Frequently asked questions pertaining to the KWV restructuring, unbundling and capitalisation

Transcription

1 KWV UNBUNDLING AND RECAPITALISATION July 2009 Frequently asked questions pertaining to the KWV restructuring, unbundling and capitalisation 1.1 What is the background to these events? Due to historic reasons and agreements between parties in the liquor industry, a structure was created in the 1970's by which KWV became a shareholder in Distell through KWV Investments (a listed company). Since then, the liquor industry and market have changed to such an extent, that KWV's status as an active competitor and shareholder in Distell, has become rather untenable and is perceived in a negative light by the investment community. Based on the market values which the investment community ascribed to KWV, the shareholding in Distell is being discounted for the pyramid structure (being the shareholding through KWV Investments and through RKB in Distell) and, at the same time, the operational businesses are valued at a minimal value. The KWV board of directors evaluated a number of strategies to unlock value and was of the opinion that the restructuring and unbundling would: allow management to focus on adding value to its operational businesses; and provide an opportunity for the market to recognise the full value of KWV s operational businesses. 1.2 What is this unbundling? The unbundling is a restructuring mechanism whereby KWV s operational businesses will be separated from its indirect interest in Distell. Consequently, the company which will be housing the operational businesses (which will be known as KWV Holdings) will be separated from the company holding the indirect interest in Distell (which will be known as Capevin Holdings and is currently named KWV). KWV Holdings will, for all practical purposes, continue to conduct the current business of KWV (with the same products and brand names) but will no longer include the indirect investment in Distell in its asset base. KWV, now renamed Capevin Holdings, will become a pure investment company, with the only asset being the indirect investment in Distell which will continue to be held through KWV Investments (also to be renamed as Capevin Investments). KWV Holdings will acquire the interests in KWV's business operations (wine and spirits) as well as the KWV brands. 1.3 Why the change of name for KWV? Since KWV will have no connection with the KWV brand names, it will have to change its name. RAND MERCHANT BANK Page 1

2 The shareholders have approved a special resolution resolving that KWV's name be changed to Capevin Holdings. The shareholders of KWV Investments have, similarly approved a special resolution to change KWVI's name to Capevin Investments. The change of names should become effective on Friday, 7 August. 1.4 What is the impact of the unbundling for KWV shareholders? All existing KWV shareholders who are recorded as such in the KWV share register on Friday, 14 August 2009, will participate in the unbundling. On the record date of the unbundling, KWV shareholders will remain shareholders in KWV (now renamed Capevin Holdings), which will hold the indirect investment in Distell Limited as its sole asset. Pursuant to the implementation of the unbundling, KWV shareholders will also hold shares in KWV Holdings (which will incorporate the KWV operational businesses). The number of shares to be held in Capevin Holdings by each KWV shareholder will remain equal to their shareholding in KWV as at the record date of the unbundling. The shareholding in KWV Holdings will be based on an unbundling ratio of 1 KWV Holdings share for every 10 KWV shares held (i.e. a KWV shareholder will receive 1 share in the new company for every 10 shares which he/she owns in KWV on the unbundling record date). 1.5 What does a KWV shareholder need to do in order to participate in the unbundling? A KWV shareholder will merely have to surrender his/her share certificate in KWV and will be issued with a replacement share certificate in Capevin Holdings and a new share certificate in KWV Holdings. The appropriate form of surrender, with accompanying instructions, was mailed to all KWV shareholders and can also be found on the KWV website ( Shareholders who return the form of surrender together with their share certificates/documents of title before 12:00 on Friday, 14 August 2009 will have the abovementioned share certificates posted to them on Monday, 17 August Shareholders who return the form of surrender together with their share certificates/documents of title after 12:00 on Friday, 14 August 2009 will have the abovementioned share certificates posted to them within 5 (five) business days of receipt thereof. 1.6 When will the unbundling be effective? The unbundling is expected to become effective on Monday, 17 August. Share certificates in KWV Holdings and Capevin Holdings are expected to be distributed to shareholders on Tuesday, 18 August. Salient dates relating to the unbundling are as follows: 2009 Resolutions for the change of name from KWV to Capevin Holdings and from KWVI to Capevin Investments registered with CIPRO on or about Friday 31 July RAND MERCHANT BANK Page 2

