PGR: PEREGRINE HOLDINGS LIMITED - Firm intention to acquire all/portion of shares in Peregrine, withdrawal of cautionary Firm intention to acquire all/portion of shares in Peregrine, withdrawal of cautionary PEREGRINE HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1994/006026/06) Share code: PGR ISIN: ZAE000078127 ('Peregrine' or 'the company') JOINT FIRM INTENTION ANNOUNCEMENT IN RESPECT OF AN OFFER TO ACQUIRE ALL OR A PORTION OF THE ISSUED ORDINARY SHARES IN PEREGRINE, EXCLUDING SHARES HELD BY PEREGRINE´S SUBSIDIARIES, PROPOSED DELISTING AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION 1.1. Shareholders of Peregrine ('Peregrine Shareholders') are referred to the initial cautionary announcement released on the Stock Exchange News Service ('SENS') operated by the JSE Limited on 31 October 2019 ('Cautionary Announcement'), and the subsequent renewals thereof released on SENS on 12 December 2019 and 29 January 2020, wherein Peregrine Shareholders were advised that Peregrine had received a non- binding expression of interest for the acquisition of the entire share capital of the Company. 1.2. Peregrine Shareholders are further advised that on 12 March 2020 ('Signature Date'), Peregrine entered into an implementation agreement ('Implementation Agreement') with Capitalworks Atlanta GP Proprietary Limited acting in its capacity as the general partner of the Project Atlanta Investment Partnership III ('Capitalworks'), and two special purpose companies, being Business Venture Investments No 2138 (RF) Proprietary Limited ('BidCo') and Business Venture Investments No 2137 (RF) Limited ('InvestCo'), in terms of which BidCo and InvestCo (the 'Offerors') have agreed to jointly make two separate but concurrent offers to acquire all or a portion of the issued ordinary shares in Peregrine ('Peregrine Shares'), excluding the Peregrine Shares held by Peregrine´s subsidiaries ('Offer Shares'), (collectively, the 'Offer'). 1.3. The Offer will be implemented by way of: 1.3.1. a scheme of arrangement in terms of section 114(1) read with section 115 of the Companies Act, No. 71 of 2008, as amended ('Companies Act') and paragraph 1.17(b) of the JSE Limited Listings Requirements ('JSE Listings Requirements'), between Peregrine and Peregrine Shareholders ('Scheme'); and 1.3.2. a general offer by the Offerors to the holders of the Offer Shares ('Eligible Shareholders') in terms of section 117(1)(c)(v) of the Companies Act and regulation 102 of the Companies Regulations, 2011 ('Regulations'), and in terms of paragraph 1.15(c) of the JSE Listings Requirements and paragraph 4.14 of the A2X Proprietary Limited listing requirements ('A2X Requirements'), conditional on the Scheme not becoming operative ('General Offer'). 1.4. The Scheme and the General Offer will be proposed concurrently on the basis that the General Offer will only be implemented if the Scheme does not become operative. In the event that the Scheme does become operative, the General Offer will lapse. 1.5. As consideration for the acquisition of an Offer Share pursuant to the Offer: 1.5.1. BidCo will offer Eligible Shareholders a cash consideration of R21.00 per Offer Share, less the aggregate amount of any Distributions (as defined in the Companies Act) per Peregrine Share which are declared by the Company on or after the Signature Date and where the record date of such Distribution is on or before the record date for Eligible Shareholders to participate in the Scheme or the last day for Eligible Shareholders to accept the General Offer, as the case may be ('Record Date'), ('Cash Consideration'); or 1.5.2. InvestCo will offer Eligible Shareholders a share consideration priced at R17.40 per Offer Share in terms of which Eligible Shareholders will receive one 'A' ordinary share in InvestCo ('InvestCo A Share') or one 'B' ordinary share in InvestCo ('InvestCo B Share'), (collectively 'InvestCo Shares') per Offer Share ('Share Consideration'), (collectively or individually, as the context may require, the 'Offer Consideration'). Further details of the Offer Consideration are set out in paragraph 4.3 below. The Offerors will be entitled to increase the Cash Consideration from time to time. 1.6. Simultaneously with the Offer, the delisting of all the Peregrine Shares from the main board of the securities exchange operated by the JSE Limited ('JSE') and the securities exchange operated by A2X Proprietary Limited ('A2X'), will be proposed to Peregrine Shareholders ('Delisting'). 1.7. The Scheme, the General Offer and Delisting (collectively or individually as the context may require, the 'Transaction') will be subject to the fulfilment or waiver of the Offer Conditions (as envisaged in paragraph 5 below). 1.8. The Independent Board (as defined in paragraph 13.1 below) and the board of directors of Peregrine ('Peregrine Board') are in support of the Transaction (as more fully set out in paragraph 13 below). 2. RATIONALE FOR THE TRANSACTION The Independent Board and Capitalworks believe that the following benefits, inter alia, can be achieved through the implementation of the Transaction: 2.1. Eligible Shareholders that elect the Cash Consideration will be afforded an opportunity to realise their investment in Peregrine at a significant premium to the volume weighted average price ('VWAP') at which a Peregrine Share traded on the JSE for the 30 trading days up to and including (i) 30 October 2019, being the last trading day prior to the publication of the Cautionary Announcement and (ii) 12 March 2020, being the last trading day prior to the publication of this announcement. 2.2. The Share Consideration affords Eligible Shareholders who elect the Share Consideration the opportunity to retain their exposure to Peregrine through InvestCo. 2.3. Peregrine and the Eligible Shareholders who receive the Share Consideration ('Reinvesting Shareholders') will benefit from the support of Capitalworks, through BidCo, as a key anchor shareholder. 2.4. Senior employees of Citadel Holdings Proprietary Limited ('Citadel') and its subsidiaries ('Citadel Group') will be appropriately incentivised to create value for all stakeholders of Peregrine, BidCo and InvestCo (including Reinvesting Shareholders) through the New Citadel Incentive Structure (as defined in paragraph 7 below). 