18 July 2014
PME African Infrastructure Opportunities plc
("PME" or the "Company" and together with its subsidiaries the "Group")
PUBLICATION OF ADMISSION DOCUMENT AND LIFTING OF SUSPENSION
Notice of EGM
Notice of AGM
The board of PME is pleased to announce that the Company has entered into a sale and purchase agreement pursuant to which PME, through one of its wholly-owned subsidiaries, is to acquire the 50 per cent. of the issued share capital of Sheltam Holdings (Proprietary) Limited ("Sheltam") not already owned by it, together with certain shareholder loans made by the vendors to Sheltam (the "Acquisition"). The consideration payable for the Acquisition will be satisfied entirely by the issue of 19,741,160 new ordinary PME shares.
The Acquisition will result in PME ceasing to be an investing company and becoming the holding company of a trading group, and in a fundamental change in PME's business and Board control, and will therefore constitute a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies. Completion of the Acquisition is conditional, inter alia, on receiving the approval of Shareholders, such approval to be sought at the EGM and on receipt of approval of the Acquisition from the South African Competition Commission.
Definitions in this announcement are the same as those included in the Company's admission document dated 17 July 2014 (the "Admission Document").
Publication of Admission Document, Notice of EGM and Restoration of Dealings
The Admission Document relating to the Acquisition and Readmission has today been published and posted to Shareholders and will be available on the Company's website: www.pmeinfrastructure.com (prior to Readmission) / www.sheltam.com (following Readmission). A notice convening the EGM of the Company is contained in the Admission Document.
Following publication of the Admission Document, the temporary suspension of trading in the Company's shares will be lifted with effect from 7:30 a.m. today and trading in the Company's shares will resume at 8:00 a.m.
The EGM will be held at 10:00 a.m. on 11 August 2014 at Millennium House, 46 Athol Street, Douglas, Isle of Man IM1 1JB for the purpose of seeking the Company's shareholders approval for the Acquisition and related matters including, amongst other things, the approval of an executive share option plan, revisions to the Company's memorandum and articles of association to remove reference to C shares and changing the name of the Company to 'Sheltam plc'.
If Shareholders approve the Acquisition at the EGM on 11 August 2014, and if approval for the Acquisition is received from the South African Competition Commission together with the consent of a lender to the Group (which are expected to occur prior to the EGM), the Company's existing quotation on AIM is expected to be cancelled on 11 August 2014. The Company envisages that the Enlarged Share Capital will then be re-admitted to trading on AIM on 12 August 2014, under the ticker 'STAM'.
Notice of AGM
The Company has also today posted to shareholders a notice convening the Company's Annual General Meeting for 9:30 a.m. on 11 August 2014 at Millennium House, 46 Athol Street, Douglas, Isle of Man IM1 1JB.
Expected Timetable of Principal Events
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Publication and posting to Shareholders of the Admission Document, Notice of EGM, Notice of AGM and Forms of Proxy
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18 July 2014 |
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Latest time and date for receipt of Forms of Proxy
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10:00 a.m. on 9 August 2014 |
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Annual General Meeting
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9:30 a.m. on 11 August 2014 |
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Extraordinary General Meeting
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10:00 a.m. on 11 August 2014 |
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Completion of the Acquisition, Readmission effective and dealings expected to commence in the Enlarged Share Capital on AIM
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8:00a.m. on 12 August 2014 |
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Expected date for crediting CREST accounts
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8:00a.m. on 12 August 2014 |
The above times are references to British Summer Time and times and/or dates may be subject to change and in the event of any such change, the revised times and/or dates will be notified to Shareholders by an announcement through a Regulatory Information Service.
Change of name
To reflect the proposed changes to the Company and its operations as a result of the Acquisition, it is proposed that, conditional on the passing of Resolution 1 as set out in the Notice of EGM, the Company will change its name to Sheltam plc.
Following Readmission, the Company's new AIM symbol will be 'STAM', which will become effective in due course when the change of name certificate issued by the Registrar of Companies in the Isle of Man is accepted by the London Stock Exchange. Pending this change becoming effective, which will be announced by the Company, the Ordinary Shares will trade under the existing AIM symbol 'PMEA'.
Recommendation and Voting Intentions
The Board recommends that Shareholder vote in favour of the Resolutions to be proposed at the EGM, as Lawrence Kearns (being the only Existing Director who holds an interest in PME Shares) has irrevocably undertaken to do in respect of his own beneficial holding, which amounts to 74,000 PME Shares representing approximately 0.1 per cent. of the Existing PME Shares.
In addition, the Company has also received an irrevocable undertaking from PUG Investments Limited to vote in favour of the Resolutions to be proposed at the EGM in respect of the 8,309,826 Existing PME Shares it holds, representing approximately 10.83 per cent. of the Existing PME Shares.
As a result, the Company has received irrevocable undertakings to vote in favour of the Acquisition in respect of a total of 8,383,826 Existing PME Shares, representing approximately 10.92 per cent. of the Existing PME Shares.
