Wrap Text
Joint firm intention announcement: Offer by Newco to acquire and delist Barloworld and withdrawal of cautionary
BARLOWORLD LIMITED K2024528179 (SOUTH AFRICA) PROPRIETARY
LIMITED
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06) (Registration number: 2024/528179/07)
(JSE share code: BAW) ("Newco" or the "Offeror")
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(A2X code: BAW)
(JSE ISIN: ZAE000026647)
(Bond issuer code: BIBAW)
("Barloworld" or the "Company")
JOINT FIRM INTENTION ANNOUNCEMENT: OFFER BY NEWCO TO ACQUIRE AND DELIST
BARLOWORLD AND WITHDRAWAL OF CAUTIONARY
Capitalised terms used in this paragraph are defined in the body of this announcement.
- A Consortium of investors, through Newco, has indicated a firm intention to make an offer to acquire
all the issued and to be issued Shares in Barloworld, other than those held by the Excluded
Shareholders, for cash, by way of a Scheme or a Standby Offer.
- Newco is proposing a transaction that unlocks substantial value for the Scheme Participants (as defined
in paragraph 5.1.1 below) at an offer price of R120.00 per Share (being the Scheme Consideration as
set out in paragraph 5.2.1 below) which will not be reduced for the R3.10 per Share dividend that was
recently declared by Barloworld on Friday, 22 November 2024 ("Declared Dividend") as set out in the
Barloworld SENS announcement dated Monday, 25 November 2024. This represents a total value
unlock at R123.10 per Share which constitutes a premium of 87% to Barloworld's 30-day VWAP, which
was R65.72, as of Friday, 12 April 2024, being the Pre-Cautionary Date.
- Newco is owned by Entsha, a newly incorporated South African company, ultimately owned by an inter
vivos trust established for the benefit of Mr Dominic Sewela (the CEO of Barloworld) and his family,
and by Gulf Falcon Holding Limited, a wholly-owned subsidiary of Zahid Tractor & Heavy Machinery
Co. Ltd and a member of the Zahid Group.
- The involvement of Entsha in the Consortium will allow the Consortium to continue to drive future growth
and support management's strategic objectives for the business.
- The Proposed Transaction aligns with Zahid Group's strategy to expand and diversify its portfolio. Zahid
Group is a long-term Shareholder of Barloworld and believes in the fundamental strengths of
Barloworld, including its brands and management team, as well as the markets in which it operates.
- The Consortium is firmly of the belief that the Proposed Transaction represents a vote of confidence in
the long-term prospects of South Africa.
- The Proposed Transaction provides Shareholders with the opportunity to accelerate the realisation of
fair value for their Shares, unlocking a material premium to the market's valuation of the Company as
reflected in the share price, prior to the first cautionary announcement pertaining to the Proposed
Transaction.
- The Barloworld Foundation, a B-BBEE Shareholder of Barloworld, will remain a Shareholder of
Barloworld post the implementation of the Proposed Transaction.
- The Consortium has committed to implement a management ownership transaction post the
implementation of the Proposed Transaction.
- Khula Sizwe, the c.R2.9 billion empowerment vehicle, with c.29 000 beneficiaries, including Barloworld
employees and public broad-based black individuals, will dispose of its Shares pursuant to the
Proposed Transaction. However, the existing property leasing arrangements will remain in place post
the Proposed Transaction.
- The Proposed Transaction is subject to the fulfilment or waiver (where capable of waiver) of the
conditions precedent described in paragraph 5.3 and 6.1.2 below.
- Caterpillar has expressed its support for the implementation of the Proposed Transaction.
1. INTRODUCTION
1.1. Barloworld ordinary shareholders ("Shareholders") are referred to the cautionary announcement
published on the Stock Exchange News Service ("SENS") of the JSE Limited ("JSE") on Monday,
15 April 2024 and renewed on Monday, 27 May 2024, Wednesday, 10 July 2024, Thursday, 22
August 2024, Friday, 4 October 2024 and Friday, 15 November 2024.
1.2. Shareholders are advised that on Wednesday, 11 December 2024, Barloworld, and a consortium of
investors ("Consortium") comprising Entsha Proprietary Limited ("Entsha") and Gulf Falcon
Holding Limited ("Falcon Holding"), entered into an implementation agreement ("Implementation
Agreement") in terms of which Newco has agreed to make an offer to Shareholders, other than
the Barloworld subsidiaries who hold Shares (including any member of the Barloworld Group
holding Shares as "Forfeitable Shares" as escrow agent), the Barloworld Empowerment
Foundation Trust ("Barloworld Foundation"), Zahid Tractor & Heavy Machinery Co. Ltd,
Mr Dominic Sewela and the Katlego Le Masego Trust ("Excluded Shareholders") ("Proposed
Transaction").
1.3. The Proposed Transaction will be implemented by way of:
1.3.1. a scheme of arrangement ("Scheme") between Barloworld and its Shareholders, in terms
of section 114(1) read with section 115 of the Companies Act, 71 of 2008 ("Companies
Act"). In terms of the Scheme, Newco will acquire all of Barloworld's issued ordinary shares
("Shares"), other than the Shares held by the Excluded Shareholders, for the Scheme
Consideration (as defined in paragraph 5.2.1 below); or
1.3.2. a general offer (the making of which is conditional on the occurrence of a Standby Offer
Trigger Event (as defined in paragraph 6.1.1 below)) to acquire all of the Shares from
Barloworld Shareholders other than the Shares held by the Excluded Shareholders
("Standby Offer"), in accordance with the provisions of sections 117(1)(c)(v) of the
Companies Act and Regulation 102 of the Takeover Regulations promulgated in terms of
section 120 of the Companies Act ("Takeover Regulations"), for the Standby Offer
Consideration (as defined in paragraph 6.2.1 below).
