TIDMBWO
RNS Number : 5846V
Barloworld Limited
09 April 2019
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income tax registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
("Barloworld")
AMMENT TO THE TERMS OF THE B-BBEE TRANSACTION
Background
Shareholders of Barloworld approved the broad-based black
economic empowerment transaction ("Khula Sizwe Transaction") on 14
February 2019, based on the Circular to shareholders dated 18
December 2018 ("the Circular") (terms defined in the Circular shall
have the same meaning in this announcement unless otherwise
defined). In terms of the Khula Sizwe Transaction, Barloworld will
dispose of a significant portion of its property portfolio to
Propco, which properties will be leased by Propco to various
subsidiaries of Barloworld. Subsequent to the abovementioned
Barloworld Shareholder approval, the operational requirements
within the Barloworld Equipment division have necessitated changes
to the existing property portfolio that forms part of the Khula
Sizwe Transaction.
The properties detailed below are currently part of the property
portfolio to be sold to Propco as part of the Khula Sizwe
Transaction. However, Barloworld has determined that these
properties do not meet the long-term requirements of Barloworld.
Barloworld and Propco accordingly wish to exclude these properties
from the Khula Sizwe Transaction so that Barloworld's subsidiaries
would not be under an obligation to lease these properties from
Propco under the Khula Sizwe Transaction. The following properties
are now to be excluded from the property portfolio being sold under
the Khula Sizwe Transaction ("Excluded Properties"), as set out
below:
Value per After 5%
Properties Description Circular discount
1 Gamma Road, Germiston Currently unoccupied. The property is to be sold
to a third party. An offer has been received R21 230 000 R20 168 500
------------------------------------------------- ----------- -----------
Corner Watt and Liter Street, Middelburg Property to be sold to a third party so that an
adjacent property can be acquired R19 640 000 R18 658 000
------------------------------------------------- ----------- -----------
Total of properties to be excluded R40 870 000 R38 826 500
------------------------------------------------- ----------- -----------
The properties detailed below ("New Properties") are to be
acquired or have additional capital expenditure spent by
Barloworld, and therefore increase the value of the property
portfolio to be sold to Propco as part of the Khula Sizwe
Transaction:
Amount
of capital
expenditure/
value as
per offers After 5%
Property Description to purchase discount
Canteen and Wellness Centre, Isando New Barloworld Equipment Head Office in the process
of being developed (additional capital
expenditure) R19 630 000 R18 648 500
---------------------------------------------------- ------------- -----------
Various properties in Middelburg Properties adjacent to Barloworld Equipment's
existing properties - this will result in improved
operational efficiencies R14 870 000 R14 126 500
---------------------------------------------------- ------------- -----------
Total of properties to be added R34 500 000 R32 775 000
---------------------------------------------------- ------------- -----------
Collectively, the property transactions referred to in the
tables above are the "New Property Transactions".
After 5%
Value discount
Net effect of New Property Transactions R6 370 000 R6 051 500
---------- ----------
Furthermore, Barloworld has taken this opportunity to process
certain other clean-up amendments, including inserting the exact
amounts relating to the Employee Trust Contribution and the
subscription price in the Employee Trust Subscription Agreement
(reflected as R174 000 000, to be increased to R174 304 000), as
well as the Management Trust Loan and the subscription price in the
Management Trust Subscription Agreement (reflected as R206 800 000,
to be increased to R206 986 000), which were previously rounded in
the agreements themselves.
