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TRANSACTION CAPITAL LIMITED - Proposed transaction regarding a further allocation of funds for Investment in the JV with Genki Group Limited

Release Date: 06/08/2019 11:45
Code(s): TCP     PDF:  
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Proposed transaction regarding a further allocation of funds for Investment in the JV with Genki Group Limited

Transaction Capital Limited                                             TransCapital Investments Limited
(Incorporated in the Republic of South Africa)                          (Incorporated in the Republic of South Africa)                                  
Registration number: 2002/031730/06                                     (Registration No. 2016/130129/06)
JSE share code: TCP                                                     Bond Company code: TCII                                       
ZAE000167391           
(“Transaction Capital” or “the company” or “the  group”)                                                                                          
                                                                                                                        
ANNOUNCEMENT OF A PROPOSED TRANSACTION REGARDING A FURTHER ALLOCATION OF FUNDS FOR INVESTMENT IN THE JOINT VENTURE WITH 
GENKI GROUP LIMITED PURSUANT TO THE JOINT VENTURE AGREEMENT AND DISTRIBUTION OF CIRCULAR INCORPORATING NOTICE OF GENERAL MEETING

1.   INTRODUCTION TO DISTRIBUTION OF CIRCULAR

1.1. Shareholders are referred to the announcement released on the Stock Exchange News Service (“SENS”) of the JSE
     Limited (“JSE”) on 19 December 2018, in terms of which Transaction Capital shareholders were advised that
     Transaction Capital had, through its wholly-owned subsidiary, Transaction Capital Risk Services Holdings Proprietary
     Limited (“TCRS”), entered into a joint venture arrangement (“Joint Venture”) with Genki Group Limited (“Genki”), a
     company owned by the respective trusts of Transaction Capital directors, Jonathan Jawno (“Jawno”), Michael
     Mendelowitz (“Mendelowitz”) and Roberto Rossi (“Rossi”) (collectively, the “Founders”) in order to invest in credit-
     orientated alternative assets (further defined as “Target Assets” in the Circular that is issued simultaneously with this
     SENS announcement). Each of Transaction Capital and Genki provided an initial allocation of €20 million to the Joint
     Venture (“Initial Allocation Amount”).
1.2. The transaction in respect of the Initial Allocation Amount was categorised as a small related party transaction in
     terms of section 10.7 of the JSE Listing Requirements.
1.3. As at the date of this announcement and by way of the first deployment of a part of the Initial Allocation Amount, the
     Joint Venture has committed €6 million to a niche credit fund focused on Western Europe (i.e. a €3 million commitment
     by each party). In this regard, 40% of the €6 million commitment (being an amount equal to €2.4 million) has already
     been called for by the said fund. TCRS’s share of this tranche, being €1.2 million, was invested into the Joint Venture
     on 30 January 2019. The next deployment of approximately €1.2 million is expected to be made during August 2019.
     The underlying fund has invested in a non-performing loan portfolio secured on commercial properties, with initial
     returns on this investment being in line with expectations. Other than the said investment, the Joint Venture has not,
     as the date of this announcement, committed or invested in any other Target Assets.

2.   PROPOSED TRANSACTION
2.1. In terms of the proposed transaction and in addition to the Initial Allocation Amount, the board of directors of the
     Company has, subject to obtaining Transaction Capital shareholder approval, approved a further allocation to TCRS
     (“Additional Allocation Amount”) pursuant to the Joint Venture Agreement for additional investment by the Joint
     Venture (“Proposed Transaction”) in Target Assets (as defined in the Circular). All details on the Proposed
     Transaction including the rationale for the investment are set out in the Circular that is issued simultaneously with this
     SENS announcement.
2.2. The Proposed Transaction will be effective immediately following approval by Transaction Capital shareholders at
     the General Meeting.

3.   DISTRIBUTION OF CIRCULAR INCORPORATING NOTICE OF GENERAL MEETING
3.1. Shareholders are advised that a circular (“Circular”) which contains the details of the Proposed Transaction and a
     summary of the salient terms of the Joint Venture Agreement, together with (i) a notice of general meeting for the
     purpose of considering and, if deemed fit, passing the resolutions required to implement the Proposed Transaction
     and the Joint Venture Agreement and (ii) a form of proxy has been distributed simultaneously with this SENS
     announcement to those Transaction Capital shareholders and other persons who are entitled to receive such
     document.
3.2. The general meeting will be held at 230 Jan Smuts Avenue, Dunkeld West, Johannesburg at 15:00 on Thursday 5 September 2019.
3.3. An electronic version of the Circular will be available on Transaction Capital’s website (www.transactioncapital.co.za).