3 2009 Finalisation date for unbundling Friday 31 July Last day to trade in KWV shares to participate in the unbundling and rights offer (see paragraph 2.5 below) Thursday 6 August Record date to participate in the unbundling and rights offer Friday 14 August Securities distribution (new share certificates posted) Tuesday 18 August Prospectus mailed to qualifying KWV Holdings shareholders (including letters of allocation) on or about Tuesday 18 August 1.7 What is the financial impact of the unbundling? The table below sets out the unaudited pro forma financial effects of the unbundling. The information upon which these financial effects are based, which is the responsibility of the directors of KWV, has been prepared for illustrative purposes only and, because of its nature, may not give a true reflection of KWV Holdings' as well as Capevin Holdings' financial positions and results of operations. The unaudited pro forma financial information is intended to provide information about how the unbundling may have affected the income statement and balance sheet of KWV Holdings and Capevin Holdings for the financial year ended 30 June 2008, had the unbundling been effected on that date. KWV Limited (audited) 1 Pro forma KWV Holdings (unaudited) 2 Pro forma Capevin Holdings (unaudited) 3 Earnings per share for continuing operations (cents) Headline earnings per share for continuing operations (cents) Net asset value per share (cents) Number of shares in issue ( 000) Notes: 1. The KWV Limited (audited) column represents the audited financial results for KWV Limited for the financial year ended 30 June The pro forma KWV Holdings (unaudited) column illustrates the pro forma financial results for KWV Holdings on the assumption that the unbundling took place on 1 July 2007 for income statement purposes and on 30 June 2008 for balance sheet purposes. 3. The pro forma Capevin Holdings (unaudited) column illustrates the pro forma financial results for Capevin Holdings on the assumption that the unbundling took place on 1 July 2007 for income statement purposes and on 30 June 2008 for balance sheet purposes and that the requisite special resolution for the name change has been registered with CIPRO. 4. The results per share reflect a tenfold increase due to the unbundling ratio of 10:1 and the subsequent lower number of shares in issue. RAND MERCHANT BANK Page 3

4 1.8 What will happen to the KWV Investments / Distell interest? The ownership structure through which KWV currently holds the indirect Distell interest of 15% (held through KWV Investments and Remgro KWV Beleggings) will remain intact, barring the proposed name changes. Following the abovementioned name changes, the indirect investment in Distell will be held by Capevin Holdings, through Capevin Investments. As of 17 August 2008, the indirect interest in Distell will be the only asset held by Capevin Investments. 1.9 What will happen to KWV s BBBEE shareholding upon unbundling? On the implementation of the unbundling KWV Holdings BBBEE empowerment initiatives will consist of a 25.1% shareholding held by Phetogo and KEET at the date of the unbundling. KWV Holdings, KEET and Phetogo have reconfirmed their commitment to the facilitation of BBBEE in KWV Holdings, and further recognise that the empowerment initiatives of KWV Holdings will be critical to the commercial sustainability of its operations. The empowerment partners have indicated that they will endeavour to follow their rights during the rights issue, which is scheduled to take place after the unbundling. The major shareholders have also committed their support to the endeavours of the empowerment partners Why is KWV Holdings undertaking a capitalisation? KWV Holdings will undertake a capitalisation of R150 million by means of a rights offer to the holders of KWV Holdings shares recorded in the shareholder's register on the record date (14 August 2009). The objective of the rights offer is to further capitalise KWV to reduce financial risk and provide a growth platform to pursue new growth opportunities. This rights offer will also partially offset the fact that KWV Holdings will no longer be able to rely on the investment income and asset base which KWV enjoyed from their interest in Distell. The proceeds from the rights offer will be utilised to - allow KWV Holdings to commence trading as a debt-free company; provide a growth reserve to promote the KWV brand; and allow KWV Holdings to pursue potential operational growth and acquisition opportunities What is the rights offer? KWV Holdings intends to undertake a capital raising by way of a rights offer to qualifying KWV Holdings shareholders to adequately capitalise the Company to operate as a stand-alone business and thus to ensure its sustainability. The rights offer will give all qualifying KWV Holdings shareholders registered as such at the record date for the rights offer, a proportionate opportunity to participate in the capital raising. In terms of the rights offer, qualifying KWV Holdings shareholders will have the right to subscribe for further shares in KWV Holdings in proportion to their existing shareholdings. Existing shareholders interest in KWV Holdings will not be diluted to the extent that they follow their rights and subscribe for their portion of the rights offer shares in KWV Holdings. The rights offer will take place through the issue of a renounceable right that is traded on the OTC market for a three week period before payment for the KWV Holdings rights offer share is due. RAND MERCHANT BANK Page 4

