1. Introduction

HCI and Seardel are pleased to announce that they have entered into an agreement (the “Transaction Agreement”) whereby HCI will sell to Seardel its 70% interest in HCI Invest 3 Holdco Proprietary Limited (“SPV”), which, following an internal restructuring within the HCI group, will hold a 63.9% interest in Sabido Investments Proprietary Limited (“Sabido”). Sabido is the investment vehicle that houses HCI’s investments in e-tv, eSat tv, yfm and Sasani Studios (the “Proposed Transaction”).

Shareholders of HCI are referred to the announcement released by HCI on 17 May 2013 (the “HCI Sactwu Announcement”), which sets out the details of the transactions between HCI and the Southern African Clothing and Textile Workers Union (“Sactwu”) (the “Sactwu Transactions”).

2. The Proposed Transaction The current structure of HCI’s investment in Sabido is as follows:

[Please refer to the pdf below for the image]

The current structure of HCI’s investment in Seardel is as follows:

[Please refer to the pdf below for the image]

Note: HCI holds 509 734 821 ordinary shares in Seardel and 11 580 352 N-shares in Seardel, which equates to an effective economic interest and voting interest in Seardel of 76.3% and 81.1% respectively.

The Proposed Transaction will be implemented in terms of the following transaction steps:

1. HCI will implement an internal restructuring on the basis set out in the Subscription and Sale of Shares Agreement entered into by HCI and SPV (“Restructuring Agreement”) in terms of which SPV will acquire HCI’s 63.9% interest in Sabido. HCI shareholders and Seardel shareholders are referred to the HCI Sactwu Announcement which sets out in more detail the internal restructuring of HCI and the capital structure of SPV.

2. In terms of the Transaction Agreement, after implementing the internal restructuring HCI will dispose of its 70% equity stake in SPV to Seardel for a purchase price of R560 million. The purchase price will be settled by Seardel by the allotment and issue to HCI of 350 million new N- shares in Seardel at a value of R1.60 per N-share. The ordinary shares in SPV will be sold to Seardel ex the right to receive any dividends which will be declared by SPV, based on the dividend which SPV will receive from Sabido, in May 2013 and November 2013. Both such dividends will accrue to HCI or its nominee.

The Proposed Transaction will result in the following structure:

[Please refer to the pdf below for the image]

Note: As a result of the Proposed Transaction, HCI will hold a total of 361 580 352 N-shares in Seardel and will continue to hold 509 734 821 ordinary shares in Seardel, which equates to an effective economic interest and voting interest of 84.4% and 81.2% respectively. HCI’s remaining 30% stake in SPV will be acquired by Sactwu in terms of the Sactwu Transactions as detailed in the HCI Sactwu Announcement.

3. An overview of Sabido

Sabido is a media group that is jointly owned by HCI and Remgro Limited. The media group grew out of the success of, South Africa’s first and only private commercial free-to-air television channel, which launched in 1998 and which is wholly owned by Sabido.

In 2008, Sabido launched South Africa’s first 24-hour television news channel, the eNews Channel. It also operates a pan-African entertainment channel, Africa, which broadcasts in 49 countries across the continent and has direct investments in broadcasting businesses in Botswana and Ghana.

Sabido continues to expand its media business with investments in content production and distribution as well as the launch of services across multiple platforms and territories.

4. Rationale for the Proposed Transaction

4.1 Benefits for HCI

The Proposed Transaction is intended to achieve several strategic objectives for HCI, including, inter alia:

– The Proposed Transaction, together with the Sactwu Transactions, will create an empowered media platform;

– Investors will have greater visibility in respect of the performance of the media investments in Sabido;

– The Proposed Transaction is anticipated to unlock value for HCI shareholders; and

– As a subsidiary of a separately listed investment holding company, Sabido will have greater access to debt and equity capital markets to fund future growth opportunities.

4.2 Benefits for Seardel

The Proposed Transaction will provide Seardel with the following benefits:

– Seardel shareholders will obtain exposure to an investment in a cash generative media asset;

– Greater scale and appeal amongst institutional investors looking for more direct exposure to Sabido; and

– An opportunity to acquire a significant asset in an attractive industry which is consistent with Seardel’s stated strategic objective of diversification.

5. Conditions precedent for the Proposed Transactions

The Transaction Agreement remains subject to the fulfilment or waiver, inter alia, of the following conditions precedent:

– the Restructuring Agreement becoming unconditional;

– Seardel obtaining a fairness opinion from an independent expert acceptable to the JSE Limited (“JSE”) in compliance with the JSE Listings Requirements (“Listings Requirements”) and the Seardel board of directors confirming that the Proposed Transaction is fair;

– the passing by the shareholders of Seardel, HCI and SPV of the shareholders’ resolutions required to authorise, approve and implement the Proposed Transaction in terms of the Companies Act, 2008, as amended, the Listings Requirements and Seardel’s Memorandum of Incorporation; – the obtaining of the consents of the bankers of HCI and Seardel to the Proposed Transaction; and

– the obtaining of such regulatory approvals as may be necessary, including, but not limited to, the approval of the JSE and the Competition Authorities in terms of the Competition Act, 1998, as amended.

6. Financial effects and salient dates The financial effects and the salient dates relating to the Proposed Transaction will be released in due course.

7. Categorisation of the Transactions

7.1  HCI categorisation

The Proposed Transaction constitutes a category 2 transaction for HCI in terms of the Listings Requirements.

7.2  Seardel categorisation

The Proposed Transaction constitutes a category 1 transaction for Seardel in terms of the Listings Requirements and is a related party transaction as a result of HCI being a material shareholder of Seardel.

8. Documentation

A circular will be issued by Seardel to Seardel shareholders in accordance with the Listings Requirements, which will incorporate a notice convening a general meeting of Seardel shareholders to approve the Proposed Transaction.

9. Cautionary announcement

HCI shareholders and Seardel shareholders are advised that the Proposed Transaction, if successfully concluded, may have a material impact on the price of the HCI’s and Seardel’s securities. Accordingly, HCI shareholders and Seardel shareholders are advised to exercise caution when dealing in HCI and Seardel securities until a further announcement incorporating the financial effects of the Proposed Transaction is made.

Click here to download the SENS announcement