Reunert Limited : Reunert preference shares redemption and delisting
June 05, 2013 at 04:21 am EDT
By
Share
Reunert preference shares redemption and delisting
5 June 2013 8:35
Shareholders of Reunert Preference Shares ("Preference Shareholders") were advised that the company has resolved to redeem all the Preference Shares in accordance with Article 3.1.2.5.5 of the company's Memorandum of Incorporation ("Redemption"). The Preference Shares will be redeemed for R2.10 per Preference Share ("the Redemption Consideration") totalling R735 000 for the 350 000 Preference Shares and will thereafter be delisted from the JSE Ltd.
Rationale
The Preference Shares have traded minimally over the last two years and the dividend payable to Preference Shareholders has, in real terms, reduced to such a level as to be of very little benefit to Preference Shareholders. The preference dividend is currently 11 cents per Preference Share per annum. Preference Shareholders receive an aggregate of R38 500 per annum on the existing 350 000 Preference Shares. The preference dividend is subject to the payment of dividend withholding tax which further erodes the benefit to Preference Shareholders.
The Redemption is further supported by the fact that the company is not maintaining the JSE Listings Requirements' requisite spread of preference shareholders, being a minimum of 50 public shareholders, excluding employees and their associates, and the company does not anticipate that the shareholder spread will significantly improve in future.
The Redemption will, once complete, significantly reduce the administration fees payable by the company to its Transfer Secretaries as well as to Strate Ltd.
Taxation Implications of the Redemption
Preference Shareholders were advised to consult their professional advisers regarding their individual tax positions as a result of the Redemption and in particular the receipt by them of the Redemption Consideration.
This paragraph contains a high level summary of the tax implications of the Redemption for Preference Shareholders. This tax analysis is not comprehensive or definitive and does not take account of individual circumstances of Preference Shareholders.
The Redemption will be funded partly from the company's contributed tax capital on which there is no dividend withholding tax payable and partly from income reserves. No secondary tax on companies' credits will be used in giving effect to the Redemption. The contributed tax capital of each Preference Share is R2.00 per share. Accordingly, the balance of the redemption amount of 10 cents per share will be funded from income reserves. In terms of the Income Tax Act, Reunert will be required to withhold dividend withholding tax of 15% on the portion of the redemption amount paid from income reserves from all holders of Preference Shares who are not exempt from dividend withholding tax. The amount of the redemption from reserves, net of dividend withholding tax equals 8.5 cents per Preference Share. The company's tax number is 9100/101/71/7/P and there are 350 000 Preference Shares in issue.
A Preference Shareholder who is not a South African resident for tax purposes may not be liable for the South African taxes set out above. Preference Shareholders are cautioned to consult their professional advisers in this regard.
Financial effects
The total value of the Redemption is R735 000. As a result, the effect on the company's net asset value, net tangible asset value, earnings and headline earnings per share is insignificant.
Salient dates and times
Circular posted to shareholders -- Wednesday, 5 June 2013
Last day to trade to be eligible for the redemption -- Friday, 21 June 2013
Suspension of the Preference Shares on the JSE trading system -- Monday, 24 June 2013
Record Date in order to receive the Redemption Consideration -- Friday, 28 June 2013
Payment of the Redemption Consideration -- Monday, 1 July 2013
Listing of Preference Shares terminated on the JSE trading system at commencement of trading on Tuesday, 2 July 2013
Circular
A circular setting out full details of the Redemption of the Preference Shares, including salient dates and times and a form of surrender, where applicable, has been posted to Preference Shareholders today, 5 June 2013.
Reunert Limited is a diversified group organized around 3 areas of activity:
- electric engineering services (51.9% of net sales): design, manufacturing, installation and maintenance of electric cables, fiber optics, transformers, low, medium and high voltage switching systems, etc. primarily for the public services, mining industry and real estate construction sectors;
- telecommunication services (22.2%): design and development of office solutions and vocal communication systems, and networking of data for professionals, individuals, government administrations and parastatal companies;
- design and manufacturing of defense systems and equipment (25.8%): communication tactic systems, terrestrial and naval research systems, fuses, artillery products, etc.;
- other (0.1%).
Net sales are distributed geographically as follows: South Africa (70.8%), Africa (15.1%), Asia (5.6%), Europe (4.9%), Australia (1.9%) and Americas (1.7%).
REUNERT LIMITED 
By 
