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Pinnacle -- posting of circular and notice of AGM
Pinnacle shareholders are referred to the announcement released on SENS on 3 May 2011 and in the press on 4 May 2011 where they were advised that Pinnacle had entered into an agreement with Amabubesi Technology Holdings (Pty) Ltd ("Amabubesi") in terms of which Pinnacle and Pinnacle Holdings Ltd, a subsidiary of Pinnacle, would repurchase shares from Amabubesi amounting to 20 million shares (the "repurchase"). A circular containing details of the repurchase, including, inter alia, a notice convening a general meeting, was posted to shareholders today. The general meeting is to be held at the registered office of the company; The Summit, 269, 16th Road, Randjespark, Midrand, 1685 at 10:00 on Friday, 24 June 2011, to consider and, if deemed fit, to pass, with or without modification, the special and ordinary resolutions authorising the repurchase of shares from Amabubesi.
The salient dates and times in relation to the general meeting are as follows:
- Last day to lodge forms of proxy by 10:00 on -- Thursday, 23 June 2011
- General meeting to be held at 10:00 on -- Friday, 24 June 2011
- Results of the general meeting released on SENS -- Friday, 24 June 2011
- Results of the general meeting published in the press -- Monday, 27 June 2011
All times indicated above are South African times. Shareholders will be notified of any amendments to the above dates or times on SENS and in the press.
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Pinnacle share repurchase & cautionary withdrawal
Further to the cautionary announcement released on SENS on Wednesday, 13 April 2011 and in the press on Thursday, 14 April 2011, shareholders were advised that Pinnacle has entered into an agreement with Amabubesi on 3 May 2011 ("the agreement"), in terms of which Pinnacle will repurchase 5 815 363 of its own ordinary shares at R5.50 per share out of its available share premium and Pinnacle Holdings Ltd, a subsidiary of Pinnacle will acquire 14 184 637 ordinary shares in Pinnacle at R5.50 per share, both from Amabubesi, amounting to a total of 20 million shares ("sale shares") purchased for and on behalf of the Pinnacle Group of Companies ("the group"), subject to the conditions precedent below (collectively "the transaction"). The effective date of the transaction will be the first business day after the date on which the last of the conditions precedent in the agreement are fulfilled or waived, as the case may be. This is expected to occur once the shareholders have approved the transaction by way of special resolution in a shareholders' meeting to be held on or about 24 June 2011.
Rationale for the transaction
Amabubesi is desirous of selling its entire holdings of 37 281 647 ordinary shares in Pinnacle due to the fund in which these shares were owned having reached its investment horizon. Pinnacle holds a pre-emptive right over these shares giving it an effective right of first refusal should Amabubesi decide to sell these shares. Amabubesi has offered a price of R5.50 per share which is 19.9% below its average traded price over the 30 business days prior to concluding the agreement. If the group was to have completed this transaction on 1 July 2010 the resultant reduction in issued shares (net of treasury shares) would have had the effect of increasing the pro-forma earnings per share by 7.4% for the six months ended 31 December 2010. For these reasons the board of directors of Pinnacle ("the board") decided to acquire as much of Amabubesi's offer that could be funded out of the group's current funding capacity without restricting the group's funding needs that are expected to arise out of future growth. The board accordingly decided to repurchase 20 million shares after considering cash flow and balance sheet forecasts prepared by each of its subsidiaries and consolidated to group level. The board also decided to retain so much of the shares as treasury shares as will increase the quantity of shares in Pinnacle that the group owns after the transaction to 10% of Pinnacle issued share capital after the transaction and to cancel the remainder out of share premium. The treasury shares so acquired will be retained for strategic purposes including the possibility of securing a new BEE partner in the future.
Terms of transaction
The purchase consideration for the transaction amounts to R110 000 000 of which R78 015 503.50 will be guaranteed by Pinnacle ("the guarantee agreement") in respect of the 14 184 637 shares that are being purchased by Pinnacle Holdings Ltd. A repurchase price of R5.50 per ordinary share has been agreed for the transaction, which represents a discount of 19.9% to the 30 business day volume weighted average price of R6.87 up to and including 29 April 2011, being the last business day prior to the signature date of the agreement. The transaction is subject to the following unfulfilled conditions precedent:
- by not later than 17h00 on 20 May 2011, the members of Amabubesi have passed all such resolutions as may be required to approve and implement the transaction, and such resolutions have, to the extent legally necessary, been filed with the Companies and Intellectual Property Commission;
- by not later than 17h00 on 4 May 2011, the board has approved and ratified the entering into of the agreement;
- by not later than 17h00 on 4 May 2011, the board of directors of Pinnacle Holdings Ltd has approved and ratified the entering into of the agreement;
- by no later than 17h00 on the 4 May 2011, 45% of the shareholders of the company have signed irrevocable undertakings to vote in favour of any resolutions as may be required to approve and implement the transaction;
- by not later than 30 June 2011, the members of Pinnacle have passed all such resolutions as may be legally necessary to, approve and implement the transaction, approve and/or authorise the provision by Pinnacle of financial assistance to Pinnacle Holdings Ltd in terms of the agreement and/or the guarantee agreement in connection with and/or for purposes of the transaction, approve and/or authorise the acquisition by the group of the sale shares; and
- by no later than 30 June 2011, the resolutions have been filed with the Companies and Intellectual Property Commission.
It is intended that the transaction will be funded out of existing cash resources. Following the implementation of the transaction, application will be made to the JSE for the cancellation and delisting of the 5 815 363 shares repurchased by Pinnacle. Pinnacle Holdings Ltd and the group controlled Pinnacle Share Purchase Scheme Trust will hold a total of 18 131 645 shares in Pinnacle as treasury shares after the transaction. At that point in time this will represent 10% of the reduced number of issued shares in Pinnacle, after the repurchase and cancellation of the 5 815 363 shares repurchased by Pinnacle.
Financial effects
Before & after the transaction:
- Earnings per share (cents per share): 48.0 & 51.5
- Headline earnings per share (cents per share): 48.0 & 51.5
- Net asset value per share (cents per share): 331.08 & 303.67
- Number of shares in issue net of treasury shares ('000): 183 328 & 163 328
Circular
A circular, providing further information on the transaction and containing a notice of general meeting and a form of proxy will be posted to shareholders on or about 25 May 2011.
Withdrawal of cautionary announcement
As details of the transaction have been provided in this announcement, shareholders were advised that they no longer need to exercise caution when dealing in their Pinnacle securities.
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