The Amendments
The New Property Transactions affect the terms of the agreements
entered into in relation to the Khula Sizwe Transaction, being the
Transaction Agreements. In addition, Barloworld is taking the
opportunity to make other minor clean-up amendments to the
Transaction Agreements. The Transaction Agreements will accordingly
be amended to provide for, inter alia, the following
("Amendments"):
1. Deletion of the Excluded Properties from the schedules of
properties (i) to be sold by Barloworld to Propco, and (ii) to be
leased
by Propco to subsidiaries of Barloworld;
2. Addition of the New Properties to the schedules of properties
(i) to be sold by Barloworld to Propco, and (ii) to be leased
by
Propco to subsidiaries of Barloworld;
3. Decrease in the purchase price for the property portfolio
being sold to Propco - aggregate purchase price to be decreased
by
R6 051 500;
4. Decrease the aggregate of the rental amounts payable by
Barloworld SA and Barloworld Logistics to Barloworld under and
in
terms of the Property Lease Agreements by an amount which takes
account of the decrease to the aggregate purchase price
payable for the Properties;
5. Increase the Employee Trust Contribution and the subscription
price in the Employee Trust Subscription Agreement from
R174 000 000 to R174 304 000; and
6. Increase the Management Trust Loan and the subscription price
in the Management Trust Subscription Agreement from
R206 800 000 to R206 986 000.
Rationale for the Amendments
The rationale for the changes to the previously defined
properties is to address the operational requirements within the
Barloworld Equipment division and the consequential changes to the
property portfolio being sold to Propco.
The Amendments are required in order to ensure that the
Transaction Agreements, as amended, accurately identify the
properties being sold to Propco and the value at which those
properties will be disposed, in addition to effecting the necessary
consequential changes.
The other amendments are to clean-up previous minor errors in
the Transaction Agreements.
Pro forma financial effects of the Amendments
The pro forma financial effects of the Khula Sizwe Transaction
on the results of Barloworld as at and for the year ended 30
September 2018 are the responsibility of the Directors and have
been reviewed by the Independent Reporting Accountants and
Auditors.
The pro forma financial effects are presented for illustrative
purposes only and because of their pro forma nature, may not fairly
present Barloworld's financial position, changes in equity and
results of operations or cash flow, nor the effect of the Khula
Sizwe Transaction going forward.
PRO FORMA A: Assumes the Black Public Scheme is fully
subscribed. In this pro forma the Propco shareholding reflects the
following:
30% Black Public Scheme
32% Employee Trust
---------------------
38% Management Trust
---------------------
PRO FORMA B: Assumes the Minimum Subscription Amount in the
Black Public Scheme is achieved. In this pro forma the Propco
shareholding reflects the following:
21% Black Public Scheme
32% Employee Trust
---------------------
47% Management Trust
---------------------
PRO FORMA C: Assumes the Minimum Subscription Amount in the
Black Public Scheme is not achieved. In this pro forma the Propco
shareholding reflects the following:
32% Employee Trust
68% Management Trust
------------------
Basis of preparation
The pro forma financial effects are the responsibility of the
Directors.
The pro forma financial effects are prepared on the same basis
as included in the Circular. The accounting policies, as included
in the Circular, also remain the same for purposes of this
announcement unless otherwise specified.
Unless otherwise indicated the pro forma income statement
adjustments are of a continuous nature.
