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Publication of circular and notice of General Meeting
HUGE GROUP LIMITED
(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
(“Huge” or “the Company”)
PUBLICATION OF CIRCULAR AND NOTICE OF GENERAL MEETING
1. PUBLICATION OF CIRCULAR
Huge takes pleasure in announcing that it has distributed a circular to its
shareholders (the Circular) which includes a Form of Proxy in respect of the
effective disposal of a 16.29% interest in Huge Connect Proprietary Limited (Huge
Connect), a wholly owned subsidiary company of Huge, to a B-BBEE investor,
through its subscription for ordinary shares in Huge Connect (the Proposed
Transaction). Copies of the Circular are available for inspection during normal
business hours at the premises of Huge at Unit 6, 1 Melrose Boulevard, Melrose
Arch, Johannesburg and on the website at www.hugegroup.com/circulars.
The Circular contains information on the background to and reasons for the
Proposed Transaction, detailed information on Huge and the actions to be
taken by shareholders. Key sections of the Circular have been set out below.
2. THE PROPROSED TRANSACTION
On 29 August 2019, Huge announced that it had entered into an
Implementation Agreement (the Implementation Agreement) with Windfall 111
Properties Proprietary Limited (Windfall), an associate of Mr Vincent Mokholo,
who is a non-executive director of the Company, and a related party to Huge.
The Implementation Agreement contemplates the conclusion of various
transaction agreements, including a Preference Share Subscription Agreement
between Huge and Huge Connect, an Ordinary Share Subscription Agreement
(the Subscription Agreement) between Huge Connect and Windfall and a
Shareholders Agreement between Huge, Windfall and Huge Connect (the
Transaction Agreements).
In terms of the Preference Share Subscription Agreement, Huge will subscribe for
1 000 preference shares in Huge Connect for a subscription price of R457 075
000.
Thereafter, Huge Connect will declare an ordinary dividend of R457 075 000 to
the holders of the ordinary shares in Huge Connect, being Huge. The obligation
of Huge Connect to effect payment of the ordinary dividend will be discharged
in toto by set-off against the obligation of Huge to effect payment of the
preference shares subscription price.
Thereafter, and in terms of the Subscription Agreement, Windfall will subscribe
(the Subscription) for 36 ordinary no par value shares (the Subscription Shares) in
the issued ordinary capital of Huge Connect, such that after the Subscription,
Windfall will own 16.29% of the issued share capital of Huge Connect.
The Implementation Agreement and the Subscription Agreement are subject to
various suspensive conditions which are customary for transactions of this nature.
3. BACKGROUND INFORMATION
Huge Connect is a telecommunications services company with a focus on
growing its payment connectivity services. It was established in 2004 and
provides connectivity to the card payment terminals of merchants, payment
services providers and the commercial banks in South Africa by making use of
secure, managed, dual SIM connectivity over GSM data networks. It has over 32
000 merchants as customers. The Company has also expanded into other
markets for payment connectivity, including connectivity for ATMs, integrated
points of sale, medical/script verifications, telemetry applications, micro-lending
applications and cash vaults.
Huge is committed to transforming the businesses in which it invests by
empowering these businesses in terms of the Codes of Good Practice on Broad-
Based Black Economic Empowerment, as read with the Amended Information
and Communication Technology Sector Code (the B-BBEE Codes), published by
the Minister of Trade and Industry under section 9 of the Broad-Based Black
Economic Empowerment Act, 2003 (the B-BBEE Act). In addition, the payment
services providers and commercial banks, who are customers of Huge Connect,
all have preferential procurement requirements, which require their suppliers to
be empowered in terms of the B-BBEE Codes and the B-BBEE Act. The Proposed
Transaction will empower historically disadvantaged individuals and it will also
ensure that Huge Connect remains competitive in its chosen market segment.
Windfall is a 100% black-owned company, which is 40% owned by Mr Vincent
Mokholo, a non-executive director of Huge, and 60% owned by his wife, Mrs
Sylvia Mokholo.
