BayHill Capital Transformational Investment Portfolio Limited LISTING CIRCULAR

118 Pages·2017·0.77 MB·English

BayHill Capital Transformational Investment Portfolio Limited
(Incorporated in the Republic of South Africa)
(Registration number 2017/458073/06)
ZAR X share code: “ZXTIP”
ISIN: ZAEZ00000042
(“BayHill TIP” or “the company”)
LISTING CIRCULAR
The definitions and interpretations commencing on page 9 of this listing circular have, where applicable, been used in these
cover pages.
This listing circular is not an invitation to the public to subscribe for shares but is issued in compliance with the ZAR X
Listings Requirements and the Companies Act, for the purpose of providing information to the public regarding BayHill
TIP and is issued in respect of:
• a private placement to raise approximately R50 000 000 by way of an offer for subscription to invited investors for
up to 50 000 000 shares in the share capital of BayHill TIP at an issue price of R1.00 per share; and
• the subsequent listing of all the issued shares of the company on ZAR X.
2018
Opening date of the private placement (09:00) on Tuesday, 3 April
Closing date of the private placement (12:00) on Friday, 13 April
Results of private placement released on ZAPS on Friday, 20 April
Proposed date of listing on ZAR X from the commencement of trade on (09:00) Tuesday, 24 April
* I nvited investors must advise the CSDP or ZAR X market participant of their acceptance of the private placement shares in the manner and cut-off time
stipulated by the CSDP or ZAR X market participant.
Important points of note
The offer, in the form of a private placement, is being made to invited investors only and will comprise the issue of
approximately 50 000 000 private placement shares at an issue price of R1.00 per private placement share.
Applications in terms of the private placement must be for a minimum subscription of R1 000 000 per investor acting
as principal.
The shares to be issued pursuant to the private placement will rank pari passu with all other shares issued by BayHill TIP.
There are no convertibility or redemption provisions relating to any of the private placement shares offered in terms of the
private placement. The private placement shares will only be issued in dematerialised form. No certificated private placement
shares will be issued. There will be no fractions of private placement shares offered or issued in terms of the private placement.
The private placement will not be underwritten. The listing is not conditional on raising a minimum amount in terms of the
private placement.
Investors should note that the main purpose of the private placement is to raise sufficient capital to fund various seed
investments and to allow the company to establish a presence on an exchange platform that facilitates trade in listed securities.
BayHill TIP undertakes and intends to raise further capital post-listing.
Immediately prior to the private placement and the listing:
• the authorised share capital of the company comprised 10 000 000 000 shares of no par value;
• the issued share capital of the company comprised 100 shares of no par value; and
• the company had no treasury shares in issue.
Assuming that the targeted private placement quantum of shares is subscribed for, immediately after the private placement
and the listing:
• the authorised share capital of the company will comprise 10 000 000 000 shares of no par value;
• the issued share capital of the company will comprise approximately 50 000 000 shares of no par value; and
• the company will have no treasury shares in issue.
At the date of listing, assuming the private placement is fully subscribed for, the anticipated market capitalisation of the
company will be approximately R50 000 000.
ZAR X has granted BayHill TIP a listing of approximately 50 million shares on ZAR X under ISIN: ZAEZ00000042, with
effect from the commencement of trade on Tuesday, 24 April 2018.
Each of the independent reporting accountants and auditors, the attorneys, the validation agent, the appointed advisor and
the company secretary whose names are included in this listing circular, have consented in writing and have not prior to
publication of this listing circular, withdrawn their written consent to the inclusion of their names in the capacity stated and,
where applicable, to their reports being included in this listing circular.
Corporate advisor Appointed advisor Attorneys
Independent reporting accountants
and auditors B-BBEE Validation Agent Bankers
Date of issue: 23 February 2018
This listing circular is available on the company’s website at www.bayhillcapital.co.za and on the ZAR X website at www.zarx.co.za from Friday, 23 February
2018 and is only available in English.
This listing circular contains the terms and conditions for the private placement.
The directors of BayHill TIP, collectively and individually, accept full responsibility for the accuracy of the information provided in this listing circular and certify
that, to the best of their knowledge and belief, there are no facts that have been omitted that would make any statement contained herein false or misleading, and
that all reasonable enquiries to ascertain such facts have been made and that the listing circular contains all information required by law.
