SUR 201906270033A
Specific repurchase of shares and withdrawal of cautionary
(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. THE PROPOSED SPECIFIC REPURCHASE OF 10 848 093 SPUR ORDINARY SHARES FOR CASH FROM GPI INVESTMENTS 1 (RF)
(PROPRIETARY) LIMITED ("GPI INVESTMENTS"), A WHOLLY OWNED SUBSIDIARY OF GRAND PARADE INVESTMENTS LIMITED ("GPI"), A
RELATED PARTY, AT A PRICE OF 2400 CENTS PER SHARE (THE "GPI REPURCHASE")
B. SPECIFIC REPURCHASE OF 6 635 901 SPUR SHARES PREVIOUSLY HELD AS TREASURY SHARES FROM SHARE BUY-BACK
(PROPRIETARY) LIMITED ("SHARE BUY-BACK"), A WHOLLY OWNED SUBSIDIARY OF SPUR AT MARKET VALUE (THE "TREASURY
REPURCHASE")
C. WITHDRAWAL OF CAUTIONARY
INTRODUCTION
Shareholders are referred to the cautionary announcement published on SENS on 3 June 2019 ("Cautionary Announcement") and are advised that Spur has
entered into an agreement for the specific repurchase of 10 848 093 ordinary shares in the share capital of the company ("Spur Shares") from GPI Investments
("GPI Repurchase Agreement"), and is separately seeking approval to repurchase 6 635 901 Spur Shares currently held as treasury shares by Share Buy-
back. Shareholders should note that the GPI Repurchase and the Treasury Repurchase, as set out in sections A and B of this announcement respectively, are
independent of one another and are not inter-conditional.
A) THE GPI REPURCHASE
1. Introduction
1.1 On 30 October 2014 the company issued and allotted 10 848 093 Spur Shares, constituting 10% of the total issued share capital of Spur post issuance,
to GPI Investments, the wholly owned subsidiary of GPI, a black owned and controlled company listed on the JSE Limited ("JSE"), in terms of a specific
issue of shares for cash for a total subscription price of R294.66 million (R27.16 per Spur Share) on the terms detailed in the circular to Shareholders dated
4 September 2014 (the "Specific Issue").
1.2 In terms of the Specific Issue, GPI and GPI Investments were restricted from trading in the issued Spur Shares without the express permission of Spur for
a period of 5 years from 30 October 2014 (the "Lock-in Period").
1.3 The Specific Issue was funded by a combination of cash and preference share funding as follows:
1.3.1 the Standard Bank of South Africa Limited ("Standard Bank") partially funded the Specific Issue through a subscription for preference shares in
GPI Investments (the "Bank Funding"), with a combined subscription value of R150.0 million. The Bank Funding is secured, inter alia, by the
cession and pledge of the Spur Shares to Standard Bank ("Cession and Pledge");
1.3.2 Spur, via its wholly owned subsidiary, Spur Group Proprietary Limited ("Spur Group"), partially funded the Specific Issue through a subscription for
preference shares with a subscription value of R72.33 million in GPI Investments (the "Spur Group Funding"). These preference shares are
subordinate to the preference shares issued in terms of the Bank Funding and are secured by a cession of GPI Investment's reversionary interest
in the Specific Issue Spur Shares (subsequent to being utilised to extinguish any liability arising from the preference shares issued in terms of the
Bank Funding); and
1.3.3 GPI provided the balance of the funding required, being R72.33 million, from existing cash resources.
2. Salient terms of the GPI Repurchase
In terms of the GPI Repurchase:
2.1 Spur will repurchase 10 848 093 Spur Shares ("GPI Repurchase Shares") from GPI Investments, representing 10% of the total issued share capital of
Spur as a specific repurchase for a total consideration of R260 354 232 (the "GPI Repurchase Consideration");
2.2 The GPI Repurchase Consideration equates to 2400 cents per Spur Share, which represents a 9.1% premium to the 30 day volume weighted average
trading price of Spur shares on the JSE as measured at the close of market on 2 June 2019, being the day prior to the date of the Cautionary
Announcement.