2.5. The costs associated with maintaining a listing on the JSE and A2X will be eliminated. 3. INFORMATION ABOUT CAPITALWORKS AND THE OFFERORS 3.1. Capitalworks 3.1.1. The Capitalworks group is a leading private equity business based in Johannesburg. The Capitalworks group operates on an independent basis (with no connection to any bank or funder) and has approximately USD1 billion of private equity funds under its management from leading international and domestic investors. Investors include domestic and international institutional investors, commercial banks, insurance companies, pension funds, family offices and high net worth individuals. 3.1.2. The Capitalworks group invests in a diversified range of equity investments in mid-market companies operating principally in South Africa on behalf of its investors. The philosophy of the Capitalworks group is centred on building exceptional businesses through partnering with leading entrepreneurs and management teams. The active involvement, strategic input, operational support and extensive relationships of the Capitalworks group team are directed, as appropriate, towards maximising the potential of its investee businesses and thereby benefiting all stakeholders. 3.2. InvestCo 3.2.1. InvestCo is a newly incorporated limited liability public company and is currently wholly owned by Capitalworks. 3.2.2. InvestCo has not conducted any business since its incorporation. It is a special purpose company incorporated for the purposes of (i) making the Offer, jointly with BidCo; (ii) acquiring the relevant Offer Shares from Reinvesting Shareholders, pursuant to the Offer; and (iii) holding ordinary shares in BidCo ('BidCo Shares') acquired pursuant to the Offer for the benefit of InvestCo´s shareholders. 3.3. BidCo 3.3.1. BidCo is a newly incorporated limited liability private company and is currently wholly owned by Capitalworks. 3.3.2. BidCo has not conducted any business since its incorporation. It is a special purpose company incorporated for the purposes of (i) making the Offer, jointly with InvestCo; (ii) acquiring the relevant Offer Shares from Offer Participants (as defined in paragraph 4.3.6 below) that elect the Cash Consideration pursuant to the Offer; and (iii) holding all the Offer Shares acquired pursuant to the Offer, for the benefit of Capitalworks and InvestCo. 4. SALIENT TERMS OF THE OFFER The Scheme and the General Offer each constitute an 'affected transaction' as defined in sections 117(1)(c)(iii) and 117(1)(c)(v) of the Companies Act, respectively, and, as such, the Offer is regulated by the Companies Act and the Regulations. The salient terms and conditions of the Offer and other salient information pertaining to the Offer are set out below. 4.1. Scheme 4.1.1. The Scheme will be proposed by the Peregrine Board, between Peregrine and Peregrine Shareholders. 4.1.2. In the event that the Scheme becomes operative, the listing of all the Peregrine Shares on the JSE and A2X will be terminated and each Eligible Shareholder (excluding those Eligible Shareholders who validly exercise their appraisal rights in accordance with section 164 of the Companies Act ('Appraisal Rights') as a consequence of the approval of the Scheme ('Dissenting Shareholders') and whose shareholder rights have not been reinstated as envisaged in sections 164(9) and 164(10) of the Companies Act or who have not been ordered by the court to withdraw their demands in terms of section 164(15)(c)(v)(aa) of the Companies Act), ('Scheme Participants') will be deemed to have disposed of all of their Offer Shares to the Offerors at the Offer Consideration. 4.1.3. The Scheme will be subject to the fulfilment or waiver of the Offer Conditions set out in paragraphs 5.1.1 and 5.1.2 below. 4.2. General Offer 4.2.1. Simultaneously with the Scheme, the Offerors will make the General Offer to all Eligible Shareholders, whereby each Eligible Shareholder will be entitled to elect whether or not to dispose of all or a portion of their Offer Shares to the Offerors at the Offer Consideration. 4.2.2. If Eligible Shareholders wish to dispose of all or a portion of their Offer Shares in terms of the General Offer, they will be required to accept the General Offer and tender such Offer Shares to the Offerors ('Tender'). 4.2.3. Eligible Shareholders who do not wish to accept the General Offer in respect of some or all of their Offer Shares will continue to hold such Offer Shares ('Remaining Shareholders'), subject to the Scheme not becoming operative and the provisions of section 124(1) of the Companies Act, as set out in paragraph 4.2.6 below. 4.2.4. The General Offer will be subject to the fulfilment or waiver of the Offer Conditions set out in paragraphs 5.1.1 and 5.1.3 below. 4.2.5. If the Scheme does not become operative and the General Offer becomes wholly unconditional and the Delisting Resolution (as defined in paragraph 5.1.3.2 below) is passed, then the listing of all the Peregrine Shares on the JSE and A2X will be terminated and each Eligible Shareholder that has accepted the General Offer and Tendered Offer Shares held by them ('General Offer Participants'), will receive the Offer Consideration for the Offer Shares Tendered and disposed of, such that the Offerors will acquire all of the Offer Shares Tendered by the General Offer Participants. In this instance, the Remaining Shareholders will remain Peregrine Shareholders in the unlisted entity, and the tradability of their Peregrine Shares will be limited. 4.2.6. In the event that the General Offer is implemented and is accepted by General Offer Participants holding at least 90% of the Offer Shares, the Offerors may, at their election, invoke the provisions of section 124(1) of the Companies Act, to compulsorily acquire all of the Offer Shares held by the Remaining Shareholders. 4.3. Offer Consideration 4.3.1. The consideration that will be offered per Offer Share in terms of the Offer will be the Cash Consideration or the Share Consideration. 