Property
amendments
(with full Black Post-
Pro forma A Per Circular Public Scheme) adjustment % Change
Basic earnings per Share (cents) 870,20 2,36 872,56 0,27
------------ ----------------- ------------ --------
Diluted earnings per Share (cents) 865,00 2,32 867,32 0,27
------------ ----------------- ------------ --------
Basic headline earnings per Share (cents) 1 073,60 2,40 1 076,00 0,22
------------ ----------------- ------------ --------
Diluted headline earnings per Share (cents) 1 067,20 2,34 1 069,54 0,22
------------ ----------------- ------------ --------
Net asset value per Share (cents) 10 127,60 10 127,60 0,00
------------ ----------------- ------------ --------
Tangible net asset value per Share (cents) 8 576,70 8 576,70 0,00
------------ ----------------- ------------ --------
Weighted average number of Shares in issue ('000s) 210 875 210 875 0,00
------------ ----------------- ------------ --------
Weighted average number of diluted Shares in issue ('000s) 212 147 212 147 0,00
------------ ----------------- ------------ --------
Number of Shares in issue ('000s) 219 271 219 271 0,00
------------ ----------------- ------------ --------
Property Post-
Per Circular amendments adjustment % Change
Profit from continuing operations 1 835 5 1 840 0,27
------------ ----------- ------------ --------
Headline earnings from continuing operations 2 264 5 2 269 0,22
------------ ----------- ------------ --------
Reconciliation of changes in earnings
Finance cost 7 Note 1
Tax (2) Note 2
IFRS 2 1 Note 3
Transaction costs (1) Note 4
-------------------------------------- --- ------
5
-------------------------------------- --- ------
Property
amendments
(with Minimum
Subscription Post-
Pro forma B Per Circular Amount) adjustment % Change
Basic earnings per Share (cents) 866,90 1,86 868,76 0,21
------------ -------------- ------------ --------
Diluted earnings per Share (cents) 861,70 1,85 863,55 0,21
------------ -------------- ------------ --------
Basic headline earnings per Share (cents) 1 070,30 1,90 1 072,20 0,18
------------ -------------- ------------ --------
Diluted headline earnings per Share (cents) 1 063,90 1,87 1 065,77 0,18
------------ -------------- ------------ --------
Net asset value per Share (cents) 10 127,60 10 127,60 0,00
------------ -------------- ------------ --------
Tangible net asset value per Share (cents) 8 576,70 8 576,70 0,00
------------ -------------- ------------ --------
Weighted average number of Shares in issue ('000s) 210 875 210 875 0,00
------------ -------------- ------------ --------
Weighted average number of diluted Shares in issue ('000s) 212 147 212 147 0,00
------------ -------------- ------------ --------
Number of Shares in issue ('000s) 219 271 219 271 0,00
------------ -------------- ------------ --------
Property Post-
Per Circular amendments adjustment % Change
Profit from continuing operations 1 828 4 1 832 0,22
------------ ----------- ------------ --------
Headline earnings from continuing operations 2 257 4 2 261 0,18
------------ ----------- ------------ --------
Reconciliation of changes in earnings
Finance cost 7 Note 1
Tax (2) Note 2
IFRS 2 0 Note 3
Transaction costs (1)
-------------------------------------- --- ------
4
-------------------------------------- --- ------
Property
amendments
(with no Black Post-
Pro forma C Per Circular Public Scheme) adjustment % Change
Basic earnings per Share (cents) 856,90 2,38 859,28 0,28
------------ --------------- ------------ --------
Diluted earnings per Share (cents) 851,80 2,32 854,12 0,27
------------ --------------- ------------ --------
Basic headline earnings per Share (cents) 1 060,30 2,42 1 062,72 0,23
------------ --------------- ------------ --------
Diluted headline earnings per Share (cents) 1 054,00 2,34 1 056,34 0,22
------------ --------------- ------------ --------
Net asset value per Share (cents) 10 127,60 10 127,60 0,00
------------ --------------- ------------ --------
Tangible net asset value per Share (cents) 8 576,70 8 576,70 0,00
------------ --------------- ------------ --------
Weighted average number of Shares in issue ('000s) 210 875 210 875 0,00
------------ --------------- ------------ --------
Weighted average number of diluted Shares in issue ('000s) 212 147 212 147 0,00
------------ --------------- ------------ --------
Number of Shares in issue ('000s) 219 271 219 271 0,00
------------ --------------- ------------ --------
Property Post-
Per Circular amendments adjustment % Change
Profit from continuing operations 1 807 5 1 812 0,28
------------ ----------- ------------ --------
Headline earnings from continuing operations 2 236 5 2 241 0,22
------------ ----------- ------------ --------
Reconciliation of changes in earnings
Finance cost 7 Note 1
Tax (2) Note 2
IFRS 2 1 Note 3
-------------------------------------- --- ------
Transaction costs (1)
-------------------------------------- --- ------
Notes to pro forma financialS
PRO FORMA A - 30% Black Public Scheme
1. Finance costs
As a result of the amendments to the Khula Sizwe Transaction,
the value of the Properties acquired by Propco from Barloworld is
reduced by R6 million to R2 716 million (originally R2 722 million
per the Circular). Propco's purchase of the Properties will be
funded 20% equity and 80% external debt. Propco will obtain
external debt of R2 172 million (originally R2 178 million per the
Circular) to fund the acquisition.