Paul Macdonald, Chairman of PME, commented:
"The board are pleased to announce that the Company has been able to advance its plan to acquire the remaining 50 per cent. of Sheltam, a company in which PME has been a long term investor.
"Sheltam is a significant player in the rail services market and has demonstrated a steadily improving operating performance in recent years. There are significant opportunities for Sheltam to exploit its position as a transport services provider, offering its current customer base additional services, and developing new transportation solutions in a number of countries in which the Sheltam Group is not currently active."
For further information please contact:
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Smith & Williamson Corporate Finance Limited
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Azhic Basirov / Ben Jeynes |
+44 20 7131 4000 |
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Oriel Securities Limited |
Neil Winward / Tom Yeadon |
+44 20 7710 7600 |
Below are extracts from the Admission Document which has today been posted to Shareholders.
Introduction
PME has announced that it has entered into an agreement pursuant to which the Group is to acquire the 50 per cent. of the issued share capital of Sheltam Holdings (Proprietary) Limited not already held by it from the Vendors (being Roy Puffett, the founder of Sheltam's business and Managing Director of Sheltam, and the Sheltam Rail Trust), together with certain shareholder loans made by the Vendors to Sheltam. The Acquisition will be satisfied entirely by the issue of the Consideration Shares, being 19,741,160 new PME Shares, to the Vendors, with completion of the Acquisition being conditional, inter alia, on readmission of the Company's Enlarged Share Capital to trading on AIM.
The Acquisition, if completed, will result in the Company being re-named Sheltam plc and the cessation of the Company's current investing policy, under which the Existing Directors have sought to realise the Company's remaining assets and, eventually, wind up the Company. The Acquisition will result in PME becoming the holding company of a trading group focused on the provision of transportation services in Africa. The Directors believe that Sheltam's consolidated shareholding structure under the Company will help facilitate the securing of debt financing on more favourable terms than are currently available to the Sheltam Group as well as better development prospects for the Sheltam Group's business through organic growth and acquisition or joint venture opportunities. The enhanced access to capital should enable the business to capitalise on the opportunities available both in South Africa and more widely within Africa. The restructuring and re-alignment of the structure of the Enlarged Group will allow better assessment of the value of the business which, in turn, should encourage a more representative, and positive, market valuation of PME Shares.
The Consideration Shares will be issued to the Vendors at an effective issue price of US$0.3040 per Share, representing a discount of approximately 33.9 per cent. to the audited Net Asset Value per PME Share of US$0.46 as at 31 December 2013 and valuing the Sheltam Shares and Sheltam Shareholder Loans at approximately US$6.0 million. The effective issue price represents a premium of 52.0 per cent. to the mid-market closing share price of PME Shares of US$0.20 on 25 June 2014, being the trading day immediately prior to the Suspension Date. The Consideration Shares will represent approximately 20.46 per cent. of the Enlarged Share Capital of the Company on Readmission.
If the Acquisition is completed, the Enlarged Group will undertake a restructuring of the existing locomotive leasing and related arrangements, as further described under the heading ''Restructuring'' in this Part I and in section 2.3 of Part II of the Admission Document.
Readmission to trading on AIM
As the Acquisition will result in a fundamental change in PME's business and board control, the Acquisition will constitute a reverse takeover of PME under the AIM Rules and the Company's current investing policy will also cease on completion of the Acquisition. As a result, the Acquisition requires the approval of Shareholders. The Company has therefore convened an extraordinary general meeting of Shareholders, to be held at 10:00 a.m. on 11 August 2014 at Millennium House, 46 Athol Street, Douglas, Isle of Man IM1 1JB, to approve the Acquisition and pass certain related resolutions. Notice of the Extraordinary General Meeting is set out at the end of the Admission Document.
If Resolution 1 is duly passed at the EGM, the Company's existing quotation on AIM will be cancelled and the Company will apply for the Enlarged Share Capital to be re-admitted to trading on AIM following the passing of Resolution 1.
In connection with the Acquisition, the Vendors have entered into the Shareholders Agreement with PUG, an Existing Shareholder, pursuant to which the Vendors will sell 5,715,667 PME Shares to PUG, following completion of the Acquisition and issue of the Consideration Shares. As a result, following Readmission and completion of such sale, the New Shareholder Group (comprising PUG and the Vendors) will each hold 14,025,493 PME Shares and an aggregate of 28,050,986 PME Shares representing 29.07 per cent. of the Enlarged Share Capital.
As a result of the Shareholders Agreement, PUG and the Vendors are deemed to be acting in concert for the purposes of the Takeover Code.
The purpose of this announcement and the Admission Document is to provide you with information on the Proposals and to explain why the Existing Board considers the Proposals to be in the best interests of the Company and the Independent Shareholders, and why they recommend that Existing Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting.
Background to and reasons for the Acquisition
On 19 October 2012, Shareholders approved, inter alia, a new investing policy for the Company pursuant to which the Existing Directors have sought to realise the remaining assets of the Company and return both the Company's cash reserves and proceeds from realisations to Shareholders. In addition, Shareholders approved the return of cash through one or more tender offers and the Company has since returned a total of approximately US$19.6 million to Shareholders.
