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Pinnacle - B-BBEE transaction
The Board is pleased to announce that it has resolved to pursue a Broad-Based Black Economic Empowerment (“B-BBEE”) ownership transaction through its wholly-owned subsidiary DCT Holdings (Pty) Ltd. (“DCT Holdings”) in terms of which it is anticipated that a B-BBEE partner will subscribe for 29,9% of the ordinary issued shares (“B-BBEE Shares”) in DCT Holdings (“Proposed B-BBEE Transaction”). The Proposed B-BBEE Transaction includes a group restructuring to simplify Pinnacle’s current group structure, align its group structure with its strategy and consolidate its main South African operating assets under DCT Holdings to facilitate the implementation of the Proposed B-BBEE Transaction (“Group Restructure”).
The Proposed B-BBEE Transaction has been structured to meet the following objectives:
- pursue real and sustainable empowerment aimed at empowering previously disadvantaged stakeholders with a focus on broad-based groupings;
- create a sustainable and non-complex funding structure which is not reliant on external bank funding, share price appreciation or dividend payments;
- materially improve DCT Holdings and its subsidiaries’ (“DCT Holdings Group”) B-BBEE ownership credentials;
- complement existing B-BBEE initiatives; and
- preserve existing value for current shareholders.
Identity of the B-BBEE partner and its beneficiaries
It is anticipated that a broad-based trust (“the Pinnacle Foundation Trust”), through a wholly-owned subsidiary (“The Pinnacle Foundation (RF) (Pty) Ltd.”), will act as the B-BBEE partner to the Proposed B-BBEE Transaction. Pinnacle will act as founder (“Founder”) for the establishment of the Pinnacle Foundation Trust. The Founder will be responsible for the appointment of the relevant trustees of which at least 50% will be independent from the Founder, at least 50% will be black people and at least 25% will be black women.
The beneficiaries of the Pinnacle Foundation Trust will include amongst others persons and/or entities and/or institutions and/or initiatives falling in one or more or all of the following categories:
- any primary, secondary and tertiary schools and/or any education initiatives;
- any initiatives that may include the donation of equipment applied in the ICT sectors, infrastructure related projects (including but not Ltd. to repairs to schools/buildings), provision of sporting facilities, cash and time donations to identified charities, communities, sport clubs, healthcare providers, general food or nutrition provision, general welfare organisations aimed at the betterment of communities identified (including but not Ltd. to clean-up projects, general upliftment projects, healthcare improvements);
- emerging entrepreneurs and/or emerging suppliers directly or indirectly in the ICT sector, and any entities or institutions or initiatives established for the benefit of such persons;
- DCT Holdings’ workers and their families, and any entities or institutions or initiatives established for the benefit of such persons;
- any potential future employee of the Pinnacle Group seeking to further his/her education; and
- any other individual/s or group/s of people or entity/ies forming part of, or that operate for an educational or other public benefit purpose within the communities in which the DCT Holdings Group operates, or of which its employees are members, provided that, in line with the applicable B-BBEE legislation, 100% of distributions to further the Pinnacle Foundation Trust’s objectives will be used to benefit black people of which 100% of all such distributions will be expended directly for the benefit of black women for the first 3 (three) financial years of the Pinnacle Foundation Trust’s existence whereafter at least 40% of such distributions will be expended directly for the benefit of black women.
Salient features of the Proposed B-BBEE Transaction
In order to facilitate the Proposed B-BBEE Transaction and as part of the Group Restructure, Pinnacle will consolidate its South African operating assets under DCT Holdings prior to the implementation of the Proposed B-BBEE Transaction. In order to retain existing value for Pinnacle shareholders and to enable Pinnacle Foundation (RF) (Pty) Ltd. (on behalf of the Pinnacle Foundation Trust) to subscribe for the B-BBEE shares at a nominal value (“B-BBEE Subscription”), it is anticipated that prior to the B-BBEE Subscription:
- Pinnacle will, subject to the declaration of the Special Distribution (as defined below), subscribe for cumulative redeemable non-participating preference shares in DCT Holdings equal to the market value of the DCT Holdings Group (“Market Value”) plus such an amount required for purposes of settling the existing inter-group loan account (“Pinnacle Treasury Loan”) between DCT Holdings and Pinnacle Treasury (“Preference Share Subscription”);
- DCT Holdings will declare a special distribution (“Special Distribution”) to Pinnacle equal to the Market Value, payment of which will be made subject to the successful implementation of the Preference Share Subscription; and
- the Pinnacle Treasury Loan followed by the loan account between Pinnacle Treasury and Pinnacle (“Inter-Group Loans”) will be settled.
Pursuant to the Preference Share Subscription coupled with the Special Distribution and the settlement of the Inter-Group Loans, Pinnacle Foundation (RF) (Pty) Ltd., will then be able to subscribe for 29,9% of the ordinary shares in DCT Holdings for a nominal amount. As Pinnacle Foundation (RF) (Pty) Ltd. will not need to raise its own acquisition funding it will result in an additional, immediate and unencumbered black ownership of 29,9% of the DCT Holdings Group which, taken together with the current flow-through black ownership contribution received from Pinnacle, is expected to result in an overall effective black ownership of the DCT Holdings Group in excess of 51% and black women ownership representation in excess of 30%.
Conditions to the Proposed B-BBEE Transaction
The appropriate subscription agreements are expected to be concluded as soon as:
- the Pinnacle Foundation Trust has been duly established;
- Pinnacle Foundation (RF) (Pty) Ltd. has been duly incorporated; and
- DCT Holdings has adopted a new memorandum of incorporation (which is required to facilitate the Preference Share Subscription and the B-BBEE Subscription).
Shareholders will be informed once the B-BBEE Subscription agreement has been concluded. Pinnacle expects to conclude the Proposed B-BBEE Transaction during July 2016.
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