IMP
IMPO
Implats/RBH/RBN - Joint announcement regarding a revised BEE Transaction
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1957/001979/06)
Share code: IMP/IMPO
ISIN: ZAE000003554
("Implats")
Royal Bafokeng Nation
("RBN")
Royal Bafokeng Holdings (Pty) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/006906/07)
("RBH")
JOINT ANNOUNCEMENT REGARDING A REVISED BLACK ECONOMIC EMPOWERMENT
TRANSACTION IN RESPECT OF IMPLATS
1. Introduction
On 4 July 2006 shareholders of Implats approved a broad-based black
economic empowerment ("BEE") transaction between Implats and its
anchor empowerment partner, the RBN. In terms of that transaction, a
corporate member of the RBH group would acquire a 49% undivided
interest in the business of Impala Refining Services Limited ("IRS")
and would have the right to convert this interest into a direct
shareholding of approximately 7,44% in Implats ("the IRS
Transaction"). Implats shareholders also approved the creation of an
Employee Share Ownership Programme ("ESOP"). The ESOP has since been
implemented, and the Morokotso Trust established in terms of the ESOP
holds 2 054 072 shares in Implats.
Following Implats" shareholder approval of the IRS Transaction,
further discussions with National Treasury ("NT") made it apparent
that Impala Platinum Limited ("Impala") will probably not be able to
offset any existing royalties payable to the RBN against royalties
payable to the State under the revised draft Royalty Bill. As a
result of this and other considerations, Implats and RBH (the
"Parties") agreed to review the IRS Transaction and examine ways in
which the Parties" interests could be better aligned through a
mutually beneficial revised transaction.
Implats and RBH are pleased to announce that they have reached
agreement in principal in terms of which:
1.1 the agreements relating to the IRS Transaction will be allowed to
lapse;
1.2 Impala will pay all royalties due and payable to the RBN for the
32-year period from 1 July 2007 to the last day of the lease
period ("the Royalty Payment"); and
1.3 the RBN, through RBH or one of its subsidiaries, will subscribe
for 9 389 400 ordinary shares in Implats.
The effect of the above steps (collectively "the Royalty Transaction")
will be that, subject to the approval of Implats shareholders, Impala
will have discharged its obligation to periodically pay royalties to
the RBN from 1 July 2007, and the RBN will, in aggregate, hold 13,4%
of the fully diluted issued ordinary share capital of Implats.
The Royalty Transaction is based inter alia on the understanding from
NT that, should the Royalty Bill allow for an offset, Impala will
receive such offset credits.
2. Rationale
Implats has embraced the principles of transformation as a strategic
imperative to reinforce its position as a leading southern African
mining company. The choice of the RBN as Implats" anchor partner will
be reinforced by the Royalty Transaction, through which RBH will
become the single largest shareholder in Implats. The RBN continues to
recognise Implats as its primary strategic relationship within the
platinum industry.
Implats and the RBN believe that the Royalty Transaction is attractive
to both Parties, and is more efficient than the IRS Transaction from
an Implats shareholder perspective for inter alia the following
reasons:
- Implats will retain 100% of the value in and cashflow from IRS;
- Implats" cashflow will increase due to the fact that royalties
will no longer be paid periodically to the RBN; and
- Implats shareholders" and the RBN"s interests are aligned, with
immediate effect.
RBH will have direct management involvement in Impala, focusing
particularly on skills transfer and employment equity.
The Parties have committed to continue to support the community of the
greater Bojanala area and particularly the women of that area, through
the creation of a local economic development trust. The Parties will
contribute an amount of R340 million over a ten year period from 2006
and at least 50% of the total amount (representing the equivalent of
R170 million) will be specifically for the benefit of the women of the
area.
The Royalty Transaction will result in a 33,6% empowerment ownership
(including the Incwala transaction) at Impala, which exceeds the
empowerment objectives of the Mining Charter.
3. The Royalty Transaction
3.1 The IRS Transaction
Implats, the RBN and RBH have agreed to allow the IRS Transaction
to lapse, while recognising the BEE facilitation provided to the
RBN under this transaction. It was further agreed that the
rights, obligations and benefits of each of Implats and the RBN,
under the IRS Transaction should, as far as is appropriate and
practicable, be preserved under the Royalty Transaction.
3.2 Terms of the Royalty Transaction
3.2.1 The Royalty Payment
Impala will pay all royalties due under Notarial
Mineral Lease K 5966/03LM to the RBN in respect of the
period between 1 July 2007 and the last day of the
lease period. Such Royalty Payment will amount to
R10,6 billion.