1.4. Following implementation of the Scheme or, if applicable, the Standby Offer, the listing of the
Shares on the Main Board of the JSE and on the A2X stock exchange will be terminated.
1.5. The Scheme and the Standby Offer form a single composite transaction, provided that the Standby
Offer will only be made if a Standby Offer Trigger Event (as defined in paragraph 6.1.1) occurs.
1.6. On Monday, 26 February 2024, the board of directors of Barloworld ("Barloworld Board") was approached
by the Consortium with a non-binding indicative offer. The identities of Consortium members were
made known to the Board at the time of the first approach. In line with applicable statutory
requirements for a transaction of this nature, an independent board ("Independent Board") was
constituted by the Barloworld Board on 28 February 2024 to consider the terms of the Proposed
Transaction. Independent Board members are detailed in paragraph 9.1 below. Given the nature
of the Consortium members and the involvement of the Chief Executive Officer ("CEO") of the
Barloworld group of companies ("Group"), and in line with its statutory and fiduciary duties, the
Independent Board introduced clear and enhanced governance protocols to address any concerns
that may result from the CEO's involvement in the Consortium and the Proposed Transaction. The
following actions were undertaken to ensure that conflicts were managed: (i) non-disclosure
agreements were entered into with Consortium members including the CEO, the Consortium's
advisers, members of the Steering Committee (as defined below), members of the Barloworld
executive committee and selected senior managers; (ii) a clear protocol was agreed between the
CEO and the Independent Board which governs how the CEO must conduct himself during this
period, including that he should (a) minimise potential conflicts of interest between his duties as a
director and as an employee and his personal interests and minimise disruption to the operation
of the Group; (b) not share any confidential Group information with the Consortium without
Independent Board consent (and all such information required to advance discussions on the
Proposed Transaction would be shared by the Independent Board through official channels); (c)
share with the Independent Board any opinion or analysis concerning the Group not in the public
domain which he gives to the Consortium or its backers; and (iii) a steering committee ("Steering
Committee") consisting of select unconflicted executives of the Company and the Independent
Board's external advisers (Rand Merchant Bank and DLA Piper) was also constituted. The
Steering Committee was tasked with assisting the Independent Board to assess the indicative
non-binding offer and navigate the transaction process. The Company's executives who were
appointed to the Steering Committee were required to sign an undertaking and confirmation that
they were not in any way conflicted by the Consortium or the CEO's role within the Consortium,
nor were they concert parties of the Consortium. The Independent Board regularly confirmed (and
continues to confirm) that this position still holds and each of the above executives is required to
immediately disclose to the Company if they become aware of any facts or circumstances that
may result in them being conflicted and/or concert parties. These protocols have served to ensure
that the business continues to be run efficiently, and in the best interests of all Shareholders and
the Company whilst mitigating any potential conflicts between the Proposed Transaction and the
day-to-day running of the Group's operations. The Independent Board is confident that sufficient
safeguards have been put in place to ensure that the Company is managed efficiently with minimal
disruption, while it considered the Proposed Transaction.
2. INFORMATION ABOUT NEWCO
2.1. Newco is a newly formed South African company owned by Entsha and Falcon Holding and was
incorporated for the purposes of implementing the Proposed Transaction.
2.2. Entsha is a newly incorporated South African company that is wholly-owned by DKMS Group
Proprietary Limited ("Manco") (also a newly incorporated South African company). Manco, in turn,
is wholly-owned by The Katlego Le Masego Trust, an inter vivos trust established for the benefit
of Mr Dominic Sewela and his family. Mr Sewela is the CEO of Barloworld. Entsha is entitled to
exercise 51% of the voting rights in Newco.
2.3. Falcon Holding is a wholly-owned subsidiary of the Zahid group of companies ("Zahid Group").
Zahid Group is a multidisciplinary conglomerate headquartered in the Kingdom of Saudi Arabia
(the "Kingdom"). For over a century, the Zahid family has been one of the leading merchant
families in the Kingdom. Zahid Group's modern era began its journey in the early 1940s
representing General Motors and sold its first CAT machine in 1950. Over the years the Zahid
Group has diversified its activities where it now operates across 14 sectors throughout the Middle
East, Africa, Europe and North America (including its existing and long-held stake in Barloworld).
As a long-term investor, Zahid Group believes in supporting and fostering the growth and success
of its portfolio of businesses and partnerships. Zahid Group's core values of integrity,
professionalism, competence, respect and tolerance, trust, pride and excellence have guided
Zahid Group through decades of growth and earned Zahid Group recognition from its partners
around the world.
2.4. As a strategic partner in Newco, Zahid Group will, on successful implementation of the Proposed
Transaction, be represented on the Barloworld Board and will support executive management who
will continue to manage and operate the business as usual.
