Disposal of Leased Assets Pool Company Limited (“LAPCO”) – Category 2 Transaction
(Incorporated in the Republic of South Africa)
(Registration No 1955/002869/06)
Share Code: TRE ISIN: ZAE000007506
(“Trencor” or the “Company”)
DISPOSAL OF LEASED ASSETS POOL COMPANY LIMITED (“LAPCO”) – CATEGORY 2 TRANSACTION
1. THE TRANSACTION
1.1. Shareholders are advised that a wholly-owned subsidiary of the Company, TAC Limited (“TAC”) (as seller), has entered into a stock purchase agreement (“SPA”) with Textainer Limited (“TEX”) (as buyer) dated 2 December 2019. TEX is a wholly-owned subsidiary of Textainer Group Holdings Limited (“TGH”), which is a Bermudan corporation listed on the NYSE.
1.2. TAC owns:
1.2.1. 100% of the issued ordinary shares of US$1,00 each and 100% of the issued non-voting cumulative redeemable preference shares of US$0,01 each, together comprising all of the issued share capital of LAPCO;
1.2.2. rights to dividends by LAPCO declared after 30 June 2019; and
1.2.3. rights to dividends by LAPCO declared before 30 June 2019 but to date unpaid, (collectively, the “Sale Interests”).
1.3. Dividends declared before 30 June 2019 and paid to TAC after 30 June 2019 in July 2019 in the amount of US$247 873 and in October 2019 in the amount of US$225 240 do not form part of the Sale Interests.
1.4. TAC will, on the terms and subject to the conditions set out in the SPA, sell the Sale Interests to TEX (the “Transaction”).
1.5. Unless otherwise agreed between the parties to the SPA, the closing date of the Transaction shall be 3 business days after all the conditions precedent to the Transaction, as set out in paragraph 5 below, have been fulfilled or waived (the “Closing Date”).
1.6. TAC and TEX are referred to hereinafter collectively as the “Parties”.
2. BUSINESS OF TAC AND LAPCO
TAC has been investing in and owning marine cargo containers since 1993. TAC’s wholly-owned subsidiary, LAPCO, owns mainly dry freight containers of various types, which are managed by a number of equipment managers who lease these containers to shipping lines. Textainer Equipment Management Limited, a wholly-owned subsidiary of TGH, continues to manage the largest portion of LAPCO’s container fleet.
3. RATIONALE FOR THE DISPOSAL
3.1. On 18 October 2019, shareholders of the Company approved the distribution in specie of the shares held by the Company in TGH to the shareholders of the Company on the terms and subject to the conditions set out in the circular sent to shareholders on 18 September 2019 (“Unbundling”).
3.2. The Unbundling was, among other conditions, subject to the implementation of the secondary inward listing of TGH shares on the main board of the JSE Limited (“Inward Listing”).
3.3. The Unbundling, the Inward Listing and the Transaction are consistent with the ongoing process of the simplification of the Company, a process which has been previously communicated by SENS.
3.4. The net US$ proceeds received pursuant to the implementation of the Transaction will be retained by, and applied for the benefit of, the Trencor group for the time being.
4. PURCHASE CONSIDERATION
The purchase consideration for the Sale Interests is US$65 526 887 (“Purchase Consideration”) to be paid by TEX to TAC in cash, provided, however, that such consideration shall be an amount of cash equal to US$64 726 887 if any action or inaction by TAC or its affiliates results in, or causes, the failure of the closing to occur by or before 31 December 2019.
5. CONDITIONS PRECEDENT
The Transaction is subject to the fulfilment or waiver of, among others, the following key or material conditions precedent:
5.1. the approval of the Bermuda Monetary Authority to the Transaction;
5.2. the relevant counterparties to a debt facility in place between LAPCO and certain banks must have consented to the closing of the Transaction (to the extent that such consent is required); and
5.3. there shall not have been any material adverse effect on LAPCO between the Signature Date and the Closing Date that still constitutes a material adverse effect on LAPCO as of the Closing Date.
6. BREAK FEE
A Break Fee of between US$1,9 million and US$4,0 million is payable by TAC to TEX if:
6.1. TAC breaches any material provision or material undertaking of the SPA and TEX terminates the SPA as a result of such breach;
6.2. a material adverse effect affecting LAPCO has occurred which is attributable to a breach of the SPA by TAC at any time prior to the date on which the Transaction has been implemented and TEX terminates the SPA as a result of such material adverse effect; or
6.3. either TAC or TEX terminates the SPA at any time on or after 21 February 2020, if the Transaction has not been consummated on or prior to that date (or such other date agreed between the Parties) and at such time any condition precedent to the obligations of TAC to consummate the Transaction has not been satisfied or waived.
7. FINANCIAL INFORMATION
7.1. The IFRS net asset value of the Sale Interests as at 30 June 2019 was US$94 698 006.
7.2. The IFRS attributable profit related to the Sale Interests for the six months ended 30 June 2019 was US$4 636 719.
7.3. The financial information contained in this announcement has not been reviewed or reported on by the auditors of the Company.
8. LISTINGS REQUIREMENTS CATEGORISATION
This Transaction is a Category 2 transaction for the Company in terms of the Listings Requirements of the JSE Limited.
Trencor Services Proprietary Limited
2 December 2019
Financial Advisor and Transaction Sponsor
Investec Bank Limited
Legal and Tax Advisor
Edward Nathan Sonnenbergs Inc.