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Offer to Acquire all of the Issued Shares of Cargo, Proposed Delisting & Withdrawal of Cautionary Announcement
CARGO CARRIERS LIMITED CARGO CARRIERS HOLDINGS PROPRIETARY LIMITED
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa)
(Registration number: 1959/003254/06) (Registration number: 1969/012377/07)
(Share code: CRG) ("CCH")
(ISIN: ZAE000001764)
("Cargo")
FIRM INTENTION ANNOUNCEMENT IN RESPECT OF AN OFFER TO ACQUIRE ALL OF THE
ISSUED ORDINARY SHARES OF CARGO ("FIRM INTENTION ANNOUNCEMENT"),
PROPOSED DELISTING OF CARGO AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
The board of directors of Cargo ("Cargo Board") is pleased to announce that Cargo has
received an offer from CCH to acquire 100% of the remaining issued ordinary share capital of
Cargo not already held by CCH ("Offer Shares"), excluding the shares held by New Seasons
Investments Holdings Proprietary Limited ("New Seasons"), treasury shares and any shares
held by persons related to CCH ("the Offer"). CCH currently holds 61.11% of the issued
shares of Cargo.
2. Mechanics of the Offer
The Offer will be implemented by way of:
2.1 a scheme of arrangement ("Scheme") in terms of section 114 of the Companies Act,
2008, as amended, ("Companies Act") and paragraph 1.17(b) of the Listings
Requirements ("Listings Requirements") of the securities exchange operated by JSE
Limited ("JSE"), to be proposed by the Cargo Board between Cargo and the holders of
the Offer Shares ("Cargo Shareholders"); alternatively, if the Scheme fails,
2.2 a general offer by CCH to the holders of the Offer Shares in terms of section 117(1)(c)(v)
of the Companies Act and paragraph 1.15(c) of the Listings Requirements ("Standby
Offer"),
in each case subject to the requirement that the listing of the issued ordinary shares of Cargo
on the JSE be terminated ("Proposed Transaction").
3. Implementation agreement
Cargo, acting through its independent board comprised of its independent non-executive
directors who act independently as contemplated in the Regulations issued pursuant to the
Companies Act ("Cargo Independent Board") and CCH have concluded a written
implementation agreement on 16 October 2018 in relation to the Proposed Transaction
(“Implementation Agreement”). The Implementation Agreement contains provisions relating
to the implementation of the Proposed Transaction and certain undertakings by Cargo,
including terms regarding the conduct of Cargo in the interim period between the dates of this
Firm Intention Announcement and the implementation of the Proposed Transaction. The
Cargo Independent Board is comprised of Ms SP Mzimela, Ms A Gcabashe, Mr V Raseroka,
Mr SF Nomvalo and Ms N Medupe.
4. Salient terms of the Offer
4.1 Purchase consideration
4.1.1 Cargo Shareholders will, if the Scheme becomes operative, or if the Scheme
does not become operative to the extent that the Cargo Shareholders accept the
Standby Offer, be entitled to receive R20.927 per Offer Share (calculated
as R21.00 per Offer Share less the interim dividend declared on 16 October 2018
of R0.073 per Offer Share), which amount will be adjusted downwards by the
amount of any other dividends declared after 16 October 2018 and paid prior to
the operative date of the Scheme (or payable to persons who were Cargo
Shareholders as at a record date preceding the operative date of the Scheme)
("Consideration"); provided that the Consideration paid to each Cargo
Shareholder shall be rounded down to the nearest whole cent.