3. RATIONALE FOR THE PROPOSED TRANSACTION
3.1. The Consortium's offer demonstrates its confidence in the long-term investment thesis of
Barloworld and the geographies it operates in. Given the Consortium's unique makeup, the
combination of executive management expertise through Entsha, underpinned by a patient capital
approach, provides a strong platform that will support the Company's existing management, staff
and operations to continue to pursue the Group's existing long-term diversified strategy to drive
growth and create value. This is the continuation of an existing investment for members of the
Consortium, who understand the economics and market dynamics of the business as well as the
cyclical nature of the sectors in which Barloworld operates.
3.2. The Proposed Transaction aims to sustain the continuity of Barloworld's management, staff and
operations in line with the Group's existing strategy. The Consortium recognises the goodwill
associated with Barloworld's name, its rich history and the strength of its brand within the markets
in which it operates. The Proposed Transaction will not affect the continuity of the name, or the
brand and the Company's headquarters will remain in Johannesburg.
3.3. The involvement of Entsha in the Consortium will allow the Consortium to continue to drive future
growth and support management's strategic objectives for the business. In addition, Entsha will
hold a majority of the voting and economic rights in Newco, enabling Barloworld to further enhance
its direct black ownership and maintain all other aspects of Barloworld's black economic
empowerment (BEE) status, in line with the South African government's objectives to build and
transform the South African economy.
3.4. Given the nature of its investments, Zahid Group possesses extensive sector expertise which it
will leverage to bring value to Barloworld. As a long-term authorised Cat dealer in the Kingdom,
Zahid Group will assist the Consortium to grow the business.
3.5. The Company and the Consortium take comfort from the fact that Caterpillar has expressed its
support for the implementation of the Proposed Transaction.
4. BROAD BASED BLACK ECONOMIC EMPOWERMENT
4.1. The Barloworld Foundation will remain a shareholder of Barloworld after the implementation of the
Proposed Transaction. Barloworld has made significant strides in Broad Based Black Economic
Empowerment ("B-BBEE"), which the Consortium is committed to maintaining under its ownership
of Barloworld and ensuring that transformation will continue to be supported through local
procurement and supplier development programmes across the value chain, as well as various
other social upliftment components. Barloworld will continue to be a South African headquartered
business and will maintain its status as a black-owned diversified business.
Barloworld Foundation
4.2. The Barloworld Foundation was established in 2019 and owns c.3.5% of Barloworld valued at
approximately R789.3 million, based on the Scheme Consideration (defined in paragraph 5.2
below). The Barloworld Foundation complies with the Broad-Based Ownership Scheme
requirements in terms of Annexure 100 (B) and the Rules for Trusts in terms of Annexure 100 (D)
of the BEE Codes. The beneficiaries of the Barloworld Foundation must be 60% black women
across the following focus areas:
- Education;
- Youth development and empowerment;
- Environment;
- Entrepreneurship; and
- Welfare, charity and humanitarian.
Barloworld will continue to support the participation of black women and black women-owned
businesses going forward across various parts of the business.
4.3. The activities of the Barloworld Foundation are in line with Barloworld's growth strategy, as well
as being aligned with the South African national development imperatives of advancing economic
transformation through the participation of black people in the mainstream economy.
4.4. Through the Barloworld Foundation, Barloworld aims to contribute to nation building and social
cohesion; critical to the sustainable existence and growth of organisations.
Khula Sizwe Property Holdings Limited
4.5. Khula Sizwe Proprietary Holdings Limited ("Khula Sizwe") is a B-BBEE empowerment vehicle
that acquired a portfolio of properties worth c.R2.9 billion in 2019 from Barloworld in terms of Statement
102 of the BEE Codes. Although the Shares held by Khula Sizwe will be acquired as part of the Proposed
Transaction, Newco is fully committed to maintaining the Khula Sizwe empowerment and property leasing
arrangements which will continue to benefit Khula Sizwe's c.29,000 broad base of shareholders and beneficiaries
comprising current and former employees of Barloworld and black Khula Sizwe public broad-based individuals.
5. TERMS AND CONDITIONS OF THE SCHEME
5.1. SCHEME PARTICIPANTS
5.1.1.The participants in the Scheme shall be all Shareholders (other than the Excluded
Shareholders) who are registered as such in Barloworld's register of Shareholders ("Register")
on the record date and time by which Shareholders must be recorded in the Register to be
eligible to receive the Scheme Consideration ("Scheme Participants").
5.1.2.The maximum number of Shares to be acquired by Newco pursuant to the Scheme is expected
to be 142,971,907 Shares, as follows:
Shares in issue 189,641,787
Treasury Shares (-) (3,202,832)
Excluded shares (43,467,048)
Zahid Group (-) 35,834,624
Barloworld Foundation (-) 6,578,121
Dominic Sewela (-) 653,207
The Katlego Le Masego Trust (-) 401,096
Shares to be acquired by Newco 142,971,907
5.2. SCHEME CONSIDERATION
5.2.1. The consideration payable for each Share acquired by Newco pursuant to the Proposed
Transaction (the "Scheme Consideration") will be an amount equal to R120.00, provided that
if Barloworld declares, pays or makes a distribution, dividend or similar payment, save for the
Declared Dividend (a "Distribution"), between the signature date of the Implementation Agreement and completion of the Proposed
Transaction, the Scheme Consideration shall be automatically reduced by an amount equal
to the amount of such Distribution in respect of each Share.
5.2.2. The Scheme Consideration of R120.00 per Share represents a premium of (i) 66% to the
market price on the JSE on 12 April 2024, being the last trading day prior to the first
transaction-related cautionary announcement, published on 15 April 2024 ("Pre-Cautionary
Date"); and (ii) 83% to the 30-day volume weighted average price ("VWAP") on the Pre-
Cautionary Date.
