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Joint Announcement Of Firm Intention Offer By ARC Fund To Acquire All or A Portion Of The CSG Shares
CSG Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/011359/06) ARC Fund
Share Code: CSG an en commandite partnership, represented by
ISIN ZAE000184438 the General Partner
(“CSG” or “the Company”)
JOINT ANNOUNCEMENT OF FIRM INTENTION OFFER BY ARC FUND TO ACQUIRE ALL OR A
PORTION OF THE CSG SHARES THAT IT DOES NOT ALREADY INDIRECTLY OWN, BY WAY OF
GENERAL OFFER, THE DELISTING OF CSG AND WITHDRAWAL OF CAUTIONARY
1. INTRODUCTION
1.1. Further to the cautionary announcement released on the Stock Exchange News Service
(“SENS”) of the JSE Limited (“JSE”) on 11 October 2021 (“Cautionary Announcement”),
shareholders of CSG (“Shareholders”) are advised that UBI General Partner Proprietary
Limited (“General Partner”), in its capacity as general partner of the ARC Fund (“ARC Fund”
or the “Offeror”), which through its wholly-owned portfolio investment company, Gemcap
Proprietary Limited, is a 24.8% indirect shareholder in the Company (including treasury
shares) has, on 4 November 2021, delivered to the board of directors of CSG (“Board”) a letter
confirming its firm intention to make an offer ("Binding Offer") to acquire all the ordinary
shares in the issued share capital of CSG (“Shares”) it does not already own, from all
Shareholders who wish to sell their Shares (“Offeree Shareholders”) for a cash consideration
of 35 cents per Share (“Offer Consideration”) (the “Offer”).
1.2. Shareholders are further advised that one of the conditions to the Offer is that, immediately
following implementation of the Offer, the Shares are delisted from the Main Board of the JSE
in accordance with paragraph 1.14 and 1.15 of the Listings Requirements of the JSE
("Delisting") and that the Board propose an appropriate resolution to Shareholders which, if
approved by the Shareholders in a general meeting (“General Meeting”), will satisfy the
Listings Requirements of the JSE ("JSE Listings Requirements") and support the application
by CSG to the JSE for the Delisting ("Delisting Resolution").
The Offer and Delisting are collectively referred to as the “Transaction”.
1.3. The Transaction will be implemented on the basis that Shareholders will be afforded an
opportunity to either monetise their investment in CSG at a fair price or to continue to hold their
Shares in an unlisted environment. The Offer will be made in compliance with the relevant
provisions of the JSE Listings Requirements and Chapter 5 of the Companies Act 71 of 2008
(the "Companies Act") and the Takeover Regulations promulgated thereunder (the
"Takeover Regulations").
1.4. This announcement is being made pursuant to the Binding Offer received by CSG on
Thursday, 4 November 2021 and constitutes a firm intention announcement in terms of
Regulation 101 of the Takeover Regulations.
2. INFORMATION ABOUT ARC FUND
2.1. ARC Fund invests in a broad range of sectors and through a variety of unlisted and listed
entities and generally seeks to gain exposure to growth and early-maturity stage businesses
in which management teams are appropriately incentivised. Where the ARC Fund holds the
majority or significant minority interests in portfolio companies, where appropriate, it seeks to
provide broad strategic guidance through representation and participation on the board of
directors of such companies.
2.2. The ARC Fund, as a Broad-Based Black-controlled investment vehicle, provides solid
empowerment credentials, access to capital, relationships, synergies and strategic support
(i.e. governance, human capital) to investee companies.
2.3. The ARC Fund has two distinct investment focus areas:
2.3.1. In terms of its financial services approach, it leverages the ARC Fund team’s extensive
experience in financial services to evaluate and pursue investment opportunities.
Investments are made considering the stand-alone and synergistic potential across all
the businesses in the financial services portfolio; and
2.3.2. In terms of its diversified investments approach, the General Partner evaluates
investment opportunities in conjunction with its partners who are sector experts (e.g.
telecoms, property, business process outsourcing). Investments are made with stand-
alone and synergistic potential in mind within the sub-category (e.g. property or
agriculture). The businesses in the diversified investments portfolio offer significant
client pool value for the financial services businesses.