3.2.2 The Subscription
The RBN, through RBH or one or more of its subsidiaries
will subscribe for 9 389 400 shares in Implats (12,1%
of the fully diluted issued ordinary share capital of
Implats) ("the Subscription"). Based on an Implats
closing price of R1 290 per share as of 22 September
2006, the value of the shares subscribed for by the RBN
is R12,1 billion. The difference between R12,1 billion
and R10,6 billion is a discount of R1,5 billion or
12,6% and will be reflected in Implats" income
statement as a BEE charge. This amount approximates the
BEE charge that would have been incurred in the IRS
Transaction. The actual BEE charge will be determined
by the share price on the effective date, as defined in
paragraph 3.5.
RBH currently holds 1 000 000 Implats ordinary shares
(1,3% of the fully diluted issued ordinary share
capital of Implats) and, after the Subscription, will
hold 10 389 400 shares, representing a 13,4%
shareholding in Implats on a fully diluted basis.
3.3 Lock-in
RBH will not be entitled to dispose of, in whole or in part, the
9 389 400 Implats ordinary shares subscribed for in terms of the
Royalty Transaction until 31 May 2014, to ensure that Impala"s
empowerment credentials are retained for the period required in
terms of the Mining Charter and Mining Scorecard, unless the
Department of Minerals and Energy indicates in writing that a
disposal by RBH will not adversely affect Impala"s empowerment
credentials.
In the event of a change of control of Implats, RBH will be
entitled to dispose of these 9 389 400 ordinary shares in Implats
subject to certain conditions.
3.4 Board representation
RBH currently has the right to nominate one director to the
Implats board and RBH, for so long as it holds no fewer than the
9 389 400 Implats ordinary shares to be issued in terms of the
Subscription, shall have the right to nominate an additional
director to the Implats board. RBH shall also have the right to
nominate three out of the ten Impala board members, at least one
of whom shall be a black woman and one of whom shall be nominated
as the Deputy Chairman of Impala.
3.5 Effective date
The effective date of the Royalty Transaction shall be five
business days after the fulfillment or waiver, as the case may
be, of the conditions precedent set out in paragraph 3.6 below.
The Royalty Payment is payable on the effective date, which is
also the date on which the Implats ordinary shares will be issued
in terms of the Subscription.
3.6 Conditions precedent
The Royalty Transaction is subject to the fulfillment of the
following conditions precedent by not later than 31 December
2006, or such later date as the Parties may agree in writing:
- signing of the requisite agreements;
- the obtaining of all necessary regulatory approvals,
including the JSE Limited;
- approval of the requisite change to tax legislation to
permit the tax deduction of any payment in advance of
royalties due to the RBN;
- the obtaining by Implats of a fair and reasonable opinion in
respect of the Royalty Transaction;
- the obtaining of such shareholder approvals as may be
required from the shareholders of Implats;
- ratification by the Kgotha Kgothe of the RBN; and
- the obtaining by the RBN, on terms and conditions (if any),
acceptable to Implats, of any necessary approvals, consents,
permissions or other authorisations to the Notarial Royalty
Payment Agreement and to the exercise of rights in terms
thereof, in terms of the Bophuthatswana Land Control Act,
1979.
3.7 Voting at the general meeting
The RBN is an existing shareholder in Implats and, because it has
an interest in the Royalty Transaction, will not vote on any
resolutions at the general meeting relating to the Royalty
Transaction.
4. Impact of the Royalty Transaction
4.1 BEE shareholding in Implats
The BEE shareholding in Implats after the implementation of the
Royalty Transaction will be:
RBH shares (pursuant to the Royalty 9 389 400
Transaction)
RBH shares currently held 1 000 000
ESOP 2 054 072
Total shares in issue (excluding treasury 77 393 393
shares)
RBH shareholding (after the Royalty 13,4%
Transaction)
4.2 Compliance with the Mining Charter
Based on the gross platinum production of Implats in 2006, the
empowerment ownership in Impala will be:
RBH holding (pursuant to the Royalty 20,0%
Transaction)
RBH (existing) 2,1%
ESOP 4,4%
Incwala credits 7,1%
Total empowerment shareholding 33,6%
Implats believes that it is on target to meet all the other
elements of the Mining Charter and the Mining Scorecard including
employment equity, procurement and skills development.
5. Discussions with National Treasury
Because of the uncertainty in relation to the draft Royalty Bill,
which is due to be published in October 2006 for comment, the Parties
have met with the NT and have entered into the Royalty Transaction
based on:
5.1 NT having recommended to the Minister of Finance that legislation
to permit the normal life-of-mine tax deduction of any payment in
advance of royalties due to communities be tabled in Parliament;
and
5.2 the understanding that should the Royalty Bill allow for an
offset of any State royalty against the royalty paid by mining
companies to communities, Impala will receive such offset credits
notwithstanding the fact that the RBN royalty will have been
prepaid.
Based on the above, the Parties have treated the Royalty Payment as
tax deductible on a life-of-mine basis in determining the terms of the
Royalty Transaction.