4.3.2. Eligible Shareholders will be entitled to elect to receive either the Cash Consideration or the Share Consideration, and in the case of the Share Consideration, either InvestCo A Shares or InvestCo B Shares, or a combination thereof in respect of their Offer Shares ('Election' or 'Elect'). The Election of the Share Consideration will be subject to the Deemed Cash Election (as defined in paragraph 4.4 below) and Deemed InvestCo A Share Election (as defined in paragraph 4.5 below). 4.3.3. With regards to the Share Consideration, the InvestCo A Shares and InvestCo B Shares will have the same rights and restrictions and will rank pari passu in all respects, save that, should Capitalworks dispose of all of its BidCo Shares, the holders of InvestCo Shares will be entitled to decide whether they wish to exit their shareholding in InvestCo and if they so elect, then - 4.3.3.1. the holders of the InvestCo B Shares will be entitled to receive a Distribution from InvestCo in respect of their InvestCo B Shares in an amount which is equivalent to the price per share at which Capitalworks disposes of its BidCo Shares; and 4.3.3.2. the holders of InvestCo A Shares will be entitled to dispose of their InvestCo A Shares at the equivalent price per share at which Capitalworks disposes of its BidCo Shares. 4.3.4. The Share Consideration, comprising the InvestCo Shares, will be issued in certificated form only and will not be listed on the JSE, A2X or any other securities exchange. In the circumstances, the InvestCo Shares will have limited tradability. 4.3.5. The table below illustrates the Cash Consideration premium and the Share Consideration premium / discount: Prior to the Share Cautionary Cash Consideration Announcement Consideration premium / (30 October 2019) premium (discount) Market price (Note 1) R17.25 21.7% 0.9% 30 day VWAP (Note 2) R17.55 19.7% (0.9%) Share Cash Consideration As at Consideration premium / (12 March 2020) premium (discount) Market price (Note 3) R17.20 22.1% 1.2% 30 day VWAP (Note 4) R18.13 15.8% (4.0%) Notes: 1. The 'market price' represents the closing price of Peregrine Shares on the JSE on 30 October 2019, being the last trading day prior to the publication of the Cautionary Announcement. 2. The '30 day VWAP' represents the VWAP at which a Peregrine Share traded on the JSE for the 30 trading days up to and including 30 October 2019, being the last trading day prior to the publication of the Cautionary Announcement. 3. The 'market price' represents the closing price of Peregrine Shares on the JSE on 12 March 2020, being the last trading day prior to the publication of this announcement on SENS. 4. The '30 day VWAP' represents the VWAP at which a Peregrine Share traded on the JSE for the 30 trading days up to and including 12 March 2020, being the last trading day prior to the publication of this announcement on SENS. 4.3.6. The tax implications of the Offer are dependent on the individual circumstances of each Scheme Participant (if the Scheme becomes operative), alternatively, each General Offer Participant (if the General Offer is implemented) (collectively or individually as the context may require, the 'Offer Participants') and the tax jurisdiction applicable to such Offer Participant. It is recommended that the Offer Participants seek appropriate professional advice in this regard. 4.4. Deemed Cash Election To the extent that: 4.4.1. Eligible Shareholders Elect to receive the Share Consideration in respect of a number of Offer Shares that would result in Capitalworks holding less than 35% of all the BidCo Shares in issue (post implementation of the Offer, and after taking into consideration the BidCo Shares issued pursuant to the InvestCo Funding Subscription (as defined in paragraph 4.6.2.2 below), the Offer Share Exchange (as defined in paragraph 10.2 below), the InvestCo LTIP 3 Subscription (as defined in paragraph 7.1.2 below) and the Nala Share Exchange (as defined in paragraph 8.3 below)) ('Minimum Post Offer Shareholding'), then the number of Offer Shares in respect of which Offer Participants have Elected to receive the Share Consideration will be reduced pro rata to their respective Share Consideration Elections and such Offer Participants will be deemed to have Elected the Cash Consideration in respect of the balance of their Offer Shares, such that Capitalworks will acquire the Minimum Post Offer Shareholding; 4.4.2. an Offer Participant fails to, or does not, make a valid Election in respect of the Offer Consideration, such Offer Participant shall be deemed to have Elected the Cash Consideration in respect of the relevant Offer Shares ('Default Election'); or 4.4.3. Peregrine Shareholders are resident or otherwise situated outside of South Africa, such Peregrine Shareholders who are Offer Participants shall be deemed to have Elected the Cash Consideration, subject to certain exceptions (which information will be included in the Circular (as envisaged in paragraph 15.1 below)), (collectively, the 'Deemed Cash Election'). 4.5. Deemed InvestCo A Share Election To the extent that: 4.5.1. Offer Participants Elect to receive InvestCo B Shares ('InvestCo B Share Election') in excess of 30 million InvestCo B Shares (after taking into account the InvestCo B Shares issued pursuant to the LTIP 3 Replacement (as defined under paragraph 7 below) and the Nala Acquisition (as defined in paragraph 8.2 below) ('Maximum Post Offer InvestCo B Shares'), then the number of Offer Shares in respect of which Offer Participants have Elected to receive the InvestCo B Shares will be reduced pro rata to their respective InvestCo B Share Election, and such Offer Participants will be deemed to have Elected the InvestCo A Shares in respect of the balance of their Offer Shares (which are the subject of the InvestCo B Share Election), such that no more than the Maximum Post Offer InvestCo B Shares are acquired by Offer Participants. To the extent that the Deemed Cash Election has been implemented, the calculation of the number of InvestCo B Share Elections made will be determined post implementation of the Deemed Cash Election; or 4.5.2. an Offer Participant fails to or does not make a valid Election in respect of the Share Consideration, subject to the Default Election, such Offer Participant shall be deemed to have elected to receive an InvestCo A Share per Offer Share, (collectively, the 'Deemed InvestCo A Share Election'). 