The Company's remaining assets consist of its transport assets - being a 50 per cent. shareholding interest in, together with shareholder loans made to, Sheltam, a South African based transportation services business, and ten General Electric C30 diesel locomotives leased to Sheltam under the Finance Lease together with the benefit of the remaining 24 years of a 30 year lease of a commercial premises called Peninsula House in Dar es Salaam, Tanzania.
In line with the investing policy adopted in 2012, and with the aim of returning cash to Shareholders during 2013, the Existing Directors undertook a sale process in respect of the Group's interests in Sheltam and the C30 Locomotives. However, during this process it became clear that, under the terms of the existing shareholders agreement between PME's subsidiary, PME RSACO, and the Vendors in respect of Sheltam, there was a misalignment of interests in relation to the proposed divestment by the Group. This misalignment reduced the attractiveness of both Sheltam and the C30 Locomotives to any potential purchaser and it was not possible to reach agreement for sale on terms which the Directors considered acceptable. Furthermore the relationship between Sheltam and PME as both a shareholder and a provider of locomotives under the Finance Lease made it difficult to structure any third party financing for Sheltam.
Whilst no sale was concluded, the sale process did highlight Sheltam's attractiveness as an investment in the transport services market in South Africa and how a re-alignment of the respective interests of its shareholders and its corporate and operational structure would benefit the shareholders in Sheltam, and ultimately the shareholders in PME. Under the terms of the Acquisition (if completed), Sheltam will become a wholly-owned subsidiary of PME (through PME RSACO), and the other shareholders in Sheltam (being the Vendors) will exchange their shares in Sheltam for a stake in PME. Under the Restructuring, the corporate structure of the Enlarged Group and the leasing arrangements for the C30 Locomotives will also be changed.
The advantages of these arrangements are as follows:
• Sheltam is a significant player in the privately owned rail services market in southern Africa and overall has demonstrated an improving operating performance in recent years. It has been hampered in its development by the terms of the Finance Lease for the C30 Locomotives and arrears in payments under the Finance Lease which had built up with the Group from the early years of operations and severely restricted Sheltam's ability to grow its operations. The removal of these obstacles under the Restructuring will improve cash flow and profitability and is expected by the Existing Directors and the Proposed Directors to, in time, provide additional financial resources for Sheltam management to pursue growth opportunities. By enhancing Sheltam's cash flow, profitability and access to funding, the Acquisition and Restructuring may also help facilitate the development of relationships with future customers and potential business partners.
* There are significant opportunities for Sheltam to exploit its position as a transport services
provider, offering its current customer base additional services, and participating in new transportation solutions in a number of countries in which the Sheltam Group is not currently active. Sheltam would thus become an increasingly attractive partner for other businesses wishing to position themselves as full service providers to the mining, transportation and national railway industries. A number of opportunities are currently being examined.
* The simplification of the Sheltam Group corporate structure pursuant to the Acquisition and the Restructuring is expected to allow PME to obtain future borrowings for the Enlarged Group on more favourable terms than have been available.
* By reducing the pressure on Sheltam in servicing debt under the Finance Lease, the prospects of the Enlarged Group paying a dividend will be significantly enhanced. The Existing Directors and the Proposed Directors intend to review PME's dividend policy in conjunction with the results for the year ending 31 December 2014.
* The shareholding structure and leasing arrangements within the Group and the Sheltam Group has made it difficult for investors to assess the potential value of the Sheltam Group. The Acquisition and Restructuring will create a more transparent ownership structure and a more efficient operating and capital structure, which will enable investors and market analysts to better assess the value and performance of the Enlarged Group.
* By focusing on a trading operation based on the development of rail assets in a growing southern Africa market, with a more robust capital structure, the Directors believe that the PME share price should more accurately reflect the underlying value of the business.
* The restructuring of the Enlarged Group and the leasing and operating services arrangements
between members of the Enlarged Group will enhance operational flexibility and is expected to improve revenue and profitability for the Enlarged Group.
Information on Sheltam
Sheltam's business was founded in 1987 by Roy Puffett. Sheltam is currently owned 50 per cent. by PME (through its subsidiary PME RSACO) and 50 per cent. by the Vendors. Sheltam has developed into a transportation services business with operations throughout southern Africa, and from time to time in various other sub-Saharan countries including the Democratic Republic of Congo, Kenya, Uganda, Tanzania and Namibia, employing 400 employees.
Sheltam's locomotive and rail division, Sheltam Rail, has historically been Sheltam's core business and, if the Acquisition is completed, it is intended that this will be the focus of the Enlarged Group's activities going forward. Sheltam Rail is headquartered in Port Elizabeth, in South Africa, with branches in Randfontein and Witbank, in South Africa. Its 38 diesel electric locomotives constitute one of the largest privately owned and operated fleets in southern Africa. The fleet is currently deployed in South Africa, the Democratic Republic of Congo, Mozambique and Swaziland.