2.3 The GPI Repurchase Consideration will be applied as follows:
2.3.1 as to redemption of the preference shares in GPI Investments, constituting the Bank Funding, such that following the implementation of the GPI
Repurchase, the amount owed by GPI Investments to Standard Bank including any taxes and costs, which is estimated to amount to
approximately R153 million at 30 September 2019 (to be finally determined on the date of implementation of the GPI Repurchase) ("Bank
Redemption Price") will be extinguished and the Cession and Pledge cancelled;
2.3.2 as to redemption of the preference shares in GPI Investments constituting the Spur Group Funding, such that following the implementation of
the GPI Repurchase, the amount owed by GPI Investments to the Spur Group, which is estimated to amount to approximately R113 million at
30 September 2019 (to be finally determined on the date of implementation of the GPI Repurchase) ("Spur Group Redemption Price"), will be
extinguished;
2.3.3 the balance of the GPI Repurchase Consideration remaining after settlement of the Bank Redemption Price and the Spur Group Redemption
Price, if any, will be paid to GPI Investments; and
2.3.4 in the event that upon settlement of the Bank Redemption Price in terms of paragraph 2.3.1 above there is a shortfall in the amount required to
settle the Spur Group Redemption Price, such shortfall shall be funded and discharged in full by GPI subscribing for one or more ordinary
shares in GPI Investments to the value of any shortfall in the Spur Group Redemption Price.
2.4 The GPI Repurchase is therefore estimated to result in a net cash outflow of approximately R153 million for the Spur group. The final amount will be
determined on date of implementation of the GPI Repurchase and announced on SENS.
3 Rationale
In terms of the Specific Issue, the Lock-in Period expires at the end of October 2019, where after GPI Investments will be able to freely trade in the GPI
Repurchase Shares. The board of directors of Spur ("Board"), does not regard this possibility as being aligned with the long term interests of Spur, or those
of its existing Shareholders. Spur has a sizeable cash balance with no immediate material investment opportunity that meets the investment criteria of its
Board. It is envisaged that the utilisation of its cash resources to implement the GPI Repurchase will be beneficial to existing Shareholders of the company
as it will enhance the company's earnings, return on equity and future dividends.
4 Required Shareholder, JSE and the Takeover Regulations Panel ("TRP") Approvals
4.1 GPI Investments is a material shareholder and related party to Spur.
4.2 In terms of the JSE Listings Requirements, the GPI Repurchase constitutes a specific repurchase of shares from a related party which requires the approval
by way of a special resolution by all Spur Shareholders present or represented by proxy at a general meeting ("General Meeting"). Spur is required to
obtain a fairness opinion from an independent expert in compliance with the provisions of paragraph 5.69(e) of the JSE Listings Requirements in respect
of the GPI Repurchase.
4.3 In addition, as the GPI Repurchase will result in the company acquiring in excess of 5% of the entire issued share capital of the company, the GPI
Repurchase is, in terms of section 48.8(b) of the Companies Act, No.71 of 2008 ("Companies Act"), subject to the provisions of sections 114 and 115 of
the Companies Act, and, as such, requires, inter alia, the preparation of a report by an independent expert on the GPI Repurchase.
4.4 Accordingly, Spur has appointed BDO Corporate Finance Proprietary Limited as the independent expert to provide external advice to the board of directors
of Spur in relation to the GPI Repurchase in terms of the JSE Listings Requirements and the Companies Act and TRP Regulations. The independent
expert's report, as well as the statements of the board of directors of Spur as to whether the GPI Repurchase is fair to Spur Shareholders, will be included
in the circular to Spur Shareholders convening the General Meeting, as detailed below.