3. RATIONALE FOR THE OFFER
3.1. Following the recent restructuring and realignment of CSG together with the changes in the
executive structures, the Offeror believes the timing is opportune to facilitate a turnaround
strategy for CSG together with management and other strategic shareholders. From the
Offeror's perspective, one of the key building blocks to a successful turnaround for CSG is to
transform CSG to a black owned and controlled entity, specifically as it operates in the contract
services sector where empowerment credentials are key to growth – including, amongst other
services, the provision of catering, staffing, cleaning, security and mining services to a wide
range of clients. The Offeror believes it can achieve this through the Offer as the Offeror is a
broad-based black economic empowerment investor with a significant network of businesses.
In light of this, the Offeror believes that it is ideally positioned as a partner to help drive growth
and value creation for CSG.
3.2. The Offeror, as a major indirect Shareholder, no longer sees the advantage of CSG remaining
listed on the JSE. One of the main reasons is the very low trading volumes of CSG’s Shares
as a significant block of Shares are tightly held by a few Shareholders and management. These
low trading volumes and the small market capitalisation of the Company, result in a lack of
analyst interest. In the Offeror's and the Board’s view, it is unlikely that this position will change
over the short- to medium-term and this is a key driver for the Offeror to require that the Offer
be made conditional on the implementation of the Delisting. Both the Offeror and the Board
believe that the Delisting will unlock much needed management time currently being spent
adhering to the JSE Listing Requirements and other compliance obligations as well as result
in significant cost savings for CSG. Furthermore, the Offeror believes that it will, following the
Delisting, be able to enhance the value that it can add to CSG together with certain other key
Shareholders that have provided irrevocable undertakings not to accept the Offer.
4. TERMS AND CONDITIONS OF THE OFFER
ARC Fund has made the Binding Offer, subject to the fulfilment of the conditions precedent set out
in paragraph 4.2 below, to acquire from CSG Shareholders all the CSG Shares in respect of which
it receives valid acceptances prior to the offer closing date.
The Binding Offer is made in terms of section 117(1)(c)(v) of the Companies Act and Regulation 102
of the Takeover Regulations and in order to support a delisting application by CSG as contemplated
in paragraphs 1.14 and 1.15 of the JSE Listings Requirements. Below are the material terms of the
Offer made by the Offeror to all CSG Shareholders.
4.1. Offer Consideration
The Binding Offer is made for a cash consideration of 35 cents per Share payable against delivery
of the registered and beneficial ownership of the relevant Shares into the Offeror's name.
The Offer Consideration per CSG Share represents:
• a premium of 75% to the closing price of 20 cents per Share; and
• a premium of 40% to the 30-day VWAP of 25 cents per Share;
as at market close on Friday, 8 October 2021, being the last business day prior to release of the
Cautionary Announcement.
4.2. Conditions precedent to the Offer
4.2.1. The Binding Offer remains conditional upon:
4.2.1.1. the Board and the Independent Board recommending, in the circular to
Shareholders in respect of the Transaction and incorporating the notice of the
General Meeting to vote on the Delisting Resolution, that Shareholders vote in
favour of the Delisting Resolution and any other resolutions to be proposed at
the General Meeting in respect of the Delisting;
4.2.1.2. by no later than 17:00 on 14 January 2022, the Delisting Resolution having
been adopted by the requisite majority of the Shareholders who are entitled to
attend and vote at the General Meeting as contemplated in paragraphs 1.15(a)
and 1.16 of the JSE Listings Requirements;
4.2.1.3. by no later than 17:00 on 31 March 2022, the receipt of all approvals, consents
or waivers from those South African regulatory authorities ("South African
Authorities") as may be necessary for the implementation of the Transaction,
including JSE, the Takeover Regulation Panel (by means of the issue of a
compliance certificate in terms of section 121(b)(i) of the Companies Act) and
the appropriate competition authorities (being the Competition Commission,
the Competition Tribunal or the Competition Appeal Court, whichever has
jurisdiction for the purposes of the Transaction, as established by the
Competition Act, No. 89 of 1998, as amended) ("Regulatory Approvals") on
an unconditional basis or if such Regulatory Approvals are granted subject to
any condition or qualification, then the Offeror and CSG must agree to the
imposition of such condition or qualification in writing (which agreement shall
not be unreasonably withheld or delayed) in which event the Regulatory
Approval will be regarded as having been granted by the relevant South African
Authority; and
4.2.1.4. until and including the earlier of: (a) one business day after the condition in
respect of the Regulatory Approvals (save for the issuance of a compliance
certificate by the Takeover Regulation Panel which, for avoidance of doubt,
shall only be issued after all other conditions precedent, including the condition
in this paragraph 4.2.1.4, have been fulfilled) set out in paragraph 4.2.1.3
above, has been fulfilled; or (b) subject to paragraph 4.2.2 below, 17:00 on 28
March 2022, CSG not selling, disposing of, or acquiring, or entering into
discussions, negotiations or concluding an agreement to sell, dispose of or
acquire, any assets or any portion of its business (in the case of a disposal or
sale) or any other business (in the case of an acquisition), except in the ordinary
course of business and for the purposes of carrying on its business.