5.3. SCHEME CONDITIONS
5.3.1. The Scheme will be subject to the fulfilment or, where applicable, waiver of each of the
following conditions precedent ("Scheme Conditions Precedent") by the date falling on the
expiry of nine months from the signature date of the Implementation Agreement, subject to the
provisions of paragraph 5.3.4 ("Longstop Date"):
5.3.1.1. either:
5.3.1.1.1. no Shareholder (i) gives notice objecting to the resolution required to approve the
Scheme in terms of section 115(2) of the Companies Act ("Scheme Resolution"),
such notice being contemplated in section 164(3) of the Companies Act, and (ii)
votes against the resolution at the general meeting to be convened by Barloworld to
approve the Scheme Resolution ("Barloworld General Meeting"); or
5.3.1.1.2. if any Shareholder gives notice objecting to the Scheme Resolution as contemplated
in section 164(3) of the Companies Act and then votes against the Scheme
Resolution at the Barloworld General Meeting, Shareholders holding no more than
5% of all of the issued Shares give such notice objecting to the Scheme Resolution
as contemplated in section 164(3) of the Companies Act and vote against the
Scheme Resolution at the Barloworld General Meeting; or
5.3.1.1.3. if any Shareholder gives notice objecting to the Scheme Resolution as contemplated
in section 164(3) of the Companies Act and then votes against the Scheme
Resolution at the Barloworld General Meeting in respect of more than 5% of all of
the issued Shares, such shareholders exercise their appraisal rights, by giving valid
demands in terms of sections 164(5) to 164(8) of the Companies Act, in respect of
no more than 5% of all of the issued Shares within the maximum period permitted
by the Companies Act;
5.3.1.2. the Scheme Resolution is approved by the requisite majority of votes at a quorate
Barloworld General Meeting as contemplated in section 115(2) of the Companies
Act;
5.3.1.3. to the extent required in terms of section 115(3)(a) of the Companies Act, the High
Court of South Africa ("Court") approves the implementation of the Scheme
Resolution;
5.3.1.4. if any person who voted against the Scheme Resolution applies to Court for a review
of the Scheme in terms of section 115(3)(b) and section 115(6) of the Companies
Act, either:
5.3.1.4.1. leave to apply to Court for any such review is refused; or
5.3.1.4.2. if leave is so granted, the Court refuses to set aside the Scheme Resolution;
5.3.1.5. save for the requirement that the Takeover Regulation Panel ("TRP") has issued a
compliance certificate in respect of the Proposed Transaction in terms of section
121(b) of the Companies Act, the following regulatory approvals required to
implement the Proposed Transaction are obtained:
5.3.1.5.1. the JSE grants such approvals as are required in terms of the Listing Requirements
of the JSE ("JSE Listings Requirements") with respect to the Proposed Transaction
(other than in relation to posting the Circular (as defined in paragraph 11 below));
5.3.1.5.2. each of the relevant competition authorities in South Africa, Angola, Botswana, the
Common Markets for Eastern and Southern Africa, and Namibia granting such
approvals as are required in terms of applicable law to implement the Proposed
Transaction, either unconditionally, or, subject to conditions acceptable to Newco
and/or Barloworld, as provided in the Implementation Agreement, provided that each
of Newco and/or Barloworld shall, when considering whether or not any conditions
are acceptable to it, act reasonably and in good faith; and
5.3.1.5.3. the Financial Surveillance Department of the South African Reserve Bank
("FinSurv") granting such approvals as are required with respect to the Proposed
Transaction, either unconditionally, or subject to conditions acceptable to Newco
acting reasonably and in good faith (other than in relation to posting the Circular);
5.3.1.6. a Material Adverse Change (as defined in paragraph 7.3 below) has not occurred;
5.3.1.7. Newco has received (i) the Final VSD, and (ii) the Dentons Report. For purposes of
this paragraph 5.3.1.7:
5.3.1.7.1. "Dentons Report" means a document, dated not later than the date of the Final
VSD, addressed to Barloworld by Dentons US LLP ("Dentons") expressing Dentons'
view to Barloworld that the facts identified in the investigation conducted by ENS
Africa (which investigation concerns whether, among other things, VT LLC has
supplied any parts, components or equipment to customers in violation of US
sanctions), do not provide a basis for Dentons to believe that an apparent violation
of US Sanctions by any one of VT LLC, Barloworld Mongolia LLC, Barloworld Middle
East FZE, VT UK LLC and/or Barloworld (and each an "Applicable Entity") has
occurred within the applicable statute of limitations as of the date of such document,
and that in Dentons' view the information disclosed pursuant to the ENS Africa
investigation does not provide a basis for any Applicable Entity to make a voluntary
self-disclosure of apparent US Sanctions violations to the US Department of the
Treasury Office of Foreign Assets Control ("OFAC");
5.3.1.7.2. "Final VSD" means the final voluntary self-disclosure report prepared by Dentons, in
a form to be presented to the U.S. Department of Commerce Bureau of Industry and
Security ("BIS") detailing the status and findings of a forensic investigation conducted
in relation to US export controls; and
5.3.1.8. no superior competing Barloworld proposal (as will be defined in the Circular)
("Superior Competing Barloworld Proposal") has completed; and
5.3.1.9. the Scheme Resolution is not withdrawn.