5 Conditions precedent
The GPI Repurchase remains subject to the fulfilment or waiver, as the case may be, of inter alia the following material conditions precedent:
5.1 The approval by Standard Bank of: -
5.1.1 the voluntary disposal by GPI Investments of the GPI Repurchase Shares to Spur;
5.1.2 the redemption of all GPI Investments Bank Funding preference shares in issue, against full and final payment of the Bank Redemption Price;
and
5.1.3 cancellation of the Cession and Pledge;
5.2 Spur receiving a report prepared by an independent expert in respect of the GPI Repurchase in terms of section 114(3) of the Companies Act, and
incorporating a fairness opinion, as required in terms of sections 10.4(f) and 5.69(e) of the JSE Listings Requirements;
5.3 GPI passing, to the extent necessary, all resolutions required in terms of the Companies Act and the JSE Listings Requirements in respect of the GPI
Repurchase;
5.4 Spur securing, to the extent necessary, regulatory approvals from all relevant regulators, including the JSE and TRP, in order to be able to conclude
and implement the GPI Repurchase including a compliance certificate by the TRP in terms of section 119(4)(b) of the Act read together with TRP
regulation 102(13);
5.5 the requisite majority of Spur Shareholders, excluding GPI Investments and its associates, approving all resolutions necessary to implement the GPI
Repurchase as required in terms of the Companies Act and the JSE Listings Requirements at the General Meeting;
5.6 in the event where the provisions of section 115(2)(c) of the Companies Act become applicable, the High Court of South Africa approving the GPI
Repurchase, to the extent required in the circumstances and manner contemplated in sections 115(3) to 115(6) of the Companies Act, provided the
company has not exercised an election to treat the GPI Repurchase as a nullity in terms of section 115(5)(b) of the Act; and
5.7 no Spur Shareholders, within the time period prescribed in section 164(7) of the Companies Act, exercising any appraisal rights in terms of section 164
of the Companies Act, by giving valid demands in accordance with sections 164(5) to 164(8) of the Companies Act.
6 The Effective Date of the GPI Repurchase
In terms of the GPI Repurchase agreement, the effective date of the GPI Repurchase will be the date of fulfilment or waiver of the last of the conditions
precedent which are detailed in paragraph 5 above, which date shall not be later than 14 October 2019. The implementation date of the GPI Repurchase
will be determined in accordance with the provisions of the Companies Act and the Listings Requirements upon conclusion of the General Meeting referred
to in paragraph 5 above and is expected to be the day following the effective date.
7 Warranties and indemnities
The GPI Repurchase is subject to the undertakings, warranties and indemnities that are normal for a transaction of this nature.
8 Funding of the GPI Repurchase
Spur will utilise existing cash resources to fund the GPI Repurchase.
B) THE TREASURY REPURCHASE
9. Introduction
Share Buy-back, a wholly owned subsidiary of Spur designated to acquire Spur Shares on the open market, has been repurchasing Spur Shares on
the open market in terms of the general authority to repurchase shares granted annually by Spur Shareholders at the annual general meeting of the
company since 2000 and currently holds 6 635 901 Spur Shares in treasury ("Treasury Shares").
10. Details of the Treasury Repurchase
On 26 June 2019, Spur entered into an agreement with Share Buy-back ("Treasury Purchase Agreement") in terms of which:
10.1 Spur will repurchase 6 635 901 Treasury Shares from Share Buy-back, representing 6.12% of the total issued share capital of Spur as a specific
repurchase at market value, for a total consideration of R145 392 591 (the "Treasury Repurchase Consideration");
10.2 The aforesaid Treasury Repurchase Consideration equates to 2191 cents per Treasury Share, the volume weighted average trading price of Spur
Shares on the JSE on 25 June 2019, being the day prior to the signature date of the Treasury Repurchase Agreement.
11. Rationale
As subsidiary companies can only hold a maximum of 10% of the shares in issue of its holding company in treasury, the Board considers it expedient
to repurchase and cancel the Treasury Shares at this time and in so doing increase the capacity of the group to acquire treasury shares in future.
12. Effective date of the Treasury Repurchase
In terms of the Treasury Repurchase Agreement, the effective date of the Treasury Repurchase will be the business day following the date of fulfilment
or waiver of the conditions precedent which are detailed in paragraph 14 below. The implementation date of the Treasury Repurchase will be determined
in accordance with the provisions of the Companies Act and the Listings Requirements upon conclusion of the General Meeting referred to in paragraph
13 below.
