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Firm intention announcement regarding the divestment by enX of Eqstra and withdrawal of cautionary announcement
ENX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ENX ISIN: ZAE000222253
("enX" or the "Company" or the "Group")
FIRM INTENTION ANNOUNCEMENT REGARDING THE DIVESTMENT BY ENX OF EQSTRA AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the cautionary announcement published on SENS on 13 June 2023 and subsequent
renewals thereof, the last of which was published on 28 November 2023, regarding the negotiations that enX had
commenced in respect of the divestment of Eqstra Investment Holdings Proprietary Limited ("Eqstra"), the
holding company of enX's fleet management business.
Shareholders are advised that the Company, Eqstra and enX Corporation Limited ("enX Corporation") have
entered into definitive transaction agreements (the "Transaction Agreements") with Nedbank Group Limited
("Nedbank"), the financial services group listed on the Main Board of the JSE Limited ("JSE"), regarding the
divestment of enX's entire shareholding in Eqstra, subject to the conditions precedent set out in paragraph 7 below
(the "Transaction"). The Transaction will be implemented in accordance with paragraph 2 below.
This announcement confirms the firm intention offer by Nedbank for certain assets controlled by enX.
The Transaction constitutes:
- a disposal of all or a greater part of enX's assets or undertaking as contemplated in section 112 (read with
section 115) of the Companies Act, No 71 of 2008, as amended (the "Companies Act");
- an "affected transaction" as contemplated in section 117(1)(c)(i) of the Companies Act and will therefore
be regulated by the Takeover Regulation Panel (the "TRP") in terms of the Takeover Regulations
promulgated under the Companies Act (the "Takeover Regulations"); and
- a category 1 disposal in terms of section 9 of the JSE Listings Requirements.
2. Structure and salient terms of the Transaction
The Transaction will be implemented by way of a linked, indivisible and sequential implementation of (i) a
subscription for ordinary shares by Nedbank in Eqstra, in terms of which Nedbank will subscribe for, and Eqstra
will allot and issue to Nedbank, such number of ordinary shares in the share capital of Eqstra against payment of
the Subscription Price (as defined in paragraph 3 below) which will result in Nedbank holding 50.2% of the
ordinary shares in Eqstra (the "Share Subscription"); and (ii) a repurchase by Eqstra of all its ordinary shares
currently held by enX in consideration for a repurchase price equal to the Subscription Price (subject to possible
adjustment based on the audited accounts of Eqstra as at the date on which the Share Subscription takes place)
(the "Repurchase Price"), such that enX will thereafter cease to be a shareholder in Eqstra and Nedbank will
hold 100% of the ordinary share capital of Eqstra (the "Share Repurchase").
Immediately following the completion of the Transaction, Nedbank will advance monies to Eqstra to (i) repay
amounts due by Eqstra on loan account to enX and its subsidiaries; and (ii) refinance Eqstra's interest bearing
debt in its entirety.
enX has undertaken not to compete with the business carried on by Eqstra for a period of five years from the
Closing Date (as defined in paragraph 3 below), save for:
- any passive investment of not more than 5% of the shares of any company listed on the JSE; or
- the existing generator rental business conducted by New Way Power Proprietary Limited.
3. Calculation of the Transaction value
The subscription price to be paid by Nedbank will be based on the unaudited net asset value of Eqstra (the "NAV")
on the date on which the Share Subscription takes place, plus R16 million, less certain agreed transaction related
costs (the "Subscription Price"). The Subscription Price will be subject to a minimum of R379 million. The
effective date will be the last day of the month in which the last of the conditions precedent to the Transaction is
fulfilled or waived and the date on which the Share Subscription will be implemented will be the fifth business
day following the final determination of the unaudited accounts for purposes of determining the NAV ("Closing
Date"). If the minimum Subscription Price of R379 million applies, then gross proceeds would be R890 million.
