgro shares
currently trade at by reducing the three listed entry points into the
underlying operations via FirstRand, RMH and Remgro;
- Giving Remgro Shareholders direct access to RMH shares and the dividends
payable in respect thereof; and
- Enabling Remgro Shareholders to participate in the RMH Unbundling pursuant
to which FirstRand shares will be distributed to them.
Remgro's direct 3.9% interest in FirstRand will be retained to provide
additional balance sheet capacity that will support growth in Remgro’s existing
portfolio, as well as its ability to pursue new opportunities that may arise.
3. Key terms of the Remgro Unbundling
Remgro will distribute all its RMH Shares (comprising 397,447,747 ordinary
shares) (the "Unbundled RMH Shares") on a pro-rata basis to all the Remgro
Shareholders as a dividend in specie.
Remgro Shareholders will receive 0.69939 Unbundled RMH Shares for every 1
Remgro share held on the Record Date (as defined in paragraph 11 below). The
transfer of the Unbundled RMH Shares will result in fractional entitlements,
which is explained in more detail in paragraph 4 below.
The Remgro Unbundling will result in Remgro Shareholders holding a direct
interest in RMH. As direct shareholders of RMH, Remgro Shareholders will be
entitled to participate in the RMH Unbundling.
The detailed tax implications of the Remgro Unbundling are set out in paragraph
9 below.
4. Fractional entitlements, cash proceeds and applicable rate
In accordance with the JSE Listings Requirements, fractional entitlements will
be rounded down to the nearest whole number. The aggregated excess fractions
of the Unbundled RMH Shares to which Remgro Shareholders will remain entitled,
will be sold in the market, on the Remgro Shareholders’ behalf, as soon as
practicable after the Remgro Unbundling. The cash proceeds of the sale of the
fractional entitlements ("Cash Proceeds") will be paid to the relevant Remgro
Shareholders on the basis set out below, net of any applicable taxes (such as
Securities Transfer Tax ("STT")) and costs.
Cash Proceeds due to Remgro Shareholders will be determined at a 10% discount
to the VWAP of RMH Shares on the Johannesburg Securities Exchange ("JSE") on
Wednesday, 3 June 2020, being the day on which Remgro shares will begin to
trade 'ex' the entitlement to receive the Unbundled RMH Shares. The actual
price used to calculate the Cash Proceeds will be announced on SENS on Thursday,
4 June 2020, by 11h00.
5. Financial effects
Based on Remgro’s unaudited results for the six months ended 31 December 2019,
the pro forma financial effects of the Remgro Unbundling on the earnings per
share ("EPS"); diluted EPS, headline earnings per share ("HEPS"); diluted HEPS,
HEPS, excluding option remeasurement, diluted HEPS, excluding option
remeasurement; net asset value per share ("NAV"); net tangible asset value per
share ("NTAV") and intrinsic NAV per share ("INAV") of Remgro, are set out
below.
These financial effects are prepared for illustrative purposes only to assist
Remgro Shareholders to assess the impact of the Remgro Unbundling but, because
of their nature, may not give a fair presentation of the effect of the Remgro
Unbundling on Remgro’s results of operations.
The summarised pro forma financial effects have been prepared in a manner
consistent in all respects with International Financial Reporting Standards
("IFRS"), the accounting policies adopted by Remgro as at 31 December 2019 and
the JSE Listings Requirements. The summarised pro forma financial effects have
not been audited, or reported on, by Remgro’s auditors or reporting
accountants.
The pro forma financial effects are the responsibility of the Board. The
material assumptions used in the preparation of the pro forma financial effects
are set out in the notes following the table below.
Unaudited Unaudited
financial pro forma
results at results at
31 December 31 December
2019 before 2019 after
the proposed the proposed
Transaction Transaction Change
(cents) (cents) (%)
EPS
- Basic 766.3 4 634.0 504.7
- Diluted 762.7 4 622.8 506.1
HEPS
- Basic 750.9 484.6 (35.5)
- Diluted 747.4 481.7 (35.5)
HEPS, excluding option remeasurement
- Basic 750.7 484.5 (35.5)
- Diluted 747.2 481.6 (35.5)
NAV 18 669 17 079 (8.5)
NTAV 14 446 12 857 (11.0)
INAV 24 093 18 429 (23.5)
Notes:
1. The pro forma financial effects are based on the unaudited financial
results of Remgro for the six months ended 31 December 2019. The
financial impact on the earnings of Remgro are illustrated as if the
Remgro Unbundling had been completed on 1 July 2019, while the impact
on the net assets of Remgro are shown as if the Remgro Unbundling had
been implemented on 31 December 2019.