5.3.2. Shareholders should take specific note that no materiality threshold applies to: (i) a Material
Adverse Change triggered by an apparent violation of export controls and sanctions
contemplated in paragraph 7.3.2, or (ii) the apparent violation of US sanctions contemplated
in paragraph 5.3.1.7(ii) documented by Dentons.
5.3.3. Newco shall be entitled, in its sole and exclusive discretion by notice in writing delivered to
Barloworld, to waive, in part or in whole, the Scheme Conditions Precedent in paragraph
5.3.1.1, 5.3.1.6 and 5.3.1.7. Neither Party shall be entitled to waive any other Scheme
Condition Precedent unless that waiver is agreed to in writing by Barloworld and Newco and
is permissible in law.
5.3.4. The Longstop Date may be varied by agreement provided that the Longstop Date shall be
extended:
5.3.4.1. in circumstances where Barloworld receives a Superior Competing Barloworld
Proposal, subject to agreement between Newco and Barloworld, and the approval
of the TRP and JSE;
5.3.4.2. by three calendar months where a Scheme Condition Precedent pertaining to any
regulatory approval set out in paragraph 5.3.1.5 has yet to be fulfilled as at the
business day immediately preceding the Longstop Date; or
5.3.4.3. if Newco delivers a written notice ("MAC Event Notice") to Barloworld stating that in
its reasonable opinion a Material Adverse Change has occurred or is occurring, until
the later of (i) the determination of a Material Adverse Change up to 80 business
days after the MAC Event Notice, and (ii) the Longstop Date contemplated in
paragraph 5.3.4.1.
5.3.5. The Scheme shall not be implemented unless the TRP has issued a compliance certificate
with respect to the Scheme in terms of section 121(b) of the Companies Act. Newco shall be
responsible for any application to the TRP for the issue of such a compliance certificate.
5.3.6. If the Scheme Conditions Precedent are fulfilled, or where applicable, waived the Scheme
shall be implemented, in which case:
5.3.6.1. each Scheme Participant shall, for each Share held by it, receive an amount equal
to the Scheme Consideration;
5.3.6.2. Newco shall acquire all the Shares from the Scheme Participants.
6. TERMS AND CONDITIONS OF THE STANDBY OFFER
6.1. OVERVIEW AND EFFECTS OF THE STANDBY OFFER
6.1.1. If the Scheme does not become operative because any of the Scheme Conditions Precedent
set out in paragraphs 5.3.1.1, 5.3.1.2, 5.3.1.3, 5.3.1.4 or 5.3.1.9 has not been fulfilled
("Standby Offer Trigger Event"), Newco will make the Standby Offer and proceed on the
terms and conditions to be set out in detail in the Circular. In such event, the timeline applicable
to the Standby Offer, including when the Standby Offer will be open for acceptance, will be
announced on SENS.
6.1.2. The Standby Offer will be subject to the fulfilment or, where applicable, waiver of;
6.1.2.1. each of the Scheme Conditions Precedent, save for those set out in paragraphs
5.3.1.1, 5.3.1.2, 5.3.1.3, 5.3.1.4 and 5.3.1.9; and
6.1.2.2. a condition that Shareholders holding at least 90% of the issued Shares, excluding
the Shares held by Newco, Zahid Group, Entsha, and their respective related, inter-
related or concert parties, nominees or subsidiaries (as contemplated in section
124(1) of the Companies Act), accept the Standby Offer, (together the "Standby
Offer Conditions").
6.1.3. The Standby Offer shall not be implemented unless the TRP has issued a compliance
certificate with respect to the Standby Offer in terms of section 121(b) of the Companies Act.
Newco shall be responsible for any application to the TRP for the issue of such a compliance
certificate.
6.1.4. If the Standby Offer Conditions are fulfilled or, where applicable, waived the Standby Offer
shall be implemented, in which case:
6.1.4.1. Newco shall: (i) acquire the Shares from the Shareholders who are entitled to accept
the Standby Offer ("Standby Offer Participants") and who accept the Standby
Offer; and (ii) pay the Standby Offer Consideration (as defined in paragraph 6.2.1
below) to the Standby Offer Participants; and
6.1.4.2. if the Standby Offer is accepted by Standby Offer Participants such that following the
implementation of the Standby Offer, Newco acquires at least 90% of the Shares
held by the Standby Offer Participants, Newco shall invoke the provisions of Section
124 of the Companies Act, in terms of which Newco will compulsorily acquire all the
Shares not already tendered by the Standby Offer Participants.
6.2. STANDBY OFFER CONSIDERATION
6.2.1. The Standby Offer Participants who accept the Standby Offer shall receive a cash
consideration equal to the Scheme Consideration ("Standby Offer Consideration").
7. SALIENT FEATURES OF IMPLEMENTATION AGREEMENT
7.1. CONDUCT OF BUSINESS UNDERTAKINGS
7.1.1. Barloworld has provided certain undertakings to Newco that are appropriate for a transaction
of this nature regarding the continuing conduct of the Group's business in the ordinary course
for the period between the signature date of the Implementation Agreement and the earlier of
(a) completion of the Proposed Transaction; (b) the date on which the Implementation
Agreement terminates (other than the surviving provisions of the Implementation Agreement),
or (c) the date on which the Proposed Transaction fails. Further details of these undertakings
will be included in the Circular.