The reduction in debt and improved interest rates, 9,59%
(originally 9,96% per Circular) result in the finance charge
decreasing by R7 million to R210 million (originally R217 million
per Circular).
2. Tax
The reduction of the finance charge and increase in transaction
costs resulted in an increased tax charge of R2 million (R6 million
at 28% corporate tax rate) to R167 million (originally R165
million).
3. IFRS 2: Share-based payment expense
The total IFRS 2 charge for the Employee Trust is R174 million
(no change from the Circular) and R103 million for the Management
Trust (originally R108 million per the Circular). These charges
will be amortised over two years for Employees and five years for
Management in accordance with the vesting period as detailed in
paragraph 7 of the Circular. The impact on Propco is an adjustment
in equity only. These transactions continue over the vesting
period.
R'million
---------------------------------- ---------
Annual IFRS 2 charge - Employees 87
Annual IFRS 2 charge - Management 21
Annual IFRS 2 charge - Total 108
---------------------------------- ---------
The change in the IFRS 2 charge results in an annual decrease of
R1 million to the amount as reported in the Circular (originally
R109 million per annum).
4. Transaction costs
The property amendments have resulted in an increase in
transaction costs of R1 million, bringing the total transaction
costs to R38 million (originally R37 million per the Circular).
5. Effect on balance sheet
The Amendments result in reduced cash in Barloworld and
increased debt and equity in Propco. However, the impact on the net
asset value per Share and tangible net asset value per Share is
less than 0,00 cents and less than 0,00%.
PRO FORMA B
The notes of pro forma A remain applicable to pro forma B other
than those detailed below.
2. Tax
The reduction of the finance charge and increase in transaction
costs resulted in an increased tax charge of R2 million (R6 million
at 28% corporate tax rate) to R166 million (originally R164
million).
3. IFRS 2: Share-based payment expense
The total IFRS 2 charge for the Employee Trust and the
Management Trust is R174 million and R129 million respectively (no
change from the original IFRS 2 charges per the Circular). These
charges will be amortised over two years for Employees and five
years for Management in accordance with the vesting period as
detailed in paragraph 7 of the Circular. The impact on Propco is an
adjustment in equity only. These transactions continue over the
vesting period.
R'million
---------------------------------- ---------
Annual IFRS 2 charge - Employees 87
Annual IFRS 2 charge - Management 26
Annual IFRS 2 charge - Total 113
---------------------------------- ---------
PRO FORMA C
The notes of pro forma A remain applicable to pro forma C other
than those detailed below.
2. Tax
The reduction of the finance charge and increase in transaction
costs resulted in an increased tax charge of R2 million (R6 million
at 28% corporate tax rate) to R164 million (originally R162
million).
3. IFRS 2: Share-based payment expense
The total IFRS 2 charge for the Employee Trust is R174 million
(no change from the Circular) and R186 million (R190 million per
Circular) for the Management Trust. These charges will be amortised
over two years for Employees and five years for Management in
accordance with the vesting period as detailed in paragraph 7 of
the Circular. The impact on Propco is an adjustment in equity only.
These transactions continue over the vesting period.
R'million
---------------------------------- ---------
Annual IFRS 2 charge - Employees 87
Annual IFRS 2 charge - Management 37
Annual IFRS 2 charge - Total 124
---------------------------------- ---------
The change in the IFRS 2 charge results in an annual decrease of
R1 million to the amount as reported in the Circular (originally
R125 million per annum).