13. Required Shareholder Approval of the Treasury Repurchase
In terms of the JSE Listings Requirements, the Treasury Repurchase constitutes a specific repurchase of shares which requires the approval by way
of a special resolution by all Spur Shareholders present or represented by proxy at a General Meeting. As the Treasury Repurchase will result in the
company acquiring in excess of 5% of the entire issued share capital of the company, the Treasury Repurchase is, in terms of section 48.8(b) of the
Companies Act, subject to the provisions of sections 114 and 115 of the Companies Act, and, as such also requires, inter alia, the preparation of a
report by an independent expert on the Treasury Repurchase. As indicated above, Spur has appointed BDO Corporate Finance Proprietary Limited as
the independent expert to provide external advice to the Board, which report will include the Treasury Repurchase in terms of the Companies Act and
TRP Regulations and be included in the circular to Spur Shareholders, as detailed below.
14. Conditions Precedent to the Treasury Repurchase
The Treasury Repurchase remains subject to the fulfilment or waiver, as the case may be, of the following conditions precedent:
14.1 Spur receiving a report prepared by an independent expert in respect of the Treasury Repurchase in terms of section 114(3) of the Act;
14.2 Spur securing, to the extent necessary, regulatory approvals from all relevant regulators, including the JSE and TRP, in order to be able to conclude
and implement the Treasury Repurchase including a compliance certificate by the TRP in terms of section 119(4)(b) of the Act read together with TRP
regulation 102(13);
14.3 the requisite majority of Spur Shareholders approving all resolutions necessary to implement the Treasury Repurchase as required in terms of the
Companies Act and the JSE Listings Requirements at the General Meeting;
14.4 in the event where the provisions of section 115(2)(c) of the Companies Act become applicable, the High Court of South Africa approving the Treasury
Repurchase, to the extent required in the circumstances and manner contemplated in sections 115(3) to 115(6) of the Companies Act, provided the
company has not exercised an election to treat the Treasury Repurchase as a nullity in terms of section 115(5)(b) of the Act; and
14.5 no Spur Shareholders, within the time period prescribed in section 164(7) of the Companies Act, exercising any appraisal rights in terms of section 164
of the Companies Act, by giving valid demands in accordance with sections 164(5) to 164(8) of the Companies Act.
15. Cancellation and delisting of GPI Repurchase and Treasury Repurchase shares
The Spur Shares that are the subject of the GPI Repurchase and Treasury Repurchase represent 16.12% of the total issued share capital of the company at
the date of this announcement. The company proposes, subsequent to the approval of the GPI and Treasury Repurchases at the General Meeting of Spur
Shareholders, that these Spur Shares will revert to authorised but unissued shares in the share capital of the company and will then be cancelled and delisted.
16. Financial effects
The table below illustrates the pro forma financial effects of each of the GPI Repurchase and the Treasury Repurchase (collectively referred to as "the
Transactions"), as well as the aggregate impact of the Transactions, based on the published results for the six-month period ended 31 December 2018. The
preparation of the pro forma financial effects is the responsibility of the directors of Spur. The pro forma financial effects have been prepared for illustrative
purposes only to provide information on how the Transactions may have impacted on Spur's results and financial position and, due to the nature thereof, may
not give a fair reflection of Spur's results and financial position.
