Shareholders of Texton Property Fund have voted against the repurchase of shares in terms of the put option related to Texton’s 2014 broad-based black economic empowerment (BBBEE) deal, the company noted in a statement on Monday.
Under the terms of the transaction, Texton Broadbased Empowerment RF, a BEE vehicle, acquired Texton shares funded by a loan from the Public Investment Corporation (PIC). Texton agreed to a put option as security for the BEE vehicle’s loan, subject to various terms and conditions, the most important being the requirement that shareholder approval be obtained for the acquisition of the shares under the put option.
The high turnout at Texton’s general meeting on December 28, 2018, saw active shareholders making an unambiguous vote against the repurchase, with 99.99% of those who voted voting against the share repurchase. Nearly 278-million shares were eligible to vote of which nearly 234-million, or 76% of the eligible votes, elected to participate. Shares that did not qualify to vote included treasury shares and those held by the PIC and Texton Broadbased Empowerment RF.
About 10% of the eligible votes abstained from voting. The general meeting was called after, first, a loan default occurred when the minimum share cover ratio was breached as Texton’s share price remained lower than the original issue price. Further, in August and September 2018, the PIC gave notice that it was exercising the put option.
The put option was conditional on receiving the necessary shareholder and regulatory approvals required to repurchase the BEE shares, equalling 13.79% of Texton’s issued ordinary share capital. The put option repurchase price equated to R12.90 per Texton share. Compared with the closing price of Texton shares of R4.10 on the last practicable date, November 20, 2018, this represented a premium of about 215% to the market price.
Based on legal advice received from two separate senior counsel and after having followed the prescribed legal processes in terms of the contract, the shareholders’ no vote means that Texton is released from its obligation to repurchase shares in terms of the put option.
“This matter is the last of a number of legacy issues that has created uncertainty for Texton investors. Given the outcome of this vote, we now look forward to working with all shareholders to regain the value that has been lost over the last number of years and to place them in the position that they were initially in,” Texton Property Fund CEO Marius Muller commented.