5 Full details regarding the rights offer will be included in a detailed prospectus to qualifying KWV Holdings shareholders which will be mailed to qualifying KWV shareholders during August Will the rights offer be successful in the current economic environment? The proposed rights offer will be jointly and fully underwritten by Zeder and Vinpro, pro rata to their respective shareholding in KWV as on 26 June Consequently, to the extent that existing KWV Holdings shareholders do not follow their rights in terms of the rights offer, Zeder and Vinpro will acquire such rights in proportion to their respective shareholdings in KWV as on 26 June 2009 in terms of their underwriting undertaking. As such, the rights offer is guaranteed to be successful for its intended R150 million recapitalisation. The underwriters will not be charging any fees for the underwriting Will there be any future general meetings required? As a result of Zeder jointly and fully underwriting the rights offer, there is a possibility that Zeder may accumulate an interest in KWV Holdings that exceeds 35% of the KWV Holdings shares in issue. In terms of Rule 8.1 of the Securities Regulation Code on Takeovers and Mergers ("the Code"), Zeder would be required to make a mandatory offer to minority shareholders once it breaches the 35% threshold. The Securities Regulation Panel ("the Panel") has, however, indicated that it is prepared to consider the granting of a waiver in terms of Rule 8.7 of the Code, conditional upon interested parties having the opportunity to make submissions to the Panel and shareholder approval of the necessary resolution to waive the requirement for a mandatory offer. Details of such a general meeting, together with the notice of general meeting and appropriate voting proxy forms, will be mailed to qualifying KWV Holdings shareholders during August What rights will a KWV Holdings shareholder receive and what happens if I cannot follow my rights? According to the proposed rights issue, every qualifying KWV Holdings shareholder will be allocated rights based on their respective shareholding in KWV Holdings on the record date for the rights offer. These rights may be sold, renounced or taken up in order to subscribe for the rights offer shares. The trading in rights will be managed by brokers, much as current share trading is done. The market will determine the price per right if there is no interest for rights, the underwriters will take up any rights on offer. Full details on the rights offer will be included in a prospectus mailed to qualifying KWV Holdings shareholders during August What is the position of foreign KWV shareholders? The distribution of KWV Holdings shares and Capevin Holdings shares to foreign KWV shareholders in terms of the unbundling may be affected by the laws of such foreign KWV shareholder s relevant jurisdiction. Those foreign KWV shareholders should consult their professional advisers as to whether they require any governmental or other consent or need to observe any other formalities to enable them to participate in the unbundling. RAND MERCHANT BANK Page 5

