SPUR CORPORATION LIMITED - Issue of shares for cash donation of Spur Shares and further cautionary announcement
31 July 2014 8:00
SUR 201407310003A
Issue of shares for cash, donation of Spur Shares and further cautionary announcement
SPUR CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/000828/06)
Share code: SUR
ISIN: ZAE 000022653
(“Spur” or “the company”)
DETAILED TERMS ANNOUNCEMENT REGARDING:
A) ISSUE OF 10 848 093 NEW SPUR SHARES FOR CASH TO A WHOLLY OWNED
SUBSDIARY OF GRAND PARADE INVESTMENTS LIMITED AT A PRICE OF 2716 CENTS
PER SHARE (THE “B-BBEE TRANSACTION”)
B) DONATION OF 500 000 SPUR SHARES PREVIOUSLY HELD AS TREASURY SHARES TO
THE SPUR FOUNDATION (THE “B-BBEE DONATION”)
C) FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Shareholders are advised that Spur has entered into various agreements to
issue ordinary shares to Grand Parade Investments Limited (“GPI”,
registration number 1997/003548/06), a strategic black empowerment partner,
and is separately seeking approval to donate a material number of Spur
shares, currently held as treasury shares, to the Spur Foundation.
Shareholders should note that the B-BBEE Transaction and B-BBEE Donation,
as set out in sections A and B of this announcement respectively, are
independent of one another and are therefore not inter-conditional.
A) THE B-BBEE TRANSACTION
1. Introduction
The company has entered into definitive agreements with GPI, a black owned
and controlled company listed on the JSE Limited (“JSE”), in terms of which
a wholly owned subsidiary of GPI (“BEECo”) will subscribe for 10 848 093
ordinary issued shares of the company (“Spur Shares”), constituting 10% of
the post B-BBEE Transaction issued share capital of Spur (the “B-BBEE
Transaction”).
2. Salient terms of the B-BBEE Transaction
In terms of the B-BBEE Transaction:
2.1. Spur will allot and issue 10 848 093 new Spur shares
(“Subscription Shares”) to BEECo (the “Specific Issue”),
representing 10% of the total share capital of Spur post issuance,
as a specific issue of shares for cash and for a total
subscription price of R294.66 million (the “Subscription Price”);
2.2. The Subscription Price equates to an issue price of R27.16 per
Spur Share which represents a 10.0% Broad-based Black Economic
Empowerment (“B-BBEE”) lock-in discount to the volume weighted
average trading price of Spur shares on the JSE for the 90 trading
days prior to 30 July 2014; and
2.3. GPI and BEECo will be restricted from trading the Subscription
Shares without the express permission of Spur for a period of 5
years from the effective date of the B-BBEE Transaction (“Lock-in
Period”). Both GPI and BEECo are required to maintain their B-BBEE
credentials in terms of the B-BBEE Codes of Good Practice
throughout the Lock-in Period and will be free to trade the
Subscription Shares once the Lock-in Period has lapsed;
2.4. In terms of the agreements between the parties, Spur (or its
nominee) will under certain circumstances, such as breach by GPI
of its empowerment obligations to Spur, have the right to acquire
some or all of the Subscription Shares during the Lock-in Period.
This may result therein that Spur shall repurchase Subscription
Shares by means of a specific repurchase (“the Potential Specific
Repurchase”).
2.5 Funding the B-BBEE Transaction:
The B-BBEE Transaction will be funded through a combination of
cash and preference share funding as follows:
2.5.1 The Standard Bank of South Africa Limited will partially fund the
B-BBEE Transaction through a subscription for A class and B class
preference shares in BEECo with a combined subscription value of
R150.0 million (the “Bank Funding”). The Bank Funding will be
secured, inter alia, by the Subscription Shares;
2.5.2 Spur will partially fund the B-BBEE Transaction through a
subscription for C class preference shares with a combined
subscription value of R72.33 million in BEECo (the “Spur
Funding”). The C Class preference shares will accrue dividends at
a rate of 90% of the prevailing prime overdraft rate of interest.
The C class preference shares will be subordinated to the A class
and B class preference shares issued in terms of the Bank Funding
and will be secured by a cession of BEECo’s reversionary interest
in the Subscription Shares (subsequent to being utilised to
extinguish any liability arising from the A class and B class
preference shares). The Spur Funding will provide 24.5% of the
funding requirement of BEECo for the Specific Issue; and
2.5.3 GPI will provide the balance of the funding required, being
R72.33 million, from existing cash resources.
The B-BBEE Transaction will result in a net cash inflow of R222.33 million
to Spur (“Subscription Proceeds”).