4. RATIONALE FOR THE PROPOSED TRANSACTION
The Company remains committed to driving transformation in ways that are
sustainable, credible and of benefit to all its stakeholders. The Proposed
Transaction is in keeping with this objective and the spirit of transformation and
constitutes a positive step in aligning Huge Connect’s ownership structure to the
ownership elements of the B-BBEE Codes. It is envisaged that the implementation
of the Proposed Transaction will significantly improve Huge Connect’s B-BBEE
credentials over the long-term, thus ensuring that it will continue to maintain its
competitive advantage in both the private and public sector.
5. PURCHASE CONSIDERATION
The subscription price (the Subscription Consideration) for the Subscription
Shares is an aggregate amount of R180 000 and will be settled by Windfall in
cash. The Subscription Consideration will be used for the purposes of working
capital.
6. EFFECTIVE DATE OF THE PROPOSED TRANSACTION
The effective date of the Proposed Transaction will be dependent on the
fulfilment or waiver, as the case may be, of the conditions precedent set out in
paragraph 7 below, and is expected to take place by no later than 28 February
2020.
7. CONDITIONS PRECEDENT
The Proposed Transaction is conditional upon:
a. the written approval of Futuregrowth Asset Management Proprietary
Limited, being the lender to Huge in terms of an agreement titled “Term
Facility Agreement – ZAR200,000,000 Facility”;
b. the delivery by Huge, Huge Connect and Windfall (the Parties) of all
authorising resolutions required by the parties to the Transaction
Agreements;
c. the filing and acceptance of the Huge Connect MOI by the Companies
and Intellectual Property Commission; and
d. the receipt of all shareholder and regulatory approvals legally required
for the implementation of the transactions contemplated in the
Transaction Agreements, including the Proposed Transaction, either
unconditionally or subject to such conditions as are reasonably
acceptable to Huge, Huge Connect and Windfall.
8. FINANCIAL INFORMATION
The net asset value of Huge Connect as at 28 February 2019 was R144.7 million
and profit after tax for that year was R41.1 million, as per its audited annual
financial statements (AFS) for the year ended 28 February 2019. The AFS have
been prepared in accordance with International Financial Reporting Standards
and the requirements of the Companies Act 71 of 2008.
9. DETAILS OF THE PURCHASER
Windfall is an associate of a related party to Huge, being Mr Vincent Mokholo, a
non-executive director of the Company. Mr Vincent Mokholo holds 40% of the
issued shares of Windfall and Sylvia Mokholo owns the remaining 60% issued
shares.
10. CATEGORISATION
The Proposed Transaction is a related party transaction in terms of the Listings
Requirements of the JSE.
Accordingly, a fairness opinion was obtained in respect of the Proposed
Transaction. The Company appointed Moore Corporate Services Cape Town
Proprietary Limited (Moore) as the independent expert who opined on the
fairness of the Proposed Transaction.
11. Notice of General Meeting
Notice is hereby given that the general meeting of shareholders will be
held on Monday, 25 November at 10h00 at the Mfundo Room, 1st Floor,
JSE Building, One Exchange Square, Gwen Lane, Sandown,
Johannesburg.
The board of directors of the Company determined that, in terms of
section 62(3)(a), as read with section 59 of the Companies Act 71 of
2008 (as amended), the record date for purposes of determining which
shareholders are entitled to receive the notice of annual general
meeting is Friday, 18 October 2019 and the record date for the purposes
of determining which shareholders of the Company are entitled to
participate in and vote at the annual general meeting is Friday, 15
November 2019. Accordingly, the last day to trade in the Company’s
shares in order to be recorded in the register of Huge shareholders to be
entitled to participate in and vote at will be Tuesday, 12 November 2019.
Shareholders are requested to lodge forms of proxy by 10h00 on
Thursday, 21 November 2019 but will nevertheless be entitled to lodge
forms of proxy prior to the proxy exercising such shareholder rights as a
shareholder at the AGM.
Johannesburg
25 October 2019
Transaction Sponsor
Questco Corporate Advisory (Pty) Ltd
Date: 25/10/2019 03:39:00
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