Sheltam Rail leases, operates, refurbishes and maintains locomotives for, and provides operations and logistics management to, mining, industrial and public sector businesses - including businesses who own their own privately-owned railway networks. These are typically used for the transportation of products such as coal, gold ore, ferrochrome, platinum, iron ore, copper and cobalt. Clients include a number of multinational corporations and state owned enterprises.
Being fully ISO 9001:2008 accredited and licensed in terms of the Railway Safety Regulator, services include the leasing of locomotives, with or without maintenance services, as well as the maintenance and repair of various makes of diesel and electrical locomotives operating in South Africa (together with rolling stock). Maintenance and repairs are undertaken in the Sheltam Group's workshops and services range from the rebuilding and refurbishing of locomotives to the operation of closed railway systems and logistics management in respect to the haulage of product. By way of example, Sheltam operates a closed rail system for a gold mining client in Randfontein as well as providing its overall maintenance and repairs. Sheltam provides a similar operational service to another client in Virginia. In addition, at Randfontein, Sheltam also maintains and manages the track and signalling system infrastructure.
Sheltam's engineers service the fleet throughout southern Africa, providing technical support and emergency maintenance and repair to locomotives in remote areas. Capabilities include complete track maintenance as well as the installation of new railway lines. In addition to the above, through its training school, Sheltam provides railway related training solutions to the African market. As an example, Sheltam has recently assisted a state owned enterprise in Nigeria in its locomotive driver training requirements.
In the year ending 31 December 2013, Sheltam recorded turnover of approximately ZAR 329.6 million, pre-tax losses of ZAR 48.8 million and as at 31 December 2013 had net assets of ZAR 143.2 million. Losses in 2013 arose primarily as a result of the US Dollar denominated Finance Lease and loan from PME Locomotives to the Sheltam Group. In 2013 there was a sharp decline in the value of the South African Rand, resulting in a relatively large unrealised exchange rate loss during 2013. Sheltam experienced similar losses in 2011.
Further information on Sheltam is set out in Part III of the Admission Document.
Intentions regarding the Company and the Enlarged Group
On completion of the Acquisition, the Company will cease to operate as an investment company and will become the holding company of a trading group focused on the provision of African transportation services. The Board will continue to seek to dispose of Peninsula House in Dar es Salaam.
The initial strategy for the Enlarged Group will be to continue to offer full levels of service to Sheltam's current customer base. The New Board intends to expand Sheltam's current workshop capabilities from which its African strategy will be supported.
Going forward, the New Board intends to use the Sheltam management team's experience of operating in a number of countries and across borders to participate in new logistics solutions in Africa, taking advantage of the anticipated continued expansion of rail networks in southern Africa, which is being supported by the World Bank, and is expected to be enhanced by direct investment in such infrastructure by host governments and inward investment by multi nationals active in the natural resources sector.
It is anticipated that the Sheltam management team will seek to open up new opportunities, teaming up with national rail operators or their foreign partners to improve the utilisation of both existing and new rail networks. In many cases the development of new logistics solutions will best be served by offering customers packaged solutions, including rail and road transportation, as well as handling facilities. To participate in these developments, it is planned that Sheltam will partner with other companies who have the requisite experience in road transportation and freight handling.
The private rail sector in southern Africa is still relatively small and the Board believes that there are opportunities to grow the Sheltam business through selective mergers, acquisitions and joint ventures
as well as by organic growth.
The Board will continue to evaluate the performance of Sheltam's other businesses, namely the Sheltam Marine division and the Sheltam Aviation division on an ongoing basis to ensure the optimal allocation of the Enlarged Group's resources.
The Acquisition
Under the terms of the Acquisition, PME RSACO will acquire the Sheltam Shares and the Sheltam Shareholder Loans from the Vendors, for the allotment and issue by PME of the Consideration Shares at an effective issue price of US$0.3040 per Share. The effective issue price represents a discount of approximately 33.9 per cent. to the audited Net Asset Value per PME Share of US$0.46 as at 31 December 2013 and a premium of 52.0 per cent. to the mid-market closing share price of PME Shares of US$0.20 on 25 June 2014, being the trading day immediately prior to the Suspension Date.
The Acquisition values the Sheltam Shares and Sheltam Shareholder Loans at approximately US$6.0 million. The carrying value of the Group's existing 50 per cent. interest in Sheltam was US$6.84 million as at 31 December 2013.
Details of the Consideration Shares
The Consideration Shares will be issued credited as fully paid and will, in aggregate, represent approximately 20.46 per cent. of the Enlarged Share Capital on Readmission. The Consideration Shares will rank pari passu with the Existing PME Shares in all respects, including the right to receive all dividends or other distributions declared, made or paid after the date of the Admission Document.
New Board and Management
On Readmission, Paul Macdonald and Lawrence Kearns will stand down from their roles as executive directors of the Company, becoming non-executive directors and in the case of Paul Macdonald, remaining as Chairman. In addition, with effect from Readmission, Roy Puffett, Trevor Karg, Steyn Delport, Wes Kruger and James Peggie will be appointed as directors of the Company. Roy Puffett will also become the Chief Executive Officer of the Company, Trevor Karg the Chief Operating Officer, Steyn Delport the Chief Financial Officer and Wes Kruger the Commercial Director.