6 Emigrants, whose shares are held and controlled by an Authorised Dealer, will need the prior approval of the South African Reserve Bank to switch an unquoted share to another unquoted share. This paragraph sets out the restrictions applicable to KWV shareholders who have registered addresses outside South Africa, who are nationals, citizens or residents of countries other than South Africa, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this notice to a jurisdiction outside South Africa or who hold KWV shares for the account or benefit of any such foreign KWV shareholder. It is the responsibility of any foreign KWV shareholder (including, without limitation, nominees, agents and trustees for such persons) who receives this notice and wishes to take up their entitlement to unbundled KWV Holdings shares to satisfy themselves as to full observance of the applicable laws of any relevant territory, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories. Foreign KWV shareholders are obliged to observe the applicable legal requirements of their relevant jurisdictions. Receipt of this notice will not constitute an offer of unbundled KWV Holdings shares or Capevin Holdings shares ( offer ) in those jurisdictions in which it would be illegal to make such an offer and, in those circumstances, this notice will be sent for information only and should not be copied or redistributed. No person receiving a copy of this notice in any territory, other than South Africa, may treat the same as constituting an offer to such person unless, in the relevant territory, such an offer could lawfully be made to him without contravention of any registration or other legal requirements. Accordingly, persons (including, without limitation, nominees, agents and trustees for such persons) receiving a copy of this notice should not distribute or send the same to any person in, or citizen or resident of, or otherwise into any jurisdiction where to do so would or might contravene local securities laws or regulations. Any person who does distribute this notice into any such territory (whether under a contractual or legal obligation or otherwise) should draw the recipient s attention to the contents of this paragraph. KWV reserves the right, but shall not be obliged, to treat as invalid any distribution of KWV Holdings shares or Capevin Holdings shares, in terms of the unbundling, which appears to KWV or its agents to have been executed, effected or dispatched in a manner which may involve a breach of the securities laws or regulations of any jurisdiction or if KWV believes or its agents believe that the same may violate applicable legal or regulatory requirements. An excluded foreign KWV shareholder includes any foreign shareholder who is unable to receive any of the KWV Holdings shares or Capevin Holdings shares to be distributed to him or her because of the laws of the jurisdiction of that shareholder, or any foreign shareholder that KWV is not permitted to distribute any of the KWV Holdings shares or Capevin Holdings shares to because of the laws of the jurisdiction of that shareholder. The KWV Holdings shares and Capevin Holdings shares to which excluded foreign KWV shareholders would be entitled in terms of the unbundling may be aggregated and disposed of on the over the counter market by the relevant broker on behalf of and for the benefit of excluded foreign KWV shareholders as soon as is reasonably practical after the implementation of the unbundling at the best price that can reasonably be obtained at the time of sale. RAND MERCHANT BANK Page 6

7 Excluded foreign KWV shareholders will, in respect of their entitlement to the unbundled KWV Holdings shares and Capevin Holdings shares, receive the average consideration per unbundled KWV Holdings share and Capevin Holdings shares (net of transaction and currency conversion costs). The average consideration per unbundled KWV Holdings share and Capevin Holdings shares due to each excluded foreign KWV shareholder will only be paid once all such unbundled KWV Holdings shares and Capevin Holdings shares have been disposed of Exchange Control The unbundled KWV Holdings shares and Capevin Holdings shares are not freely transferable from the Common Monetary Area (South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho) and must be dealt with in terms of the Exchange Control Regulations, 1961, as amended ( Exchange Control Regulations ). The following is a summary of the Exchange Control Regulations, is not comprehensive and is intended as a guide only. In the event that KWV shareholders have any doubts in respect of their obligations in terms of the Exchange Control Regulations, they should consult their professional advisers Emigrants from the common monetary area The unbundled KWV Holdings shares and Capevin Holdings shares received by the KWV shareholders who are emigrants from the Common Monetary Area and whose registered address is outside the Common Monetary Area and whose documents of title have been restrictively endorsed under the Exchange Control Regulations, will be endorsed Non-Resident and will be sent to the Authorised Dealer in foreign exchange controlling their blocked assets All other non-residents of the common monetary area The unbundled KWV Holdings shares and Capevin Holdings shares received by the KWV shareholders who are non-residents of the Common Monetary Area and who have never resided in the Common Monetary Area and whose registered address is outside the Common Monetary Area and whose documents of title have been restrictively endorsed under the Exchange Control Regulations, will be deposited with an Authorised Dealer in foreign exchange in South Africa nominated by such KWV shareholder. It will be incumbent on the KWV shareholder concerned to nominate the Authorised Dealer and to instruct the nominated Authorised Dealer as to the disposal of the relevant shares. If the information regarding the Authorised Dealer is not given, the unbundled KWV Holdings shares will be held in trust for the KWV shareholder concerned pending the receipt of the necessary information or instruction.] 1.16 What is the amount for which KWV Holdings purchased the subsidiaries of KWV (to be renamed Capevin Holdings)? R294 million 1.17 What amount did KWV (Capevin Holdings) earn (cash) from the Distell investment over the past two financial years? About R91 million is expected in 2009 and R71 million in 2008 RAND MERCHANT BANK Page 7

