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Terms Announcement relating to Balwin’s proposed Black Economic Empowerment Transaction
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration Number: 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
(“Balwin”)
TERMS ANNOUNCEMENT RELATING TO BALWIN’S PROPOSED BLACK ECONOMIC
EMPOWERMENT TRANSACTION ("BEE TRANSACTION")
1. INTRODUCTION
1.1. In order to facilitate the continued growth of Balwin, successful collaboration with the right
business partners is of utmost importance. Balwin is committed to creating a business that
is diverse, representative, and transformed.
1.2. Since its listing in 2015, Balwin has embraced transformation in its business in line with the
company’s objective of working together with the South African community rather than in
isolation. Balwin has made considerable efforts in transforming its business over the past
few years and supports the principles and objectives of the B-BBEE Act. A B-BBEE
transformation charter has been developed which outlines Balwin’s B-BBEE strategy and
which further sets out the structures and processes which are being implemented to enable
Balwin to reach a compliant status this year.
1.3. While Balwin has made considerable progress on most of the B-BBEE pillars (i.e. Skills
Development, Enterprise Development, Supplier Development, Preferential Procurement
and Employment Equity), it understands that in order to further advance its empowerment
objectives, it needs to increase black participation within the Balwin Group.
1.4. Balwin is progressing the BEE transaction and in particular seeks to set itself apart from other
similar transactions concluded by:
1.4.1.offering a measure of protection to BEE shareholders during the lock-in period;
1.4.2.ensuring meaningful participation of the BEE shareholders in distributions declared by
Balwin from time to time during the funding period; and
1.4.3.procuring the necessary undertakings and commitments from the BEE shareholders in
respect of their funding obligations and ensuring the commercial interests of Balwin
are at the same time maintained.
1.5. Balwin hopes that this transaction will serve as a yardstick for the conclusion of similar
transactions such as this in future.
2. BEE SPV AND PARTNER
2.1. Balwin has considered the skills, qualifications, talents, interests, and abilities of Aobakwe
Reginald Koketso Kukama (“Mr Kukama”) and it believes that Mr Kukama will be a value
adding partner who possesses the functional and technical expertise to complement the
existing management skillset and to achieve the ambition of growing the Balwin brand
within the South African market.
2.2. Mr Kukama obtained a Bachelor of Architectural Studies (BAS) and Bachelor of Architecture
(Hons.) Cum Laude, from the University of Cape Town. He also holds an MSc in Urban Design
in Development from the University of London. After completion of his Master’s degree in
London, he returned to South Africa, and was offered a position of Associate Director and
Head of Urban Design at Stauch Vorster Architects in Cape Town.
2.3. During that period, he became an exchange employee to a leading retail architectural firm
in Baltimore, Development Design Group, whom at that time were designing Cavendish
Square for Old Mutual Properties.
2.4. Mr Kukama founded Yaetsho Investments & Projects, which is a multi-disciplinary
investment company that holds investments in agriculture, property, telecommunications
and information technology.
2.5. Mr Kukama has extensive experience in a number of aspects of the property industry,
including greenfields development, redevelopment of properties, education centres,
student accommodation, healthcare properties, office accommodation, property banking
and property equity investments in excess of R3 billion. Notably, he has overseen the
following projects, namely : –
2.5.1. the co-ordination of Project Management Resource Groups for various
departmental projects on behalf of various Provincial Departments of Public
Works;
2.5.2. new and restorative schools and clinics for various Provincial Departments of
Infrastructure Development;
2.5.3. the construction of Bheki Mlangeni District Hospital being a 300 bed hospital in
Soweto for the Gauteng Department of Infrastructure Development; and
2.5.4. the development and maintenance of Provincial Roads for the Mpumalanga
Department of Public Works, Roads and Transport.
2.6. Apart from his work in the property sector, Mr Kukama has invested in Swissport, Ad
Outpost and Commco. Due to the success of these ventures and in particular
Mr. Kukama’s extensive property and project management experience, Waterfall
Investment Company also collaborated with Mr Kukama in order to originate certain of their
other Property Developments at Waterfall City. Mr Kukama is also undertaking a similar
exercise at the Vaal River City Development.
2.7. Mr Kukama holds the following professional memberships –
2.7.1.member of the South African Council for the Project and Construction Management
Professions; and
2.7.2.member of the Association of Construction Project Managers.
2.8. The shares in Balwin will be subscribed for by the BEE SPV, controlled by Mr Kukama and,
which is a special purpose vehicle established for the purpose of holding the interests of the
strategic black partners in Balwin. In order to ensure that Balwin obtains sufficient points on
its ownership scorecard, the BEE SPV will ultimately be owned by the following shareholders
:–
2.8.1.Mr Kukama will hold 51%;
2.8.2.a black female will hold 24%; and
2.8.3.black youth will hold 25%.
3. SALIENT TERMS OF THE BEE TRANSACTION
3.1. Balwin has concluded the following transactional agreements with Tatovect Proprietary
Limited (“BEE SPV”) –
3.1.1. A Subscription Agreement in terms of which, inter alia:
3.1.1.1. the BEE SPV will subscribe for 47 219 260 shares in Balwin and will
consequently become a 10% shareholder in Balwin (“Subscription Shares”);
3.1.1.2. the price at which the Subscription Shares will be issued shall be the 30 day
Volume Weighted Average Price (“VWAP”) of Balwin's listed shares on signature
date less a discount of 20%, resulting in a total subscription consideration of
approximately R214,375,437;
3.1.1.3. the BEE SPV will contribute R20million of its own capital towards the
subscription consideration;
3.1.1.4. the balance of the subscription price will be vendor financed by Balwin in the
form of a loan agreement between Balwin and BEE SPV; and
3.1.1.5. the Subscription Shares are fully paid up on issue.