In terms of the B-BBEE Transaction GPI will, subject to compliance with the
JSE Listings Requirements and ratification by shareholders, be entitled to
nominate and appoint one non-executive director to Spur’s board of
directors.
3. Rationale
It is envisaged that the implementation of the B-BBEE Transaction will
improve the company’s B-BBEE credentials over the long-term and thereby
ensure that it will continue to maintain its competitive advantage. The
board of directors estimates that the B-BBEE shareholding post the B-
BBEE Transaction (and the B-BBEE Donation) will be in excess of 10%.
The B-BBEE Transaction furthermore addresses the impact of legislative
requirements.
The B-BBEE Transaction is aimed at securing meaningful empowerment
credentials for Spur which are necessary from a commercial perspective
in obtaining trading and liquor licences from regulatory authorities,
and in tendering for restaurant sites where property developers and
landlords increasingly require both the franchisee and franchisor to
meet B-BBEE requirements.
The B-BBEE Transaction is also aimed at promoting the company’s
sustainability and ensuring that it remains relevant to all
stakeholders, including its extensive middle market customer base spread
across South Africa.
The directors of Spur believe that GPI is a true commercial partner in
addition to being a B-BBEE shareholder. GPI has shown its commitment to
the transaction and to the success of the relationship by investing in a
sizeable shareholding in Spur, thereby aligning its interests with those
of Spur.
As both companies operate in the food and hospitality industry there are
potential synergies that can be gained, particularly in supply chain and
product manufacture.
GPI is a well-established black owned and black managed company that has
demonstrated its ability to contribute to community upliftment by
empowering a broad base of beneficiaries at grassroots level.
4. Description of the business carried on by Spur
Spur is a growing multi-brand restaurant franchisor, headquartered in
Cape Town, and listed in the travel and leisure sector of the JSE. The
Spur group franchises four table service sit down restaurant brands
including Spur Steak Ranches, Panarottis Pizza Pasta, John Dory’s Fish
Grill Sushi and The Hussar Grill Steakhouse. Spur is also the
franchisor of Captain DoRegos, a quick service convenience chain which
it acquired in March 2012.
5. Background information on GPI
GPI is a Western Cape-based, broad-based black owned and controlled
company historically focussed on non-operated investments in the South
African hospitality and gaming industry. In recent years, GPI has also
positioned itself to take advantage of high growth opportunities beyond
this sector, particularly where there are strong synergies with
existing investments, while maintaining a core focus on maximising the
potential of new and existing hospitality related investments.
GPI currently holds investments in the following key assets:
- 25.1% of SunWest Proprietary Limited, the holding company of
GrandWest Casino, the Table Bay Hotel and a minority interest in
the Cape Town International Convention Centre;
- 25.1% of Golden Valley Casino and Hotel;
- 100.0% of GPI Slots – the Limited Payout Machine operated with
Route Operator licences in the Western Cape, KwaZulu-Natal,
Gauteng and Mpumalanga;
- 5.6% effective holding of Sibaya Casino;
- 91% of Burger King SA; and
- 65% of MacBrothers Catering Equipment Proprietary Limited.
GPI has entered into formal agreements to divest of its holding in
SunWest Proprietary Limited and the Golden Valley Casino and Hotel, 70%
of GPI Slots over a three year period and its entire 5.6% holding in
Sibaya Casino. Additional information can be found on GPI’s website.
6. The Effective Date of the B-BBEE Transaction
In terms of the B-BBEE Transaction agreements, the effective date and
the closing date of the Transaction will be the fifth business day
following the fulfilment or waiver of the conditions precedent which
are detailed below.
7. Conditions precedent
The B-BBEE Transaction is subject to certain conditions precedent,
which are considered customary for a transaction of this nature and
include, but are not limited to, the following:
i. Approval to the extent required by the shareholders of Spur of
the B-BBEE Transaction by no later than 31 October 2014;
ii. Approval to the extent required by the shareholders of Spur of
the Spur Funding by no later than 31 October 2014;
iii. Approval by the JSE of the listing of the Subscription Shares;
iv. Fulfilment of conditions precedent to the implementation of the
Spur Funding, Bank Funding and related agreements, by no later
than 31 October 2014; and
v. Confirmation by GPI that no material adverse change has taken
place within Spur.
8. Warranties and indemnities
The B-BBEE Transaction is subject to warranties and indemnities that
are normal for a transaction of this nature.
9. Application of the Subscription Proceeds
Spur intends to apply the Subscription Proceeds towards enhancing its
African support structure, seeking strategic acquisition opportunities
in related businesses, expanding and upgrading the company’s existing
manufacturing facilities, the construction of additional head office
building space and pursuing vertical integration of manufacturing
facilities related to core products used in its restaurant operations.
