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Management company internalisation and renewal of cautionary announcement
STELLAR CAPITAL PARTNERS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/015580/06)
Share code: SCP ISIN: ZAE000198586
("Stellar Capital" or "the Company")
MANAGEMENT COMPANY INTERNALISATION AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement first released on the
Stock Exchange News Service on 18 November 2020, and based on
various interactions with stakeholders, shareholders are
advised that the Stellar Capital board of directors ("Board")
has concluded its evaluation of the Management Company
structure and has resolved, subject to shareholder approval,
to terminate the Management Company structure through the
acquisition of all the issued shares in the Management Company
from Foxglove Capital Resources Limited and K2016225267 (South
Africa) Proprietary Limited (collectively, the "Manco
shareholders")("Manco internalisation").
2. BACKGROUND
Stellar Capital has appointed Thunder Securitisations
Proprietary Limited ("Manco"), since 2015, as its dedicated
investment manager to manage the portfolio of the Company in
accordance with Section 15 of the JSE Limited ("JSE") Listings
Requirements. The Manco, in terms of its management agreement
with the Company, acts on behalf of the Company in sourcing,
negotiating, concluding and executing investment opportunities
for the Company. The management agreement is perpetual but is
subject to renewal at each Annual General Meeting in terms of
an ordinary shareholder resolution.
3. OVERVIEW AND RATIONALE FOR THE MANCO INTERNALISATION
The Board, after engaging with relevant stakeholders,
recognises that, going forward, the Manco internalisation will
better align the interests of management with those of Stellar
Capital shareholders and is in line with current corporate
best practices. Shareholders holding a majority of Stellar
Capital ordinary shares have indicated their lack of support
for a further management agreement renewal resolution at the
next Annual General Meeting. The Board further recognises that
the failure to terminate the relationship with Manco could be
an impediment to Stellar Capital’s ability to pursue certain
corporate strategies, which may be in conflict with the
interests of an external Management Company.
The current management agreement requires the issue of 50 000
000 Stellar Capital ordinary shares to the Manco on
termination of the management agreement, as well as a full 3-
month notice period once shareholders have voted to terminate
the relationship through an ordinary resolution, presented
annually to shareholders at the Annual General Meeting, which
is next scheduled for November 2021.
The Board believes that the internalisation of the Manco for
the same economics (50 000 000 Stellar Capital ordinary
shares) provides a more constructive and beneficial route than
termination of the management agreement, as internalisation of
the Manco retains the skills and continuity of the resources
from the Manco, limiting disruption and retaining key
knowledge. This internalisation will also allow the Board to
accelerate strategic initiatives.
It is envisaged that, after the implementation of the Manco
internalisation, the management agreement between Manco (at
the time a wholly owned subsidiary of the Company) and the
Company will be amended or terminated as an intra-group
contract, if deemed fit by the Board. Following the Manco
internalisation, Stellar Capital will ensure that the
Memorandum of Incorporation of Manco does not frustrate or
relieve Stellar Capital in any manner from compliance with the
JSE Listings Requirements.
4. TRANSACTION CONSIDERATION
If the Manco internalisation is approved and implemented in
accordance with the Manco sale and purchase agreement executed
between the Company and Manco, the purchase consideration of
50 000 000 Stellar Capital ordinary shares currently held in
treasury will accordingly be payable by the Company to the
Manco shareholders, instead of the equivalent settlement
payment payable to Manco on termination of the management
agreement.
5. CONDITIONS PRECEDENT
The Manco internalisation and Manco sale and purchase
agreement remain subject to the fulfilment of the conditions
precedent that the Manco internalisation be approved by the
requisite majority of Stellar Capital shareholders, and that
all regulatory approvals that are required, be obtained.
6. OTHER SIGNIFICANT TERMS OF THE MANCO SALE AGREEMENT
The Manco internalisation, if implemented, will have
retrospective effect from 1 January 2021.
The Manco shareholders have warranted the financial position
of the Manco, on the basis that the net asset value of the
Manco as at 31 December 2020, excluding the shares in the
Company of which the Manco is the current beneficial owner
("excluded assets") and after deduction of any taxes payable
by the Manco pursuant to the Manco internalisation and the
transfer of the excluded assets, will not be greater than a
negative R2 100 000.
7. CATEGORISATION
The Manco internalisation constitutes a category 2 related
party transaction in terms of the JSE Listings Requirements
and, accordingly, requires shareholder approval by way of an
ordinary resolution.
8. RELATED PARTY TRANSACTION
In terms of the JSE Listings Requirements, the Manco
internalisation constitutes a related party transaction as
Stellar Capital is transacting with its management company
pursuant to the Manco sale and purchase agreement and Foxglove
Capital Resources Limited, the current 50% shareholder of
Manco, is also a material shareholder of Stellar Capital.
A circular will be dispatched to Stellar Capital shareholders
in due course to provide them with detailed information
regarding the Manco internalisation (including consolidated
pro forma financial information) and to convene a general
meeting at which shareholders other than the Manco and
Foxglove Capital Resources Limited will have the opportunity
to consider and vote on the Manco internalisation.
An independent board has been constituted by Stellar Capital
to consider the Manco internalisation and to advise
shareholders of its opinion in relation to the Manco
internalisation. The independent board has, in turn, appointed
an independent expert to provide it with external advice and
to prepare a report, indicating whether the Manco
internalisation is fair to Stellar Capital shareholders. A
copy of this report will be included in the circular to
shareholders.
9. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement first
released on the Stock Exchange News Service on 18 November
2020 and renewed on 31 December 2020, where shareholders were
advised that the Board is considering various proposals, in
addition to the evaluation of the Management Company
structure, in order to achieve the Company’s strategic
objectives. Accordingly, shareholders are advised to continue
to exercise caution when dealing in their Stellar Capital
shares, until a further announcement is made or the cautionary
announcement is withdrawn.
Cape Town
5 February 2021
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 05-02-2021 10:00:00
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