4.6. Funding of the Cash Consideration 4.6.1. The total funding requirement for the Offer is dependent upon the extent to which Offer Participants Elect, or are deemed to have elected, the Cash Consideration ('Total Cash Consideration') and/or the level of acceptances (in the event of the General Offer being implemented). 4.6.2. In order to enable BidCo to settle the Total Cash Consideration: 4.6.2.1. Capitalworks: 4.6.2.1.1. has procured funding for the Offerors from Nedbank Limited (acting through its Nedbank Corporate and Investment banking division) ('Nedbank') in an amount of up to approximately R2.9 billion ('Funding'); and 4.6.2.1.2. will capitalise the Offerors by subscribing for BidCo Shares, prior to implementation of the Offer, at a subscription price equal to the value of the Share Consideration per BidCo Share, for the balance of the Total Cash Consideration. 4.6.2.2. Prior to the implementation of the Offer, InvestCo will use a portion of the Funding to subscribe for BidCo Shares, at a subscription price of R17.40 per BidCo Share, in order to enable BidCo to make payment of a portion of the Total Cash Consideration ('InvestCo Funding Subscription'). The number of BidCo Shares to be subscribed for by InvestCo pursuant to the InvestCo Funding Subscription will be calculated as the sum of the number of BidCo Shares subscribed for by InvestCo (i) pursuant to the Offer Share Exchange; (ii) pursuant to the InvestCo LTIP 3 Subscription; and (iii) pursuant to the Nala Share Exchange, multiplied by 50% (rounded down to the nearest whole number), provided that the number of BidCo Shares to be subscribed for by InvestCo will be limited to R525 million divided by R17.40 (rounded down to the nearest whole number). 4.6.2.3. The InvestCo Funding Subscription will enable Reinvesting Shareholders to obtain a larger see-through shareholding in Peregrine via the Offerors. 4.7. Cash guarantee In accordance with Regulations 111(4) and 111(5), Nedbank and FirstRand Bank Limited, acting through its Rand Merchant Bank Division, have each issued a bank guarantee to the Takeover Regulation Panel for the maximum Cash Consideration payable to Offer Participants, amounting to approximately R3.7 billion. This amount was derived by taking into account the Cash Consideration payable in respect of 175 220 672 Offer Shares, being the maximum number of Offer Shares in respect of which the Cash Consideration may be Elected after deducting the Offer Shares subject to the Minimum Share Consideration Election (as defined in paragraph 5.1.1.1 below). 4.8. Confirmation of sufficient securities to settle the Share Consideration Capitalworks confirms that InvestCo has sufficient authorised but unissued InvestCo A Shares and InvestCo B Shares available to settle the Share Consideration to Offer Participants. 5. OFFER CONDITIONS 5.1. The implementation of the Offer will be subject to the fulfilment or waiver of the following conditions precedent: 5.1.1. in the case of the Scheme or the General Offer, as the case may be: 5.1.1.1. subject to the Deemed Cash Election, Eligible Shareholders Elect the Share Consideration in respect of no less than 30 million Offer Shares ('Minimum Share Consideration Election'); 5.1.1.2. the Nala Acquisition Agreement (as defined in paragraph 8.2 below) becomes unconditional in accordance with its terms, save in relation to the condition contained therein in relation to the Offer being implemented; 5.1.1.3. the disposal by Stenham Group Limited of its entire shareholding in Stenham Asset Management Holdings Limited ('SAM Holdings') to SAM Global Limited is implemented in accordance with the terms of the relevant agreements; and 5.1.1.4. to the extent required pursuant to any material contracts to which a member of the Peregrine group is a party, the written consent or waiver of the relevant counterparties to such agreements to the implementation of the Transaction. 5.1.2. in the case of the Scheme: 5.1.2.1. the approval of the Scheme by way of special resolution ('Scheme Resolution'), adopted by the requisite majority of Peregrine Shareholders at the general meeting of the Peregrine Shareholders convened for purposes of considering and, if deemed fit, approving the resolutions required to implement the Transaction or any postponement or adjournment thereof, as contemplated in section 115(2)(a) of the Companies Act ('General Meeting'), and, in the event of the provisions of section 115(2)(c) of the Companies Act becoming applicable: 5.1.2.1.1. either (i) the High Court of South Africa approving the implementation of the Scheme Resolution and no appeal or review being timeously lodged or, if timeously lodged, the appeal or review is not successful; or (ii) the provisions of section 115(2)(c) of the Companies Act cease to be applicable; and 5.1.2.1.2. if applicable, the Company not treating the Scheme Resolution as a nullity as contemplated in section 115(5)(b) of the Companies Act; and 5.1.2.2. with regards to Peregrine Shareholders exercising their Appraisal Rights (if any), either: 5.1.2.2.1. no Peregrine Shareholder gives notice objecting to the Scheme Resolution as contemplated in section 164(3) of the Companies Act, alternatively Peregrine Shareholders give notice objecting to the Scheme Resolution as contemplated in section 164(3) of the Companies Act and vote against the Scheme Resolution at the General Meeting, in respect of 1% or less of all of the Offer Shares; or 5.1.2.2.2. if Peregrine Shareholders do give notice objecting to the Scheme Resolution as contemplated in section 164(3) of the Companies Act and vote against the Scheme Resolution at the General Meeting in respect of more than 1% of all of the Offer Shares, then Dissenting Shareholders do not exercise Appraisal Rights, by giving valid demands in terms of sections 164(5) to 164(8) of the Companies Act, in respect of more than 1% of all the Offer Shares; and 5.1.2.3. the receipt, on an unconditional basis (or on such conditions as may be reasonably acceptable to the party negatively affected thereby), of all approvals, consents, exemptions and/or waivers from those South African and foreign regulatory authorities as may be necessary in terms of any law to give effect to the Funding and implement the Scheme, (collectively, the 'Scheme Conditions'). 