If the Transaction had closed on 31 August 2023, the gross proceeds received by enX before taxes and transaction
costs would have been R1 045 million ("Gross Proceeds"). The Gross Proceeds would have comprised the
Subscription Price of R534 million and the loans repaid to enX of R511 million, as described in paragraph 2
above. On the Closing Date, the board of directors of enX (the "Board") expects this amount to change by
approximately the net profit after tax of Eqstra between 1 September 2023 and the Closing Date.
As at 31 August 2023, the interest bearing debt that Nedbank would have refinanced was R1 474 million, resulting
in the enterprise value of the Transaction, determined as at 31 August 2023, amounting to R2 519 million.
4. Description of Eqstra and Nedbank
Eqstra provides a full spectrum of commercial and passenger vehicle leasing services including fleet management,
outsourcing solutions, maintenance, warranty management, remarketing and vehicle tracking solutions. Included
in Eqstra is Kynite Solutions, a Software-as-a-Service solution which digitises the full spectrum of vehicle
services, with external customers now making use of this offering. Eqstra has a footprint that spans South Africa
and Southern Africa and the business is active in in the fleet management sector.
Nedbank is one of the largest financial services groups in Africa, offering wholesale and retail banking, as well
as insurance, asset management and wealth management services and solutions to more than seven million clients.
In South Africa, Nedbank has a strong franchise, which contributes 90% of the Nedbank group's R1.3 trillion in
assets and 86% of the Nedbank group's R14 billion in headline earnings. Nedbank also has operations in the
Southern African Development Community, in central and west Africa through its partnership with Ecobank and
businesses in selected countries outside of Africa. Nedbank's ordinary shares have been listed on the Main Board
of the JSE since 1969.
5. Rationale for the Transaction
The Board is of the view that the continued ownership of Eqstra by enX may limit Eqstra's growth prospects and
restrict the returns that can be delivered to enX shareholders. This perspective is based on the following
considerations:
- enX may face challenges in securing the necessary capital at a scale that Eqstra requires for aggressive
market growth, diversification of its asset base, and an increase in its credit risk appetite.
- As a non-banking entity, enX is at a disadvantage in raising funds at competitive rates, which is crucial for
Eqstra to maintain sustainable competitiveness, particularly against South African banks.
- Eqstra is currently maintaining equity buffers in excess of what would be ideal, impacting its ability to
yield returns above its equity cost of capital.
The Board believes that Nedbank, addressing the concerns highlighted above, is well positioned to facilitate
value-enhancing opportunities through access to significant capital resources at lower costs and enabling a
reduction in equity buffers. Furthermore, the Board considers that proceeding with the Transaction with Nedbank
reduces implementation risk.
The Board foresees the following benefits of the Transaction for enX and its shareholders:
- A significant decrease in enX's debt profile, as Nedbank will assume all of Eqstra's financial obligations,
which is where the majority of enX's interest bearing debt resides.
- The Transaction represents an attractive opportunity for enX to monetise its investment in Eqstra at a
valuation that, in the view of the Board, fairly reflects the future prospects and cash flows of Eqstra.
- The monetary realisation of an asset at a value that exceeds what the Board believes is currently reflected
in enX's share price.
- The distribution of surplus capital to enX shareholders.
6. Use of proceeds
The Board expects the Gross Proceeds to be applied in combination as follows:
- R100 million towards an escrow deposit which is required for a period of three years post the Closing Date
as restricted cash collateral for any claims that may arise in relation to the Uninsured Warranties and
Indemnities (as defined in paragraph 8 below), or for such longer period in the event that there are
unresolved claims;
- a return of capital to enX shareholders, the amount of which will be determined by the Board in due course
and the timing of which will be dependent on the Closing Date; and
- the remaining amount for general corporate purposes.