Opinion
The Amendments do not, in the opinion of the Board, the Legal
Adviser to Barloworld, the Independent Property Valuer and the
Independent Expert, affect the overall guiding principles and
intention of the Khula Sizwe Transaction in terms of which
Barloworld is seeking to maintain or improve its BEE Status as a
business imperative to operating in South Africa; based on which
Barloworld obtained the approval of Barloworld Shareholders in the
General Meeting held on 14 February 2019. This rationale for the
Khula Sizwe Transaction will be met in that Barloworld will still
be disposing of a material property portfolio to Propco resulting
in the creation of a broad-based empowered property entity and the
disposal will confer BEE ownership points to Barloworld in terms of
Statement 102 of the BEE Codes.
In addition:
1. The net impact on the Disposal Consideration under the
Transaction Agreements will be a decrease of R6 051 500,
representing
a 0,22% decrease;
2. The net impact on the future market value under the
Transaction Agreements will be a decrease of R6 370 000,
representing
a 0,22% decrease;
3. The net impact on the as-is value of the property portfolio
will be a decrease of R26 000 000, representing a 0,94%
decrease;
4. The net impact on the aggregate annual rental amounts payable
by Barloworld SA and Barloworld Logistics under and in terms
of the Property Lease Agreements will be a decrease of R777 918,
representing a 0,31% decrease in the aggregate annual rental
amounts payable under and in terms of Property Lease
Agreements;
5. The net impact of the increase in the Employee Trust
Contribution and subscription price in the Employee Trust
Subscription
Agreement from R174 000 000 to R174 304 000, represents a 0,17%
increase; and
6. The net impact of the increase in the Management Trust Loan
and the subscription price in the Management Trust Subscription
Agreement from R206 800 000 to R206 986 000, represents a 0,09%
increase.
Therefore, in the opinions of the Board, the Legal Adviser, the
Independent Property Valuer and the Independent Expert, the
Amendments are:
(i) not material; and
(ii) not in conflict with the approved Khula Sizwe
Transaction.
On the basis of the Independent Property Valuer's revised
valuation and the Independent Expert's statement that the
Amendments will not result in a change to the outcome of their
fairness opinion issued on 7 December 2018 (which states that the
terms and conditions of the Khula Sizwe Transaction are fair to
Barloworld Shareholders), the Board is of the opinion that the
Khula Sizwe Transaction remains fair insofar as Barloworld
Shareholders are concerned.
Based on the above, the Board, the Legal Adviser, the
Independent Property Valuer and the Independent Expert are of the
opinion that the Amendments do not require the further approval of
Barloworld Shareholders in general meeting.
No objection
A submission was made to the JSE in accordance with Guidance
Letter: Amending transaction terms as approved by shareholders
issued on 8 May 2012.
The JSE has issued a no objection letter in respect of the
Amendments to the approved Khula Sizwe Transaction not being
referred back to Barloworld Shareholders.
As a result, the Amendments to the approved Khula Sizwe
Transaction will not be referred back to Barloworld Shareholders
for approval.
Documents for inspection
A copy of the addendum to the Transaction Agreements reflecting
the Amendments is available for inspection at Barloworld's
registered office (61 Katherine Street, Sandown, Sandton, 2196)
during normal business hours from Tuesday, 9 April 2019 to Tuesday,
30 April 2019.
Johannesburg
9 April 2019
Company Secretary
A Ndoni
Corporate Adviser and Transaction Sponsor
Tamela
Sponsor
Nedbank CIB
Independent Reporting Accountants and Auditors
Deloitte & Touche
Independent Property Valuer
Broll Valuation and Advisory Services Proprietary Limited
Independent Expert
BDO Corporate Finance Proprietary Limited
Basis Points Capital Proprietary Limited
Legal Adviser
Dentons
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END
MSCSSWSMUFUSEFL
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