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MMI
MMI
MMI - MMI Holdings Limited - Proposed restructuring of the existing broad-based
Black Economic Empowerment transaction
MMI Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/031756/06)
JSE share code: MMI NSX share code: MIM
ISIN: ZAE000149902
("MMI" or "the Company")
PROPOSED RESTRUCTURING OF THE EXISTING BROAD-BASED BLACK ECONOMIC EMPOWERMENT
("BEE") TRANSACTION BETWEEN MMI HOLDINGS LIMITED ("MMI") AND KAGISO TISO
HOLDINGS PROPRIETARY LIMITED (RF) ("KTH"), PROPOSED ODD-LOT OFFER AND VOLUNTARY
REPURCHASE OFFER
1. RESTRUCTURING OF THE EXISTING BEE TRANSACTION
1.1 Introduction
MMI and KTH have a long-standing relationship, which began in 2004 when Kagiso
Trust Investments Proprietary Limited (now known as KTH following its merger
with Tiso Group Proprietary Limited) acquired a 10% shareholding in MMI, through
Off the Shelf Investments 108 Proprietary Limited ("SPV"), and became MMI`s
strategic empowerment partner ("BEE transaction").
MMI was created in 2010 pursuant the merger of Metropolitan Holdings Limited
("Metropolitan") and Momentum Group Limited ("Momentum"), resulting in a
substantially larger and more diversified financial services group. MMI supports
opportunities to improve its business and advance its BEE status in line with
the philosophy of good corporate citizenship and in line with the philosophy of
good corporate citizenship and the department of trade and industry`s broad-
based black economic empowerment codes of good practice ("codes").
Following the merger of Metropolitan and Momentum in 2010, KTH and the
Metropolitan Empowerment Trust (the vehicle through which MMI management held an
indirect interest in MMI) together held approximately 8% of MMI`s total issued
ordinary shares. The Metropolitan Empowerment Trust has since exited the BEE
structure, and KTH has increased its effective shareholding in MMI.
MMI, in line with the continued objective to advance its BEE status, intends to
facilitate the refinancing of the BEE transaction through specific amendments
which will result in a restructuring thereof ("BEE restructuring"). This
announcement outlines the key details of the BEE restructuring.
1.2 Rationale
BEE is one of MMI`s most important business imperatives and is in line with
MMI`s strategic objectives. While KTH`s effective interest in MMI has increased,
the current beneficial BEE shareholding was reduced following the Metropolitan
Empowerment Trust`s exit. Given that the lock-in restrictions on KTH`s holding
of MMI ordinary shares as provided for in the current relationship agreement
will expire in the near future, the empowerment credentials of MMI could be
negatively impacted should KTH elect to sell its interests in MMI.
MMI intends to facilitate the BEE restructuring through the refinancing of KTH`s
shareholding in MMI and the extension of the lock-in restrictions in relation to
KTH`s shareholding in MMI. Pursuant to this, MMI and KTH have entered into a
revised relationship agreement to facilitate MMI`s empowerment credentials.
1.3 Terms of the BEE restructuring
Below are the principal terms of the proposed BEE restructuring:
Step 1: Extension and amendment to Both the A3 SPV preference shares and
the terms of the A3 MMI the A3 MMI preference shares will be
preference shares and A3 extended for a period of 5 years and
SPV preference shares the terms attaching to these shares
will be amended. The annual coupon
per share payable on the A3 MMI
preference shares will be reduced to
R1.32 per share per annum from the
current R1.76 per share.
Step 2: Convert all A1 and A2 MMI SPV will convert all the A1 and A2
preference shares into MMI MMI preference shares held by it into
ordinary shares MMI ordinary shares on a one-for-one
basis as set out in the terms and
conditions attaching to the A1 and A2
MMI preference shares.
Step 3: Funding raised by SPV SPV intends to independently raise
funding of up to R271 million by
issuing a new class of preference
shares to external funders, which
funding will be utilised to redeem
the existing A1 SPV preference
shares.