7. Conditions precedent to the Transaction
The implementation of the Transaction is subject to the fulfilment (or waiver) by no later than the date falling
9 months following the signature date of the Transaction Agreements (the "Long Stop Date"), unless otherwise
stated, of the following conditions precedent:
- approval of the Transaction by the enX shareholders as a Category 1 transaction in terms of the JSE Listings
Requirements and in terms of the applicable provisions of the Companies Act by way of a special
resolution;
- if a shareholder who voted against the Transaction has duly called upon enX in terms of section 115(3) of
the Companies Act to seek court approval of the implementation of the Transaction, such approval is duly
obtained;
- the receipt of various regulatory approvals, including from the competition authorities in South Africa,
Botswana, Namibia and Eswatini (as applicable);
- written consent from the debt funding providers (the "Lenders") of enX Corporation, being a wholly-
owned subsidiary of Eqstra, to facilitate the early repayment of enX Corporation's external bank facilities;
- to the extent required, receipt of written confirmation from the Lenders that enX, Eqstra and each member
of the Eqstra group of companies, as required, will, with effect from the Closing Date, be released as
guarantors and obligors under the applicable bank facilities;
- to the extent required, the consent from certain counterparties for the change of control in Eqstra that will
occur as a result of the implementation of the Transaction;
- the completion of the acquisition by Eqstra of Nozala Investments Proprietary Limited's shareholding in
Amasondo Fleet Services Proprietary Limited ("Amasondo") such that Eqstra will become the sole
shareholder of Amasondo; and
- by not later than 31 January 2024, enX delivers to Nedbank a copy of a tax opinion regarding the tax
implications of the Transaction.
Once all of the conditions precedent have been fulfilled or waived, as the case may be, enX will apply to the TRP
for the issuance of a compliance certificate as contemplated in section 121(b) of the Companies Act. The
Transaction will not be implemented until the compliance certificate is received from the TRP.
The Long Stop Date will automatically be deemed to be extended by an additional 90 days should all the
conditions precedent not be fulfilled or waived, as the case may be, by then.
Nedbank shall be entitled to terminate the Transaction prior to the Closing Date if (i) one or more of the
customer(s) of Eqstra, constituting more than 10% (calculated with reference to Eqstra's net leasing book value)
("Lost Net Book Value"), send a notice informing Eqstra that they are terminating, or intend terminating their
contract(s) and Eqstra has not signed new contracts with other customers who are bona fide and appear to have
sufficient substance and creditworthiness to meet their obligations under such contract(s), such that the Lost Net
Book Value (taking account of such new contracts) is less than 10% (calculated with reference to Eqstra's net
leasing book value) or (ii) the NAV is determined to be less than R429 million.
In addition, on the Closing Date, enX has the obligation to deliver to Nedbank a supplementary disclosure letter.
To the extent that any matters, facts or circumstances disclosed in the supplementary disclosure letter give rise to
a claim in respect of any insured warranty which (i) would otherwise have given rise to an insured claim pursuant
to warranty and indemnity insurance policy ("W&I Policy"), but by virtue of such disclosure, Nedbank is not
able to enforce such insured claim under the W&I Policy; and (ii) such claim exceeds R50 million, then Nedbank
and enX shall each have the election to terminate the Transaction Agreements before implementation of the
Transaction. For the avoidance of doubt, enX's aforementioned right to terminate the Transaction Agreements
will only arise on the Closing Date (and accordingly, after shareholder approval has been obtained), but before
implementation of the Transaction.
8. Warranties and indemnities
The Transaction Agreements contain warranties and indemnities that are customary for transactions of this nature.
Nedbank has obtained the W&I Policy which covers the majority of warranty claims. enX has provided certain
warranties and indemnities which are uninsured (the "Uninsured Warranties and Indemnities"). enX will be
liable for these for periods of either 36 or 60 months after the Closing Date. The Uninsured Warranties and
Indemnities will be secured by a R100 million escrow deposit made immediately on the Closing Date for a period
of 36 months (or such longer period, subject to certain terms and conditions as more fully set out in the Transaction
Agreements, in the event that there are unresolved claims and until such time that any unresolved claim is
finalised).
