Conduit Capital Limited (JSE:CND) News - Investment in Conduit Capital Through an Issue of Preference Shares and Withdrawal of Cautionary Announcement

Conduit Capital Limited
Incorporated in the Republic of South Africa
(Registration number 1998/017351/06)
Share code: CND ISIN: ZAE000073128
(“Conduit Capital” or “the Company”)


INVESTMENT IN CONDUIT CAPITAL THROUGH AN ISSUE OF PREFERENCE SHARES
AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


1. INTRODUCTION

  The board of directors of Conduit Capital (“the Board”) is pleased to inform shareholders that Mmuso
  Capital Hybrid Fund I Proprietary Limited (“Mmuso Capital”) has agreed to invest R500 million in the
  Company as a long-term investor.

  To this end, on 20 December 2021 Conduit Capital entered into a binding term sheet (“Term Sheet”)
  with Mmuso Capital on behalf of the Mmuso Consortium (as detailed in paragraph 2.2 below) in terms
  of which the Mmuso Consortium will, subject to certain conditions, subscribe for a new class of shares in
  Conduit Capital, being redeemable convertible participating preference shares (“Preference Shares”), in
  an aggregate value of R500 million (“Proposed Transaction”).

  The Term Sheet requires the Company and Mmuso Capital to enter into substantive legal documents
  (“Transaction Documentation”) to give effect to the Proposed Transaction.


2. THE PROPOSED TRANSACTION

   2.1     Salient features of the Preference Shares

           2.1.1 Coupon:         The Preference Shares will attract a cumulative coupon of 95% of the
                                 prime rate from time to time and the Coupon will be payable only on
                                 redemption of the Preference Shares by Conduit Capital as
                                 contemplated in paragraph 2.1.3 below.

           2.1.2 Conversion:     The Mmuso Consortium is entitled to convert the Preference Shares into
                                 ordinary shares in Conduit Capital at any time during the period between
                                 the 3rd and 5th anniversary of the completion of the Proposed
                                 Transaction (“Conversion Period”) at the lesser of a value of 63.14
                                 cents and such lesser value as would result in the Mmuso Consortium
                                 holding 53.5% (on a fully diluted basis) of all ordinary shares on
                                 completion of the conversion (“Specific Issue”).
                                 The Mmuso Consortium will be entitled to pre-emptive rights with
                                 respect to the issuance of new ordinary shares any time before the
                                 Conversion Period.

           2.1.3 Redemption:     If the Mmuso Consortium has not converted the Preference Shares on
                                 or before the last day of the Conversion Period, then Conduit Capital will
                                 be entitled to redeem the Preference Shares at any time thereafter for
                                 the face value of the Preference Shares plus the Coupon. For the
                                 avoidance of doubt, the Preference Shares will continue accruing the
                                 Coupon after the Conversion Period until the date, if any, of redemption
                                 by Conduit Capital.

   2.2     Rationale for the Proposed Transaction

           Conduit Capital is an investment holding company with investments in the insurance sector
           through its wholly-owned subsidiaries, Constantia Life Limited, Constantia Life and Health
           Assurance Company Limited and Constantia Insurance Company Limited, as well as a number of
           insurance-related subsidiaries (the “Insurance Business”). Conduit Capital is also the owner of
           several high-quality non-insurance businesses.

           Mmuso Capital, which was founded in June 2012 and is managed by professionals with
           experience in the financial services and insurance sector, focusses on impact investments in
           South Africa.

           The shareholders of the Mmuso Consortium (a company to be incorporated under the laws of
           South Africa), are or will be Mmuso Capital, ISIGQI Proprietary Limited and Bazalathi Holdings
           Proprietary Limited.

           The Proposed Transaction will enable Conduit Capital to capitalise the Insurance Business for
           growth.

           The parties to the Term Sheet (“Parties”) acknowledge that the Mmuso Consortium, which
           wishes to appoint the Company’s chief executive officer, will be entitled to nominate one
           representative director per 15% shareholding and up to a maximum of three directors, to the
           Board, as well as one representative director to each of the subsidiary boards of Conduit Capital.

     2.3   Intended use of the funds

           The capital raised pursuant to the Proposed Transaction will provide Conduit Capital with the
           necessary funding to invest in the Insurance Business to access long-term growth opportunities
           at or below the Insurance Business’ stated 95% or better combined ratio target.

     2.4   Conditions

           The implementation of the Proposed Transaction will be conditional on the fulfilment or waiver, as
           the case may be, of the following Conditions:

           2.4.1    the Company and Mmuso Capital entering into the Transaction Documentation and the
                    Transaction Documentation becoming unconditional in accordance with their terms;

           2.4.2    the completion of the due diligence of Conduit Capital by the Mmuso Consortium and the
                    findings thereof being satisfactory to the Mmuso Consortium;

           2.4.3    Conduit Capital obtaining any relevant regulatory approvals and/or consents as may be
                    necessary to give effect to the Proposed Transaction and the Specific Issue, including
                    without limitation, the Prudential Authority, the JSE Limited, the Takeover Regulation
                    Panel and/or the Competition Authorities which it may require and as applicable;

           2.4.4    shareholders of the Company providing the relevant shareholder approvals for the
                    waiver of the mandatory offer provisions as set out in the Companies Act, 2008 (Act 71
                    of 2008), as amended (“Waiver”);

           2.4.5    Conduit Capital issuing a circular relating to the Proposed Transaction and the Specific
                    Issue, which circular will include revised listing particulars and an independent expert
                    report opinion in relation to the Waiver; and

           2.4.6    shareholders of the Company providing the relevant shareholder approvals required to
                    amend the Company’s memorandum of incorporation, obtain the Waiver, effect the
                    Proposed Transaction and complete the Specific Issue.


3. IRREVOCABLE LETTERS OF UNDERTAKING

  The Company has, as set out in the table below, received irrevocable letters of undertaking from
  shareholders who will be entitled to vote on the Proposed Transaction and the Specific Issue at a
  general meeting to be convened pursuant to the notice of general meeting to be included in the circular
  referred to in paragraph 2.4.5 above holding or representing a total of 437 826 356 shares, equivalent to
  57.27% of all shares eligible for voting (which shares exclude those held as treasury shares). All such
  shareholders or representatives have indicated that they will vote in favour or recommend to their clients
  to vote in favour of the Proposed Transaction and the Specific Issue, to the extent that they are permitted
  to do so under the JSE Listings Requirements.

                                                                                                  Percentage
                                                                                 Number of      shareholding
    Shareholder                                                                     shares               (%)
    Leo Chou*                                                                  174 656 150             22.85
    Protea Asset Management LLC                                                263 170 206             34.43
                                                                               437 826 356             57.27
   * relating to the shares owned by Leo Chou, his family and the shares managed by Leo Chou.


4. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

   Shareholders are referred to the renewal of cautionary announcement released on SENS on
   30 November 2021 wherein shareholders were advised, inter alia, of the proposed transaction by a third
   party to capitalise Conduit Capital with a cash investment. Shareholders are hereby advised that
   following the release of this announcement, caution is no longer required when dealing in the Company’s
   securities.


Johannesburg
20 December 2021


Corporate Advisor and Sponsor to Conduit Capital
Merchantec Capital

Legal Advisor to Conduit Capital
Africa Solved

Date: 20-12-2021 04:30:00
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