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PROPOSED SPECIFIC REPURCHASE OF HCI SHARES

01 Dec Uncategorized

R1. INTRODUCTION

HCI has concluded agreements (“Repurchase Agreements”) with certain directors of HCI, directors of HCI subsidiary companies and/or associates of such directors (“the Parties”) in terms of which HCI will acquire 2,000,000 HCI ordinary shares (“HCI Shares”), subject to the terms and conditions referred to below, at a price of R150 per HCI Share (the “Specific Repurchase”).

2. RATIONALE FOR THE SPECIFIC REPURCHASE

The HCI board of directors believe that the Specific Repurchase, at the repurchase price of R150 per HCI Share, is at a discount to HCI’s intrinsic net asset value and is an efficient use of HCI’s cash and facilities.

The repurchase price of R150 per HCI Share represents a discount of:
– 5.6% to the closing price on Friday, 28 November 2014; and
– 3.1% to the 30 day volume weighted average price up to and including Friday, 28 November        2014 (“VWAP”).

The HCI Shares which are the subject of the Specific Repurchase represent a small portion of the Parties’ HCI Shares and the directors and members of management involved in the Specific Repurchase are committed to HCI with a significant portion of their wealth invested in the Company.

The Parties have entered into an option agreement, comprising a put and call option, with the Southern African Clothing and Textile Workers’ Union (“Sactwu”) in respect of Sactwu’s shares in Montauk Holdings Limited (“Montauk Holdings”) which will be listed on the Main Board of the JSE Limited (“JSE”) on Monday, 8 December 2014. Sactwu has indicated that it may divest from its investment in Montauk Holdings as the investment does not fit its investment mandate of supporting businesses that operate in South Africa and, as such, the option agreement will provide Sactwu with the opportunity to exit its 30% shareholding in Montauk Holdings in an orderly manner which doesn’t adversely impact Montauk Holdings or its shareholders.

The call option provides that the Montauk Holdings ordinary shares (“Montauk Holdings Shares”) held by Sactwu can be acquired by the other parties to the agreement for an aggregate consideration of R142 645 000 (plus an amount of R3.44 per additional Montauk Holdings Share acquired by Sactwu prior to the exercise of the call option) during the call option period of 180 days commencing on the date of listing.

The put option allows Sactwu to sell the Montauk Holdings Shares to the other parties to the agreement at the lesser of the 20 day VWAP prior to the date on which the put option is exercised and the aggregate amount of R142 645 000 (plus R3.44 per additional Montauk Holdings Share acquired by Sactwu prior to exercise of the put option) during the put option period which commences when the call option period ends and lasts for 20 business days thereafter.

The Parties intend utilising the cash received from the Specific Repurchase to fulfil their obligations in terms of the option agreement concluded with Sactwu.

3. TERMS OF THE SPECIFIC REPURCHASE

HCI has agreed to acquire the following HCI Shares at a price of R150 per HCI Share subject to the
conditions precedent set out below:
Party                                                                        Number of shares
The trustees for the time being of The Corjo Trust                                      500,000
Andre van der Veen                                                                      150,000
Majorshelf 183 Proprietary Limited                                                      350,000
Circumference Investments Proprietary Limited (“Circumference”)                       1,000,000
TOTAL                                                                                 2,000,000

The Repurchase Agreements are subject, inter alia, to the fulfilment or waiver of the following conditions
precedent:

–   the listing of Montauk Holdings [Limited] on the Main Board of the JSE [Limited (“JSE”)];
–   the shareholders of HCI (excluding the Parties and their associates) approving the necessary        special resolution, by way of a specific authority, required to implement the Specific Repurchase;
–   the receipt of the necessary approvals from the JSE [Limited];
–   the board of directors of HCI approving the Specific Repurchase in terms of the Repurchase       Agreements and adopts the requisite resolutions in accordance with sections 46 and 48 of the        Companies Act, 71 of 2008, as amended (“Companies Act”);
–   the passing by the shareholders of Circumference (and Circumference’s holding company, if        necessary) of a special resolution in terms of section 115 read with section 112 of the Companies Act approving the sale by Circumference of the HCI Shares to HCI; and
–   the obtaining of the consents of the bankers of HCI to the Specific Repurchase.

The repurchase of the HCI Shares and the payment of the purchase consideration in terms of the Specific epurchase will take place on the third business day in respect of the repurchase from Circumference and on the tenth business day in respect of the repurchase from the remaining Parties after the fulfilment of the last of the conditions precedent referred to above (“Repurchase Dates”). The HCI Shares repurchased will be cancelled and their listing terminated on or, as soon as possible after, the Repurchase Dates. After the Specific Repurchase and the cancellation of the HCI Shares referred to above, HCI will hold 5,500,000 HCI Shares in treasury.

4. CATEGORISATION

In terms of the JSE Listings Requirements the Specific Repurchase is a related party transaction as:
– The Corjo Trust, is a family trust of Mr Copelyn, the Chief Executive Officer of HCI;
– Mr van der Veen is a director of various subsidiaries of HCI;
– Majorshelf 183 Proprietary Limited is an associate, as defined in the JSE Listing Requirements, of
Mr Govender, the Chief Financial Officer of HCI;
– Circumference Investments Proprietary Limited is an associate, as defined in the JSE Listing
Requirements, of Mr Copelyn and Mr Golding, the Chief Executive Officer and former Executive
Chairman of HCI respectively.

Consequently in terms of the JSE Listings Requirements, in order to implement the specific repurchase a
special resolution of the Company must be passed by securities holders excluding the above mentioned
directors and their associates. As the purchase price of R150 per HCI Share is at a discount to the 30 day
VWAP, a fairness opinion is not required.

In terms of the Listings Requirements, the votes of the Parties will be taken into account in determining
whether a quorum of shareholders is present at the general meeting, but such votes will not be taken into
account in determining the results of the voting at the general meeting.

5. IMPACT ON THE FINANCIAL INFORMATION OF HCI

The Specific Repurchase will be funded from HCI’s cash and/or debt facilities and will result in a decrease
in equity as a result of the repurchase of HCI Shares.

6. CIRCULAR TO SHAREHOLDERS

A circular, including a notice of general meeting, detailing the terms of the Specific Repurchase and
actions required by shareholders will be posted to shareholders on or about Friday, 9 January 2015. It is
expected that the general meeting will be held on or about Tuesday, 10 February 2015.