On Readmission, the Board of Directors will therefore comprise the following:
Paul Martin Macdonald, Independent Non-Executive Chairman, aged 61
Paul Macdonald qualified as a chartered accountant in 1979. He worked for Pilkington plc for sixteen years, the last seven of these in Germany. In Germany he was managing director for Pilkington Deutschland GmbH (holding company) and managing director at both Flachglas AG (glass manufacturer) and Dahlbusch AG (property and holding company). For the last fifteen years Paul has been active in the private equity market and has been successful in developing a number of companies covering a number of industries including Sirona Beteiligungs GmbH (Germany), a leverage buyout from Siemens. Paul is Chief Executive of Helvetica Deutschland GmbH, a Berlin based property services company and he is also a non-executive director of Qatar Investment Fund plc.
Roy Puffett, Chief Executive Officer, aged 62
Roy Puffett is the Founder and Managing Director of the Sheltam Group. He founded the Sheltam Group in 1987 after the Electro-Motive Division of General Motors South Africa closed its manufacturing facility in Port Elizabeth where he had served for 10 years as Senior Field Service Engineer in the Sales and Service Department. He has grown the Sheltam Group to become one of the largest privately owned locomotive owners and service providers on the African continent. Roy led the Sheltam Group in winning the railway concession in Kenya and Uganda - where he founded the Rift Valley Railways group in October 2005 to manage the railway concession. Roy served as managing director of Rift Valley Railways for several years. His involvement with this Company ended in November 2009, when the shareholding in Rift Valley Railways held by an entity controlled by Mr. Puffett was sold.
Trevor Garth Karg, Chief Operating Officer, aged 62
After graduating from Rhodes University in 1974 with a B.Comm Honours degree, Trevor commenced his career in the banking sector, before joining Ford Motor Company in 1978. Trevor spent eight years with Ford Motor Company as Project Controller, with his responsibilities including the acquisition of board approval for all capital expenditure for the introduction of new model derivatives. Following Ford Motor Company's decision to disinvest from South Africa, Trevor joined Executive Projects, a then newly formed business management and consultancy Company, which was founded by three of the senior directors of Ford Motor Company in South Africa. Trevor spent fifteen years in consulting and joined the Sheltam Group in 2000 as Financial Manager, rising to the position of Finance Director in 2005. Trevor is a board member of the Sheltam Group companies and has been a key member of management in the growth of the Sheltam Group in its growth to its current position as one of the largest privately owned locomotive companies in South Africa.
Steyn Gerhard Delport, Chief Financial Officer, aged 35
Steyn has been a consultant to PME since November 2010 and was appointed as a non-executive director of the Sheltam board of directors in December 2010. Steyn graduated from the University of Johannesburg in 2001 with a B.Comm Honours degree in Accounting and joined the FirstRand Banking Group in 2002. Steyn worked in various areas of the bank which included First National Bank Retail, FNB Leverage Finance, Rand Merchant Bank Private Equity, FRB International, Tax and Internal Audit. Steyn left the group in 2006 and joined a niche regulatory and economic capital consultancy, Monocle Solutions, where he obtained international experience in the Basel II Regulatory and Economic Capital frameworks. Steyn joined Masazane Capital, a boutique advisory business, in 2007 where he gained a wide range of corporate finance, debt restructuring, non-recourse finance, general capital market and BEE advisory experience. Steyn joined Symphony Capital, which specialises in non-recourse finance with a particular application in BEE, in 2011 as a director.
Steyn holds Chartered Accountant (South Africa) and Chartered Financial Analyst qualifications.
Wes Kruger, Commercial Director, aged 45
Wes Kruger joined the Sheltam Group in 1999 and has played key roles in the development and negotiation of successful bids for long term railway concessions in the Republic of the Congo (Brazzaville), Ethiopia and Djibouti and Wes also previously played a key role in the successful bid and financial closure for the joint railway concession companies in Kenya and Uganda. Prior to joining the Sheltam Group, Wes spent five years with the Standard Bank of South Africa where he obtained an Associate Diploma from the Institute of Bankers (SA). He left banking to obtain an MBA from the University of Cape Town Graduate School of Business and then provided strategy consulting services to small businesses before joining the Sheltam Group. Wes is currently on the board of several private companies of which three are Public Benefit Organisations/not-for-profit companies. Wes achieved a B Comm Honours degree in Economics in 1992.
Lawrence Albert Kearns, Independent Non-Executive Director, aged 66
Larry was formerly Chairman of Anglo Irish Bank Corporation (I.O.M.) P.L.C. and its subsidiaries in the Isle of Man. Prior to that he was Managing Partner of Ernst & Young in the Isle of Man from 1990 to 2002. After the sale of Ernst & Young fiduciary business in 2002 to Anglo Irish Trust Co Ltd, he became an executive director of that company. On his retirement in 2004 he assumed the position of Chairman. Following a management buyout in December 2006, Anglo Irish Trust Co Ltd was acquired by Equiom Limited, of which Larry is the Chairman. Larry was Chairman of the Isle of Man Society of Chartered Accountants in 1988 and President of the Chamber of Commerce from 1991-1993.
