Hulamin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/013924/06)
Share code: HLM ISIN: ZAE000096210
("Hulamin" or "the Company")

1. Introduction and rationale

In 2007 Hulamin concluded transactions that resulted in Black Economic Empowerment ("BEE") parties acquiring an effective 15% interest in Hulamin (the "BEE Schemes"). Chaldean Trading 67 (Proprietary) Limited ("BEE SPV") acquired a 10% interest in the form of A ordinary shares, which shares carry only voting rights, and a 10% interest in the ordinary shares of Hulamin Operations (Pty) Ltd, a wholly-owned subsidiary of Hulamin. In addition the Hulamin Management Share Ownership Trust ("MSOP Share Trust") and the Hulamin Employee Share Ownership Trust ("ESOP Share Trust") (the "Trusts") jointly acquired a 5% interest in Hulamin in the form of B ordinary shares.

In June 2010 Hulamin raised R750 million by way of an underwritten rights issue of 100,000,000 new ordinary shares of 10 cents each ("Rights Issue Shares"), at a subscription price of R7.50 per share, in the ratio of 46.25457 rights for every 100 Hulamin ordinary shares held on the record date ("Rights Issue").

The Articles of Association of Hulamin ("Articles") do not confer upon the holders of A ordinary shares and B ordinary shares specific rights to participate in the Rights Issue.
As the Rights Issue Shares were issued at a discount to the market price, the issuing of these additional ordinary shares has resulted in a dilution of both the value of the shares and the voting rights held by the BEE parties. The Rights Issue has consequently had a negative impact on Hulamin's BEE status.

Shareholders were advised at the time of the Rights Issue that the Company would subsequently approach ordinary shareholders, where necessary, to approve certain adjustments to these BEE Schemes to restore the BEE parties to the same economic and/or voting position they were in prior to the Rights Issue, which would also ensure that Hulamin's BEE rating is preserved.

The Company therefore proposes to amend the terms of the BEE Schemes to neutralise the impact of the Rights Issue ("BEE Schemes Amendments"). In addition, the Company proposes to amend the Articles to allow the Directors to approve changes to the BEE Schemes which may be required following any future corporate actions ("Articles Amendments"). The BEE Schemes Amendments and Articles Amendments are hereafter collectively referred to as "the Amendments".

The following authorities will be required from ordinary shareholders in order to effect the Amendments:

  • an increase in the authorised share capital;
  • a specific issue of 2 261 240 B ordinary shares for cash;
  • an issue of 11 235 471 A ordinary shares;
  • cancellation of the current memorandum of association and adoption of a new memorandum of association;
  • amendments to the Articles to allow for the impact of the Rights Issue to be neutralised in respect of the holders of the B ordinary shares;
  • amendments to the Articles to give authority to the Directors to approve changes to the BEE Schemes as a result of future corporate actions;
  • authority to repurchase A ordinary shares and B ordinary shares; and
  • approval to provide financial assistance.

2. The Amendments

2.1 Increase in authorised share capital
In order to place the BEE SPV in the same voting position and the participants of the Trusts in the same economic position as they were in prior to the Rights Issue, additional A ordinary shares will be issued to the BEE SPV and additional B ordinary shares will be issued to the Trusts. The authorised share capital will therefore have to be increased to ensure there are sufficient A ordinary shares and B ordinary shares to be able to effect these Specific Issues, which will necessitate the cancellation of the current memorandum of association and the adoption of a new memorandum of association. The authorised share capital will be increased by the creation of an additional 11 000 000 A ordinary shares and 7 000 000 B1 ordinary shares.

2.2 The share issues
Additional A ordinary shares will be allotted and issued at par value, and B1 ordinary shares and B3 ordinary shares will be allotted and issued at fair value (the "Specific Issues"), as follows:

Share class: B1 ordinary shares issued to ESOP Share Trust
Number of shares to be issued: 2 197 700
Subscription consideration: R1,328,801
Subscription price per share: R0.60

Share class: B3 ordinary shares issued to MSOP Share Trust
Number of shares to be issued:  63 540
Subscription consideration:  R565,556
Subscription price per share: R8.90

Share class: A ordinary shares issued to BEE SPV
Number of shares to be issued:  11 235 471
Subscription consideration: R1,123,547
Subscription price per share: R0.10

2.3 Amendment of strike price
The issue price (strike price) of the B2 ordinary shares will be amended from R21.44 to R18.93 and the Articles will be amended to authorise the Directors to issue additional B ordinary shares or to amend the terms of the B ordinary shares in the event of a corporate action (e.g. issue for cash, vendor placing, rights issue or capitalisation issue of shares), so that the fair value of the shares is similar before and after such corporate action.