10. Required Shareholder Approval
10.1. In terms of paragraph 5.51(g) of the Listings Requirements of the
JSE, the specific issue of shares for cash requires the approval
by way of an ordinary resolution (requiring at least a 75%
majority of the votes cast in favour of such resolution) by all
Spur shareholders present or represented by proxy at a general
meeting;
10.2. In terms of sections 44 and 45 of the Companies Act, No. 71 of
2008, as amended (“Companies Act”), the Spur Funding will or may
constitute financial assistance as contemplated in the Companies
Act, and, as such, requires approval by way of a special
resolution by all Spur shareholders present or represented by
proxy at a general meeting; and
10.3. In terms of the Companies Act and the Listings Requirements of
the JSE the Potential Specific Repurchase requires approval by
way of a special resolution by all Spur shareholders present or
represented by proxy at a general meeting.
B) THE B-BBEE DONATION
1. Introduction
On 18 July 2012, in honour of Mandela Day, Spur established The Spur
Foundation (the “Foundation”), with a cash donation of R670 000 from
its wholly-owned subsidiary, Spur Group Proprietary Limited.
The Spur Foundation supports initiatives that assist children in
impoverished communities by administering feeding schemes and providing
basic necessities and amenities. The Foundation also ties in with
Spur’s business and its existing alignment with FoodBank.
Current beneficiaries of the Spur Foundation include the Teddy Bear
Clinic, Joint Aid Management (JAM), Sisanda Fundaytion, Creating
Change, Reach for a Dream, FoodBank, ASHA Trust, Solomon’s Haven (a
safe house in Mitchells Plain), and Durban Children’s Home.
The Spur Foundation is a benevolent public benefit organisation and is
in possession of a section 18A tax certificate. The original donation
was a finite amount and whilst the group continues to make smaller
donations to the Spur Foundation each year, its limited resources will
soon run out. The intention is for the Spur Foundation to partner with
its beneficiaries in order to provide on-going support and in order to
do this, it needs annuity income.
2. Details of the B-BBEE Donation
As part of Spur’s corporate social responsibility initiative, the board
of directors of Spur has approved the donation of 100 000 Spur shares
per annum for five consecutive years to the Spur Foundation in order to
provide the Spur Foundation with the annuity income it needs to sustain
its charitable activities. The shares to be donated are currently held
as treasury shares.
3. Required Shareholder Approval
The issue of the 500 000 treasury shares to the Foundation constitutes
a specific issue of shares to a related party and, as it will be a
donation, the discount to market price at which it will be issued will
in effect be 100%. The dilution as a result of the specific issue will
be 0.51%. The B-BBEE Donation is subject to shareholder approval at a
general meeting and in terms of the Listings Requirements the board
should obtain an opinion from an independent expert on the donation
from which it appears whether it is fair to shareholders.
4. Fairness and Reasonableness
Schedule 5 of the Listings Requirements determines that the fairness of
a transaction is evaluated by considering quantitative issues, such as
the value of the underlying asset and the consideration payable in
respect thereof, whereas the reasonableness of a transaction is
determined by taking into consideration other significant qualitative
issues.
Under the circumstances it is clear that the specific issue of the Spur
Foundation shares as a donation will not be fair, as no consideration
is payable by the Spur Foundation for the Spur Foundation shares, and
that it will not be possible to obtain an opinion from an independent
expert on the proposed issue that will determine that it is fair to
shareholders. The board however believes that the donation is
reasonable when giving consideration to qualitative issues such as the
nature and purpose of the Spur Foundation and its endeavours and those
shareholders should be able to vote on the issue, despite it not being
fair.
FINANCIAL EFFECTS AND CAUTIONARY
The financial effects of the B-BBEE Transaction, the Spur Funding, the
Potential Specific Repurchase and the B-BBEE Donation have not been
finalised.
Shareholders are referred to the cautionary announcement dated 26 March
2014 and the subsequent renewals of same on 14 May 2013 and 26 June 2014,
and are hereby advised to continue to exercise caution when dealing in the
company’s securities until a further announcement is made.
CIRCULAR AND GENERAL MEETING
A general meeting of Spur shareholders will be held to consider and, if
deemed fit, to pass, with or without modification, the resolutions required
to approve the B-BBEE Transaction, the Spur Funding, the Potential Specific
Repurchase and the BEE Donation (“the General Meeting”). A circular
containing full details of the transactions set out in this announcement
and convening the General Meeting will be posted to shareholders in due
course.
31 July 2014
Sponsor
Sasfin Capital
Corporate Advisor
Leaf Capital
Legal Advisor
Bernadt Vukic Potash & Getz
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