Thembeka Capital, the black owned investment holding company and an associate of PSG Group, announced today that it is to unlock value for its shareholders.
By doing this Thembeka’s black shareholders will effectively realise R165.85 per share, a 56.3% premium to the Thembeka OTC share price of R106.12 per share, as at 30 June 2014, being the 30 day volume-weighted average price.
Thembeka shareholders will receive 1.7 PSG shares for every 1 Thembeka share held. A total of 11.7 million PSG shares will be issued in accordance with a scheme of arrangement proposed by PSG, with the transaction amounting to approximately R1.14 billion.
Commenting on the rationale for the unlock of value, executive chairman of Thembeka Capital, KK Combi, noted that a change in the South African BEE landscape over the past few years and particularly with many companies changing the way in which they conclude BEE ownership transactions, has made Thembeka’s business model less viable.
Thembeka has also grown its assets under management substantially over the years, with the result that Thembeka would require substantial capital injections to continue to make new investments. Given Thembeka’s unique shareholding structure with 51% of the shares which is black owned, the scarcity of black capital and stringent bank funding requirements, the company recognises that Thembeka’s ability to raise additional capital to pursue new sizeable investments will be restricted.
“Scheme participants will receive a more liquid and tradeable instrument, being new JSE-listed shares in PSG. Thembeka currently restricts the trading of its shares to black individuals only. As such Thembeka has historically traded at a substantial discount to its underlying intrinsic value.
“The proposed unlocking of value will result in Thembeka’s black shareholders realising the company’s underlying intrinsic value at a fair price.
“The recent FSB directive that prohibits OTC trading in its current form makes it difficult for Thembeka’s BEE shareholders to exit and/or realise value. With what we’re announcing today we seek to remedy these effective ‘lock-in’s’ for Thembeka’s shareholders,” Combi said.
The process of unlocking of value will be implemented in a series of consecutive transaction steps, which will see Thembeka disposing of its investments subject to BEE lock-in periods to a new black- owned and controlled company at a determined value, the shareholding of which will ultimately be held by the Stellenbosch BEE Education Trust (“SBET”), as to 51%, and PSG, as to the remaining 49%.
The investments subject to BEE lock-in periods are Pioneer Food Group, Kaap Agri and those shares in Curro Holdings that are still subject to a BEE lock-in period. SBET is a broad-based BEE trust of which 100% of the beneficiaries are black students.
Following this, PSG Group intends to firstly repurchase the shares held by Thembeka in PSG Group and then acquire all the ordinary shares in Thembeka, not already held by PSG or its subsidiaries (i.e. 6.8 million Thembeka shares) by way of a scheme of arrangement.
The repurchase of the shares held by Thembeka in PSG Group and the scheme of arrangement is only to be implemented after the transfer of lock-in investments to SBET and post 31 December 2014. This is still subject to the fulfilment of certain conditions precedent which include shareholder and regulatory approvals.