9. enX shareholder support
Irrevocable undertakings to vote in favour of the resolutions proposing the Transaction have been received by
Nedbank from the following enX shareholders holding in aggregate 91 012 657 enX shares, representing 49.93%
of the enX shares in issue:
Shareholder Number of enX shares % of issued share capital
held of enX
MCC Contracts Proprietary Limited 61 305 360 33.63
Samvenice Trading 1 (RF) Proprietary Limited 12 785 271 7.01
African Phoenix Investments Limited 8 158 592 4.48
Eric Ellerine Trust Proprietary Limited 4 467 329 2.45
Seaview Global Investments 4 296 105 2.36
Total 91 012 657 49.93
10. Ability to proceed with the Transaction
Nedbank has confirmed to the Board that it has sufficient funds to fully satisfy the Subscription Price. Nedbank
Limited has delivered to the Takeover Regulation Panel an irrevocable unconditional cash confirmation in
accordance with Regulations 111(4) and 111(5) of the Takeover Regulations confirming that Nedbank Limited
has sufficient cash resources specifically allocated to enable Nedbank to settle the Share Subscription, which will
in turn enable Eqstra to meet its payment obligations in relation to the Share Repurchase on the Closing Date.
Each of the Subscription Price payable by Nedbank in respect of the Share Subscription, and the Repurchase Price
payable by Eqstra in relation to the Share Repurchase shall not be less than R379 million and are not expected to
be more than R600 million.
11. Appointment of independent board and independent expert
In accordance with the provisions of the Companies Act and the Takeover Regulations, an independent sub-
committee of the Board comprising Khati Mokhobo, Nomahlubi Simamane and Kgosie Matthews (the
"Independent Board") has been appointed to assess the terms of, and to advise enX shareholders on the
Transaction.
The Independent Board has appointed Valeo Capital Proprietary Limited as the independent expert for purposes
of preparing an opinion in respect of the Transaction, in accordance with the Takeover Regulations.
12. Beneficial interest in enX of Nedbank, persons related to, and/or persons acting in concert with Nedbank
There are no beneficial interests held or controlled, directly or indirectly, in enX by Nedbank and/or any persons
related to Nedbank and/or any persons acting in concert with Nedbank.
13. Financial information
In terms of the audited published financial information for the year ended 31 August 2023, prepared in accordance
with International Financial Reporting Standards, in respect of the businesses being divested, in the form they
will be divested:
- the value of the net assets of Eqstra, attributable to enX, amounted to R529 million;
- the value of loans that were and will become due to enX and its subsidiaries amounted to R511 million;
- leasing assets totalled R2 615 million, representing c.11 300 vehicles under lease; and
- the profit after tax attributable to Eqstra was R109 million after deducting group charges. These charges
will no longer be payable by Eqstra to enX once the Transaction has become unconditional.
14. Shareholder approval and distribution of circular
The Transaction constitutes a disposal of all or a greater part of enX's assets or undertaking as contemplated in
section 112 of the Companies Act and must therefore be approved by a special resolution of shareholders in
accordance with section 115 of the Companies Act. The Transaction also constitutes a category 1 disposal in
terms of section 9 of the JSE Listings Requirements and must be approved in this respect.
A circular, together with a notice of general meeting, as contemplated in Regulation 102 and 106 of the Takeover
Regulations and paragraph 9.20(b) of the JSE Listings Requirements, containing full details in respect of the
Transaction and incorporating the Independent Board's view of the Transaction, together with the opinion
prepared by the independent expert on the Transaction, is in the process of being prepared and will be distributed
to shareholders on or about 9 February 2024 (or such longer period as allowed by the TRP and JSE, if required).
The salient dates and times in relation to the Transaction will be published on SENS and in the press by enX on
or about the distribution date of the circular.
15. Responsibility statements
The Board and Independent Board 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 is true and this announcement does not omit anything that is likely to affect the
import of such information.
16. Withdrawal of cautionary announcement
Following the release of this announcement, shareholders are advised that caution is no longer required to be
exercised in their dealings in enX shares.
12 December 2023
Transaction sponsor
Java Capital
Legal advisor
White & Case
Independent expert
Valeo Capital
Date: 12-12-2023 07:30:00
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