5.1.3. in the case of the General Offer: 5.1.3.1. any of the Scheme Conditions are not timeously fulfilled or waived, or, if the Scheme Conditions are fulfilled or waived, the Scheme does not become operative timeously; 5.1.3.2. the approval of the Delisting by way of an ordinary resolution ('Delisting Resolution'), adopted by the requisite majority of Peregrine Shareholders at the General Meeting; 5.1.3.3. Eligible Shareholders accept the General Offer in respect of so many Offer Shares as will result in the Offerors acquiring at least 45% of the Offer Shares; and 5.1.3.4. the receipt, on an unconditional basis (or on such conditions as may be reasonably acceptable to the party negatively affected thereby), of all approvals, consents, exemptions and/or waivers from those South African and foreign regulatory authorities as may be necessary in terms of any law to give effect to the Funding and implement the General Offer and Delisting. The conditions precedent envisaged in paragraphs 5.1.1, 5.1.2 and 5.1.3 above shall collectively hereinafter be referred to as the 'Offer Conditions'. 5.2. The Offer Conditions envisaged in: 5.2.1. paragraphs 5.1.1, 5.1.2.2, 5.1.3.2 and 5.1.3.3 above are capable of waiver by the Offerors, in whole or in part, by written notice to the Company; and 5.2.2. paragraphs 5.1.2.1, 5.1.2.3, 5.1.3.1 and 5.1.3.4 above shall not be capable of waiver. 6. TERMINATION EVENTS The Scheme and/or the General Offer will terminate with immediate effect, inter alia, upon the occurrence of the following events: 6.1. if any Offer Condition, which may be waived by the Offerors, becomes incapable of fulfilment, and the Offerors notify Peregrine in writing that they will not waive that Offer Condition; 6.2. if any or all of the Offer Conditions have not been fulfilled or waived on or before the relevant date/s for fulfilment or waiver; 6.3. upon written notice by Capitalworks and the Offerors to the Company, if the Company declares and/or pays any Distribution in respect of Peregrine Shares after the Signature Date and where the record date of such Distribution is on or before the Record Date; 6.4. upon written notice by Peregrine, Capitalworks and/or the Offerors to the other party/ies ('Defaulting Party'), given before the Scheme or the General Offer, as the case may be, becomes unconditional, if the Defaulting Party commits a breach of any material provision of the Implementation Agreement, as detailed therein, and if such breach is capable of remedy, the Defaulting Party fails to remedy such breach within 5 business days of receipt of a notice by the Defaulting Party from another party requesting such remedy; or 6.5. on the business day following a written notice by Capitalworks and/or the Offerors to Peregrine to such effect in the event that a 'Material Adverse Change' (as such term is defined in the Implementation Agreement) has occurred. 7. NEW CITADEL INCENTIVE STRUCTURE Capitalworks recognises the importance of a motivated, aligned and engaged management team in order to achieve growth and shareholder satisfaction. Accordingly, with effect from the Offer becoming unconditional (i) the current long term incentive plan which was effective from April 2018 for the benefit of select senior management of the Citadel Group ('LTIP 3 Participants'), ('LTIP 3') will be replaced with a new incentive scheme ('LTIP 3 Replacement'); (ii) a new long-term incentive plan will be implemented ('New LTIP') and (iii) the current short-term cash bonus scheme ('STIS') will become subject to an adjustment (collectively referred to as the 'New Citadel Incentive Structure'), as detailed below. 7.1. LTIP 3 Replacement 7.1.1. Benefits under LTIP 3 automatically vest upon a change of control of Peregrine. Subject to the Offer becoming wholly unconditional, LTIP 3 Participants have agreed to exchange their entitlement to receive a cash payment as settlement pursuant to the vesting of the LTIP 3 benefits ('LTIP 3 Cash Settlement'), for shares in a newly established company ('ManCo'). The shares held by the LTIP 3 Participants in ManCo will be subject to employment-related restrictions as well as disposal and encumbrance restrictions. 7.1.2. On implementation of the Offer, ManCo will utilise the LTIP 3 Cash Settlement to subscribe for InvestCo B Shares at a price of R17.40 per InvestCo B Share ('ManCo Subscription'). InvestCo will, in turn, utilise the proceeds received pursuant to the ManCo Subscription to subscribe for BidCo Shares at a subscription price of R17.40 per BidCo Share ('InvestCo LTIP 3 Subscription'). 7.2. New LTIP 7.2.1. The LTIP 3 Participants have agreed to waive their entitlement (if any) to participate in 60% of the current 25% profit participation in the Citadel Group´s operating profits ('Current Profit Participation'), with effect from the Offer implementation date. 7.2.2. After Implementation of the Offer, the New LTIP will be established for the benefit of select senior employees of the Citadel Group ('New LTIP Participants'). In terms of the New LTIP, New LTIP Participants will acquire new 'A' ordinary shares in Citadel ('New LTIP Citadel Shares') through a new special purpose, ring-fenced, company ('Citadel InvestCo'). The shares held by the New LTIP Participants in Citadel InvestCo will be subject to employment-related restrictions as well as disposal and encumbrance restrictions. 7.2.3. The New LTIP Citadel Shares will comprise 15% of the aggregate number of Citadel shares in issue and will not be entitled to receive dividends until the earlier of 5 years post implementation of the Offer and the date on which such portion of the Offer funding as is notionally attributable to Citadel, has been settled. 7.3. STIS 7.3.1. The STIS is currently funded from 40% of the Current Profit Participation. 7.3.2. Conditional on the Offer being implemented, the STIS will increase to 15% of the Citadel Group´s operating profits from the earlier of (i) the fifth anniversary of the implementation of the Offer; and (ii) upon Capitalworks´ complete disposal of its indirect shareholding in the Citadel Group. Further details regarding the New Citadel Incentive Structure will be disclosed in the Circular. 