SACTWU reduces stake in HCI while acquiring three key properties worth over R500 million
Image: David Ritchie
The South African Clothing and Textile Workers Union (SACTWU) will lower its stake in Hosken Consolidated Investments (HCI) as part of two agreements that include buying three HCI properties, including Gallagher Estate, for R549.7 million in total.
HCI stated in a regulatory, related party announcement to the JSE on Friday that the reason for the transactions was that SACTWU wished to increase its cash holdings for its operations, and to increase its interests in additional investment properties to generate more regular, ideally monthly cash flow to fund its operational and member benefit programs and other related employment projects.
Because HCI only distributes cash dividends to shareholders on a six-monthly basis, SACTWU had recently been disposing of HCI shares on the market through the JSE order book to enable it to fund its ongoing obligations. However, these disposals were not sustainable over a longer period, and SACTWU engaged HCI to find solutions for its cash flow requirements.
In terms of a cash share purchase agreement, HCI subsidiary Squirewood Investments 64 Proprietary concluded an agreement with its material shareholder SACTWU, in terms of which Squirewood will purchase 1.1 million HCI shares owned by SACTWU, for R131 per HCI share, or R144.1m in total.
HCI's share price closed 2.12% lower at R127.27 on the JSE on Friday.
In another transaction, HCI will sell its shares in and shareholder loan claims against three owned property subsidiaries in the HCI group: Gallagher Estate Holdings, HCI Rand Daily Mail, and HCI Solly Sachs House, to SACTWU for R549.7m in total.
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Squirewood will purchase 4.2 million HCI shares beneficially owned by SACTWU, which represents about 4.9% of the total HCI shares in issue, for a purchase price of R131.00 per HCI share, or R549.7m in total.
SACTWU is the beneficial owner of about 23.8% of the total HCI shares, and should the Squirewood share transaction and property purchase be implemented, the trade union will be left holding about 18.4% of the total HCI shares in issue.
SACTWU has held its interest in HCI since 1997, primarily as an income-generating asset and significant investment vehicle to fund the trade union's objectives, aiming to benefit union members through investments in, inter alia, media, hotels, casinos, coal mines, and transport.
SACTWU holds significant property interests outside of its investment in HCI, with most of its properties being occupied by the union itself.
'The parties agreed, given SACTWU's desire to increase its interests in property, that investments in immovable property generating sustainable monthly cash flows would likely be the most appropriate asset class for SACTWU to acquire to service its needs,' HCI said.
SACTWU conducted due diligence on HCI's property assets, two independent valuations were done, and 'pursuant to their investigation, SACTWU selected the three subject companies it wishes to acquire,' HCI stated.
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