Step 4: Redemption of the A2 SPV SPV will sell such number of MMI
preference shares ordinary shares as is required to
redeem all the A2 SPV preference
shares.
Following the BEE restructuring KTH will hold a direct and indirect equity
interest of approximately 7% in MMI mainly through 79 million ordinary shares
and 34 million A3 MMI preference shares.
1.4 Pro forma financial effects of the BEE restructuring
The table below sets out the unaudited pro forma financial effects of the BEE
restructuring on earnings per share ("EPS"), headline EPS ("HEPS"), net asset
value ("NAV") and tangible net asset value ("TNAV") per share assuming that the
proposed BEE restructuring took place to its full extent for purposes of the
income statement for the six-month period started 1 July 2011 and ended 31
December 2011 and as at 31 December 2011 for purposes of the statement of
financial position.
The unaudited pro forma financial effects are the responsibility of the
directors of MMI and have been prepared for illustrative purposes only to
provide information about how the BEE restructuring may have impacted MMI
shareholders ("shareholders") on the relevant reporting date and because of its
nature may not give a fair reflection of the group`s financial position, changes
in equity, results of operations or cash flows after implementation of the BEE
restructuring or of the group`s future earnings. The unaudited pro forma
financial effects have been prepared using accounting policies that are
consistent with International Financial Reporting Standards ("IFRS") and in
accordance with the accounting policies adopted by MMI.
Before Pro forma
the BEE after the BEE % Movement
restructuring restructuring
EPS (cents) 54 53 -1.85
HEPS (cents) 54 54 0.00
NAV per share (cents) 1,532 1,492 -2.61
TNAV per share (cents) 730 724 -0.82
Weighted average number 1,489 1,555 4.43
of shares in issue
(millions)
Notes:
1. Assuming that SPV converts 65.7 million MMI convertible, redeemable
preference shares into 65.7 million MMI ordinary shares, this will result
in the conversion of a R388 million preference share liability into equity.
2. The SPV converts the A1 and A2 MMI preference shares into MMI ordinary
shares, resulting in a reduction of preference share dividends (accounted
for as finance costs) of R15 million. The impact of additional interest
income, and the related tax impact, is negligible and has been ignored for
these purposes. No adjustment was made to dividends paid on MMI ordinary
shares. This also results in the basic weighted average number of MMI
ordinary shares in issue increasing by 65.7 million shares.
3. Assumes both the A3 MMI preference shares and the A3 SPV preference shares
are extended for a period of five years. The dividend rate per annum
payable by MMI on the A3 MMI preference shares will be R1.32 per share,
resulting in a saving of R9 million in finance costs. The net impact of
interest income on this saving and the extension of the A3 SPV preference
shares, and the related tax impact, is negligible and has been ignored for
these purposes.
4. Transaction costs of R5 million (R1 million deferred tax) have been taken
into account.
1.5 Conditions precedent
The BEE restructuring is subject to:
* the approval of all relevant resolutions in the notice of general meeting
attached to the circular posted to shareholders today by the requisite majority
of votes at the general meeting, which resolutions are required in order to
effect the amendment to the terms attaching to the A3 MMI preference shares as
detailed in the circular, and
* the lodgement of the relevant special resolutions with the Companies and
Intellectual Property Commission.
1.6 Fairness opinion
As the BEE restructuring involves the amendment of a previously approved BEE
transaction and includes an extension of existing preference shares which are
unlisted voting instruments, the Listings Requirements of the JSE Limited
("JSE") require an opinion from an independent professional expert, confirming
that the terms of the BEE restructuring are fair to MMI`s shareholders. Ernst &
Young has been appointed by MMI as an independent expert and is of the opinion
that the BEE restructuring is fair. Ernst & Young`s opinion is detailed in the
circular posted to shareholders today.