2. The following common assumptions have been used in the calculation of
the pro forma financial information:
a. A FirstRand share price of R62.80 at 31 December 2019; and
b. An RMH share price of R80.44 at 31 December 2019.
3. As a result of the Remgro Unbundling, Remgro ceases to have significant
influence in FirstRand and would therefore have to derecognise its
FirstRand equity accounted investment and account for it as a financial
asset at fair value through other comprehensive income (the “FirstRand
Reclassification”). The pro forma income statement effects represent
the dividends received from FirstRand and the reversal of Remgro's
attributable portion of FirstRand’s and RMH’s equity accounted earnings
for the six months ended 31 December 2019, as well as the profit realised
on the Remgro Unbundling and FirstRand Reclassification
4. The statement of financial position effects represent the profit
realised on the Remgro Unbundling and FirstRand Reclassification as
described above, as well as the dividend in specie.
5. The financial effects set out above have been prepared based on IFRS
and interpretations of IFRS applicable at 31 December 2019.
6. Information relating to RMH
RMH is an investment holding company with a track record of investing in
disruptive and entrepreneurial financial services businesses.
RMH was listed on the JSE in 1992 as a vehicle to allow investors to co-invest
with the founders of Rand Merchant Bank, and since then has played a significant
role in the establishment and growth of some of South Africa’s most iconic
financial services businesses, including FirstRand, Discovery, Momentum
Metropolitan and OUTsurance.
In 2011, RMH's insurance interests (Discovery, Momentum Metropolitan and
OUTsurance) were separately listed as Rand Merchant Investment Holdings
Limited. Since then RMH has been an investment vehicle into FirstRand, one of
South Africa’s most successful financial services groups. RMH is the largest
shareholder in FirstRand.
During July 2016 RMH expanded its investment strategy to include a property
investment business alongside its 34% investment in FirstRand. This involved
establishing a diversified portfolio of scalable entrepreneur-led businesses
with proven track records in managing and growing property portfolios.
For further detailed information on RMH, Remgro Shareholders are referred to
the annual report of RMH for the financial year ended 30 June 2019 and the
unaudited interim results of RMH for the six-month period ended 31 December
2019, both of which can be accessed on RMH's website (www.rmh-online.co.za).
7. Condition precedent
The implementation of the Remgro Unbundling is subject to the fulfilment, or
waiver, as the case may be, of the condition precedent that by no later than
30 April 2020 the Ontario Securities Commission has granted an exemption from
the prospectus requirement of section 53 of the Securities Act (Ontario) in
connection with the Remgro Unbundling.
8. Exchange Control Regulation
The Unbundled RMH Shares are not freely transferable from the common monetary
area and must be dealt with in terms of the South African Exchange Control
Regulations, 1961 (as amended) ("Exchange Control Regulations"). The following
summary of the Exchange Control Regulations is intended as a guide only and
is not a comprehensive statement of the Exchange Control Regulations or advice.
Remgro Shareholders who are in any doubt regarding the Exchange Control
Regulations should contact their own professional advisers. This summary is
based on the laws and regulations as in force and as applied in practice as
at the date hereof and is subject to changes to those laws and regulations and
practices subsequent to such date.
8.1 Emigrants from the Common Monetary Area consisting of South Africa, the
Republic of Namibia and the Kingdoms of Lesotho and eSwatini ("CMA")
Any share certificates that may be issued by RMH to emigrants from the CMA
will be endorsed "non-resident" in accordance with the Exchange Control
Regulations.
Uncertificated Unbundled RMH Shares will be credited directly to the emigrants’
respective emigrant share accounts at the CSDP or broker controlling their
remaining portfolios and an appropriate electronic entry will be made in the
relevant register reflecting a “non-resident” endorsement. The CSDP or broker
will ensure that the emigrant adheres to the Exchange Control Regulations.
Any Unbundled RMH Shares and/or securities issued in certificated form, cash
dividends and residual cash payments based on emigrants’ Unbundled RMH Shares
and/or securities controlled in terms of the Exchange Control Regulations will
be forwarded to the authorised dealer in foreign exchange controlling their
remaining assets.
8.2 Residents outside of the CMA
Any share certificates that may be issued by RMH to non-residents of the CMA
will be endorsed "non-resident" in accordance with the Exchange Control
Regulations.