7.2. EXCLUSIVITY AND NON-SOLICITATION PROVISIONS
7.2.1. Barloworld has provided certain exclusivity and non-solicitation undertakings to Newco that
are appropriate for a transaction of this nature and which apply for the period between the
signature date of the Implementation Agreement and the earlier of:
7.2.1.1. the date on which the Scheme Resolution is approved by the requisite majority of
Shareholders;
7.2.1.2. the date on which a Scheme Condition Precedent fails and is not timeously waived,
provided that the Standby Offer Trigger Event has not occurred; or
7.2.1.3. if the Standby Offer Trigger Event occurs:
7.2.1.3.1. the date on which a Standby Offer Condition fails and is not timeously waived; and
7.2.1.3.2. the date of completion of the Standby Offer.
7.2.2. Further details of the above will be included in the Circular.
7.3. MATERIAL ADVERSE CHANGE
A Material Adverse Change shall occur if before all Scheme Conditions Precedent are fulfilled or
waived, other than the Scheme Condition Precedent in 5.3.1.6 ("MAC Period"):
7.3.1. any event occurs which:
7.3.1.1. causes the EBITDA of the Group for any 12-month period ending during the MAC
Period, to be less than ZAR3,468,000,000; or
7.3.1.2. is reasonably likely to cause the EBITDA of the Group for the 12-month period
following the event, circumstance, effect or state of affairs (or a combination thereof)
to be less than ZAR3,468,000,000; or
7.3.2. during the MAC Period:
7.3.2.1. any member of the Group or Newco becomes aware (including as a consequence of
BIS, or any other governmental authority commencing an investigation into potential
violations of export controls) that any act or omission of any member of the Group
(whether such act or omission occurred before or during the MAC Period) constitutes,
or is reasonably likely to constitute, a violation of export controls by any member of the
Group;
7.3.2.2. any member of the Group or Newco becomes aware (including as a consequence of
OFAC or any other governmental authority commencing an investigation into potential
violations of sanctions) that any act or omission of any member of the Group (whether
such act or omission occurred before or during the MAC Period) constitutes, or is
reasonably likely to constitute, a violation of sanctions by any member of the Group;
or
7.3.2.3. any member of the Group of Newco becomes aware that OFAC has commenced an
investigation into potential violations of sanctions by any member of the Group,
provided that a Material Adverse Change (other than a Material Adverse Change
contemplated in paragraph 7.3.2.2 or 7.3.2.3) shall not be regarded as having occurred as a
result of any impact, or reasonably foreseeable impact, caused by any (or a combination of
any) of the following events, circumstances, effects, occurrences or states of affairs: (i)
changes after the signature date of the Implementation Agreement to accounting practices
which are included in the accounting principles contemplated in the Implementation
Agreement (or the authoritative interpretation thereof); (ii) changes or proposed changes after
the signature date of the Implementation Agreement to applicable law (other than export
controls or sanctions); (iii) any acts of God, natural disasters, political instability, terrorism,
armed hostilities, war, sabotage or insurrection or any escalation or worsening of any of the
aforesaid events; (iv) any epidemic, pandemic or disease outbreak or any escalation or
worsening of any epidemic, pandemic or disease outbreak; (v) changes in the stock markets,
interest rates, currency exchange rates, commodity prices or other economic conditions; (vi)
changes in the conditions generally affecting companies which carry on similar businesses to
any member of the Group; (vii) the announcement of the Proposed Transaction, or (viii) any
matter fairly disclosed to Newco prior to the signature date of the Implementation Agreement.
7.3.3. Any dispute between Barloworld and Newco in relation to whether a Material Adverse Change
has occurred or is occurring shall be determined by an independent expert.
7.4. TREATMENT OF THE LONG TERM INCENTIVE PLANS
7.4.1. Barloworld has three long term incentive plans in place, namely the Barloworld Forfeitable
Share Plan 2010 ("FSP"), the Barloworld Conditional Share Plan 2020 ("CSP") and the
Barloworld Cash Settled Share Appreciation Right Scheme 2007 ("SARP").
7.4.2. All awards under the SARP have vested, are exercisable by participants and will be settled in
accordance with the rules of the SARP and will not be impacted by the Proposed Transaction.
7.4.3. The Proposed Transaction will result in a "Change of Control" ("Change of Control") occurring
in terms of the rules of the CSP and the FSP ("Rules").
7.4.4. The Rules provide, upon a Change of Control, for:
7.4.4.1. the partial accelerated vesting of unvested awards based on the proportion of the
vesting period which has expired, and the percentage achievement of any
performance targets set out in the relevant award letters ("Award Letters")
("Accelerated Vested Awards"); and
7.4.4.2. the continuation of the unaccelerated and unvested awards in accordance with the
relevant Award Letters ("Remaining Unvested Awards");
7.4.4.3. the Accelerated Vested Awards to be settled in Shares;
7.4.4.4. the Remaining Unvested Awards to continue to be governed by the terms of the
Award Letters unless the remuneration committee of Barloworld ("Remco"),
exercising its discretion, determines that the terms of such Award Letters are no
longer appropriate, in which case Remco is permitted, among other things, to settle
the Remaining Unvested Awards in cash in lieu of Shares;
7.4.4.5. if any event occurs which may affect awards, including the Shares ceasing to be
listed, Remco may take such action as it considers appropriate to protect the
interests of participants; and
7.4.4.6. the number of Accelerated Vested Awards and by implication the number of
Remaining Unvested Awards shall be determined as set out in the Implementation
Agreement. These numbers depend on, in respect of the CSP and FSP, the (i)
number of awards, (ii) deemed achievement rates of performance targets, (iii) the
grant and vesting dates, and (iv) the completion date of the Proposed Transaction.