Andrew James Peggie, Non-executive Director, aged 43
James Peggie has a legal background in mergers and acquisitions. He is a director of Principle Capital Advisors Limited based in London, where he takes responsibility for the corporate finance, legal and transactional aspects of the Principle Capital group's investment projects. He has extensive experience of the South African investment markets and has advised on a number of corporate transactions and property related investments in South Africa. He is a non-executive director of Sirius Real Estate Limited, a German real estate company and of Earthchild Clothing (Waterfront)(Pty) Limited, a South African childrenswear and womenswear retailer. Between 2006 and 2010 he was a non-executive director of Liberty plc, the owner of London's famous store. Prior to the Principle Capital group, he was responsible for the corporate finance, legal and transactional affairs of the Active Value group. He is a qualified solicitor and prior to joining Active Value, he worked in the corporate finance division of Sinclair Roche & Temperley (now Stephenson Harwood), an international law firm. James graduated from Oxford University in 1992 and in 1994 from The College of Law (with Distinction).
It is anticipated that certain executive directors and key employees will participate in the management incentive arrangements described below.
The Company intends to identify and appoint an additional independent non-executive director in due course.
Significant Shareholders
As at the date of this announcement, and following Readmission, the Company is aware of the following persons being interested directly or indirectly in 3 per cent. or more of the issued share capital of the Company.
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At present |
After Readmission |
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Shareholder |
Number of PME Shares |
Percentage of issued share capital
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Number of PME Shares
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Percentage of Enlarged Share Capital |
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Qatar Investment Authority |
30,886,653 |
40.24% |
30,886,653 |
32.01% |
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Roy Puffett(1) |
0 |
0.00% |
14,025,493 |
14.53% |
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PUG Investments Limited |
8,309,826 |
10.83% |
14,025,493 |
14.53% |
(1) Including 7,012,747 ordinary shares held by The Sheltam Rail Trust, of which Mr. Puffett is a trustee.
(2) On Readmission, Roy Puffett and The Sheltam Rail Trust will together sell an aggregate of 5,715,667 shares to PUG Investments Limited - equalising the shareholding of PUG Investments Limited with that of the aggregate holding of Roy Puffett and The Sheltam Rail Trust.
Management incentive arrangements
The Directors believe that it is important that executive directors and senior management of the Group are appropriately motivated and rewarded and, accordingly, the Existing Directors and the Proposed Directors are proposing to seek Shareholder approval for the Executive Share Option Plan in which executive directors (other than Roy Puffett, who will not be eligible) and other senior management of the Enlarged Group will be eligible to participate. The Executive Share Option Plan would be implemented following completion of the Acquisition and option grants shall be determined by the Remuneration Committee of the Board, provided that at no time will options granted under the ESOP exceed 5 per cent. of the Enlarged Group's issued ordinary share capital.
Further details of the new Executive Share Option Plan are set out in paragraph 15 of Part VI of the Admission Document. The Directors have no intention at present to introduce an all-employee share plan.
In addition to the new Executive Share Option Plan, the Existing Directors and the Proposed Directors anticipate adopting a new executive bonus scheme, pursuant to which certain executive directors and other senior management of the Group will be eligible to receive an annual bonus. The terms of the new bonus scheme will be determined by the remuneration committee of the Board following completion of the Acquisition.
Further details of the new Executive Share Option Plan are set out in Part VI of the Admission Document.
Principal terms of the Acquisition
Pursuant to the Sheltam Share Purchase Agreement, the Company has conditionally agreed to acquire the Sheltam Shares and the Sheltam Shareholder Loans from the Vendors (the "SPA"). The consideration under the SPA is the issue by the Company and allotment to the Vendors of the Consideration Shares at an effective issue price of US$0.3040 per Ordinary Share.
Completion of the SPA is conditional upon the satisfaction or waiver of various conditions including:
(i) the receipt of merger approval and all other necessary consents and approvals in relation to the Acquisition, including the approval of the Acquisition by the Existing Shareholders;
(ii) the receipt of consent in relation to the Acquisition from First Rand Bank Limited (acting through its First National Bank Division) in connection with the facility provided by it to Sheltam Pty; and
(iii) each condition to the PME Shares being readmitted to trading on AIM being satisfied; and
Each of the Vendors and PME and PME RSACO have provided warranties in relation to their capacity and authority to enter into the SPA and, in the case of the Vendors, in relation to title in the Sheltam Shares that are to be transferred under the SPA. Each of the warranties is to be repeated immediately prior to completion.
The SPA also provides for the termination of the shareholders' agreement to which the Vendors and PME RSACO are party in relation to Sheltam.
In consideration for the allotment and issue by the Company to the Vendors of the Consideration Shares under the SPA, PME RSACO has agreed to issue a loan note in favour of the Company in an amount equal to the aggregate effective issue price of the Consideration Shares.