Uncertificated Unbundled RMH Shares and/or securities will be credited directly
to the non-resident’s non-resident share accounts at the CSDP or broker
controlling their portfolios and an appropriate electronic entry will be made
in the relevant register reflecting a "non-resident" endorsement. The CSDP or
broker will ensure that the non-resident adheres to the Exchange Control
Regulations.
Any Cash Proceeds payable to non-resident Remgro Shareholders in relation to
their fractional entitlements are freely transferable from South Africa,
subject to being converted into a currency other than Rand or paid for the
credit of a non-resident Rand account.
9. Taxation
The following summary describes the tax consequences of the Remgro Unbundling
that may apply to Remgro Shareholders generally. This summary is based on the
laws as in force and as applied in practice as at the date hereof and is
subject to changes to those laws and practices subsequent to such date.
In the case of persons who are non-residents of South Africa for tax purposes,
this summary should be read in conjunction with the provisions of any
applicable double tax agreement between South Africa and their country of
residence. Remgro and its advisers cannot be held responsible for the taxation
consequences that the Remgro Unbundling may have on individual Remgro
Shareholders and therefore if you are in any doubt about your tax position you
should consult an appropriate independent professional adviser.
The Remgro Unbundling will constitute a disposal by Remgro of the Unbundled
RMH Shares to Remgro Shareholders. It is intended that the disposal will be
implemented in terms of section 46 of the Income Tax Act, which allows for a
tax neutral implementation of the Remgro Unbundling from an income tax, Capital
Gains Tax ("CGT"), dividend tax and STT perspective, including the following
concessions for Shareholders:
9.1 Remgro shares held as trading stock
Remgro Shareholders holding Remgro shares as trading stock will be deemed to
acquire the Unbundled RMH Shares as trading stock through a dividend in specie
that must be disregarded for dividends tax purposes. The distribution must
also not be treated as a return of capital for the purposes of paragraph 76B
of the Eighth Schedule to the Income Tax Act.
The original expenditure incurred in respect of the Remgro shares will be
apportioned between the Unbundled RMH Shares and the Remgro shares based on a
ratio that is determined with reference to the respective closing prices of
the shares in RMH and Remgro on the first business day after the LDT Date (as
defined in paragraph 11 below).
9.2 Remgro shares held as capital assets
Remgro Shareholders holding Remgro shares as capital assets will be deemed to
acquire the Unbundled RMH Shares as capital assets through a dividend in specie
that must be disregarded for dividends tax purposes. The distribution must
also not be treated as a return of capital for the purposes of paragraph 76B
of the Eighth Schedule to the Income Tax Act.
The CGT 'base cost' of the Remgro shares in the hands of Remgro Shareholders
immediately before the Remgro Unbundling will be apportioned between the
Unbundled RMH Shares and the Remgro shares based on a ratio that is determined
with reference to the respective closing prices of the shares in RMH and Remgro
on the first business day after the LDT Date (as defined in paragraph 11
below).
Remgro Shareholders will be deemed to have acquired the Unbundled RMH Shares
on the date on which the Remgro shares were originally acquired.
9.3 Apportionment ratios to be used
Remgro will advise Remgro Shareholders of the relevant apportionment ratios
to be used to determine their tax cost bases in the Remgro shares and the
Unbundled RMH Shares by way of an announcement to be released on SENS on the
second business day after the LDT Date (as defined in paragraph 11 below).
These ratios must be used in the determination of any income or capital gains
or losses (as the case may be), derived on any future disposals of the Unbundled
RMH Shares or Remgro shares.
10. Foreign Shareholders
The following summary describes the restrictions applicable to Remgro
Shareholders in terms of the Remgro Unbundling who have registered addresses
outside South Africa and/or who are nationals, citizens or residents of
countries other than South Africa ("Overseas Shareholders") or who are persons
(including, without limitation, custodians, nominees and trustees) who have a
contractual or legal obligation to forward this announcement to a jurisdiction
outside South Africa, or who hold Remgro shares for the account or benefit of
any such Overseas Shareholder and will therefore hold RMH in a similar manner
and hence may have an impact on Remgro Shareholders.
The Remgro Unbundling will be implemented as a pro-rata distribution in specie
for no consideration to all Remgro Shareholders recorded as such in the
register of Remgro on the Record Date.
