AECI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1924/002590/06)
JSE ordinary share code: AFE
JSE preference share code: AFEP
JSE ordinary share ISIN: ZAE000000220
JSE preference share ISIN: ZAE000000238
(“AECI” or “the Company”)
1.Introduction
AECI shareholders (“Shareholders”) are referred to the detailed terms announcement released on the Securities Exchange News Service (“SENS”) on Thursday, 13 October 2011 and published in the press on Friday, 14 October 2011 relating to the proposed Broad-based Black Economic Empowerment (“B-BBEE”) transaction (“the proposed B-BBEE Transaction”) and the results of the general meeting and the cautionary announcement released on SENS on Thursday, 24 November 2011 and published in the press on Friday, 25 November 2011 (“the 24 November Announcement”).
Shareholders are further referred to the circular to Shareholders containing the full terms of the proposed B-BBEE Transaction (“the Circular”), posted to Shareholders on Wednesday, 26 October 2011.2.Mechanics of the proposed B-BBEE Transaction
As set out in the Circular, the proposed B-BBEE Transaction will be implemented through:
the creation and the specific issue of 10 117 951 unlisted redeemable convertible B ordinary shares (“AECI B Ordinary Shares”) to the AECI Employees Share Trust (“the EST”), constituting 8% of the Net Enlarged Issued Share Capital (as defined in the Circular); and
the specific issue of 4 426 604 AECI ordinary shares to the AECI Community Education and Development Trust (“the CST”) (“CST Ordinary Shares”), constituting 3,5% of the Net Enlarged Issued Share Capital.
3.Changes to the proposed B-BBEE Transaction
In the 24 November 2011 Announcement, Shareholders were advised that following feedback from key Shareholders on the terms of the proposed B-BBEE Transaction, the Company was giving further consideration to these and was engaging with Shareholders in this regard.
Shareholders are hereby advised that, following discussions with key Shareholders, the transaction term relating to the EST (“the EST Term”) has been amended from seven years to 10 years.
Accordingly, the notional loan provided by AECI to the EST to fund the subscription by the EST of the 10 117 951 AECI B Ordinary Shares will now be settled at the end of a period of 10 years, as extended or anticipated in terms of the EST trust deed .
No other material changes have been made to the terms of the proposed B-BBEE Transaction.
The amendment to the EST Term will allow AECI to maintain the B-BBEE benefits derived from the EST for a further three years and, at the same time, will increase the potential for eligible employees to unlock greater value from the proposed B-BBEE Transaction.
4.Economic cost
AECI had previously estimated the economic cost of implementing the proposed B-BBEE Transaction to be approximately R257 million. Based on the revised EST Term, this figure has been revised upwards to approximately R260 million, calculated in accordance with International Financial Reporting Standards (“IFRS”), specifically IFRS 2 - Share-based Payments.
5.Unaudited pro forma financial effects
Based on the revised EST Term, the unaudited pro forma financial effects set out below have been prepared to assist Shareholders to assess the impact of the proposed B-BBEE Transaction on the earnings per share (“EPS”), headline earnings per share (“HEPS”), net asset value per share (“NAV”) and tangible net asset value per share (“TNAV”).
The unaudited pro forma financial effects are presented for illustrative purposes only and because of their nature may not fairly present AECI’s financial position, changes in equity, results of operations or cash flows after the proposed B-BBEE Transaction.
It has been assumed for purposes of the pro forma financial effects that the proposed B-BBEE Transaction took place with effect from 1 January 2011 for statement of comprehensive income purposes and at 30 June 2011 for statement of financial position purposes.
The Board is responsible for the preparation of the unaudited pro forma financial effects.