2. ODD-LOT OFFER AND VOLUNTARY REPURCHASE OFFER
2.1 Introduction and rationale
Following the merger and the subsequent unbundling by FirstRand Limited
("FirstRand") of its entire shareholding in MMI to FirstRand ordinary
shareholders, MMI inherited a large number of minority shareholders, who each
hold up to 500 MMI ordinary shares. On Tuesday 8 May 2012, MMI had a total of
31,176 shareholders, of which approximately 4,915 shareholders (15% of all
shareholders) held less than 100 MMI ordinary shares ("odd-lot holders") and an
additional 12,898 shareholders (41% of all shareholders) held from 100 to 500
MMI ordinary shares ("voluntary holders"). These shareholders hold approximately
2,915,526 MMI ordinary shares in aggregate, which constitutes approximately 0.2%
of the total number of MMI ordinary shares in issue.
In order to reduce the substantial and ongoing costs of administration connected
with a large number of odd-lot and voluntary holders, and to provide them with a
cost effective method of realising their investment in MMI, the Board is
proposing the implementation of an odd-lot offer to repurchase the MMI ordinary
shares of shareholders holding less than 100 MMI ordinary shares ("odd-lot
offer") and a voluntary repurchase offer to repurchase the shares of
shareholders holding from 100 to 500 MMI ordinary shares ("voluntary repurchase
offer") (collectively, "the offers").
2.2 Terms of the offers
In terms of the odd-lot offer, odd-lot holders are offered the opportunity to:
* sell their odd-lot holdings at the offer price detailed below; or
* retain their odd-lot holdings.
Those odd-lot holders who do not make an election by no later than 12:00 on
Friday 20 July 2012 ("record date"), will automatically be regarded as having
chosen to sell their odd-lot holdings at the offer price.
In terms of the voluntary repurchase offer, MMI is extending an offer to
voluntary holders to sell their entire shareholding at the offer price. Those
voluntary holders who do not make an election by no later than 12:00 on the
record date will retain their shareholding in MMI.
2.3 Shareholder information line
Minority shareholders are encouraged to carefully read the circular and complete
the relevant election form. Any odd-lot or voluntary holder can contact the
transfer secretary, Link Market Services South Africa Proprietary Limited on
telephone +27 11 713 0894 from Thursday 7 June 2012 to Friday 29 June 2012
between 09:00 and 12:00, excluding weekends and public holidays, for further
information.
2.4 Offer price
The offer price will be calculated using the volume weighted average traded
price of an MMI ordinary share on the JSE over the 5 trading days commencing on
Thursday 28 June 2012 and ending on Wednesday 4 July 2012, plus a 10% premium
("offer price"). The offer price will be announced on SENS on Friday 6 July 2012
and published in the South African and Namibian press on Monday 9 July 2012.
2.5 Mechanism
* The offers shall be open for acceptance from 09:00 on Thursday 7 June 2012 and
will close at 12:00 on Friday 20 July 2012. All shareholders who hold less than
100 MMI ordinary shares at the close of business on the record date are invited
to participate in the odd-lot offer, and shareholders who hold from 100 to 500
MMI ordinary shares at the close of business on the record date are invited to
participate in the voluntary offer.
* The MMI ordinary shares of those odd-lot holders who do not make an election
or who choose to receive the offer price will be repurchased by MMI. Any such
repurchase will be regarded as an acquisition of shares under a specific
approval in terms of the Companies Act, Act 71 of 2008 ("Companies Act") and as
a specific repurchase of shares in terms of the JSE Listings Requirements.
Shareholders will be required to exercise their votes to approve or not approve
the odd-lot offer at the general meeting.
* The MMI ordinary shares of those voluntary holders who choose to receive the
offer price will be repurchased by MMI. Any such repurchase will be regarded as
an acquisition of shares under a specific approval in terms of the Companies Act
and as a specific repurchase of shares in terms of the JSE Listings
Requirements. Shareholders will be required to exercise their vote to approve or
not approve the voluntary offer at the general meeting.
