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Announcement Relating to a Small Related Party Transaction
Imperial Logistics Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/021048/06
Share code: IPL
ISIN: ZAE000067211
(“Imperial”)
ANNOUNCEMENT RELATING TO A SMALL RELATED PARTY TRANSACTION
INTRODUCTION AND BACKGROUND
Imperial shareholders (“Shareholders”) are referred to the announcement
released on the Stock Exchange News Service (“SENS”) on 30 October 2018 and
14 December 2018 in which they were advised of the introduction of a Broad-
Based Black Economic Empowerment partner, namely, Afropulse Group (Pty)
Limited (“Afropulse”) in its subsidiary, Imperial Logistics Advance (Pty)
Limited (“Imperial Advance”), by way of a subscription of 25% of the issued
share capital of Imperial Advance (“B-BBEE Transaction”).
Afropulse is a wholly black woman-owned business. As such, the B-BBEE
Transaction resulted in Imperial Advance being a more than 51% black-owned
and more than 30% black woman-owned enterprise contributing to enhancing
Imperial Logistics’ relevance and competitiveness in South Africa, and that
of its clients.
NATURE OF THE BUSINESS OF IMPERIAL ADVANCE
Imperial Advance houses the Tanker Services Fuel & Gas, the Tanker Services
Food & Chemicals business units previously held by Imperial Logistics South
Africa Group Proprietary Limited, as well as the business unit of Imperial
KWS Logistics Proprietary Limited. The core capability of Imperial Advance
is bulk road transportation management of liquids, gases, powders, ores and
grains, which requires specialised assets and skills.
Imperial Advance’s net asset value is R245,001,285 for the year ended 30
June 2020 and generated revenue and operating profit of R3,836,119,282 and
R124,031,971, respectively.
THE PROPOSED TRANSACTION
As part of the B-BBEE Transaction, Afropulse, through a special purpose
vehicle, Opal Corp Trading (RF) Proprietary Limited (“Opal Corp”), financed
a portion of its acquisition consideration for the 25% interest in Imperial
Advance through preference shares ("Preference Shares")issued to The Standard
Bank of South Africa Limited (“SBSA”).
In recent months, a decline in the Imperial share price, which was exacerbated
by the recent COVID-19 lockdown, combined with an increase in net debt and
decline in EBITDA in Imperial Advance has resulted in breaches of the
financial covenants set out in the funding agreements in respect of the
Preference Shares ("Funding Agreements").
As to the consequences of any potential enforcement by SBSA as a result of
the abovementioned breaches and remedy the abovementioned breaches, a credit
enhancement has been proposed (and accepted by SBSA) whereby the Opal Corp
shareholders will provide to SBSA a guarantee up to R10 million, and Imperial
Logistics South Africa Holdings Proprietary Limited ("ÏLSA") will provide to
SBSA a guarantee up to R37 million (“Imperial Guarantee”).
TERMS REGARDING THE IMPERIAL GUARANTEE
In terms of the Imperial Guarantee, until such time as, inter alia, the
financial covenants set out in the Funding Agreements recover to an
appropriate level, ILSA, subject to certain limitations, guarantees
irrevocably, unconditionally and on the basis of a principal and primary
continuing obligation, to the holders of the Preference Shares ("Holders"),
the payment and other obligations of Opal Corp under the Funding Agreements
to the Holders (including any amounts which were scheduled to be paid by
Opal Corp to the Holders but could not be paid due to restrictions imposed
by law) and to provide further indemnities to the Holders, in each instance
insofar as same relate to the A Preference Shares issued by Opal Corp.
The maximum aggregate liability of ILSA to Holders in terms of the Imperial
Guarantee shall not exceed ZAR37 million (“Liability Cap”) (excluding
interest on late payment and enforcement costs). ILSA shall be entitled to
request a reduction in the Liability Cap from time to time, should, inter
alia, the financial covenants set out in the Funding Agreements recover to
certain levels.
SUSPENSIVE CONDITIONS
The Proposed Transaction is subject to conditions precedent that are typical
of an agreement of this nature, including the required JSE Limited and
internal approvals.
The Proposed Transaction will become effective from the date of all
conditions precedent being fulfilled.
SMALL RELATED PARTY TRANSACTION
The Chairman of the Board of Imperial, Phumzile Langeni, is a director and
material shareholder of Afropulse. In terms of the Listings Requirements of
the JSE Limited (“Listings Requirements”), Afropulse is an associate of a
director of Imperial. Accordingly, ILSA, a subsidiary of Imperial, will enter
into an agreement in respect of the Proposed Transaction, which agreement
will benefit a related party as defined in terms of paragraph 10.1(vii) of
the Listings Requirements.
The Imperial Guarantee constitutes a small related party transaction in terms
of paragraph 10.7 of the Listings Requirements and consequently requires a
fairness opinion from an independent professional expert (“Independent
Expert”) acceptable to the JSE, advising that the terms of the Proposed
Transaction are fair as far as Shareholders are concerned.
In compliance with paragraph 10.7(b) of the Listings Requirements, Imperial
has appointed PricewaterhouseCoopers Corporate Finance (Pty) Ltd (“PWC”) as
the Independent Expert, to provide the fairness opinion in this regard.
PWC has concluded and confirmed to Imperial that the terms of the Proposed
Transaction and the Imperial Guarantee are fair as far as the Shareholders
are concerned, and in this regard a copy of such fairness opinion has been
provided to the JSE as required in terms of paragraph 10.7(c) of the Listings
Requirements, the fairness opinion will be available to Shareholders for a
period of 28 days from the date of this announcement by making a written
request to Imperial at jeetesh.ravjee@imperiallogistics.com. Due to COVID-
19 restrictions, the fairness opinion will be available for inspection by
appointment only at the registered offices of Imperial, which appointment
should be requested by sending an email to
jeetesh.ravjee@imperiallogistics.com.
09 SEPTEMBER 2020
Sponsor: Merrill Lynch South Africa (Pty) Ltd
Date: 09-09-2020 10:00:00
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