4.1.2 The Consideration represents a premium of:
4.1.2.1 82.13% to the closing price of Cargo Shares on the JSE as at
31 January 2018, being the last business day immediately prior to the date
of the first cautionary announcement;
4.1.2.2 39.33% to the closing price of Cargo Shares on the JSE as at 15
October 2018, being the last business day immediately prior to the date of
this Firm Intention Announcement;
4.1.2.3 39.33% to the volume weighted average price ("VWAP") of Cargo Shares
on the JSE for the 30 days up to 15 October 2018; and
4.1.2.4 59.66% to the VWAP of Cargo Shares on the JSE for the 180 days up to
15 October 2018.
4.2 Scheme
4.2.1 In the event the Scheme becomes operative, the listing of all the issued ordinary
shares of Cargo ("Cargo Shares") on the JSE will be terminated and each Cargo
Shareholder, excluding those shareholders that validly exercise their appraisal
rights in accordance with section 164 of the Companies Act as a consequence of
the approval of the Scheme and whose shareholder rights have not been
reinstated as envisaged in sections 164(9) and 164(10) of the Companies Act or
who have not been ordered by the court to withdraw their demands in terms of
section 164(15)(v)(aa) of the Companies Act ("Scheme Participants"), will be
deemed to have disposed of all of their Offer Shares for the Consideration, such
that CCH will own all of the Offer Shares previously held by the Scheme
Participants.
4.2.2 The Scheme is subject to the fulfilment or waiver of the suspensive conditions set
out in paragraph 7.
4.3 Standby Offer
4.3.1 In the event that the Scheme fails, CCH will make a general offer to all Cargo
Shareholders whereby each Cargo Shareholder will be entitled to elect whether
or not to dispose of all (and not only a part) of their Offer Shares to CCH for the
Consideration.
4.3.2 If Cargo Shareholders wish to dispose of all of their Offer Shares in terms of the
Standby Offer, they will be required to accept the Standby Offer and tender such
Offer Shares to CCH.
4.3.3 Cargo Shareholders who do not wish to accept the Standby Offer in respect of all
of the Offer Shares held by them will continue to hold their Offer Shares, as
unlisted shares.
4.3.4 The Standby Offer will be subject to the fulfilment or waiver of the suspensive
conditions set out in paragraph 8.
5. Rationale for the Proposed Transaction
5.1 The primary rationale for the Proposed Transaction is the intention to delist Cargo and
provide the company with the flexibility required to introduce sustainable broad-based
black economic ownership structures.
5.2 CCH is of the view that it is unsustainable for Cargo to maintain its listing on the JSE
and delisting will result in substantial cost and management time savings.
5.3 The Cargo Shares are currently not readily tradeable on the JSE and the Proposed
Transaction will provide a liquidity opportunity for shareholders at an attractive premium.
In the past, trades in even small volumes, have driven share prices down.
5.4 The JSE free float requirement remains a challenge and the introduction of additional
broad-based black economic ownership structures will exacerbate this.
6. Conditions to posting of the circular
The posting of the circular to Cargo Shareholders is subject to the fulfilment or waiver (in whole
or in part) of the following suspensive conditions by 30 November 2018:
6.1 the Cargo Board and the Independent Board unanimously recommending to the Cargo
Shareholders, without qualification, that they vote in favour of the Scheme;
6.2 the requisite approvals being received from the JSE, the Takeover Regulation Panel
("TRP") and the Financial Surveillance Department of the South African Reserve Bank
(in each case to the extent necessary) for the posting of the circular in respect of the
Proposed Transaction;
6.3 as of the date of the fulfilment or waiver of the last of the conditions in paragraphs 6.1
and 6.2:
6.3.1 none of the irrevocable voting undertakings received from Cargo Shareholders
as referred to in paragraph 9 ceasing for any reason to be enforceable by CCH;
and
6.3.2 the independent expert having issued its report in terms of section 114(3) of the
Companies Act (read with the Regulations of the Companies Act) confirming that
the Consideration offered (or proposed to be offered) to Cargo Shareholders is
fair and reasonable and such opinion not being withdrawn or adversely amended.