4.2.2. The conditions precedent set out in paragraph 4.2.1 are for the benefit of the Offeror
and may be waived by the Offeror in writing, other than the condition precedent in
paragraph 4.2.1.3 which is not capable of waiver. The dates stipulated in 4.2.1.2 to
4.2.1.4 for the fulfilment or waiver of the conditions precedent may be extended by
agreement between the Offeror and CSG, subject to any approval as may be required
from the TRP and/or the JSE. The extension of any such dates will be announced on
SENS and on CSG's website at https://www.csgholdings.co.za.
4.3. Remaining Shares
Shareholders who do not accept the Offer will remain Shareholders in respect of their unlisted
Shares.
4.4. CSG undertaking not to dispose of its assets or business and not to acquire any assets
or business
Until such time as the Transaction is implemented, CSG has undertaken that it shall not sell,
dispose of, or acquire, or enter into discussions, negotiations or conclude an agreement to
sell, dispose of or acquire, any assets or any portion of its business (in the case of a disposal
or sale) or any other business (in the case of an acquisition), except in the ordinary course of
business and for the purposes of carrying on its business.
5. ABILITY TO PROCEED WITH THE BINDING OFFER
The Offeror has confirmed to the Board that the Offeror has sufficient funds to fully satisfy the cash
Offer Consideration. The Offeror has delivered an irrevocable unconditional confirmation in
accordance with Regulations 111(4) and 111(5) of the Takeover Regulations from Absa Bank
Limited that sufficient funds are available to satisfy the cash Offer Consideration.
6. THE DELISTING
An application will be made to the JSE for the removal of the Company's Shares from the list
maintained by the JSE subject to:
6.1. the Delisting being approved by more than 50% of the votes of all eligible Shareholders present
or represented by proxy at the General Meeting, excluding any controlling Shareholder, its
associates and any party acting in concert, and any other party which the JSE deems
appropriate, being cast in favour of such delisting resolution; and
6.2. the Board having confirmed that the Offer is fair based on the report obtained from an
independent expert.
7. SHAREHOLDINGS
7.1. The Offeror has disclosed the following shareholdings in CSG held by the Offeror, persons
related to the Offeror and/or persons acting in concert with the Offeror:
Shareholder Number of Shares % of issued Shares*
Gemcap Proprietary Limited# 130 208 820 24.80%
Total 130 208 820 24.80%
* Including 2 463 260 treasury shares
# It is intended that the Shares held by Gemcap Proprietary Limited will in due course be
transferred to the Offeror and may therefore be held by the Offeror directly at the time of
implementation of the Transaction.