3.1.2.A Loan Agreement in terms of which, inter alia:
3.1.2.1. the balance of the subscription price outstanding will bear interest at the
prime rate;
3.1.2.2. the BEE SPV will be obligated to repay the balance of the subscription price
over a 9 year period from the distributions it receives by virtue of its
ownership of the Subscription Shares. If the distributions are insufficient to
cover the capital and interest owed, then the BEE SPV will be required to
make top-up payments to Balwin to ensure that the repayment profile is
adhered too;
3.1.2.3. the BEE SPV will be entitled to dividends in respect of the Subscription Shares
to the extent that these are declared and paid on Balwin ordinary shares.
Dividends will be applied to the reduction of the outstanding loan amount
from time to time in accordance with the repayment profile and the
prevailing Codes for the Property Sector.
3.1.3.A Relationship Agreement in terms of which, inter alia:
3.1.3.1. the BEE SPV will be subject to a 10 year lock-in period and may not dispose
of or encumber its Subscription Shares during the 10-year period following
the issue date thereof without the prior consent of Balwin.
3.1.3.2. During the 10-year period following the issue of the Subscription Shares, the
BEE SPV will be entitled to dividends to the extent that these are declared
and paid on Balwin ordinary shares (subject to such dividends being applied
to the reduction of the loan amount as contemplated in the Loan
Agreement).
3.1.3.3. the BEE SPV will be entitled to exercise all voting rights attached to the
Subscription Shares;
3.1.3.4. the BEE SPV will be entitled to appoint one non-executive director to the
board of Balwin; and
3.1.3.5. subject to further terms and conditions as are customary for transactions of
this nature.
3.1.4.A Cession and Pledge Agreement in terms of which, inter alia, the BEE SPV will cede
and pledge the BEE Shares to Balwin as security for its obligations under the Transaction
Documents;
(collectively referred to as the “Transaction Agreements”)
4. CONDITIONS PRECEDENT
4.1. The Transaction Agreements are subject to the fulfilment of the following conditions
precedent –
4.1.1.The shareholders of Balwin passing all special and ordinary resolutions required to
implement the Transaction Agreements, including the following resolutions –
4.1.1.1. an ordinary resolution, supported by at least 75% of voting rights exercised,
authorising the allotment and issue of the Subscription Shares to the BEE
SPV pursuant to Subscription Agreement;
4.1.1.2. a special resolution in terms of section 44 of the Companies Act authorising
the provision of financial assistance by Balwin to the BEE SPV for the
acquisition of the Subscription Shares; and
4.1.1.3. a special resolution authorising the reacquisition of the Subscription Shares
pursuant to any enforcement by Balwin under the Pledge and Cession
Agreement;
4.1.2. each of the Transaction Documents (which include the agreements described above,
as well as a new, ring-fenced MOI for BEE SPV) is entered into and becomes
unconditional in accordance with its terms;
4.1.3.Balwin has confirmed in writing to BEE SPV that the ownership structure of BEE SPV
(including its ultimate beneficial shareholders) and the content of and principles
underlying the BEE SPV MOI and BEE SPV Shareholders Agreements is satisfactory to
Balwin and consistent with the BEE principles and BEE objectives;
4.1.4.each of the BEE SPV Shareholders has signed a deed of accession to the Relationship
Agreement;
4.1.5.Balwin has confirmed in writing to BEE SPV that no Material Adverse Change has
occurred between the Signature Date and closing;
4.1.6.Mr Kukama and the BEE SPV have entered into a transaction, on terms and conditions
acceptable to Balwin, resulting in the shares in the BEE SPV being owned by the
shareholders contemplated in paragraph 2.8 above.
4.1.7. Balwin has confirmed in writing to Mr Kukama and the BEE SPV that no Material
Adverse Change (as defined in the Relationship Agreement) has occurred between the
signature date of the Relationship Agreement and the date on which the last of the
other conditions precedent to the Relationship Agreement have been fulfilled.
4.1.8.Each Transaction Agreement is entered into and becomes unconditional in accordance
with its terms.
4.1.9.The JSE has granted a listing for the Subscription Shares on its main board.
5. CIRCULAR
Balwin Shareholders are advised that, in accordance with the JSE Limited Listings Requirements,
a circular to Balwin shareholders containing further details of the BEE Transaction, including inter
alia, a notice of a general meeting to Balwin shareholders, will be issued within 60 calendar days
of this announcement, following approval thereof by the JSE Limited ("the Circular"). An
announcement will be released on the Stock Exchange News Service to notify Balwin
shareholders of the posting date of the Circular, including the details of the general meeting.
Johannesburg
26 May 2021
JSE Equity Sponsor:
Investec Bank Limited
Legal Advisor to Balwin:
Head of Legal assisted by Cliffe Dekker Hofmeyr Inc.
Legal Advisor to BEE SPV:
Padayachee Attorneys Inc.
Date: 26-05-2021 12:34:00
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