8 1.18 Who are the directors of KWV Holdings? The new directors will be announced in the prospectus that will be distributed to qualifying KWV Holdings shareholders during August What happens if I don t fill in any forms? If a KWV shareholder does not complete and submit the appropriate form of surrender and also surrenders his/her share certificate in KWV, he/she will not be issued the replacement share certificate in Capevin Holdings. Consequently, such a shareholder that does not surrender his/her share certificate will not be able to trade their shares in Capevin Holdings in future. If you find yourself in such a position and want to trade your Capevin Holdings shares in future, you will have to first exchange your KWV share certificate for the replacement share certificate in Capevin Holdings which might take some time (see par. 1.5) Where can I get hold of a KWV annual report? There is an annual report on the website or otherwise phone the company secretary Who can advise me on the rights offer and my choices? KWV will create a help desk to assist shareholders in the administration of the unbundling and the proposed rights offer. Details about this will be announced shortly, and will also be on the website When will the new companies pay dividends? The payment of dividends will be decided by the new respective boards of directors after the financial results of the first year are available. There are none expected during the first financial year Why has most of the documentation for the unbundling been prepared in English? Business norms dictate that companies use English as their basis for communication (this practice includes other listed companies in our region, such as Remgro). KWV also has a number of shareholders that do not understand Afrikaans. We have therefore given preference to English as our standard medium for communication. It is also a major cost issue it will cost KWV more than R to have all the unbundling documentation done in a second language. To accommodate our Afrikaans shareholders, we have translated the majority of documents in Afrikaans, and these are available on the website. The help desk that is currently being created will also be able to advise shareholders in Afrikaans Why have some KWV shareholders not received any documentation? Shareholders that hold their shares in KWV through nominees must please contact their nominee companies for information. KWV only communicates with the institutions and individuals on its share register. In many cases these are nominee companies, and they, in turn, have the responsibility to communicate with their individual investors. KWV does not have access to the details of the individual shareholders within the nominee companies. RAND MERCHANT BANK Page 8

9 1.25 Why did KWV sell 9% of its shareholding in KWV Investments recently? KWV sold the 9% for R250 million as part of its capitalisation efforts to ensure the future sustainability of KWV Holdings If I own KWV Ltd (Capevin Holdings Ltd) shares, how many KWV Holdings shares will I get and how much do I need to invest to follow my rights? When you surrender your KWV Ltd share certificate to the transfer secretary, you will receive: Capevin Holdings shares, and 1 share in KWV Holdings for every 10 shares held in KWV Ltd (Capevin Holdings). Accordingly, you will receive 100 KWV Holdings shares. If the recommended rights issue is approved, you will also be allotted 54 rights in KWV Holdings and it will cost you R to follow these rights to own 54 more shares in KWV Holdings. Otherwise, you can simply give instruction to your broker to sell your rights. RAND MERCHANT BANK Page 9