8. NALA ACQUISITION 8.1. Nala PGR SA Holdings Proprietary Limited ('Nala') currently holds 20% of the issued ordinary shares in Peregrine SA Holdings Proprietary Limited, with the remaining 80% being held by Peregrine. Peregrine holds 30% of the issued shares in Nala, with the remaining 70% being held by Nala Empowerment Investment Company Holdings Proprietary Limited ('NEICH'). 8.2. NEICH and the Offerors have entered into a sale and purchase agreement ('Nala Acquisition Agreement') in terms of which, subject to, inter alia, the Offer being implemented, the Offerors will acquire NEICH´s 70% shareholding in Nala ('Nala Shares') for a consideration settled through the issue by InvestCo of 9 022 989 InvestCo B Shares and a cash payment by BidCo in an amount of R93 million (plus interest), a portion of which may be deferred (the 'Nala Acquisition'). 8.3. The Nala Shares acquired by InvestCo pursuant to the Nala Acquisition will be exchanged for BidCo Shares in an amount equal to the number of InvestCo B Shares issued to NEICH ('Nala Share Exchange'). 9. DELISTING The listing of all the Peregrine Shares on the JSE and the A2X will be terminated pursuant to: 9.1. the Scheme becoming operative; or 9.2. the Delisting Resolution being approved by the requisite majority of Peregrine Shareholders at the General Meeting and the General Offer being implemented. 10. BIDCO AND INVESTCO SHARE STRUCTURE 10.1. The share capital of BidCo will comprise of BidCo Shares and cumulative redeemable non-convertible and non-participating preference shares ('BidCo Prefs'). Upon implementation of the Offer, Capitalworks and InvestCo will hold all of the BidCo Shares and Nedbank and one or more other lenders (the 'Lenders') will hold all of the BidCo Prefs pursuant to the Funding. 10.2. The Offer Shares acquired by InvestCo pursuant to the Offer will be exchanged for BidCo Shares on a one-for-one basis ('Offer Share Exchange'). In the circumstances: 10.2.1. the extent of InvestCo´s shareholding in BidCo is dependent on the quantum of Offer Shares acquired by InvestCo pursuant to (i) the Share Consideration Elections, (ii) the InvestCo Funding Subscription, (iii) the InvestCo LTIP 3 Subscription and (iv) the Nala Share Exchange; and 10.2.2. BidCo will hold all of the Offer Shares acquired by the Offerors pursuant to the Offer. 10.3. The memorandum of incorporation of BidCo will contain various specially protected matters, pre-emptive rights, tag along and drag along rights and other shareholder rights, obligations and restrictions applicable to the holders of the BidCo Shares and BidCo Prefs. 10.4. The share capital of InvestCo will comprise of InvestCo A Shares, InvestCo B Shares, cumulative redeemable non-convertible and non-participating preference shares ('InvestCo Prefs') and an N ordinary share, which share will be held by Capitalworks and entitle Capitalworks to voting rights in respect of a resolution to approve certain disposals by InvestCo and/or any member of the BidCo group ('N Share') as more fully set out in the memorandum of incorporation of InvestCo. Upon implementation of the Offer, Reinvesting Shareholders will hold InvestCo A Shares and/or InvestCo B Shares; ManCo and NEICH will hold InvestCo B Shares; Capitalworks will hold the N Share and the Lenders and/or BidCo will hold the InvestCo Prefs. 10.5. The memorandum of incorporation of InvestCo will contain various specially protected matters, pre-emptive rights, tag along and drag along rights and other shareholder rights, obligations and restrictions applicable to the holders of the InvestCo Shares, InvestCo Prefs and the N Share. 11. IRREVOCABLE UNDERTAKINGS As at the date of this announcement, irrevocable undertakings have been obtained from Peregrine Shareholders in terms of which (i) 37.8% of the Offer Shares are in support of the Offer; and (ii) at least 6 920 610 Offer Shares will elect to receive the Share Consideration. 12. BENEFICIAL INTEREST The Offerors have no beneficial interests, or options to purchase beneficial interests, in Peregrine that are held or controlled, directly or indirectly by the Offerors or any parties acting in concert with the Offerors. 13. INDEPENDENT BOARD, INDEPENDENT EXPERT REPORT AND RECOMMENDATIONS 13.1. Peregrine has convened an independent board ('Independent Board'), comprised of Steven Stein, Stefaan Sithole and Boitumelo Tlhabanelo, to consider the Offer and the Offer Consideration. 13.2. The Independent Board and the Peregrine Board have appointed KPMG Services Proprietary Limited as the independent expert ('Independent Expert') for purposes of preparing an opinion in respect of the Offer and the Offer Consideration in accordance with Regulation 90, as read with sections 114(2) and 114(3) of the Companies Act; paragraph 1.15(d) as read with Schedule 5 of the JSE Listings Requirements; and paragraph 4.14.1 as read with paragraph 4.14.3.3 of the A2X Requirements ('Independent Expert Report'). A preliminary Independent Expert Report ('Preliminary Independent Expert Report') has been prepared by the Independent Expert and a copy thereof has been made available to the Independent Board and the Peregrine Board. The Independent Expert has expressly informed the Independent Board that the Preliminary Independent Expert Report is subject to changes and will be updated based on changes in market conditions from the date of issue of the Preliminary Independent Expert Report to the date of issue of the Independent Expert Report. 13.3. Having regard to the Preliminary Independent Expert Report: 13.3.1. the Independent Board is of the opinion that the Offer and the Cash Consideration are fair and reasonable; and 13.3.2. the Peregrine Board is of the opinion that the Offer is fair in so far as the Eligible Shareholders are concerned. 13.4. Accordingly, the Independent Board and the Peregrine Board recommend that Peregrine Shareholders vote in favour of the Scheme Resolution and the Delisting Resolution and that they accept the General Offer. Notwithstanding the aforegoing, in the event that the Independent Expert withdraws or adversely amends, modifies or qualifies the content of the Preliminary Independent Expert Report in the Independent Expert Report, the Independent Board and the Peregrine Board may reconsider their respective opinions and recommendations. 