6. Financial effects of the Royalty Transaction
The unaudited pro-forma financial effects of the Royalty Transaction
for the financial year ended 30 June 2006 are set out in the table
below to assist Implats" ordinary shareholders to assess the impact of
the Royalty Transaction on Implats" basic earnings per share, headline
earnings per share, fully diluted earnings and headline earnings per
share, net asset value per share and tangible net asset value per
share, based on the audited results for the year ended 30 June 2006.
These unaudited pro-forma financial effects have been presented for
illustrative purposes only and may not give a fair reflection of
Implats" financial position nor the effect on future earnings post the
implementation of the Royalty Transaction. The directors of Implats
are responsible for the preparation of the unaudited pro-forma
financial effects.
Before (1) After (2) % change
Basic EPS (cents) 6607 4084 (38%)
Diluted EPS (cents) 6589 4075 (38%)
Basic HEPS (cents) 6006 3558 (41%)
Diluted HPS (cents) 5989 3550 (41%)
NAV per share (cents) 21 001 32 314 54%
NTAV per share (cents) 20 911 18 186 (13%)
1. Extracted from the audited Implats financial statements for the
year ended 30 June 2006.
2. Earnings and headline earnings per share after the Royalty
Transaction have been determined assuming that the Royalty
Transaction was implemented on 1 July 2005, as follows:
- Eliminating the annual royalty charge under the Notarial
Mineral Lease between the RBN and Impala amounting to R858,1
million before tax and R604,8 million after tax at 29%;
- Amortising the Royalty Payment of R10,6 billion using the
units of production basis (assuming a straight line charge
over 30 years for the purposes of the pro-forma financial
effects), amounting to R352,8 million before tax and R254,3
million after tax at 29%. This amortisation will commence in
financial year 2008 being the first year covered by the
Royalty Payment. The transaction assumes that Implats will
get a tax deduction for the Royalty Payment in line with the
accounting treatment;
- Charging an amount of R1,5 billion, being the difference
between the value of the new ordinary shares issued (R12,1
billion) and the value of the Royalty Payment (R10,6
billion), as a BEE compensation charge;
- Creating an expense of R83,6 million (the present value of
the estimated future payments at a discount rate of 13,35%)
for the liability relating to the commitment to contribute
up to R170 million up to 30 June 2016 to the Bafokeng Impala
Development Trust;
- Charging R11,2 million, representing the impact of unwinding
the discounted community development liability noted above;
- Charging R6 million, representing the estimated transaction
costs before tax (assumed that these costs will be tax
deductible); and
- Issuing an additional 9 389 400 new ordinary shares,
increasing the weighted average number of shares in issue
during the year to 75,157 million for basic earnings and
headline earnings per share and to 75,338 million for
diluted earnings and headline earnings per share.
Net asset and tangible net asset value per share after the
Royalty Transaction have been determined assuming that the
Royalty Transaction was implemented on 30 June 2006, as follows:
- Raising a royalty asset of R10,6 billion, being the agreed
value of the Royalty Payment;
- Raising additional share capital at R12,1 billion, being the
issue of 9 389 400 new ordinary shares at a price of R1 290
per share;
- Charging an amount of R1,5 billion to retained income, being
the difference between the value of the new ordinary shares
issued (R12,1 billion) and the value of the royalty payment
(R10,6 billion), as a BEE compensation charge;
- Raising a R83,6 million community development liability
relating to the commitment with regards to the Bafokeng
Impala Development Trust (present value of estimated future
payments at a discount rate of at 13,35%) with a
corresponding "community development expense" to retained
earnings;
- Reducing "cash and equivalents" by R6 million and charging
retained earnings with this amount, representing the
estimated transaction costs; and
- Issuing an additional 9 389 400 new ordinary shares,
increasing the total number of ordinary shares in issue to
75,339 million; and
- Treating the royalty asset of R10,6 million as an intangible
asset for the purposes of calculating the tangible net asset
value per share.
7. Circular to shareholders
A circular setting out full details of the Royalty Transaction,
including a notice of general meeting, will be posted to shareholders
by the end of October 2006. The general meeting is expected to be
held by no later than end November 2006.
Johannesburg
28 September 2006
Financial adviser and transaction sponsor to Implats
Morgan Stanley South Africa (Pty) Limited
Legal and tax adviser to Implats
Deneys Reitz
Reporting accountants to Implats
PricewaterhouseCoopers Advisory Services (Pty) Limited
Sponsor to Implats
Deutsche Securities (SA) (Pty) Limited
Investment bank to RBH
Standard Bank
Adviser to RBH
Thebe
Legal adviser to RBH
Bell Dewar Hall
Date: 28/09/2006 12:15:13 PM Produced by the JSE SENS Department
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