TIDMTHL
RNS Number : 2974Z
Tongaat Hulett Limited
16 May 2019
Unwind of 2007 broad-based black economic empowerment equity
transaction and notification of resultant transfer of shares
Tongaat Hulett Limited
Registration number 1892/000610/06
Share code: TON
ISIN ZAE000096541
("Tongaat Hulett")
UNWIND OF 2007 BROAD-BASED BLACK ECONOMIC EMPOWERMENT EQUITY
TRANSACTION AND NOTIFICATION OF RESULTANT TRANSFER OF SHARES
In June 2007, Tongaat Hulett entered into a 10-year Broad-Based
Black Economic Empowerment ("B-BBEE") equity transaction whereby
two B-BBEE SPVs, TH Development Infrastructure SPV (RF) Proprietary
Limited ("Infrastructure SPV") and yoMoba SPV (RF) Proprietary
Limited ("yoMoba SPV"), subscribed for around 25,1 million ordinary
shares in Tongaat Hulett ("the TH Subscription Shares"), pursuant
to which they held 18% of the then issued shares ("the
Transaction"). Infrastructure SPV held a 10% shareholding and
yoMoba SPV held an 8% shareholding.
The ordinary shareholders of the B-BBEE SPVs were as
follows:
- Tongaat Hulett's strategic partner companies, Ayavuna Women's
Investments Proprietary Limited ("Ayavuna") and Sangena Capital and
Investment Holdings Proprietary Limited ("Sangena"). Ayavuna and
Sangena ("the Strategic Partners") held a 30% interest in
Infrastructure SPV and yoMoba SPV respectively; and
- Two trusts representing communities in certain of Tongaat
Hulett's land conversion and cane growing areas, the Mphakathi
Trust and the Masithuthukisane Trust. The Mphakathi Trust and the
Masithuthukisane Trust ("the Community Trusts") held a 70% interest
in Infrastructure SPV and yoMoba SPV respectively.
The subscription for the TH Subscription Shares was funded as
follows:
- The Strategic Partners invested R9 million as equity and R9
million as interest-free shareholder loans ("Strategic Partner
Shareholder Loans") in the B-BBEE SPVs;
- FirstRand Bank Limited, acting through its Rand Merchant Bank
division ("RMB"), and Depfin Investments Proprietary Limited, a
wholly owned subsidiary of Nedbank Limited ("Nedbank") ("the
Preference Share Funders") subscribed for redeemable preference
shares ("Preference Shares") issued by the B-BBEE SPVs; and
- Tongaat Hulett provided notional vendor funding ("NVF").
No funds were invested by the Community Trusts.
The Transaction contemplated that certain of the TH Subscription
Shares would be disposed of to fund the redemption of the
Preference Shares and, thereafter, the repayment of the Strategic
Partner Shareholder Loans.
The B-BBEE SPVs' obligation to redeem the Preference Shares was
secured by a cession and pledge of the ordinary shares in the
B-BBEE SPVs. The Preference Share terms required a minimum share
cover ratio of 2 times based on the 10-day volume weighted average
price of the TH Subscription Shares ("Share Cover Ratio"). The
Preference Share Funders did not have any recourse to Tongaat
Hulett for payment of the redemption amount.
In July 2014, after the initial seven year vesting period of the
Transaction, a share repurchase calculation was performed in
accordance with the terms of the Transaction agreements. Given,
inter alia, that the Tongaat Hulett share price had not appreciated
sufficiently over the initial seven year vesting period, this
calculation determined that:
- Tongaat Hulett had the right, though not the obligation, to
repurchase up to 23,4 million of the TH Subscription Shares for a
consideration of 1 cent per share to settle the NVF. This share
repurchase right could only be exercised to the extent the B-BBEE
SPVs still held shares after the disposal of TH Subscription Shares
to fund the redemption of the Preference Shares and, thereafter,
the repayment the Strategic Partner Shareholder Loans; and
- the B-BBEE SPVs were not entitled to retain any of the TH
Subscription Shares, and so would no longer hold any shares after
settlement of the Preference Shares, the Strategic Partner
Shareholder Loans and the NVF.
Tongaat Hulett explored possible ways of restructuring the
Transaction. Any restructuring would have required shareholder
approval. In order to facilitate the possibility of a restructure,
the redemption date of the Preference Shares was extended
ultimately to 31 January 2019.
The Preference Shares were not redeemed on 31 January 2019, the
Share Cover Ratio was breached in February 2019 and subsequent to a
continued decline in the Tongaat Hulett share price the Strategic
Partners and the Community Trusts were formally notified by the
Preference Share Funders that the redemption amount of the
Preference Shares was due.
In April 2019, the Preference Share Funders exercised their
security rights by acquiring the ordinary shares in the B-BBEE SPVs
and indicated that they were in the process of transferring the TH
Subscription Shares into their own names, towards redemption of the
Preference Shares. Based on the number of Tongaat Hulett shares
required to redeem the Preference Shares, there would no longer be
any Tongaat Hulett shares available for the repayment of the
Strategic Partner Shareholder Loans and for Tongaat Hulett to
repurchase in terms of its repurchase right.
In terms of Section 3.83(b) of the JSE Listings Requirements and
Section 122 of the Companies Act No. 71 of 2008, shareholders are
accordingly advised that Tongaat Hulett has received formal
notification that:
- Infrastructure SPV has disposed of a 10,08% interest in the
ordinary shares of Tongaat Hulett, retaining a 0,24% interest
therein;
- yoMoba SPV has disposed of an 8,06% interest in the ordinary
shares of Tongaat Hulett, retaining a 0,20% interest therein;
- RMB has acquired a 9,07% interest in the ordinary shares of Tongaat Hulett; and
- Nedbank has acquired a 9,07% interest in the ordinary shares of Tongaat Hulett.
The transfer of securities will not adversely affect Tongaat
Hulett's B-BBEE ownership score because currently no B-BBEE
ownership scorecard points are claimed for the Transaction given
that, as determined in 2014, the BEE SPVs were not in any event
entitled to retain any of the TH Subscription Shares.
The Community Trusts will operate on a socio-economic basis
(without ownership), with Tongaat Hulett channelling a portion of
its socio-economic development expenditure through them.
B-BBEE continues to be a fundamental imperative for Tongaat
Hulett.
Tongaat
14 May 2019
Sponsor
Investec Bank Limited
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END
MSCBBGDUGUBBGCL
(END) Dow Jones Newswires
May 16, 2019 07:56 ET (11:56 GMT)
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