13.5. Pending receipt of the Independent Expert Report, the Independent Board and the Peregrine Board are not yet in a position to express an opinion or make any recommendations in regard to the Share Consideration. 13.6. The Independent Expert Report will be included in the Circular (as envisaged in paragraph 15 below). 14. PRO FORMA FINANCIAL INFORMATION 14.1. The tables below set out the pro forma financial effects of the Offer on an Offer Participant who receives the Share Consideration. 14.2. The pro forma financial effects have been prepared for illustrative purposes only in order to provide information on how the Offer may affect the financial performance and position of an Offer Participant who receives the Share Consideration, by illustrating the effect thereof on the basic and diluted earnings per share ('EPS') and basic and diluted headline earnings per share ('HEPS') for both continuing and discontinued operations and the net asset value per share ('NAVPS') and tangible net asset value per share ('TNAVPS') of an Offer Share that an Offer Participant will be exchanging for the EPS, HEPS, NAVPS and TNAVPS per one InvestCo A Share or one InvestCo B Share. 14.3. The pro forma financial effects have been prepared to illustrate the effect of the Offer on an Offer Participant who receives the Share Consideration, had the Offer been implemented on 1 April 2019 for purposes of EPS and HEPS and on 30 September 2019 for purposes of NAVPS and TNAVPS. 14.4. The pro forma financial effects set out below are the responsibility of the directors of Peregrine, InvestCo and BidCo, and have not been reviewed or reported on by reporting accountants or auditors. The pro forma financial effects are provided for illustrative purposes only and because of their nature, may not fairly represent the financial performance and position of an Offer Participant after the implementation of the Offer. The pro forma financial effects have been prepared in accordance with International Financial Reporting Standards ('IFRS'), the Guide on Pro forma Financial Information issued by the South African Institute of Chartered Accountants and the JSE Listings Requirements. 14.5. The pro forma financial effects have been presented in respect of the following scenarios: 14.5.1. Scenario 1: Offer Participants Elect to receive the Share Consideration in respect of 30 million Offer Shares (being the Minimum Share Consideration Election). 14.5.2. Scenario 2: Offer Participants Elect to receive the Share Consideration in respect of 41 055 316 Offer Shares (being the maximum Share Consideration Elections that may be received before the Deemed Cash Election calculation is applied). 14.6. The following assumptions have been made for purposes of presenting the pro forma financial effects of the Offer: 14.6.1. The Offerors acquire all the Offer Shares, amounting to 205 220 672 Peregrine Shares, from Offer Participants. 14.6.2. Offer Participants Elect to receive: 14.6.2.1. in respect of Scenario 1: 14.6.2.1.1. the Share Consideration, in the form of InvestCo A Shares only, in respect of 30 million Offer Shares, resulting in 30 million InvestCo A Shares being issued to Offer Participants; and 14.6.2.1.2. the Cash Consideration in respect of 175 220 672 Offer Shares, resulting in a total Cash Consideration payable of approximately R3 680 million to Offer Participants. A Cash Consideration of R21.00 per Offer Share has been assumed. 14.6.2.2. in respect of Scenario 2: 14.6.2.2.1. the Share Consideration, in the form of InvestCo A Shares only, in respect of 41 055 316 Offer Shares, resulting in 41 055 316 InvestCo A Shares being issued to Offer Participants; and 14.6.2.2.2. the Cash Consideration in respect of 164 165 356 Offer Shares, resulting in a total Cash Consideration payable of approximately R3 448 million to Offer Participants. A Cash Consideration of R21.00 per Offer Share has been assumed. 14.6.3. For purposes of capitalising BidCo in order to enable the settlement of the Cash Consideration: 14.6.3.1. in respect of Scenario 1, of approximately R3 680 million by BidCo, Capitalworks will subscribe for BidCo Shares at a price of R17.40 per BidCo Share, in addition to the R2 742 million received by BidCo pursuant to the Funding. 14.6.3.2. in respect of Scenario 2, of approximately R3 448 million by BidCo, Capitalworks will subscribe for BidCo Shares at a price of R17.40 per BidCo Share, in addition to the R2 838 million received by BidCo pursuant to the Funding. 14.6.4. The Offer Shares acquired by InvestCo pursuant to the Offer will be exchanged for BidCo Shares on a one-for-one basis, pursuant to the Offer Share Exchange. 14.6.5. The issue of 6 100 000 InvestCo B Shares, at R17.40 per InvestCo B Share, to ManCo and the subscription by InvestCo for BidCo Shares, at a price of R17.40 per BidCo Share, pursuant to the LTIP 3 Replacement. 14.6.6. The issue by InvestCo of 9 022 989 InvestCo B Shares and a cash payment by BidCo of R93 million (plus interest) to NEICH, and the exchange of the Nala Shares by InvestCo for BidCo Shares, pursuant to the Nala Acquisition. 14.6.7. Estimated once-off transaction costs amounting to R14.0 million (in respect of Scenario 1) and R14.8 million (in respect of Scenario 2) are payable by InvestCo. BidCo will subscribe for InvestCo Prefs in order to fund InvestCo´s pro rata portion of the costs incurred pursuant to the Funding. This loan is repayable in 5 years and will accrue interest at 117.5% of the prime rate and is accounted for as debt. 14.6.8. InvestCo will be treated as an investment entity in terms of IFRS 10. Accordingly, InvestCo accounts for its investment in BidCo at fair value through profit or loss, does not consolidate any subsidiaries and does not apply IFRS 3 when it obtains control of the entity. The fair value of the investment in BidCo amounts to the consideration paid by InvestCo for the BidCo Shares. 14.6.9. There are no other post balance sheet events which require adjustment, other than those detailed herein. 