     IMPORTANT DATES AND TIMES                                                                                        2019
     Record date for posting the Circular                                                                  Friday, 26 July
     Circular incorporating notice of general meeting posted to Transaction Capital                      Tuesday, 6 August
     shareholders on or about
     Last day to trade in order to be eligible to attend and vote at the general meeting                Tuesday, 27 August
     Record date for attending and voting at the general meeting                                         Friday, 30 August
     Recommended day to lodge forms of proxy in respect of the general meeting                        Tuesday, 3 September
     preferably by 15:00*                                                                                                                         
     General meeting of Transaction Capital shareholders to be held at 230 Jan Smuts                 Thursday, 5 September
     Avenue, Johannesburg at 15:00 for the purpose of considering and, if deemed fit,
     approving, with or without modification, the resolutions proposed thereat
     Results of general meeting released on SENS                                                      Thursday, 5 September
   
     *Forms of proxy not lodged with the transfer secretaries may be handed to the chairperson of the general meeting before the
     proxy exercises the voting rights of the shareholder at the general meeting.

4.   JOINT VENTURE AGREEMENT
4.1. The agreement which governs the relationship between the parties to the Joint Venture was approved by the audit
     risk and compliance committee and was entered into between TCRS International (Pty) Ltd (a wholly owned
     subsidiary of TCRS) and Genki on 29 July 2019 (“Joint Venture Agreement”).
4.2. In terms of the Joint Venture Agreement, any investments to be made by the Joint Venture parties in respect of:
     4.2.1. the Initial Allocation Amount shall be governed by the provisions of the Joint Venture Agreement with effect
            from 23 November 2018; and
     4.2.2. the Additional Allocation Amount shall be governed by the provisions of the Joint Venture Agreement with
            effect from the date of fulfilment of the suspensive condition to the Joint Venture Agreement, being the
            approval of the Proposed Transaction and the Joint Venture Agreement by ordinary resolution of Transaction
            Capital shareholders at a general meeting.
4.3. The salient terms of the Joint Venture Agreement are set out in annexure B to the Circular.

5.   RELATED PARTY TRANSACTION
5.1. The Proposed Transaction is classified as a Category 2 transaction in terms of paragraph 9.5(a) of the JSE Listings
     Requirements, as well as a related party transaction in terms of paragraphs 10.1(a), 10.1(b)(i) and 10.1(b)(ii) of the
     JSE Listings Requirements. The Proposed Transaction is classified as a Category 2 transaction in terms of the JSE
     Listings Requirements as the aggregate of the Initial Allocation Amount and Additional Allocation Amount is 5% or
     more but less than 30% of Transaction Capital’s market capitalisation as at 26 July 2019, being the date prior to
     signature of the Joint Venture Agreement.
5.2. The parties to the Proposed Transaction are considered to be related parties.
     5.2.1. As at the date of this announcement, Jawno and Mendelowitz are executive directors of Transaction Capital,
            with Rossi being a non-executive director. Each of Jawno, Mendelowitz and Rossi are contingent discretionary
            beneficiaries of trusts that each own directly or indirectly an effective 9.69% of Transaction Capital.
     5.2.2. In addition, Jawno, Mendelowitz and Rossi are also contingent discretionary beneficiaries of trusts that each
            own 33.3% of Genki.
5.3. As a related party transaction, the Proposed Transaction requires the approval by ordinary resolution of Transaction
     Capital shareholders, excluding the votes of the related parties and their associates, at a general meeting prior to the
     implementation of the Proposed Transaction.

6.   FAIRNESS OPINION
     The Proposed Transaction is not an acquisition or disposal of assets, but rather an allocation of a defined cash
     amount for investment by the Joint Venture (which in turn would acquire and or dispose of various investments).
     Given that Transaction Capital shareholders are approving the Joint Venture Agreement in terms of which the risks
     and rewards of the Joint Venture are shared equally between the Joint Venture parties and based on the fact that no
     fees are payable to either Joint Venture Party, the JSE has dispensed with the requirement to provide a fairness
     opinion.

7.   PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION
     Given that the Proposed Transaction is an allocation of cash to the Joint Venture, the JSE has determined that only
     the Statement of Financial Position be disclosed. As the approval being sought is an advanced approval to allocate
     cash to the Joint Venture for future investments, the pro forma information has been presented in the Circular showing
     three possible scenarios whereby Transaction Capital funds the allocation through a combination of cash, equity or
     debt funding. The pro forma financial information is based on Transaction Capital’s published unaudited interim
     results for the six-month period ended 31 March 2019. This pro forma financial information was provided to our
     external auditors and their report is included in Annexure A of the Circular.

Sponsor: Rand Merchant Bank (A Division of FirstRand Bank Limited).
Dunkeld West, Johannesburg
6 August 2019

Enquiries:
Phillipe Welthagen - Investor Relations
Telephone: +27 (0) 11 049 6700

Date: 06/08/2019 11:45:00
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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