9. IRREVOCABLE UNDERTAKINGS
9.1. Irrevocable undertakings to vote in favour of the Delisting Resolution have been received from
the following Shareholders holding in aggregate 241 339 760 Shares, representing 61.52% of
all Shares excluding the Shares that the Offeror already owns and 2 463 260 treasury shares
(“Excluded Shares”):
Shareholder Number of Shares % of issued Shares (excluding
Excluded Shares)
PDT Investments (Pty) Ltd 73 291 923 18.68%
GTT Investments (Pty) Ltd 72 379 528 18.45%
Vuwa Scaffolding (Pty) Ltd 46 500 000 11.85%
NRT Investments (Pty) Ltd 21 431 039 5.46%
Daniel E Engelbrecht 9 761 535 2.49%
Gary Davis 6 892 272 1.76%
Pieter Jacob Van Der Westhuizen 5 800 613 1.48%
Cilliers de Kock 5 282 850 1.35%
Total 241 339 760 61.52%
9.2. In addition, irrevocable undertakings relating to at least 169 839 760 Shares (representing at
least 43.29% of Shares, excluding Excluded Shares) have been received from Shareholders
(representing management and former management of the CSG group) to not accept the Offer
and to retain their Shares in the Company post the Transaction:
Shareholder Number of Shares % of issued Shares (excluding
Excluded Shares)
PDT Investments (Pty) Ltd 48 291 9231 12.31%
GTT Investments (Pty) Ltd 72 379 528 18.45%
NRT Investments (Pty) Ltd 21 431 039 5.46%
Daniel E Engelbrecht 9 761 535 2.49%
Gary Davis 6 892 272 1.76%
Pieter Jacob Van Der Westhuizen 5 800 613 1.48%
Cilliers de Kock 5 282 850 1.35%
Total 169 839 760 43.29%
1. PDT Investments (Pty) Ltd has elected to partially accept the Offer for up to 25 000 000
Shares it holds.
10. APPOINTMENT OF THE INDEPENDENT BOARD AND THE INDEPENDENT EXPERT
10.1. In accordance with the provisions of the Companies Act and the Takeover Regulations, an
independent sub-committee of the Board, comprising Mathukana Mokoka, Renganayagee
(Rojie) Kisten and Nona Ndiliseka Sonjani ("Independent Board") has been appointed to
advise Shareholders on the Offer.
10.2. The Independent Board has appointed Mazars Corporate Finance Proprietary Limited
("Mazars"), as the Independent Expert, to provide the Independent Board with its opinion as
to whether the terms of the Offer are fair and reasonable to Shareholders, in accordance
with the Takeover Regulations and the JSE Listings Requirements.
10.3. Based on the draft report received from Mazars which takes into account the Company’s
unpublished interim results for the six-month period ended 30 September 2021, and subject
to the final independent expert report being issued, the Independent Board is presently of
the opinion that the Offer Consideration is fair and reasonable to Shareholders, and intends,
in the circular, to recommend that Shareholders vote in favour of the Delisting Resolution
and accept the Offer.
10.4. Mazars' full independent expert report, as well as the Independent Board's opinion on the
Binding Offer and Offer Consideration, will be included in the circular to be posted to
Shareholders.
11. CIRCULAR
A combined offer circular containing full details of the Transaction, notice of General Meeting and
incorporating the Independent Board's view on the Binding Offer and the independent expert report
prepared by Mazars, is in the process of being prepared. The circular will be distributed to
Shareholders in due course.
Shareholders will be advised of the posting of the circular and the opening date of the Offer by
means of a SENS announcement. The Offer will remain open for acceptance for at least 30
business days after the opening date of the Offer and for a period of at least 10 business days
after the fulfillment of all conditions precedent to the Offer.
12. THE INDEPENDENT BOARD AND CSG BOARD RESPONSIBILITY STATEMENT
The Independent Board and the Board (to the extent that the information relates to CSG),
collectively and individually, accept responsibility for the information contained in this
announcement and certify that, to the best of their knowledge and belief, the information contained
in this announcement relating to CSG is true and this announcement does not omit anything that
is likely to affect the importance of such information.
13. OFFEROR RESPONSIBILITY STATEMENT
The Offeror (to the extent that the information relates to the Offeror) accepts responsibility for the
information contained in this announcement and certifies that, to the best of its knowledge and
belief, the information contained in this announcement relating to the Offeror is true and this
announcement does not omit anything that is likely to affect the importance of such information.
14. WITHDRAWAL OF CAUTIONARY
Further to the information set out in this firm intention announcement, the Cautionary
Announcement is hereby withdrawn and caution is no longer required to be exercised by
Shareholders when dealing in the Shares.
Pretoria
8 November 2021
Corporate Advisor to CSG: Deloitte Capital Proprietary Limited
Transaction Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Legal Advisor to CSG: CMS RMPartners Proprietary Limited
Independent Expert: Mazars Corporate Finance (Pty) Limited
Legal Advisor to ARC Fund: Webber Wentzel
Date: 08-11-2021 07:05:00
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