7. Conditions to the Scheme
The Scheme will be subject to the fulfilment, or waiver (in whole or in part), of the following
suspensive conditions by no later than the date which falls 120 days after the date of this Firm
Intention Announcement:
7.1 the passing of a resolution, as contemplated in section 115(2) of the Companies Act, in
terms of which Cargo Shareholders approve the Scheme by the requisite majority of
Cargo Shareholders ("Scheme Resolution");
7.2 the passing of the resolution in terms of which the listing of all Cargo Shares is
terminated on the main board of the JSE by the requisite majority of Cargo Shareholders
as contemplated in the JSE Listing Requirements ("Delisting Resolution");
7.3 if required by section 115(3) of the Companies Act, the approval of the Scheme
Resolution shall have been approved by a court. In order to establish whether such
approval is required if less than 15% of the votes exercised on the Scheme Resolution
were opposed to the Scheme Resolution, Cargo shall not implement the Scheme
Resolution until either a period of ten business days has elapsed since the vote without
any Cargo Shareholder who opposed the Scheme Resolution applying for leave to apply
to a court for a review of the Proposed Transaction or, if any such application is made
by such a Cargo Shareholder, such application is unsuccessful. If such approval of a
court is required, Cargo shall, at the reasonable cost and expense of CCH, seek such
approval and shall not treat the Scheme Resolution as a nullity, as contemplated in
section 115(5)(b) of the Companies Act unless requested to do so by CCH;
7.4 Cargo Shareholders not having exercised appraisal rights by giving valid demands to
this effect to Cargo, in terms of section 164(7) of the Companies Act, in respect of more
than 5% of the Cargo Shares within 30 business days following the shareholders'
meeting of Cargo convened to pass the Scheme Resolution and the delisting, provided
that, in the event that any Cargo Shareholders give notice objecting to the Scheme, as
contemplated in section 164(3) of the Companies Act, and all or some of those Cargo
Shareholders vote against the resolution proposed at the Shareholders' Meeting to
approve the Scheme, but do so in respect of no more than 5% of the Cargo Shares this
condition shall be deemed to have been fulfilled at the time of the shareholders' meeting;
7.5 the receipt of all unconditional approvals, consents or waivers from South African
governmental and other South African regulatory authorities necessary for the
implementation of the Proposed Transaction ("Consents") (or if such Consent is
conditional, such conditions being satisfactory to the party/parties on whom such
condition is imposed of which party/parties is affected thereby and for which purpose a
condition imposed on Cargo shall be deemed to be imposed on both parties), including
from:
7.5.1 the TRP (in terms of a compliance certificate to be issued in terms of the
Companies Act); and
7.5.2 the Financial Surveillance Department of the South African Reserve Bank, or its
duly authorised agent;
7.6 by the date upon which all conditions to the Scheme, other than the condition in this
paragraph 7.6, are fulfilled or waived, as the case may be, an adverse effect, fact or
circumstance which is or might reasonably be expected (alone or together with any
other such adverse effect, fact or circumstance) to be material with regard to the
operations, continued existence, business, condition, assets and liabilities of Cargo and
its subsidiaries has not occurred. For the purposes of this paragraph, to be material, the
adverse effect, fact or circumstance must:
7.6.1 have (or be reasonably expected to have) an adverse effect upon Cargo's annual
profit after tax of not less than R5 000 000;
7.6.2 constitute a change in the laws of South Africa which has (or may reasonably be
expected to have) a material adverse effect upon the Scheme such that the
effective direct or indirect cost to CCH of the Scheme would increase by 15% or more; or
7.6.3 consist of a fall in the JSE All Share index by 20% or more compared with such
index as at the last trading day of September 2018.
8. Conditions to the Standby Offer
The Standby Offer will be subject to the fulfilment or waiver (in whole or in part) of the same
suspensive conditions as the Scheme as listed in paragraphs 7.2, 7.5 and 7.6.
