Africa Opportunity tidies up share structure – The Board of Africa Opportunity Fund Limited has announced the creation and issue of Contingent Value Rights to holders of its Existing Ordinary Shares (details of which are set out below) and conversion of the outstanding C Shares into New Ordinary Shares.
Africa Opportunity issued 29,200,000 C Shares in March 2014. Ordinarily, after the net proceeds of the C Share issue had become substantially invested, the C Shares would have converted into Ordinary Shares. However, a dispute relating to title to Africa Opportunity’s investment in Shoprite was ongoing and therefore the conversion was postponed, awaiting the resolution of the dispute.
On 1 February 2017, they announced that the arbitrator had concluded that the company had not obtained good title to 637,528 of the 679,145 Shoprite shares which they believed they owned. The estimated loss to the company was circa US $5 million, which equated to a reduction in NAV of approximately US$0.12 per existing Ordinary Share. The company subsequently announced in its quarterly report for the period ended 31 December 2016 that it would appeal the arbitrator’s award. That appeal is currently ongoing.
The Board made a provision of US $0.12 per existing Ordinary Share to reflect the arbitrators’ award and subsequent NAV announcements have been made on that basis.
The Board has talked to shareholders and had decided it makes sense to get on with the C share conversion. This will have logistical and administrative advantages to the company (as it would no longer have to segregate and maintain its assets in two separate pools) as well as saving costs (including the costs of maintaining two separate lines of listed shares) and with an enlarged single class of shares could lead to improved marketability and stock liquidity.
The Net Asset Values attributable to the existing Ordinary Shares and the C Shares as at the Calculation Date (being the close of business on 11 August 2017) were $0.868 per existing Ordinary Share and $0.910 per C Share. Accordingly, the Conversion Ratio, as calculated in accordance with the Articles and the Prospectus, is 1.1034 New Ordinary Shares for every C Share. The Conversion Date (at which time Conversion will take place) shall be 23 August 2017. The NAV of the Existing Ordinary Shares includes an accrual to reflect the Board’s best estimate of the costs and expenses to be incurred by the Company in respect of the future conduct of the Shoprite Dispute.
Contingent Value Rights
The Board has decided that existing Ordinary Shareholders should benefit from any ultimate favourable conclusion to the Shoprite Dispute and has resolved to issue Contingent Value Rights (CVRs) to existing Ordinary Shareholders prior to the C Shares converting into New Ordinary Shares.
The company will agree to pay to the holders of the CVRs the amount in cash or any net benefit of a successful conclusion or settlement of the Shoprite Dispute.
Other characteristics of the CVRs are as follows:
- they will be created on the basis of one CVR for every existing Ordinary Share;
- they will not be listed or quoted on any stock exchange;
- they will be issued directly to the underlying holders of the Existing Ordinary Shares;
- they will not be held in Euroclear/Clearstream;
- they will be freely transferable by way of private treaty;
- their value is highly contingent and dependent on the outcome of the Shoprite Dispute. There can be no guarantee that the Shoprite Dispute will be concluded in a manner that is favourable to the Company and will result in a payment being made by the Company in respect of the CVRs;
- they are passive instruments with no votes and the conduct of the Shoprite Dispute is vested in the Company which shall, without reference to the holders or the CVRs, be entitled to take all decisions (including as to settlement and/or continuance of the Shoprite Dispute) in respect of the Shoprite Dispute as it in its sole discretion shall determine; and
- the Company’s obligation to make payment to the holders of the CVRs is subject to compliance by the Company with all laws and regulatory requirements applicable to it.
AOF : Africa Opportunity tidies up share structure