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Rights offer in respect of a subsidiary
REMGRO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1968/006415/06)
JSE Share code: REM
ISIN: ZAE000026480
(“Remgro” or “the Company”)
RIGHTS OFFER IN RESPECT OF A SUBSIDIARY
1. INTRODUCTION
Shareholders of Remgro (“Shareholders”) are advised that Remgro’s wholly owned
subsidiary Industrial Electronic Investments Proprietary Limited (“IEI”) is participating in a
rights offer being undertaken by Community Investment Ventures Holdings Proprietary
Limited (“CIVH”), a company in which IEI held 55.2% of its issued shares as at 30 June
2021, as detailed more fully in this announcement.
2. BUSINESS CONDUCTED BY IEI AND CIVH
2.1. Remgro holds 100% of the shares of IEI. IEI carries on business as an investment holding
company in respect of Remgro’s interests in CIVH.
2.2. CIVH’s subsidiaries deliver a variety of products to a differentiated customer base in the
telecommunications and information technology sectors and is the holding company of a
group of companies, of which Dark Fibre Africa Proprietary Limited (“DFA”) and Vumatel
Proprietary Limited (“Vumatel”) are its largest operating subsidiaries.
2.3. DFA is the premier open-access fibre infrastructure and connectivity provider in South
Africa. It builds, installs, manages and maintains a world class fibre network to transmit
metro and long-haul telecommunications traffic, which is leased to its customers
(Telecommunication Companies and Internet Service Providers (“ISPs”)) using an open
access wholesale commercial model. DFA has in excess of 13 000 km of fibre assets and
owns fibre networks in Johannesburg, Cape Town, Durban, Midrand, Centurion and
Pretoria, as well as in twenty-five smaller metros including East London, Polokwane,
Tlokwe, Emalahleni and George.
2.4. Vumatel is an open access fibre provider at the last mile level and provides Fibre-to-the-
Home (“FTTH”) products and services to ISPs. Vumatel installs FTTH in residential suburbs
and has in excess of 19 000 km of fibre assets. Vumatel in turn, leases its infrastructure to
ISPs, who then provide broadband retail internet services to end customers.
3. THE SECOND TRANCHE RIGHTS OFFER
3.1. CIVH issued a notice, dated 20 May 2021 (the “Second Tranche Rights Offer Formal
Notice”), in terms of the memorandum of incorporation (“MOI”) of CIVH, inviting all
shareholders of CIVH (“CIVH Shareholders”) to participate in a rights offer to be
undertaken by CIVH in order to raise an aggregate amount of R3,720,000,000 (three billion
seven hundred and twenty million rand) (the “Second Tranche Rights Offer”).
3.2. In terms of the Second Tranche Rights Offer Formal Notice:
3.2.1. a valuation of approximately R23.2 billion (twenty three billion and two hundred million
rand) was ascribed to CIVH (“Valuation Price”);
3.2.2. the Second Tranche Rights Offer was made at a 20% (twenty percent) discount to
the Valuation Price, with the result that the CIVH shares to be issued pursuant to the
Second Tranche Rights Offer (“STRO Shares”) will be issued at an issue price of
R31,534.31 (thirty one thousand five hundred and thirty four rand thirty one cents) per
STRO Share;
3.2.3. IEI’s proportionate share of the STRO Shares will be issued for an aggregate
subscription price of R2,052,126,758 (two billion fifty two million one hundred and
twenty six thousand seven hundred and fifty eight rand);
3.2.4. CIVH Shareholders who wish to do so, may over-subscribe for their proportionate
share of the STRO Shares offered in terms of the Second Tranche Rights Offer, if
there are any CIVH Shareholders who do not take up their proportionate share of the
STRO Shares; and
3.2.5. the aggregate subscription amount due by each CIVH Shareholder who elects to
participate in the Second Tranche Rights Offer must be paid to CIVH by 19 July 2021
or, at an increased subscription price, by 31 August 2021.
3.3. Remgro has resolved to take up all its rights in terms of the Second Tranche Rights Offer,
namely to (i) subscribe for its proportionate share of the STRO Shares and (ii) over-
subscribe for 10 104 further STRO Shares up to a maximum amount of R319,000,000
(three hundred and nineteen million rand), through IEI. Remgro will effect payment of the
aggregate subscription amount due on 19 July 2021.