9. Undertakings
CCH has received irrevocable undertakings to vote in favour of the resolutions required to
approve the Proposed Transaction, including the Scheme Resolutions and the Delisting
Resolution, from the following Cargo Shareholders holding or controlling 1 949 901 of the Offer
Shares, representing an aggregate of 9.26% of the Cargo Shares and 42.90% of the Offer
Shares:
Cargo Shareholder Number of Scheme Shares
Allan Hurwitz 1 379 000
Alan Shkudsky 348 203
Roger Downard and his related persons:
• GLD Investments Proprietary Limited 101 010
• RMMC Investments CC 45 130
• Roger Downard 75 518
• Meydown Investments CC 1 040
Total 1 949 901
10. Shareholdings in Cargo
10.1 CCH holds 12 865 837 Cargo Shares equal to 61.11% of all Cargo Shares. CCH
confirms that it is the ultimate proposed purchaser of the Offer Shares.
10.2 The following holders of Cargo Shares are either acting in concert with CCH or hold
treasury shares or are directors, or persons related to CCH or its directors, as
contemplated in section 2 of the Companies Act:
Shareholder Number of Cargo Shareholding
Shares held Interest
New Seasons 2 861 032 13.59%
Garth Bolton 87 388 0.41%
Murray Bolton 50 372 0.24%
Glynnis Nassif 19 677 0.09%
Stan Chilvers 11 169 0.05%
Karen Organ 1 000 0.004%
Jean Bolton Family Trust 19 508 0.09%
Cargo Carriers Limited 593 710 2.82%
Employees Share Incentive Trust
(treasury shares)
Total 3 643 856 17.31%
11. Management
CCH intends to retain Cargo’s existing senior management.
12. Cash confirmation to the TRP
Webber Wentzel has, on behalf of CCH, delivered a cash escrow confirmation in compliance
with the TRP requirements to the TRP for an amount of R95 070 084, in compliance with
Regulations 111(4) and (5) of the Companies Regulations, 2011, which is sufficient for the
purpose of fully satisfying the Consideration payable in terms of the Proposed Transaction.
13. Termination of Cargo listing
Following implementation of the Scheme, or the Standby Offer if the Scheme fails, application
will be made to the JSE to terminate the listing of the Cargo Shares on the JSE.
14. Recommendation and fairness opinion
14.1 The Independent Board intends, based on the information currently available to it, to
make a unanimous recommendation to Cargo Shareholders to vote in favour of the
resolution to be proposed at the shareholders meeting to approve the Scheme, as well
as the Delisting Resolution, provided that the Independent Board receives an opinion
from the independent expert to the effect that the Consideration is fair and reasonable.
14.2 The Independent Board has appointed Mazars Corporate Finance Proprietary Limited,
an independent advisor acceptable to the TRP, to review the terms of the Proposed
Transaction, and to provide a fair and reasonable opinion as required in terms of section
114(3) of the Companies Act and Regulation 90 of the Companies Regulations, 2011.
15. Documentation
Further details of the Proposed Transaction will be included in a circular which will be sent to
Cargo Shareholders, subject to all the requisite approvals being received as contemplated in
paragraph 6. It is estimated that the circular will be posted to Cargo Shareholders on or about
9 November 2018, which will include the notice of the shareholders' meeting to be held for the
purpose, inter alia, of considering and, if deemed fit, passing the Scheme Resolution and the
Delisting Resolution.
16. Withdrawal of cautionary announcement
Following the release of this Firm Attention Announcement, the cautionary announcement
originally published by Cargo on 1 February 2018, and which was last renewed on
6 September 2018 is hereby withdrawn and caution is no longer required to be exercised by
the Cargo Shareholders when dealing in their Cargo Shares.
17. Responsibility statement
The Independent Board and CCH each accept responsibility for the information contained in
this announcement and, to the best of their respective knowledge and belief, confirm that the
information is true and this announcement does not omit anything likely to affect the
importance of the information included.
Corporate advisor to Cargo Corporate advisor to CCH
PricewaterhouseCoopers Corporate Nodus Capital (Pty) Limited
Finance (Pty) Limited
Legal advisor to Cargo Legal advisor to CCH
PricewaterhouseCoopers Legal (Pty) Webber Wentzel
Limited
JSE Sponsor Independent expert to Cargo
Arbor Capital Sponsors (Pty) Limited Mazars Corporate Finance (Pty) Limited
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