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Pinnacle -- BEE deal
Further to the cautionary announcements dated 8 September 2005 and 24 October 2005, Pinnacle has reached agreement with Amabubesi in terms of which Amabubesi will be introduced as a Black Economic Empowerment equity partner to Pinnacle. Amabubesi will acquire and subscribe for 20% in aggregate of the total issued share capital of Pinnacle at a subscription price of 100cps, subject to the fulfilment of the suspensive conditions. The negotiations with Amabubesi have been ongoing since June 2005, when the share price was below 80cps, which formed the initial basis for discussions.
Background to Amabubesi
Amabubesi is a BEE company owned and controlled by historically disadvantaged South Africans and premised on sound business principles. Amabubesi's board of directors consists of prominent businessmen led by Bulelani Ngcuka, Sango Ntsaluba, Thabiso Tlelai, Peter Moyo and other executive directors. Amabubesi sees itself as a new generation player in the BEE arena and focuses on making investments in sectors where it has relevant expertise, including the tourism & leisure, transport & logistics, technology, healthcare and property industries.
Subject to the suspensive conditions, the ordinary shares will be issued to Amabubesi as follows:
- Amabubesi will subscribe for 37 281 647 ordinary shares at 100cps, which will result in it obtaining a 20% shareholding in the company following the ordinary share issue.
- Amabubesi will undertake not to sell any of their ordinary shares in the company for a period of four years from the date of issue (other than up to 50% of their shareholding to another BEE company as approved by Pinnacle), provided that should Amabubesi decide to sell its Pinnacle ordinary shares after this four year period, Pinnacle will have a right of first refusal to buy back these ordinary shares at a price to be agreed between the parties.
- The company will grant Amabubesi a put option in terms of which Amabubesi will have the right to sell the 20% ordinary shareholding back to the company by way of a share buy-back mechanism if a minimum cumulative audited headline earnings per ordinary share of 110c in respect of the 2006, 2007, 2008 and 2009 financial years, and a minimum audited headline earnings per ordinary share of 33c in respect of the 2009 financial year, is not achieved. The warranted earnings as set out above will be calculated before taking account of any accounting entries in respect of the ordinary share issue that may be required as a result of the application of the International Financial Reporting Standard 2.
- Amabubesi may exercise the put option at any time during the six-month period following the public release of the audited results of the company in respect of the 2009 financial year.
- Amabubesi will decide, at its sole discretion, on the number of ordinary shares to sell to the company under the put option on the basis as set out above.
- The price per ordinary share payable by the company if the put option is exercised will be calculated as follows: the original cost of 100cps plus one half of Amabubesi's cumulative funding costs less any dividends received from Pinnacle.
Further issue of ordinary shares
- Amabubesi will furthermore, for a period of five years from 1 July 2005, have a right of first refusal to increase its shareholding by way of an issue of new ordinary shares for cash at a future price to be agreed between the parties, if the need to issue more ordinary shares for cash in the company arises. Amabubesi may subscribe for such number of additional ordinary shares which after such subscription will amount to Amabubesi holding up to 34.9% of the issued share capital of the company at that point in time.
- The further issue of ordinary shares is subject to the company complying with the relevant Listings Requirements of the JSE Limited ("JSE") and provisions of the Companies Act, 1973 (Act 61 of 1973), as amended. Other terms
- Amabubesi will have the right to appoint two non-executive directors to the board of the company. In addition to participating at board level, Amabubesi intends to actively participate and support management in adding value to the company's operations, and actively support management in efforts to brand the company as a leading BEE player in its field.
Conditions of the ordinary share issue
The ordinary share issue is subject to the fulfilment of the following suspensive conditions by no later than 31 January 2006:
- A subscription agreement containing all the terms and conditions of the ordinary share issue being entered into between Pinnacle and Amabubesi; and
- Approval of the terms and conditions relating to the issue of the ordinary shares and the put option by shareholders of Pinnacle in general meeting.
Notice of general meeting and withdrawal of cautionary announcement
A circular containing full details of the ordinary share issue, including a notice to shareholders convening a general meeting to be held to enable shareholders to consider and if deemed fit to approve, with or without modification, the resolutions required to implement the ordinary share issue, will be posted to shareholders in January 2006. Shareholders are referred to the cautionary announcement dated 24 October 2005 and are advised that, as full disclosure of the transaction referred to therein has been made in this announcement, caution in the dealing of the company"s securities is no longer required.
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