14.6.10. All adjustments, with the exception of the once-off transaction costs, are expected to have a continuing effect. Pro forma financial effects of the Offer on an Offer Participant who receives the Share Consideration Reported Adjusted, Scenario 1 Scenario 2 before the Offer After the Offer After the Offer InvestCo InvestCo Percentage Percentage InvestCo InvestCo Percentage Percentage A Share B Share change in change in A Share B Share change in change in respect of respect of respect of an respect of an an InvestCo an InvestCo InvestCo A InvestCo B A Share B Share Share Share Actual Pro forma Pro forma Pro forma % % Pro forma Pro forma % % Continuing operations Basic EPS (cents) 78.0 95.5 (84.0) (84.0) (188%) (188%) (79.0) (79.0) (183%) (183%) Diluted EPS (cents) 78.0 95.5 (84.0) (84.0) (188%) (188%) (79.0) (79.0) (183%) (183%) Basic HEPS (cents) 78.0 67.5 (84.0) (84.0) (224%) (224%) (79.0) (79.0) (217%) (217%) Diluted HEPS (cents) 78.0 67.5 (84.0) (84.0) (224%) (224%) (79.0) (79.0) (217%) (217%) Discontinued operations Basic EPS (cents) (0.2) (0.2) (84.0) (84.0) - - (79.0) (79.0) - - Diluted EPS (cents) (0.2) (0.2) (84.0) (84.0) - - (79.0) (79.0) - - Basic HEPS (cents) (0.2) (0.2) (84.0) (84.0) - - (79.0) (79.0) - - Diluted HEPS (cents) (0.2) (0.2) (84.0) (84.0) - - (79.0) (79.0) - - NAVPS (cents) 857.2 852.0 1 709.0 1 709.0 101% 101% 1 713.7 1 713.7 101% 101% Reported Adjusted, Scenario 1 Scenario 2 before the Offer After the Offer After the Offer InvestCo InvestCo Percentage Percentage InvestCo InvestCo Percentage Percentage A Share B Share change in change in A Share B Share change in change in respect of respect of respect of an respect of an an InvestCo an InvestCo InvestCo A InvestCo B A Share B Share Share Share Actual Pro forma Pro forma Pro forma % % Pro forma Pro forma % % TNAVPS (cents) 579.8 638.4 1 709.0 1 709.0 168% 168% 1 713.7 1 713.7 168% 168% Weighted average number of shares in issue (`000) 203 181 203 181 30 000 15 123 41 055 15 123 Number of shares in issue (`000) 203 181 203 181 30 000 15 123 41 055 15 123 Notes: 1. The financial information in the 'Reported' column has been derived, without adjustment, from Peregrine´s unaudited consolidated interim financial statements for the six months ended 30 September 2019. The weighted average number of Peregrine Shares in issue and number of Peregrine Shares in issue reflects all Peregrine Shares in issue, amounting to 220 467 242 Peregrine Shares, less 15 246 570 Peregrine Shares held by subsidiaries and 2 012 792 and 26 533 Peregrine Shares held by the Citadel Holdings Limited Employee Share Trust and the Peregrine Share Incentive Share Trust respectively. 2. The 'Adjusted, before the Offer' column has been derived from the 'Reported' column adjusted for: 2.1 the disposal by Stenham Group Limited of its entire shareholding in SAM Holdings to SAM Global Limited ('SAM Disposal'), being an Offer Condition, for approximately GBP11.25 million (translated at the relevant exchange rate on 31 March 2019 for purposes of EPS and HEPS and on 30 September 2019 for purposes of NAVPS and TNAVPS resulting in a capital loss of R6.7 million, offset by the release of the estimated cumulative translation adjustment of R83.4 million as a result of the deconsolidation of the foreign entity for statement of comprehensive income purposes and for statement of financial position purposes a capital gain of R5.9 million. It is assumed that the proceeds are reinvested at an interest rate of 6.25%; 2.2 once-off transaction costs attributable to the Offer and which are payable by Peregrine amounting to approximately R17.9 million; and 2.3 R9.2 million of costs pertaining to the accelerated vesting of Peregrine Shares in terms of Peregrine´s long-term executive remuneration incentive scheme, as well as the derecognition of a liability relating to the short-term incentive scheme of R6.4 million, all of which, with the exception of the profit/loss relating to the SAM Disposal and once- off transaction costs, are expected to have a continuing effect. 3. The financial information included in the 'After the Offer' columns has been derived by taking the InvestCo pro forma financial effects pursuant to the Offer (based on InvestCo´s unaudited financial statements at incorporation, adjusted for the Offer based on the assumptions detailed in paragraph 14.6 above), and multiplying these results by the exchange ratio of one InvestCo Share for every one Offer Share, to provide pro forma financial effects of the Offer on an Offer Participant who receives the Share Consideration, presented separately for an InvestCo A Share and an InvestCo B Share. 4. The 'Percentage change in respect of an InvestCo A Share' column compares the 'InvestCo A Share' column included in the 'After the Offer' column with the 'Adjusted, before the Offer' column. 5. The 'Percentage change in respect of an InvestCo B Share' column compares the 'InvestCo B Share' column included in the 'After the Offer' column with the 'Adjusted, before the Offer' column. 15. CIRCULAR AND PROSPECTUS 15.1. Peregrine and the Offerors will issue a combined offer circular to Peregrine Shareholders, as contemplated in Regulations 102 and 106, setting out the full terms and conditions of the Scheme and the General Offer and including the notice convening the General Meeting ('Circular'). 15.2. The Circular will be accompanied by a prospectus to be issued by InvestCo in accordance with section 99 of the Companies Act and registered with the Companies and Intellectual Property Commission, the purpose of which is to provide Peregrine Shareholders with information regarding InvestCo ('Prospectus'). 15.3. The Circular, accompanied by the Prospectus, is expected to be posted on or about 14 April 2020. A further announcement pertaining to the posting of the Circular and Prospectus will be released in due course. 15.4. Peregrine Shareholders are advised to refer to the Circular and the Prospectus for the full terms and conditions of the Transaction. 16. OTHER IMPORTANT INFORMATION Further details relating to the Transaction and the related salient dates and times will be published on SENS in due course. 17.
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Peregrine Holdings Limited published this content on 13 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 March 2020 07:52:04 UTC