4. IMPLEMENTATION
4.1. Following closing of acceptances for the Second Tranche Rights Offer, Remgro has been
allocated a further 2 288 STRO Shares at an aggregate subscription price of R72,150,501
(seventy two million one hundred and fifty thousand five hundred and one rand) as a result
of its over-subscription. The Second Tranche Rights Offer will be implemented by CIVH on
19 July 2021, upon which date IEI will pay an aggregate amount of R2,124,277,259 (two
billion one hundred and twenty four million two hundred and seventy seven thousand two
hundred and fifty nine rand) to CIVH and CIVH will issue the relevant STRO Shares to IEI.
4.2. Following implementation of the Second Tranche Rights Offer, IEI’s shareholding in CIVH
will increase to 55.5%.
5. THE FIRST TRANCHE RIGHTS OFFER
5.1. During November 2020, CIVH undertook a rights offer in order to raise an aggregate
amount of R3,000,000,000 (three billion rand) (the “First Tranche Rights Offer”) in terms
of the MOI of CIVH.
5.2. In terms of the First Tranche Rights Offer:
5.2.1. a valuation of R18.5 billion (eighteen billion and five hundred million rand) was
ascribed to CIVH (“FT Valuation Price”);
5.2.2. the First Tranche Rights Offer was made at a 20% (twenty percent) discount to the
FT Valuation Price, with the result that the CIVH shares issued pursuant to the First
Tranche Rights Offer (“FTRO Shares”) were issued for an issue price of R29,974.02
(twenty nine thousand nine hundred and seventy four rand two cents) per FTRO
Share;
5.2.3. IEI subscribed for its proportionate share of the FTRO Shares for an aggregate
subscription price of R1,635,676,537 (one billion six hundred and thirty five million six
hundred and seventy six thousand five hundred and thirty seven rand); and
5.2.4. the First Tranche Rights Offer was implemented on 29 January 2021, being the date
upon which the CIVH Shareholders who participated in the First Tranche Rights Offer
paid their respective aggregate subscription amounts to CIVH and CIVH issued to
each such CIVH Shareholder its proportionate share of the FTRO Shares.
6. RATIONALE FOR THE FIRST AND SECOND TRANCHE RIGHTS OFFERS
6.1. CIVH has evolved since its inception from a small dark fibre operator in 2009 with only
Vodacom as a customer, into a large telecommunications company delivering a vast variety
of products to a more differentiated customer base.
6.2. During 2021, various funding instruments used to fund CIVH’s operations and expansion
will reach maturity, and will be required to be refinanced or for which CIVH will require
capital injections. The board of directors of CIVH and its shareholders considered equity
capital injections to be more appropriate for its capital structure and to retain flexibility to
capitalise on any available or future expansion opportunities.
6.3. The proceeds from the First Tranche Rights Offer were used to reduce CIVH’s debt and
unlock debt facilities available to CIVH for further capital expenditure.
6.4. The proceeds from the Second Tranche Rights Offer will be used to settle further debt owed
by CIVH to Rand Merchant Bank, a division of FirstRand Bank Limited, and in respect of
which Remgro has issued a guarantee.
7. NET ASSET VALUE AND PROFITS
7.1. As at 31 December 2020 (Remgro’s last reported results), the intrinsic net asset value and
accounting net asset value of Remgro’s (through its wholly owned subsidiary IEI) holding
in CIVH amounted to R10 326 million and R3 780 million, respectively. The earnings and
headline earnings of Remgro (through its wholly owned subsidiary IEI), for the six months
ended 31 December 2020, attributable to CIVH and its operations were losses of
R210 million and R209 million, respectively. In terms of International Financial Reporting
Standards (“IFRS”), Remgro accounts for its 55.2% interest in CIVH as an equity accounted
investment.
7.2. As at 31 March 2021 (CIVH’s last audited results, which were prepared in accordance with
IFRS), the net asset value of CIVH amounted to R8 636 million. The earnings and headline
earnings of CIVH and its operations, for the year ended 31 March 2021, were losses of R1
056 million and R797 million, respectively.
8. CATEGORISATION
8.1. When the subscription amounts payable by Remgro (through IEI) for its proportionate share
of the FTRO Shares in the First Tranche Rights Offer and its proportionate share of and
maximum over-subscription for the STRO Shares in the Second Tranche Rights Offer,
respectively, are aggregated and categorised in accordance with section 9 and 3.36 of the
JSE Listings Requirements, they constitute a category 2 transaction for Remgro.
8.2. This announcement is accordingly issued in compliance with paragraphs 9.15 and 3.36 of
the JSE Listings Requirements in respect of the First Tranche Rights Offer and Second
Tranche Rights Offer contemplated in this announcement.
Johannesburg
Monday, 19 July 2021
JSE Sponsor – RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Remgro and IEI legal advisor – ENSafrica
Date: 19-07-2021 03:30:00
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