Related arrangements
Shareholders Agreement
In connection with the Acquisition, the Vendors have entered into the Shareholders Agreement with PUG, an Existing Shareholder, pursuant to which the Vendors will sell 5,715,667 PME Shares to PUG immediately following completion of the Acquisition and Readmission at a price of US$0.30 per PME Share. The Vendors and PUG have also agreed arrangements relating to voting their ongoing holdings of PME Shares.
Stabilisation and Relationship Agreement
The members of the New Shareholder Group have entered into the Stabilisation and Relationship Agreement with the Company and Smith & Williamson pursuant to which they have agreed, with limited exceptions, not to, and to procure that their respective associates and concert parties do not, dispose of PME Shares to, or acquire PME Shares from any third party during a period of twelve months from completion of the Acquisition. In addition, the Vendors and PUG have agreed to exercise their rights as Shareholders so as to ensure that the Company is capable of carrying on its business independently of them.
Restructuring
On completion of the Acquisition, it is intended that the existing Finance Lease in place between PME Locomotives, Sheltam and Sheltam Pty (pursuant to which the Group leases the C30 Locomotives to the Sheltam Group) will be terminated and replaced by a master operating lease between Sheltam Pty and PME Locomotives, under which three locomotives will be leased to Sheltam Pty, two of which are the subject of a sublease to a third party. Another sublease under which a further three locomotives are leased by the Sheltam Group to a third party will be assigned to PME Locomotives with effect from completion of the Acquisition. In addition, Sheltam and Sheltam Pty will sell to PME Locomotives equity interests representing 99.9 per cent of the equity capital of Sheltam Mozambique in consideration for payment of a cash amount calculated based on the net asset value of Sheltam Mozambique and Sheltam Pty will acquire certain tools used for operation and maintenance of the C30 Locomotives from PME Locomotives, provided such sale of equity interests in Sheltam Mozambique and tools will be conditional on grant of exchange control approval by the Bank of Mozambique. A new master operating lease will also be entered into between PME Locomotives and Sheltam Mozambique to facilitate the current sublease by Sheltam Mozambique of four C30 Locomotives to a third party. It is expected that two of the C30 Locomotives which are subject to the new operating lease with Sheltam Pty, together with one further C30 Locomotive which is subject to the Finance Lease and is used by Sheltam Pty, will revert to PME Locomotives on expiry of the relevant sublease and thereafter be leased directly by PME Locomotives to third parties so that over time all ten C30 Locomotives will be leased directly or indirectly by PME Locomotives to third party lessees.
Sheltam Pty and PME Locomotives have entered into an operating and maintenance services agreement, effective on completion of the Acquisition, for the provision of services by Sheltam Pty to PME Locomotives, in respect of the C30 Locomotives other than those which are subject to the master operating lease between Sheltam Pty and PME Locomotives.
On completion of the Acquisition, Sheltam and PME Locomotives will enter a master operating lease under which locomotives owned by Sheltam can be leased to PME Locomotives from time to time. Sheltam Pty and PME Locomotives will also enter into an operating and maintenance services agreement which will permit the provision of operating and maintenance services by Sheltam Pty to PME Locomotives for locomotives leased under the master operating lease.
Dividends
The return of further capital to Shareholders, including payment of any future dividends, will depend on the future earnings of the Company. The Board intends to review the Company's dividend policy in 2015 on the basis of the Group's financial results for the year ended 31 December 2014.
The Board also intends, provided that it appears to the Directors to be commercially appropriate at the relevant time and subject to securing appropriate debt financing for the trading group, to undertake a tender offer after Readmission.
Proposed Directors' Service Contracts
Roy Puffett, Proposed Chief Executive Officer
Service contract with PME
Roy Puffett will enter into a service contract with PME which will become effective on Readmission, on which date Roy Puffett's continuous employment with the Company will commence. Roy Puffett's appointment is terminable on six months' notice by either party. Roy Puffett's salary is £30,000 per annum. The agreement does not provide for any other benefits.
Service contract with Sheltam
Roy Puffett will enter into a service contract with Sheltam which will become effective on Readmission. Roy Puffett's period of continuous employment under the contract is deemed to have commenced on 1 November 1987. Roy Puffett's appointment is terminable on six months' notice by either party. Roy Puffett's appointment will also terminate at the end of the month in which he turns 65 years of age, unless he and Sheltam agree otherwise. Roy Puffett's salary is ZAR 2,229,800 per annum. The agreement also entitles Roy Puffett to be a member of a pension scheme, to which the Sheltam Group will contribute on his behalf, and of the Sheltam Group's medical aid scheme.
Trevor Karg (Proposed Chief Operating Officer)
Service contract with PME
Trevor Karg will enter into a service contract with PME which will become effective on Readmission, on which date his continuous employment with the Company will commence. Trevor Karg's appointment is terminable on six months' notice by either party. Trevor Karg's salary is £30,000 per annum. Under the contract, Trevor Karg is also entitled to participate in the Executive Share Option Plan and any bonus scheme of the Company, the applicability of which in each case is subject to the Board's discretion.