Further detail is set out in paragraph 7.4.5 below.
7.4.5. The Implementation Agreement sets out the treatment of Accelerated Vested Awards and
Remaining Unvested Awards upon and following implementation of the Scheme, or Standby
Offer. In summary:
7.4.5.1. set out below are the deemed achievement rates (following testing in respect of
awards granted prior to 2024) of the performance targets that shall apply to all
awards for purposes of determining the aggregate number of Accelerated Vested
Awards and Remaining Unvested Awards and the number of awards under each
plan after applying such deemed achievement rate –
- 68% for 2022 CSP awards, with participants being entitled to 413 365
Shares;
- 215% for 2023 CSP awards, with participants being entitled to 2 136 716
Shares;
- 112.5% for the anticipated 2024 CSP awards, with participants being entitled
to such number of Shares as determined by Remco in due course;
- 30% for 2022 FSP awards (with performance targets), resulting in
participants being entitled to 203 954 Shares;
- 100% for 2023 FSP awards (with performance targets), resulting in
participants being entitled to 1 483 301 Shares;
- 100% for 2022 FSP awards (without performance targets), resulting in
participants being entitled to 457 325 Shares; and
- 65% for the anticipated 2024 FSP awards (with performance targets), with
participants being entitled to such number of Shares as determined by
Remco in due course;
7.4.5.2. the number of Accelerated Vested Awards on completion of the Proposed
Transaction shall be the aggregate number of awards (described in paragraph 7.4.5
above) multiplied by a time prorating factor (being the number of months between
the relevant grant date and completion divided by the number of months between
the relevant grant date and award vesting date), rounded to the nearest whole
number (grant and vesting dates set out below) –
- 2022 CSP awards were granted on 25 November 2022 and have a vesting
date of 24 November 2025;
- 2023 CSP awards were granted on 7 December 2023 and have a vesting
date of 6 December 2026;
- 2022 FSP awards (with performance targets) were granted on
25 November 2022, 19 January 2023, 1 February 2023 and 12 April 2023
and have vesting dates of 24 November 2025, 18 January 2026, 31 January
2026 and 11 April 2026, respectively;
- 2022 FSP Awards (without performance targets) were granted on 25
November 2022, 19 January 2023, 1 February 2023 and 12 April 2023 and
have vesting dates of 24 November 2025, 18 January 2026, 31 January
2026 and 11 April 2026, respectively;
- 2023 FSP awards (with performance targets) were granted on 7 December
2023 and have a vesting date of 6 December 2026; and
- Remco will determine the dates of grant and vesting dates for the anticipated
2024 CSP and FSP awards in due course;
7.4.5.3. the Remaining Unvested Awards will vest on their relevant vesting dates under the
award letters (and summarised in paragraph 7.4.5 above) after completion;
7.4.5.4. if a vesting date occurs before completion of the Proposed Transaction, the relevant
awards will vest and be settled before completion in accordance with the Rules; and
7.4.5.5. each Accelerated Vested Award and each Remaining Unvested Award will be settled
in cash at a value equal to the Scheme Consideration, or Standby Offer
Consideration.
7.5. POST IMPLEMENTATION MANAGEMENT INCENTIVE
7.5.1. Newco recognises the importance of a motivated, aligned and engaged management and
therefore post-the Proposed Transaction, Newco has committed to implement a management
ownership transaction.
8. BENEFICIAL INTERESTS OF NEWCO AND CONCERT PARTIES
8.1. Falcon Holding and Entsha each confirm that they are the ultimate purchasers of the Shares
pursuant to the Scheme, or Standby Offer. The Excluded Shareholders may be deemed to be
acting in concert with Newco and will not vote on the Scheme Resolution or be Scheme
Participants, or Standby Offer Participants. Save as mentioned in this announcement, Newco is
not acting in concert with any other party in relation to the Scheme.
8.2. Newco does not hold any Shares as at the business day immediately preceding this
announcement ("Pre-FIA Date").
8.3. Zahid Group, the holding company of Falcon Holding, holds approximately 18.90% of the Shares
as at the Pre-FIA Date.
8.4. The Katlego Le Masego Trust, which indirectly holds all the shares in Entsha, holds approximately
0.21% of the Shares as at the Pre-FIA Date.
8.5. Mr Dominic Sewela holds approximately 0.34% of the Shares as at the Pre-FIA Date.
8.6. The Barloworld Foundation holds approximately 3.47% of the Shares as at the Pre-FIA Date.
9. INDEPENDENT BOARD AND INDEPENDENT EXPERT
9.1. Barloworld has, in accordance with regulation 108(8) and 108(9) of the Takeover Regulations,
constituted an Independent Board, comprising Dr Nolulamo Gwagwa (Chair), Neo Mokhesi (Lead
Independent Director), Peter Schmid, Nicola Chiaranda and Vuyisa Nkonyeni to consider the
terms of the Proposed Transaction and to advise Shareholders thereon.
9.2. The Independent Board appointed Rothschild & Co as the independent expert ("Independent
Expert"), as required in terms of section 114(2) of the Companies Act and regulation 110 of the
Takeover Regulations, to issue a report dealing with the matters set out in sections 114(2) and
114(3) of the Companies Act and regulations 90 and 110 of the Takeover Regulations and in
accordance with paragraph 1.15(d) of the JSE Listings Requirements, in respect of its opinion on
whether the terms and conditions of the Proposed Transaction are fair and reasonable to
Shareholders ("Independent Expert Report").