It is the responsibility of any Overseas Shareholder (including, without
limitation, nominees, agents and trustees for such persons) being notified by
this announcement of the Remgro Unbundling and wishing to have their Unbundled
RMH Shares transferred to them in terms of the Remgro Unbundling to satisfy
themselves in respect of the applicable laws in their territory, including
obtaining any requisite governmental or other consents, observing any other
requisite laws, requirements or formalities and paying any issue, transfer or
other taxes due in such territories.
Accordingly, persons (including, without limitation, nominees, agents and
trustees) being notified in terms of this announcement should not distribute
or send the announcement to any person in, or citizen or resident of, or
otherwise into any jurisdiction where to do so would or might contravene
applicable law or regulation, including local securities laws or regulations.
Any person who does distribute this announcement into any such territory
(whether under a contractual or legal obligation or otherwise) should draw the
recipient’s attention to the contents of this paragraph.
Remgro reserves the right, but shall not be obliged, to treat as invalid any
transfer of Unbundled RMH Shares in terms of the Remgro Unbundling, which
appears to Remgro or its agents to have been executed, effected or dispatched
in a manner which may involve a breach of the securities laws or regulations
of any jurisdiction; or if Remgro believes (in its discretion) or its agents
believe that the same may violate applicable legal or regulatory requirements;
or if Remgro believes (in its discretion) that it is prohibited or unduly
onerous or impractical to transfer the RMH Shares to such Overseas Shareholder
in terms of the Remgro Unbundling.
If an Overseas Shareholder is of the view that the transfer of the Unbundled
RMH Shares in terms of the Remgro Unbundling to such Overseas Shareholder may
involve a breach of the securities laws or regulations or violate applicable
legal or regulatory requirements, such Overseas Shareholder must as soon as
reasonably practicable notify their CSDP or broker of such fact or
circumstance.
Remgro shall be entitled (in its discretion), including in either of the
aforementioned instances, to do all things necessary or desirable to ensure
compliance with applicable law and/or regulation including selling the
Unbundled RMH Shares that would otherwise have been transferred to the Overseas
Shareholder under the Remgro Unbundling on behalf of the Overseas Shareholder
and at their risk, with the net proceeds of such sale (after deduction of any
applicable taxes which may in this instance include STT, withholdings or costs)
to be paid to the Overseas Shareholder. In this regard, the Unbundled RMH
Shares may be aggregated and disposed of on the JSE in an orderly manner by
the Remgro transfer secretaries on behalf of and for the benefit of such
Overseas Shareholders as soon as is reasonably practical after the
implementation of the Remgro Unbundling at the best price that can reasonably
be obtained at the time of sale.
11. Salient dates and times
2020
Terms announcement released on SENS Tuesday, 14 April 2020
Terms announcement published in South African press Wednesday, 15 April 2020
Finalisation announcement released on SENS Thursday, 30 April 2020
Finalisation announcement published in South African Monday, 4 May 2020
press
Last day to trade in Remgro shares on the JSE to Tuesday, 2 June 2020
participate in the Remgro Unbundling ("LDT Date")
Remgro shares trade "ex" entitlement to receive the Wednesday, 3 June 2020
Unbundled RMH Shares
Announcement of specified ratio in respect of Thursday, 4 June 2020
apportionment of costs/base costs of Remgro for
taxation/CGT purposes released on SENS
Announcement of Cash Proceeds released on SENS, by Thursday, 4 June 2020
11h00
Record date to receive Unbundled RMH Shares in terms Friday, 5 June 2020
of the Remgro Unbundling ("Record Date")
Remgro unbundles the Unbundled RMH Shares to Remgro Monday, 8 June 2020
Shareholders
Remgro Shareholder’s account with CSDP or broker Monday, 8 June 2020
updated
Notes:
1. All times shown in this announcement are South African times unless otherwise stated.
2. The above dates and times are subject to change. The above dates have been determined based on
certain assumptions regarding the Remgro Unbundling. If the relevant dates change and the dates set
out above are therefore impacted, details of the relevant change will be released on SENS and
published in the South African press.
3. There may be no rematerialisation or dematerialisation of Remgro shares between Wednesday, 3 June
2020 and Friday, 5 June 2020, both days inclusive.
12. Withdrawal of cautionary
Remgro Shareholders are advised that, as a result of the publication of this
announcement, all prior cautionary announcements are now withdrawn and caution
is no longer required to be exercised by Remgro Shareholders when dealing in
their Remgro shares.
Stellenbosch
14 April 2020
Financial adviser and Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Legal adviser
DLA Piper Advisory Services Proprietary Limited
Date: 14-04-2020 05:46:00
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