After
Before GPI After GPI Treasury Treasury After
Transactions Repurchase Repurchase % Repurchase Repurchase % Transactions %
(notes 1, 2, 3) (note 4) (note 5) Change (note 6) (note 7) Change (note 8) Change
Total number of shares in issue 108 480 926 (10 848 093) 97 632 833 -10.0% (6 635 901) 101 845 025 -6.1% 90 996 932 -16.1%
Number of shares in issue net of
shares held by subsidiary
companies 94 849 527 (10 848 093) 84 001 434 -11.4% - 94 849 527 0.0% 84 001 434 -11.4%
Weighted average number of
shares in issue 95 318 610 (10 848 093) 84 470 517 -11.4% - 95 318 610 0.0% 84 470 517 -11.4%
Diluted weighted average number
of shares in issue 95 544 714 (10 848 093) 84 696 621 -11.4% - 95 544 714 0.0% 84 696 621 -11.4%
Basic earnings per share (cents) 88.01 - 98.64 12.1% - 88.00 0.0% 98.62 12.1%
Diluted earnings per share (cents) 87.80 - 98.38 12.0% - 87.79 0.0% 98.36 12.0%
Headline earnings per share (cents) 88.02 98.65 12.1% 88.00 0.0% 98.63 12.1%
Diluted headline earnings per share
(cents) 87.81 98.39 12.0% 87.79 0.0% 98.37 12.0%
Net asset value per share (cents) 904.65 718.81 -20.5% 904.01 -0.1% 718.09 -20.6%
Net tangible asset value per share
(cents) 511.71 275.13 -46.2% 511.08 -0.1% 274.41 -46.4%
NOTES
1 The pro forma Condensed Consolidated Statement of Profit or Loss and Comprehensive Income ("SOCI") figures illustrate the
possible financial effects as if the Transactions had taken place on 1 July 2018.
2 The pro forma Statement of Financial Position ("SOFP") figures have been based on the assumption that the Transactions had taken
place on 31 December 2018.
3 The pro forma SOCI and SOFP ("Before Transactions" column) are based on the published unaudited financial information of Spur for
the six-month period ended 31 December 2018, as released on SENS on 28 February 2019.
4 The "GPI Repurchase" column relates to the following:
- the repurchase of 10 848 093 Spur Shares for cash from GPI Investments at a price of 2400 cents per share, or R260 354 232 in
aggregate, comprising a 9.1% premium to the 30 day volume-weighted Spur Share price as at 2 June 2019.
- the redemption of the preference shares in GPI Investments constituting the Spur Group Funding ("Preference Shares"), such
that following the implementation of the GPI Repurchase, the amount owed by GPI Investments to Spur Group will be
extinguished, in the amount R100 624 100 as at 1 July 2018 or R105 301 051 at 31 December 2018.
5 The "After GPI Repurchase" column indicates the pro forma financial information after only the GPI Repurchase.
6 The "Treasury Repurchase" column relates to the following:
- the repurchase of 6 635 901 Spur Shares for cash from Share Buy-back at 2191 cents per share, being the market price of the Spur
Share on 25 June 2019, the day immediately preceding the signature date of the Treasury Repurchase Agreement ("Treasury
Repurchase"), amounting to R145 392 591 in aggregate.
7 The "After Treasury Repurchase" column indicates the pro forma financial information after only the Treasury Repurchase.
8 The "After Transactions" column indicates the pro forma financial information after both the GPI Repurchase and Treasury
Repurchase transactions.
9 The carrying value of the Preference Shares at 1 July 2018 amounted to R96 570 869. On the assumption that the Preferences Shares
are redeemed at 1 July 2018, the gross receivable would have amounted to R100 695 351 (including capitalised transaction costs),
and cash inflow on redemption would have amounted to R100 624 100. Upon the adoption of IFRS9 - Financial Instruments, the
group impaired the Preference Share receivable to the extent of R4 124 482 as a result of expected credit losses, which impairment
was charged directly to opening retained earnings at 1 July 2018. Had the Preference Shares been redeemed on 1 July 2018, the
group would have recognised a gain on the derecognition of a financial asset carried at amortised cost amounting to R4 124 482 in
profit or loss for the period ended 31 December 2018. In addition, the group had recognised further impairment losses on the
Preference Shares relating to expected credit losses in the period to 31 December 2018 amounting to R4 303 023, which would not
have been necessary had the Preference Shares been redeemed on 1 July 2018. The sum of the aforementioned gain on
derecognition of the financial instrument and the reversal of the impairment loss, less the costs relating to the early settlement of
the Preference Shares (refer note 14 below), have been recognised in operating profit before finance income. Amortisation of
capitalised transaction costs relating to the Preference Shares in the amount of R28 500, recognised as a reduction in finance income
for the period to 31 December 2018, has also been reversed against finance income in profit or loss (refer note 10 below).