9.3. A draft of the Independent Expert Report ("Draft Report") has been delivered to the Independent
Board prior to the date of this announcement in which the Independent Expert has, on a preliminary
basis, concluded that the terms and conditions of the Proposed Transaction are fair and
reasonable to Shareholders, and the Independent Board has taken into account the Draft Report
and the preliminary view of the Independent Expert and has, on a preliminary basis, concluded
that the terms and conditions of the Proposed Transaction are fair and reasonable to
Shareholders, as a result of which the Independent Board intends to recommend in the Circular
(described in paragraph 11 below) that Shareholders vote in favour of the Scheme (provided that
the preliminary conclusion of the Draft Report is confirmed in the final Independent Expert Report).
9.4. The Independent Expert Report and the recommendations of the Independent Board and the
Barloworld Board will be included in the Circular.
10. CASH CONFIRMATION
10.1.In accordance with Regulation 111(4) and 111(5) of the Takeover Regulations, Newco has
delivered to the TRP a written, irrevocable, unconditional cash guarantee from The Standard
Bank of South Africa Limited for R17,156,628,840, being the amount required to guarantee the
aggregate Scheme Consideration or Standby Offer Consideration, as applicable and the TRP
has confirmed that such cash confirmation is compliant in terms of regulations 111(4) and 111(5)
of the Regulations.
11. DOCUMENTATION
11.1. Barloworld and Newco will jointly issue a Circular to Shareholders, containing the full terms and
conditions of the Scheme and the Standby Offer and including the notice to convene the
Barloworld General Meeting to consider and, if appropriate, approve the Scheme Resolution. The
Circular will further include the final Independent Expert Report, the opinion and recommendation
of the Independent Board and the pertinent dates relating to the Scheme and the Standby Offer
and necessary forms to give effect to the Scheme or Standby Offer ("Circular").
11.2. The Circular is expected to be distributed to Shareholders within 20 business days from the date
of this announcement, as specified in the Takeover Regulations (or such longer period as may be
allowed by the TRP), subject to the fulfilment or waiver of the following conditions:
11.2.1. Barloworld and Newco shall have obtained the approval of the JSE, the TRP and FinSurv
for the posting of the Circular;
11.2.2. the Independent Expert has delivered the Independent Expert Report to the Independent
Board which confirms that the Scheme Consideration, or Standby Offer Consideration, if
applicable, is fair and reasonable;
11.2.3. Barloworld has delivered to Newco a copy of resolutions passed by the Independent Board
in which it resolved:
11.2.3.1. that the Scheme Consideration, or Standby Offer Consideration, if applicable, is fair
and reasonable;
11.2.3.2. to recommend the Proposed Transaction to Shareholders; and
11.2.3.3. to recommend that Shareholders vote in favour of the Scheme Resolution or accept
the Standby Offer (if applicable).
11.3. A further announcement relating to the distribution of the Circular, including the salient dates and
times pertaining to the Scheme or, if applicable, the Standby Offer, will be published on SENS in
due course.
12. DELISTING
12.1. If the Scheme is successfully implemented, an application will be made for all of the Shares to be
delisted from the JSE as contemplated in paragraph 1.17(b) of the JSE Listings Requirements as
well as the A2X.
12.2. In respect of the Standby Offer, if the Standby Offer is accepted by the Standby Offer Participants
such that following the Standby Offer, Newco holds at least 90% of the Shares of the Standby
Offer Participants, then Newco shall be entitled to invoke the provisions of section 124 of the
Companies Act to acquire the remaining Shares and all of the Shares will be delisted from the
JSE without shareholder approval as permitted in terms of paragraph 1.17(a) of the JSE Listings
Requirements following an application to the JSE.
13. WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT
13.1. Pursuant to the release of this announcement, Shareholders are advised that caution is no longer
required to be exercised when dealing in their Shares.
14. RESPONSIBILITY STATEMENTS
The Independent Board
The Independent Board of Barloworld (to the extent that the information relates to Barloworld),
individually and collectively, accepts responsibility for the information contained in this announcement
and certifies, to the best of its knowledge and belief, that the information contained in this
announcement is true and that this announcement does not omit anything that is likely to affect the
importance of the information included.
Newco
The board of directors of Newco (to the extent that the information relates to Newco), individually and
collectively, accepts responsibility for the information contained in this announcement and certifies, to
the best of its knowledge and belief, that the information contained in this announcement is true and
that this announcement does not omit anything that is likely to affect the importance of the information
included.
Johannesburg
11 December 2024
Exclusive financial adviser, corporate broker and transaction sponsor to Barloworld
Rand Merchant Bank (A division of FirstRand Bank Limited)
Legal adviser to Barloworld
DLA Piper
Communications adviser to Barloworld
ByDesign Communications
Joint financial advisers to the Offeror
Deutsche Bank
The Standard Bank of South Africa Limited
Tamela Holdings Proprietary Limited
Legal adviser to the Offeror
Bowmans
South African legal adviser on competition law and legal due diligence to the Offeror
Webber Wentzel
International legal adviser on competition law and legal due diligence to the Offeror
Ashurst
Communications adviser to the Offeror
FTI Consulting
Independent Expert
Rothschild & Co
Date: 11-12-2024 12:34:00
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