Service contract with Sheltam
Trevor Karg will enter into a service contract with Sheltam which will become effective on Readmission. Trevor Karg's period of continuous employment under the contract is deemed to have commenced on 1 May 2000. Trevor Karg's appointment is terminable on six months' notice by either party. Trevor Karg's appointment will also terminate at the end of the month in which he turns 65 years of age, unless he and Sheltam agree otherwise. Trevor Karg's salary is ZAR 831,000 per annum. The agreement also entitles Trevor Karg to be a member of a pension scheme, to which the Sheltam Group will contribute on his behalf, and of the Sheltam Group's medical aid scheme. Trevor Karg has an existing contract of employment with the Sheltam Group which will terminate upon Readmission. Trevor Karg has agreed to receive a cash amount in lieu of accrued leave under the existing agreement.
Steyn Delport, Proposed Chief Financial Officer
Service contract with PME
Steyn Delport will enter into a service contract with PME which will become effective on Readmission, on which date his continuous employment with the Company will commence. Steyn Delport's appointment is terminable on six months' notice by either party. Steyn Delport's salary is £30,000 per annum. Under the contract, Steyn Delport is also entitled to participate in the Executive Share Option Plan and any bonus scheme of the Company, the applicability of which in each case is subject to the Board's discretion.
Consultancy agreement with Sheltam
From Readmission, Steyn Delport will provide services to Sheltam as a director under a consultancy agreement between Thabilo Financial Consulting Services CC and Sheltam. The consultancy agreement is for an initial term of twelve calendar months from Readmission, after which it will continue on a rolling basis until terminated by either party on three months' written notice. Sheltam may also terminate the agreement without notice in specified circumstances. An annual fee of ZAR 1,052,720 is payable to Thabilo Financial Consulting Services CC under the consultancy agreement.
Wes Kruger, Proposed Commercial Director
Service contract with PME
Wes Kruger will enter into a service contract with PME which will become effective on Readmission, on which date his continuous employment with the Company will commence. Wes Kruger's appointment is terminable on six months' notice by either party, or in the event that Readmission does not occur by 31 August 2014. Wes Kruger's salary is £30,000 per annum. Under the contract, Wes Kruger is also entitled to participate in the Executive Share Option Plan and any bonus scheme of the Company, the applicability of which in each case is subject to the Board's discretion.
Service contract with Sheltam
Wes Kruger will enter into a service contract with Sheltam which will become effective on Readmission. Wes Kruger's period of continuous employment under the contract is deemed to have commenced on 19 August 1999. Wes Kruger's appointment is terminable on six months' notice by either party, or in the event that Readmission does not occur by 31 August 2014. Wes Kruger's appointment will also terminate at the end of the month in which he turns 65 years of age, unless he and Sheltam agree otherwise. Wes Kruger's salary is ZAR 775,293 per annum. The agreement also entitles Wes Kruger to be a member of a pension scheme, to which the Sheltam Group will contribute on his behalf, and of the Sheltam Group's medical aid scheme. Wes Kruger has an existing contract of employment with the Sheltam Group which will terminate upon Readmission and Wes Kruger has agreed to receive a cash payment (in multiple installments) in lieu of leave accrued under the existing agreement.
James Peggie, Proposed Non-Executive Director
Letter of appointment
James Peggie has entered into a letter of appointment with PME which will become effective on and from Readmission, terminating his existing letter of appointment. The appointment will be subject to retirement by rotation in accordance with PME's Articles of Association and earlier termination with immediate effect in specified circumstances. The annual fee payable to James Peggie under the letter of appointment will be £30,000 per annum.
Important Information
The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and, therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. Failure to comply with any such restrictions may constitute a violation of the securities laws of any jurisdiction.
Each of Smith & Williamson Corporate Finance Limited ("Smith & Williamson") and Oriel Securities Limited ("Oriel"), which are each authorised and regulated by the Financial Conduct Authority, are acting exclusively for the Company and for no-one else in connection with the arrangements set out in this announcement and will not be responsible to any other person for providing the protections afforded to clients of Smith & Williamson or Oriel or for providing advice in connection with the arrangements, the contents of this announcement or any matters referred to in this announcement. Neither Smith & Williamson nor Oriel is responsible for the contents of this announcement. This does not exclude or limit any responsibilities which either Smith & Williamson or Oriel may have under the AIM Rules or any other regulatory regime.
No person has been authorised to give any information or make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied upon as having been authorised by the Company, Oriel or Smith & Williamson. None of the Company, Oriel or Smith & Williamson takes any responsibility for, or can provide assurance as to the reliability of, other information that you might be given.
This announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.
The expected timetable including the date of readmission may be influenced by a range of circumstances such as market conditions. There is no guarantee that readmission will occur and you should not base your financial decisions on the Company's intentions in relation to arrangements and readmission at this stage. Acquiring ordinary shares to which this Announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This Announcement does not constitute a recommendation concerning the arrangements. The value of ordinary shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of any action involving the Company or the arrangement described in this announcement for the person concerned. Past performance or information in this Announcement or any of the documents relating to the arrangements cannot be relied upon as a guide to future performance.