* Odd-lot holders who do not make an election should note that, subject to the
resolutions necessary to implement the offers being passed at the general
meeting, their shares will automatically be repurchased by MMI, without any
further action on their part and without any further notice to them.
* Voluntary holders who do not make an election will retain their shareholding
in MMI.
2.6 Effect on share capital
The maximum number of shares that could potentially be repurchased by MMI if all
odd-lot and voluntary holders sell their holdings to MMI will not exceed
2,915,526 shares. As the current issued share capital of MMI (prior to the
implementation of the offers) comprises 1,503,985,331 shares as at 31 December
2011, the repurchase of shares in terms of the offers will have no material
effect on MMI`s issued share capital.
2.7 Specific repurchase of shares and tax consequences thereof for shareholders
selling their shares in MMI in terms of the odd-lot offer and voluntary
repurchase offer
Below is a high-level summary of the potential tax consequences arising for
shareholders who are odd-lot holders and voluntary holders in respect of the
disposal of MMI ordinary shares by way of a specific share repurchase by MMI in
terms of the offers. The summary of the tax implications serves as a general
guide and is not intended to constitute a complete analysis of the tax
consequences of the repurchase under South African tax law. It is not intended
to be, nor should it be considered to be legal or tax advice. As each such
shareholder`s personal circumstances may lead to a different tax analysis,
shareholders should seek appropriate advice in respect of their particular
circumstances from their personal tax advisors.
In general, the cash consideration paid by MMI to shareholders pursuant to the
specific share repurchase under the offers should constitute a "dividend" in the
hands of such MMI shareholders as no portion of the repurchase price will
consist of contributed tax capital.
The dividend should constitute an "exempt dividend" as contemplated in section
10(1)(k)(i) of the Income Tax Act (unless one of the specific exclusions apply).
The dividend will, however, be subject to the withholding of dividends tax at a
rate of 15 % (fifteen percent) of the dividend paid to the shareholder, unless a
specific exemption from dividends tax applies.
2.8 Financial effects
The table below sets out the unaudited pro forma financial effects of the offers
on EPS, HEPS, NAV and TNAV per share assuming that the odd lot and voluntary
repurchase offers took place to their full extent for purposes of the income
statement for the six-month period started 1 July 2011 and ended 31 December
2011 and as at 31 December 2011 for purposes of the statement of financial
position.
The unaudited pro forma financial effects are the responsibility of the
directors of MMI and have been prepared for illustrative purposes only to
provide information about how the offers may have impacted shareholders on the
relevant reporting date and because of its nature may not give a fair reflection
of the group`s financial position, changes in equity, results of operations or
cash flows after implementation of the offers or of the group`s future earnings.
The unaudited pro forma financial effects have been prepared using accounting
policies that are consistent with International Financial Reporting Standards
("IFRS") and in accordance with the accounting policies adopted by MMI.
Before the Pro forma %
offers after the Movement
offers
EPS (cents) 54 54 0.00
HEPS (cents) 54 54 0.00
NAV per share (cents) 1,532 1,531 -0.07
TNAV per share (cents) 730 728 -0.27
Weighted average number of 1,489 1,486 -0.20
shares in issue (millions)
Notes:
1. Assuming a maximum number of 2,915,526 MMI ordinary shares are repurchased in
terms of the offers, the financial cost is expected to be R56 million.
2. All odd-lot offer shareholders and all voluntary holders are assumed to sell
their odd-lot holdings (less than 100 shares) to MMI at the offer price,
totalling R3 million.
3. The offer price assumed for pro forma purposes is R19.07. The impact of the
offers results in a loss of interest income of R1 million on an assumed 5%
interest rate (based on MMI`s actual average interest rate earned on cash during
the six months from 1 July to 31 December 2011) before tax (tax impact is
negligible) and a reduction of 3 million in the weighted average number of
shares.
