|Wescoal - offer to acquire shares, cautionary|
|2 February 2017 17:43|
|The purpose of this joint firm intention announcement (“Firm Intention Announcement”) is to advise Keaton Energy Shareholders and Wescoal ordinary shareholders (“Wescoal Shareholders”) of the terms and conditions of the Proposed Transaction.
Salient terms of the Offer
If the Scheme becomes unconditional, the consideration payable by Wescoal to Keaton Energy Shareholders in terms of the Scheme will be R1.80 per Keaton Energy Share, representing approximately R525.59 million in total (“Scheme Consideration” or “Offer Consideration”). The Scheme Consideration will be settled partly in cash (R1.20 per Keaton Energy Share) (“Cash Component”), representing approximately R350.39 million and the remainder will be settled in Wescoal ordinary shares (“Wescoal Shares”) (“Share Component”). The Share Component will be settled by Wescoal in the ratio of 0.30 Wescoal Shares for every 1.00 Keaton Energy Share held (“Switch Ratio”), resulting in 87 598 277 new Wescoal Shares (“Consideration Shares”) being issued to Keaton Energy Shareholders at an issue price of R2.00 per Consideration Share.
Wescoal has sufficient authorised but unissued Wescoal Shares to settle the Share Component. On completion of the Scheme, Keaton Energy will become a wholly- owned subsidiary of Wescoal and be delisted from the JSE.
The Scheme Consideration is determined on the basis that Keaton Energy will not issue any further shares, options or rights, other than those granted under the ESOPS (defined in paragraph 2.2 below) between the Signature Date and the Effective Date (defined in paragraph 7 below), or make any distributions after the date of this Firm Intention Announcement. Should Keaton Energy implement any such issue or make any distribution, the Scheme Consideration will be adjusted pro rata per Keaton Energy Share.
A comparable offer is also being made to all participants of the Keaton Energy Holdings Long-Term Performance Incentive Scheme (2007) and the Keaton Energy Holdings Ltd. 2013 Share Plan (“ESOPs”), subject to the successful completion of the Proposed Transaction (“Comparable Offer”).
Reciprocal break fee
Each of Wescoal and Keaton Energy has undertaken to the other to pay a break fee equal to 1% of the Scheme Consideration if it breaches any material provision or material undertaking of the Offer and, if capable of remedy, fails to remedy that breach within the time period contemplated in the Offer Letter.
Source of funds
The Cash Component of the Scheme Consideration and the Comparable Offer, as well as other expenses related to the Offer, will be funded by Wescoal through a combination of internal cash resources, debt facilities and the cash raised by Wescoal through its BEE transaction implemented in December 2016.
Conditions to the posting of the circular to Keaton Energy Shareholders (“Scheme Circular”)
The posting of the Scheme Circular to Keaton Energy Shareholders will be subject to the fulfilment, or waiver, as the case may be, of the following conditions by not later than 23:59 on the 60th day after the Signature Date (or, to the extent applicable, such earlier date stated below):
In terms of the Offer Letter, the Scheme will be subject to the fulfilment or waiver, as the case may be, of the following conditions by not later than 23:59 on the date which is 180 days after the Signature Date (“Long Stop Date”) (or such later date as may be agreed between Wescoal and Keaton Energy and notified to all Keaton Energy Shareholders and Wescoal Shareholders):
The effective date of the Scheme will be the 3rd business day after the last of the Scheme Conditions set out above is fulfilled or waived (“Effective Date”) and the Scheme will be implemented at the earliest date after the Effective Date.
Category 1 acquisition for Wescoal
The Proposed Transaction is classified as a Category 1 transaction for Wescoal and accordingly requires Wescoal Shareholder approval. The net asset value of Keaton Energy as at 30 September 2016 was R515.9 million and the net profit after tax attributable to Keaton Energy Shareholders for the six months ended 30 September 2016 was R20.8 million.
Guarantees and confirmations to the TRP
Wescoal has delivered to the TRP an irrevocable, unconditional bank guarantee issued by Investec Bank Ltd., for the maximum possible Cash Component of the Scheme Consideration.
Wescoal will (if it so elects), as a Standby Offer, if the Scheme Circular is not posted or the Scheme is not implemented, at any time prior to the Long Stop Date offer to purchase the Offer Shares held by the Keaton Energy Shareholders on the same terms and conditions as would have been applicable to the Scheme.
The Standby Offer is subject to the same conditions detailed in paragraph 7 above which, as at the date of failure of the posting of the Scheme Circular or implementation (save for the Scheme Conditions in paragraphs 7.3, 7.4 and 7.5 above), have yet to be fulfilled or waived, as the case may be.
The Standby Offer shall, unless Wescoal determines otherwise, only become operative if Keaton Energy Shareholders (i) holding at least 50.1% of the Offer Shares have delivered written acceptances of the Standby Offer, and (ii) have approved, by a resolution passed by a simple majority, the delisting of Keaton Energy from the JSE.
Termination of the Keaton Energy listing
Following implementation of the Proposed Transaction, application will be made to the JSE to terminate the listing of the Keaton Energy Shares on the JSE.
Details of the Proposed Transaction will be included in the Wescoal Circular, which will contain, inter alia, a notice of the Wescoal General Meeting and a form of proxy. The Wescoal Circular is expected to be posted to Wescoal Shareholders in due course.
Details of the Scheme and the Standby Offer will be included in the Scheme Circular, which will contain, inter alia, details of the Proposed Transaction, a notice of the Scheme Meeting, a form of proxy, a form of surrender and transfer and Standby Offer form. The Scheme Circular is expected to be posted to Keaton Energy Shareholders in due course.
The salient dates and times pertaining to the Proposed Transaction will be released on SENS and published in the press at the time of posting of the abovementioned circulars.
As the pro forma financial effects of (i) the Proposed Transaction on Wescoal, and (ii) the Scheme on Keaton Energy Shareholders, have not yet been published:
until such time as the aforementioned pro forma financial effects are published.
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