The company warrants that the information contained in this listing circular is true and complete and indemnifies ZAR X to the fullest extent permitted by law
in respect of any claim, action or expense arising from, or connected with, and breach of this warranty.
CORPORATE INFORMATION
Registered office of the company Company secretary
BayHill Capital Transformational Investment Portfolio Limited CIS Company Secretaries Proprietary Limited
(Registration number 2017/458073/06) (Registration number 2006/024994/07)
6A Sandown Valley Crescent Rosebank Towers
Sandton, 2196 15 Biermann Avenue
South Africa Rosebank, 2196
(PO Box 651969, Benmore, 2010) (PO Box 61051, Marshalltown, 2107)
Appointed advisor Corporate advisor
Consilium Securities Proprietary Limited Java Capital Proprietary Limited
2nd Floor, President Place (Registration number 2012/089864/07)
Hood Avenue 6A Sandown Valley Crescent
Johannesburg, 2196 Sandton, 2196
(PO Box 2512, Parklands, 2121) South Africa
(PO Box 2087, Parklands, 2121)
Independent reporting accountants and auditors
Attorneys
SizweNtsalubaGobodo Incorporated
Practice number 946016-0000 Cliffe Dekker Hofmeyr Inc.
20 Morris Street East (Registration number 2008/018923/21)
Woodmead, 2191 11 Buitengracht Street
(PO Box 2939, Saxonwold, 2132) Cape Town, 8001
(PO Box 695, Cape Town, 8000)
B-BBEE validation agent
Bankers
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07) Investec Limited
Rosebank Towers (Registration number 1925/002833/06)
15 Biermann Avenue 100 Grayston Drive
Rosebank, 2196 Sandown, Sandton
(PO Box 61051, Marshalltown, 2107) Johannesburg, 2196
Place and date of incorporation
Incorporated in the Republic of South Africa on 12 October 2017.
Offers in South Africa only
This listing circular has been issued in connection with the private placement in South Africa only and is addressed only to
persons to whom the private placement may lawfully be made. The distribution of this listing circular and the making of an
offer through this private placement may be restricted by law. Persons into whose possession this listing circular comes must
inform themselves about and observe any such restrictions. This listing circular does not constitute an offer of or invitation
to subscribe for and/or purchase any of the shares in any jurisdiction in which such offer, subscription or sale would be
unlawful. No one has taken any action that would permit a public offering of shares in the company to occur outside South
Africa.
Applications in terms of the private placement must be for a minimum subscription of R1 000 000 per investor acting as
principal.
Forward-looking statements
This listing circular includes forward-looking statements. Forward-looking statements are statements including, but not
limited to, any statements regarding the future financial position of the company and its future prospects. These forward-
looking statements have been based on current expectations and projections about future results which, although the directors
believe them to be reasonable, are not a guarantee of future performance.
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TABLE OF CONTENTS
The definitions and interpretations commencing on page 9 of this listing circular have been used in the following table of
contents.