2.4 Specific authority to repurchase shares
Hulamin currently has the right to repurchase the A ordinary shares and certain of the B ordinary shares from the BEE SPV and the Trusts, respectively, on the termination of the BEE Schemes. The creation and issue of additional A ordinary shares and B ordinary shares will require an extension of the authority of Hulamin to cover the repurchase of these additional shares.

2.5 Facilitation of the subscription
Hulamin will provide a capital contribution of R1,123,547 to the BEE SPV to enable it to subscribe for the additional A ordinary shares, and Hulamin's operating subsidiaries will provide a capital contribution of R1,894,357 to the Trusts to facilitate their subscription for the additional B1 ordinary shares and the additional B3 ordinary shares.

3. Financial effects

The Specific Issues will not have a significant impact on the net asset value, net tangible assets, earnings per share and headline earnings per share of the Company.

There is no change in economic value arising from the issue of additional A ordinary shares as these shares carry only voting rights. The issue of additional B1 ordinary shares and B3 ordinary shares and the amendment to the strike price of the B2 ordinary shares does not result in an incremental IFRS 2 cost. There are therefore no financial effects resulting from the Specific Issues. The reporting accountants have reported to the Directors on the financial effects of the Specific Issues, which report is available for inspection at the Company's registered office.

The financial assistance to be provided is an inter-company transaction and thus has no financial effect on the financial position and performance of Hulamin. Other than the transaction costs relating to the Amendments (including the Specific Issues), which amounts will be deducted from equity, there are no other financial effects.

4. Conditions precedent to implementing the Amendments.

Implementation of the Amendments is subject to the following conditions being fulfilled:

  • approval of the required resolutions at the general meeting by a requisite majority of ordinary shareholders; and
  • registration by CIPRO of the special resolutions set out in the notice to the general meeting posted to ordinary shareholders today.

5. Salient dates and times 2011

Last day to lodge forms of proxy with the transfer secretaries to vote at the general meeting by 15h00 on Tuesday, 22 February
General meeting to be held at 15h00 on Thursday, 24 February
Results of general meeting released on SENS on Thursday, 24 February
Results of general meeting published in the press on Friday, 25 February
Registration of special resolutions with CIPRO on or about Friday, 11 March
The above dates and times are subject to change. Any material changes will be released on SENS and published in the press.
All times referred to in this announcement are local times in South Africa.

6. Independent fairness opinion

When the A ordinary shares and B ordinary shares were first created upon the implementation of Hulamin's BEE transaction, the JSE Limited ("JSE") required a fairness opinion to be issued because unlisted voting instruments were created. The JSE has again requested that a fairness opinion be obtained from an independent expert as the proposed amendments to the Articles and Specific Issues involve the issue of additional, and/or adjustment to the terms and conditions of, unlisted voting securities in terms of a special dispensation granted by the JSE to waive the restrictions outlined in paragraph 4.24 of its Listings Requirements, which dispensation is conditional upon Hulamin obtaining the appropriate fairness opinion.
Hulamin has accordingly engaged the services of Vunani Corporate Finance, trading as a division of Vunani Capital (Proprietary) Limited ("Vunani") as independent expert, and they have confirmed that the proposed Amendments (including the Specific Issues) are fair to Hulamin ordinary shareholders. Their full opinion is included the circular posted to ordinary shareholders today.

7. General meeting

A general meeting of ordinary shareholders will be held at 15h00 on 24 February 2011 at the company's registered offices, Moses Mabhida Road, Pietermaritzburg, to consider and, if deemed fit, pass, inter alia, the resolutions required to authorise the Amendments.

8. Posting of circular

A circular was posted today to ordinary shareholders holding certificated shares, as well as to those ordinary shareholders holding dematerialised shares, that have elected to receive such documents. Ordinary shareholders who hold dematerialised shares and have not elected to receive such documents must contact their CSDP or broker in the manner and at times stipulated in the terms of the agreement entered into between such shareholders and their CSDPs or brokers should they wish to receive the relevant documents.

31 January 2011

Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Legal advisors
Bowman Gilfillan Inc.

Independent expert
Vunani Corporate Finance

Reporting accountants
PricewaterhouseCoopers Inc.