2.9 Conditions precedent
Subject to:
* the requirements of section 48 (read with section 46) of the Companies Act,
* to the special resolution authorising the specific repurchase in terms of the
offers and the ordinary resolution authorising the directors to make and
implement the odd-lot offer and the voluntary repurchase offer being passed by
shareholders at the general meeting, and
* the lodgement of the relevant special resolutions with the Companies and
Intellectual Property Commission,
all MMI ordinary shares sold by odd-lot holders and voluntary holders in terms
of the offers will be repurchased by MMI as a specific share repurchase in terms
of section 48 (read with section 46) of the Companies Act and the provisions of
the JSE Listings Requirements.
3. POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING
Shareholders are advised that in accordance with the JSE Listings Requirements,
a circular incorporating a notice of a general meeting of shareholders has been
dispatched to shareholders today, Friday 18 May 2012, containing full details of
the BEE restructuring and the offers. This Circular is also available on the MMI
website.
The general meeting is convened to be held at MMI`s offices, 268 West Avenue,
Centurion, on Monday 18 June 2012 at 12:00 for the purpose of obtaining the
necessary approvals required to give effect to the proposed BEE restructuring
and the offers.
4. SALIENT DATES AND TIMES
The salient dates and times in respect of the BEE restructuring and the offers
are as follows:
2012
Post circular Friday 18 May
Last day to trade in order to be eligible Friday 1 June
to attend and vote at the general meeting
Offers open at 09:00 Thursday 7 June
Record date to determine which Friday 8 June
shareholders are entitled to attend and
vote at the general meeting
Proxy forms for the general meeting of Thursday 14 June
shareholders to be received by transfer
secretaries by 12:00 (see note 3)
General meeting of shareholders to be held Monday 18 June
at MMI`s registered offices at 12:00
Results of the general meeting released on Monday 18 June
SENS
Results of the general meeting published Tuesday 19 June
in the press
Fulfilment of conditions precedent and Friday 6 July
finalisation of the offer price
announcement (including the final offer
price) released on SENS
Offer price announced in press Monday 9 July
Last day to trade in order to participate Friday 13 July
in the offer
Shareholders who purchase shares on or Friday 13 July
after this date will not be eligible to
participate in offers
Shares trade "ex" the offers Monday 16 July
Forms of election and surrender for the Friday 20 July
offers to be received by transfer
secretaries by 12:00
Offers close at 12:00 Friday 20 July
Record date to determine those Friday 20 July
shareholders entitled to participate in
the offers at the close of business
Implementation of the offers takes effect Monday 23 July
after close of business
Odd-lot holders and voluntary holders with Monday 23 July
dematerialised shares will have their
accounts held at their CSDP or broker
updated with their new holding and
credited with the offer price
Payments of the offer price to odd-lot Monday 23 July
holders and voluntary holders with
certificated shares in respect of their
sale shares
Results of the offers released on SENS Monday 23 July
Results of the offers published in the Tuesday 24 July
press
Notes:
1. These dates and times are subject to change and are indicated in South
African local time. Any material changes will be published on SENS and in
the press in South Africa and Namibia.
2. Share certificates may not be dematerialised or rematerialised between
Monday 16 July 2012 and Friday 20 July 2012, both days inclusive.
3. Any proxies not lodged by this time must be handed to the company
secretary/Link Market Services or to the person designated by the chairman
in the alternate venue to be used for electronic participation in the
general meeting, if any, immediately prior to the general meeting.
Centurion
18 May 2012
Merchant bank, transaction sponsor and debt advisor to MMI
Rand Merchant Bank (A division of FirstRand Limited)
Independent sponsor to MMI
Merrill Lynch South Africa Proprietary Limited
Independent reporting accountants
PricewaterhouseCoopers Inc
Legal advisor to MMI
Edward Nathan Sonnenbergs Inc.
Legal advisor to KTH
Webber Wetzel Attorneys
Transaction and debt advisors to KTH
Afterguard Services Proprietary Limited
Independent expert
Ernst & Young
Date: 18/05/2012 07:05:09 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS. |
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