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Small related party transaction and withdrawal of cautionary announcement
CHOPPIES ENTERPRISES LIMITED
Registration number BW00001142508
ISIN:BW0000001072
BSE SHARE CODE: CHOP-EQO
JSE SHARE CODE: CHP
Tax Reference Number: C08710401018
("Choppies" or "the Company")
SMALL RELATED PARTY TRANSACTION AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
INTRODUCTION
The board of directors of Choppies ("Choppies Board") hereby advises shareholders of a related
party transaction at subsidiary level, between Kamoso Africa Proprietary Limited ("Kamoso"),
Mediland Health Care Distribution Proprietary Limited ("Mediland"), Vidya Sanooj ("V Sanooj") and
Joseph Scott Senwelo ("S Senwelo").
Kamoso is a related party and an indirect subsidiary of Choppies as a result of Choppies Distribution
Centre Proprietary Limited ("CDC") holding a 76% shareholding in Kamoso. Additionally, Kamoso
and CDC are related as a result of common directorships.
Kamoso Group – a Botswana based company running retail and distribution operations. Mediland is
engaged in the distribution of diagnostic medical equipment and consumables, as well as distribution
of pharmaceutical products.Mediland is wholly owned by Kamoso and related to Choppies through
indirect common shareholding.
V Sanooj is the Chief Compliance Officer of Choppies.
S Senwelo is the Chief Executive Officer of Mediland.
DETAILS OF THE PROPOSED TRANSACTION
As explained above, Mediland became a non-core indirect subsidiary of Choppies in July 2023
(through CDC's acquisition of Kamoso Group in July 2023) and has been sustaining significant
losses over a prolonged period of time with no prospect of returning to profitability in its present form.
These losses are eroding the overall performance of the Choppies Group. Mediland is currently
technically insolvent and Choppies has no desire to inject any new capital into this lossmaking
operation. Therefore, the Choppies Board has decided to dispose of Kamoso's entire shareholding
in Mediland to S Senwelo and V Sanooj for a nominal consideration of BWP 100.00 as a going
concern. The abovementioned incoming shareholders have agreed to take over Mediland's existing
revolving trade credit facility obligations ("Revolving trade credit facility") of BWP 40 million to
Kamoso (subject to interest) and settle them over a period of five years. They have also agreed to
retain the current employees of Mediland without making any retrenchments.
Accordingly, the board of directors of Kamoso ("Kamoso Board") has resolved to dispose of 100% of
its shareholding in Mediland to S Senwelo and V Sanooj, for a consideration of BWP 100.00 in the
following proportions ("Proposed Transaction"):
- V Sanooj: 30,685 096 ordinary shares representing 95% of the total issued share capital in
Mediland; and
- S Senwelo: 1,615, 005 ordinary shares representing 5% of the total issued share capital in
the Mediland.
(Collectively the "Sale Shares").
Mediland's Revolving trade credit facility of BWP 40 million to Kamoso will be interest bearing and
shall be repayable by Mediland to Kamoso on or before the expiration of a period of 5 (five) years
from 19 June 2024 ("Repayment Term"). For the duration of the Repayment Term and while any
portion of the Revolving trade credit facility remains outstanding, no dividends will be declared by
Mediland and all cash surpluses shall be paid by Mediland to Kamoso towards reducing the
Revolving trade credit facility.
Based on the above, the consideration payable for the Sale Shares by V Sanooj and S Senwelo is
payment of the nominal sum of BWP 100.00 in aggregate, which amount is to be paid by S Senwelo
and V Sanooj in proportion to their respective shareholding. Furthermore, and as an integral
component of the Proposed Transaction, V Sanooj and S Senwelo will secure the Revolving trade
credit facility of BWP 40 million by granting a pledge of the Sale Shares in favour of Kamoso, in their
proportionate shares.
To this end, the parties have concluded the following agreements:
- a revolving trade credit facility agreement recording the existing Revolving trade credit facility
in the cumulative amount of BWP 40 million;
- a pledge of shares in favour of Kamoso, by V Sanooj and S Senwelo in respect of 100% of
the issued share capital in Mediland; and
- a sale of shares agreement in respect of the Sale Shares between Kamoso, Mediland, V
Sanooj and S Senwelo in respect of 100% of the issued share capital in Mediland.
The Proposed Transaction has been approved by the Kamoso Board and the Choppies Board.
There are no put, call or other options relating to the Proposed Transaction.
BENEFITS OF THE PROPOSED TRANSACTION TO CHOPPIES GROUP
- Kamoso will be able to cut the losses in the region of BWP 8 million per annum that the
lossmaking and technically insolvent subsidiary, Mediland, had been hitherto sustaining.
- If not for this Proposed Transaction, Kamoso will not be able to recover the funds it has
advanced over the years to Mediland totaling BWP 40 million. As part of the Proposed
Transaction, Kamoso will receive in present value terms circa BWP 26 million cash. The
BWP 26 million is the present value of the Revolving trade credit facility of P40 million and
interest.
- Approximately 30 employees of Mediland will not lose their employment with the company
because the incoming shareholders have agreed to retain their services.
CLASSIFICATION OF THE PROPOSED TRANSACTION
In line with section 7.2 of the BSE Equity Listing Requirements, the Proposed Transaction is a related
party transaction between a subsidiary of a listed company (being Choppies) and its management.
The Revolving trade credit facility outstanding in Kamoso's books as at the date of the Proposed
Transaction is BWP 40 million and is not considered to be part of the purchase consideration.
The purchase consideration of P100.00 is less than 5% of the net asset value of Choppies Group as
of the signature date of the binding agreements, being 19 June 2024, therefore it is treated as a
small, related party transaction as per section 7.6 read with section 6.4 (a) of the BSE Equity Listings
Requirements.
Choppies confirms that Sections 7.6(c) read with 6.9(a)(x) of the BSE Equity Listings Requirements
on appointment of directors are not applicable to this small, related party transaction as the
transaction relates to the granting of a revolving trade credit facility by a subsidiary and the disposal
of shares, without any appointment of directors or new service contracts relating to the appointment
of new directors.
SMALL RELATED PARTY CONSIDERATIONS
In accordance with section 7.6 of the Botswana Stock Exchange Listings Requirements, Choppies
confirms that its Audit Risk and Compliance Committee ("the Audit Committee") has reviewed the
terms of the Proposed Transaction and determined that the terms with the related parties are fair
insofar as the Company's shareholders are concerned.
Shareholders are further informed that a fairness opinion from the Audit Committee will lie open for
inspection at the Company's registered office for a period of 28 days from the date of this
announcement.
CHOPPIES SHAREHOLDER APPROVAL
Choppies confirms that in terms of section 7.6 of the BSE Equity listings Requirements, Shareholders
will not be required to vote on or approve the Proposed Transaction and this announcement is
therefore for information purposes only for shareholders.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the Company's cautionary announcement released on X-News and
SENS on 19 June 2024.
Shareholders are hereby advised that as the particulars of the Proposed Transaction have now been
announced, caution is no longer required to be exercised by shareholders when dealing in the
Company's securities.
The Company has a primary listing on the BSE and a secondary listing on the JSE.
13 September 2024
BSE Sponsoring Broker JSE Sponsor
Motswedi Securities (Pty) Ltd PSG Capital
Date: 13-09-2024 02:00:00
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