10 Dividend income of R4 648 451 on the Preference Shares earned by the group (recorded as interest income as the Preference Shares
are treated as a loan receivable), would not have been earned had the Preference Shares been redeemed on 1 July 2018. The
dividend accruing on the Preference Shares is 90% of the prime overdraft rate of interest less amortised initial transaction costs
(refer note 9). The dividend income is non-taxable. This dividend income has been reversed against interest income.
11 Interest of R5 913 334 that would have been forgone on the net cash outflow arising from the GPI Repurchase, had the transaction
occurred on 1 July 2018, has been calculated at 7.3% nominal annual compounded monthly for the period to 31 December 2018.
This is the average rate of interest which the group earned on its short term deposits during the period. The interest has been
reversed against interest income. This interest was taxable at the South African corporate tax rate of 28%, resulting in a reduction in
the income tax expense of R1 655 734.
12 Interest of R22 106 forgone on the net cash outflow relating to transaction costs arising from the Treasury Repurchase has been
calculated at 7.3% nominal annual compounded monthly for the period to 31 December 2018. This is the average rate of interest
which the group earned on its short term deposits during the period. This interest was taxable at the South African corporate tax
rate of 28%, resulting a reduction in the income tax expense of R6 190.
13 The carrying value of the Preference Shares at 31 December 2018 amounted to R96 916 297. On the assumption that the
Preferences Shares are redeemed at 31 December 2018, the gross receivable would have amounted to R105 343 802 (including
capitalised transaction costs), and cash inflow on redemption would have amounted to R105 301 051. Upon the adoption of IFRS9 -
Financial Instruments, the group impaired the Preference Share receivable to the extent of R4 124 482 as a result of expected credit
losses, which impairment was charged directly to opening retained earnings at 1 July 2018. In addition, the group had recognised
further impairment losses on the Preference Shares relating to expected credit losses in the period to 31 December 2018 amounting
to R4 303 023. On the basis that the Preference Shares are fully redeemed as at 31 December 2018, the group would have
recognised a gain on the derecognition of a financial asset carried at amortised cost, amounting to the aggregate of the
aforementioned impairment losses, included in profit or loss. In addition, the balance of the capitalised transaction costs in the
amount of R42 750 would also be reversed to profit or loss on the redemption of the Preference Shares at 31 December 2018.
14 One-off legal, advisory and transaction costs of an estimated R2 279 006 are expected to be incurred in respect of the GPI
Repurchase transaction. These include VAT (as Spur is not in a position to claim the related input tax credits) and have been
assumed to be non-tax deductible. Of these costs, R2 187 006 are in respect of costs that are directly attributable to the acquisition
by the company of the company's own shares and have accordingly been charged to equity (retained earnings). Costs of R92 000
relate to the redemption of the Preference Shares and have been charged to profit or loss. These costs are not expected to be tax
deductible.
15 The original cost to the group of the Treasury Shares referred to in note 6 as at 31 December 2018 was R110 434 482. Upon the
acquisition of the Treasury Shares by Spur, and subsequent cancellation of those shares, the original cost of the Treasury Shares has
been reallocated within equity from 'Shares repurchased by subsidiaries' to 'Retained earnings' in the SOFP.
16 One-off legal, advisory and transaction costs of an estimated R605 631 are expected to be incurred in respect of the Treasury
Repurchase transaction. These include VAT (as Spur is not in a position to claim the related input tax credits) and have been
assumed to be non-tax deductible. These costs are directly attributable to the intragroup transfer of treasury shares and have
accordingly been charged to equity (retained earnings).
17. 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 GPI Repurchase and Treasury Repurchase. 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.
C) WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Having regard to the information published in this announcement caution is no longer required by Spur Shareholders when dealing in their securities.
27 June 2019
Sponsor
Sasfin Capital
A member of the Sasfin Group
Legal Advisor
Bernadt Vukic Potash & Getz
Date: 27/06/2019 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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