AECI
LIMITED
(Incorporated
in the Republic of South
Africa)
(Registration
No. 1924/002590/06)
Share
code: AFE ISIN:
ZAE000000220
Hybrid
code: AFEP ISIN: ZAE000000238
Bond
company code: AECI
LEI:
3789008641F1D3D90E85
("AECI"
or the
"Company")
AECI TO IMPLEMENT NEW BROAD-BASED OWNERSHIP
SCHEME
-
INTRODUCTION
Shareholders and noteholders are advised that the board of
directors of AECI ("Board") has resolved to introduce a new
Broad-Based Black Economic Empowerment ("B-BBEE") transaction to be
implemented as a Broad-Based Ownership Scheme ("B-BOS") ("B-BOS
Transaction" or "Transaction").
The B-BOS Transaction will entail the AECI Foundation (formerly
known as the "Tiso AEL Development Trust") ("Foundation")
subscribing for a new class of ordinary shares
("B Ordinary
Shares") in AECI Mining Limited ("AECI Mining"), a wholly-owned
subsidiary of AECI, resulting in the Foundation holding an
effective interest of 15.5% in AECI Mining. The B Ordinary Shares
will entitle the Foundation to participate in the economic interest
arising from the South African operations of AECI Mining,
comprising the AECI Mining Explosives and AECI Mining Chemicals
divisions.
The Transaction demonstrates AECI's continued support of the South
African Government's principles and objectives as set out in the
Broad-Based Black Economic Empowerment Act, No. 53
of 2003, as amended, together with the Amended Codes of Good
Practice of 2013 (the "Codes").
AECI believes that the Transaction will advance its B-BBEE
initiatives and enhance the positive impact that the Company has in
designated communities.
-
OVERVIEW OF AECI MINING
AECI Mining is a leading provider of comprehensive mining
solutions, specialising in the manufacture and supply of
explosives, initiating systems, blasting services and mining
chemicals. With a history spanning over one hundred years, AECI
Mining has prioritised innovation, safety enhancement and
efficiency in the mining industry.
-
RATIONALE AND OVERVIEW OF THE B-BOS
TRANSACTION
The implementation of the B-BOS Transaction is aligned with AECI's
objective to improve AECI Mining's ownership from 41.9% to (i)
51.0% Black Owned in terms of the Codes and (ii) 51.0% Historically
Disadvantaged Persons owned in terms of the Mining Charter,
2018.
The Foundation is an existing Public Benefit Organisation with the
primary objective of providing holistic development for orphans and
vulnerable children in the communities located in the areas in
which AECI Mining operates, and particularly in relation to
education, food security, water and health. The Foundation's
activities include,
inter alia,
the care and counselling of, and the provision of education
programmes to, abandoned, abused, neglected, orphaned or homeless
children, as well as the
promotion of community-based projects relating to self-help,
empowerment, capacity building, skills development and poverty
alleviation.
The B-BOS
Transaction will include the following salient features:
-
AECI
Mining will issue 73,586,835 B
Ordinary Shares to the Foundation, equivalent to a total
transaction value of R522 million ("Consideration"), equating to an
issue price of R7.10 per B Ordinary Share;
-
the B
Ordinary Shares will carry the same voting rights as the existing
issued ordinary shares of AECI Mining, and will represent 15.5% of
the total voting and economic rights in AECI Mining, based on the
earnings of the South African operations of AECI
Mining;
-
the
Foundation will fund the Consideration through facilitation from
AECI Mining, comprising a cash contribution equal to 35% of the
Consideration and notional vendor financing for the remaining
65%;
-
the
notional vendor financing is subject to a funding rate set at the
lower of dividends declared in respect of the B Ordinary Shares
(net of the trickle dividends as described below) and 60% of the
prevailing Prime lending rate;
-
the
notional vendor financing period is indefinite and will terminate
upon the notional vendor financing balance being reduced to Rnil;
and
-
the
Foundation will be entitled to receive trickle dividends equating
to 20% of the distributions made related to its shareholding in the
South African operations of AECI Mining in the first 10 years, and
25% of the relevant cash distributions thereafter, for the balance
of the notional vendor financing period. The balance of the
dividends attributable to the B Ordinary Shares will be applied
towards servicing the notional vendor financing.
-
FINANCIAL
EFFECTS AND FAIRNESS OPINION
The B-BOS Transaction has been valued at R522 million. The cash
contribution to the Foundation from AECI Mining is equal to 35% of
the Consideration, and the related cash consideration payable by
the Foundation for the subscription of B Ordinary Shares will have
a net nil effect on the value of the net assets of AECI
Mining.
The value of the net assets of the South African operations of AECI
Mining as at 31 December 2024 was
R5 750
million and the profit attributable thereto for the year ended
31 December 2024 was R409 million.
This financial information has been extracted from the audited
consolidated annual financial statements of AECI Mining for the
year ended 31 December 2024, which
were prepared in accordance with International Financial Reporting
Standards ("IFRS").
The B-BOS arrangement falls outside the scope of International
Financial Reporting Standards ("IFRS") 2 - Share-based Payment. As
such, there will be no IFRS 2 charge recognised in the AECI
financial statements.
While a fairness opinion is not mandatory with regard to the B-BOS
Transaction, in the interest of transparency, the Board resolved to
obtain a fairness opinion.
AECI appointed PricewaterhouseCoopers Corporate Finance Proprietary
Limited ("Independent Expert") as the independent professional
expert. The Independent Expert has provided a fairness opinion
concerning the B-BOS Transaction, in which they have advised AECI
that, in their opinion, the price at which the B Ordinary Shares
are to be issued to the Foundation is fair insofar as AECI
shareholders are concerned.
-
CLASSIFICATION
OF THE TRANSACTION
The B-BOS Transaction constitutes a category 2 transaction in terms
of the JSE Limited Listings Requirements ("Listings Requirements")
and accordingly does not require AECI shareholder approval.
Additionally, the Foundation is not deemed to be a related party in
terms of section 10 of the Listings Requirements.
-
CONDITIONS
PRECEDENT
The B-BOS Transaction is subject to the fulfilment of the following
material outstanding conditions precedent by no later than
31 March 2025:
-
AECI's
B-BBEE verification agency conducting a rating review of AECI
Mining and confirming, in writing, that AECI Mining will, upon
implementation of the Transaction, achieve the necessary B-BBEE
requirements; and
-
AECI
Mining having filed a new memorandum of incorporation creating the
B Ordinary Shares with the Companies and Intellectual Property
Commission ("CIPC") and the CIPC having accepted (or being deemed
to have accepted) such new memorandum.
-
EFFECTIVE
DATE
The Transaction will be effective on or about 20 March 2025, subject to the fulfilment of the
conditions precedent as stipulated in paragraph 6 above.
Woodmead,
Sandton
28 February 2025
Financial
Adviser and Transaction Sponsor to AECI
Investec
Bank Limited
Legal
Adviser to AECI
Bowmans
Equity
Sponsor
One
Capital
Debt
Sponsor
Questco
Proprietary Limited