Imara Holdings Limited’s attempt at preventing a hostile takeover from FWA Financial Ltd has fallen through following two major developments that tilted the scales in FWA’s way. This week, Competition Authority unconditionally approved the proposed acquisition of 71.23% of the issued share capital of Imara Holdings Ltd by FWA Financial Ltd, leading to a 100% shareholding.
In approving the acquisition, the antitrust body determined through the analysis of the facts of the merger, that the proposed transaction is not likely to result in the prevention or substantial lessening of competition, or endanger the continuity of the services offered in the market under consideration. The market structure in the provision of investment banking, financial products and services to corporate, institutional and private clients will not be altered and as such does not raise any competition concerns.
The regulatory approval is a major victory for FWA, a financial holding company incorporated in Mauritius, as it now set to be a controlling majority shareholder in Imara following a major development that saw high ranking shareholders accepting the takeover offer. A total of 59,494,301 Imara Shares are currently in issue, of which 17,234,046 Imara Shares are held by FWA, representing approximately 28.97% of the issued share capital of Imara. The Offer by FWA was therefore to acquire the remaining 42,260,255 Imara Shares which are currently not held by them. The Offer was made directly to shareholders for a cash consideration of P2.10 per share.
As part of the Offer Conditions, it was announced that that the Offer will become Unconditional once FWA has received valid acceptances in respect of not less than 12,572,599 Imara Shares or such number of Imara’s shares that when aggregated with FWA’s current shareholding results in FWA owning no less than 50.1% in nominal value of IHL Shares after the implementation of the Offer (“Acceptance Condition”). FWA has since announced that as of 16 December 2016 FWA has now accepted offers for IHL shares representing 35,597,118 shares (60%) and, combined with its extant holding such share represents 89 % of the total nominal value of IHL Shares.
FWA has confirmed that if, following the implementation of the Offer, FWA owns more than 80% of the Imara Shares in issue, then it is the intention to approach the BSE to delist Imara on the basis that the requisite shareholder spread is no longer extant. Furthermore, the company said if the Offer is accepted by Imara Shareholders holding such number of Imara Shares as will result in FWA (together with its existing beneficial shareholding) beneficially holding (directly or indirectly) not less than 90% of the entire issued share capital of Imara, then FWA reserves the right to implement a compulsory acquisition of the remaining Shares in accordance with the Botswana Companies Act.
The success of FWA in achieving the threshold they needed for a complete takeover of Imara adds to the drama that has pitied FWA against the Independent Board of Imara which has been desperately fending off FWA’s advances ever since the takeover was proposed. When making its offer to take over the whole of Imara, FWA said Imara has failed to hold steady amid difficult trading conditions in the sub-Saharan African markets in which it operates in.
African economies have suffered a sharp decline in the past 18 months, driven by weak commodity prices which led to declines in currencies versus the US Dollar, difficult economic conditions, currency controls, reduced liquidity, lower share prices and reduced equity trading volumes. Indicative of the challenges experienced by Imara is the 50% drop in the value of the flagship Imara African Opportunities Fund in US Dollar terms in the period from 30 April 2015 to 30 September 2016 as a result of the decline in African equity values and redemptions.
FWA has also noted that Imara has high central costs for a company of its size, adding that the high central costs reflect the fixed costs associated with its listing on the Venture Capital Board of the BSE as well as fixed costs associated with the complexity of its business model. “In determining the Offer price, FWA has taken in to account IHL’s track record, the value of IHL’s balance sheet at 30 April 2016 and IHL’s growth prospects. FWA therefore considers that the all-cash nature of the Offer allows Shareholders to realise their entire investment at a fair value given the uncertainties facing African economies and IHL at this time,” the acquiring company said.
While it appeared that FWA had made a convincing case for the takeover, the Independent Board rejected the offer price. The board of directors of Imara were obligated to form the independent board for the purpose of considering the terms and conditions of the offer. The Independent Board, in accordance with its obligations in the Takeover Regulations, appointed KPMG as an Independent Expert to provide it with a fair and reasonable opinion regarding the fairness and reasonable of the offer consideration.
“The Independent Board, taking into account the opinion of the Independent Expert that the terms and conditions of the Offer are not fair and not reasonable, has considered the Offer and is of the opinion that the Offer undervalues the Company and, on that basis, recommends that Imara Shareholders reject the Offers,” the independent board advised before adding that the Independent Board considers the offer to be an opportunistic move to take advantage of the current short-term adverse trading environment for the IHL Group and to acquire control of it cheaply.
The Independent Board’s recommendation was to be soon overshadowed by Imara’s interim loss and the biggest blow came through shareholders who somersaulted on the promises not to sell .In an Offeree Response Circular issued by the Independent Board of Imara to Shareholders, it was revealed that Mrs Ann Mackeurtan, a non-executive director, who indirectly holds 2 623 124 shares, has indicated that she will not be accepting the Offer. The board has since released a statement that Mrs. Mackeurtan, having reflected on her original decision, has confirmed to the Independent Board on 9 December 2016, that she will now be accepting the Offer in respect of all of her shares.
With FWA having exceeded the acceptance condition and the offer now becoming unconditional as to acceptances-which means it has acquired sufficient acceptances from shareholders of Imara- the takeover is certain to go ahead. Imara shareholders will be getting P2.10 per share, which is 19% lower than the current share price. The offer consideration values the entire issued share capital of the company at approximately P125 million, based on shares outstanding. This is lower than the actual market value of Imara which is currently at P154 million on the Botswana Stock Exchange.
Based on the offer consideration, the aggregate value of the consideration payable by FWA to Imara Shareholders is P88.7 million. FWA will be funding the offer consideration by means of internal resources and a line of finance received from Standard Chartered Bank Mauritius Limited. Imara’s shares have not moved in response to the hostile takeover that begun over two months back, further strengthening the case of FWA to delist Imara after they get complete control of it.
When making the offer, FWA reasoned that the offer price of P2.10 per share is attractive to shareholders, providing a liquidity event as well as representing a fair value proposition. The Mauritius based company had made the absence of liquidity for Imara shares on the Venture Capital Board of the BSE a rallying call for shareholders to exit their positions by selling the shares to FWA. The strategy appears to have worked.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.