Page
Corporate information Inside front cover
Salient features 4
Salient dates and times 8
Definitions and interpretations 9
Listing circular
Section one – Information on the BayHill TIP
1. Name, address and incorporation 14
2. Directors, other office holders or material third parties 14
3. History, state of affairs and prospects of the company 20
4. BayHill TIP Trading Rules 21
5. Share capital of the company 23
6. Options and preferential rights in respect of shares 24
7. Employee share incentive scheme 24
8. Commissions paid or payable in respect of underwriting 24
9. Material contracts 24
10. Interests of directors and promoters 25
11. Loans and borrowings 25
12. Shares issued or to be issued otherwise than for cash 25
13. Properties, assets and business undertakings acquired or to be acquired 25
14. Amounts paid or payable to promoters 25
15. Preliminary expenses and issue expenses 25
Section two – Details of the private placement
16. Purpose of the private placement and the listing 26
17. Salient dates and times 26
18. Particulars of the private placement 26
19. Minimum subscription 30
20. Use of proceeds of the private placement 30
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Page
Section three – Financial information
21. Adequacy of capital 31
22. Report by directors as to material changes 31
23. Statement as to listing on stock exchange 31
24. Historical financial information 31
25. Dividends and distributions 31
26. Liquidity 31
27. Analysis of capital resources 32
28. Off-balance sheet arrangements 32
29. Transactions with related parties 32
Section four – Additional material information
30. Risk factors 33
31. Post-listing trading procedure 33
32. Appointed advisor 33
33. Government protection and investment encouragement law 33
34. Exchange Control Regulations 33
35. Corporate governance 34
36. Litigation statement 34
37. Directors’ responsibility statement 34
38. Consents 34
39. Documents available for inspection 34
40. Certificate of the issuer and board statement 34
Annexure 1 Structure diagram 36
Annexure 2 Information on the directors, management and material third parties 37
Annexure 3 Extracts from the MOI 40
Annexure 4 Capital structure 49
Annexure 5 Extracts from the investment advice and service level agreement 54
Annexure 6 Rules of the BayHill TIP trading dispensation 58
Annexure 7 Trading procedure and fees 73
Annexure 8 Key Accounting Policies of BayHill TIP 75
Annexure 9 Corporate Governance Statement 80
Annexure 10 Risk factors 89
Explanation of application process for BayHill TIP shares 91
Form A: Private placement application form (white) Attached
Form B: Investor declaration for B-BBEE validation purposes (green) Attached
Form C: Computershare custody and settlement agreement for ZAR X Securities
(including Computershare’s summary of its required FICA documentation) (blue) Attached
Form D: Dividend tax – Beneficial owner declaration of status (yellow) Attached
Form E: FATCA self-certification (pink) Attached
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SALIENT FEATURES
The information set out in this section of the listing circular is only an overview and is not intended to be comprehensive. It
should be read in conjunction with the information contained in other sections of this listing circular.
1. INTRODUCTION
BayHill TIP was incorporated as a private company on 12 October 2017 and converted to a public company on
12 December 2017. The company’s financial year-end is 31 March. The company is a simple, transparent, majority
black held investment vehicle with both investment and transformative objectives that seeks to leverage private capital to
deepen B-BBEE ownership and multi-level participation in the economy as well as create a platform to optimise wealth
creation for predominantly black investors, thereby creating a permanent base of black capital.
2. NATURE OF BUSINESS AND BUSINESS STRATEGY
2.1 Overview
BayHill TIP is an investment holding company founded by BayHill Capital with the objective of:
– creating a base of permanent black wealth;
– driving economic transformation in the country using black investment capital;
– generating attractive investment returns for its investors;
– embedding ‘transformation’ into the ethos of savings across the country; and
– building financial inclusion by offering a low cost, easily accessible investment portfolio for smaller investors.
2.2 Investment case
BayHill Tip aims to build an investment portfolio across all investible sectors of the economy and to provide
shareholders with attractive medium to long-term capital growth:
– through exposure to a diversified portfolio of investible BEE opportunities;
– through exposure to off-market BEE transactions that are typically unavailable to smaller and retail investors;
– by leveraging the founder’s network for deal flow; and
– held in the form of a liquid equity instrument.
BayHill TIP aims to provide investors with a liquid exposure to a company managed by an experienced team
that:
– owns a diversified core portfolio of quality listed shares acquired at a BEE discount to market value via BEE
schemes, or directly from the listed companies themselves;
– invests in, and supports black industrialists with a focus on, but not limited to, gap funding requirements; and
– targets special opportunities that offer both attractive returns and are also aligned with the social transformation
objectives of BayHill TIP, including private equity and listed companies.
The dynamic pre-trade compliance process that the ZAR X operating environment affords BayHill TIP will
enable BayHill TIP to maintain its status as a permanent majority black-owned company in terms of the B-BBEE
Codes of Good Practice. By combining BayHill TIP’s Trading Rules (which are designed to regulate black
control and ownership), and BayHill TIP’s investor validation protocols with ZARX’s dynamic trading process
(whereby a real-time shareholder register is maintained), all market trades that may breach BayHill TIP’s Trading
Rules will be restricted to prevent any trade that may result in BayHill TIP no longer being black-owned and
controlled at that time.
In order to implement the Trading Rules, all first-time investors, whether by subscription in the private placement
or purchase on the open market post-listing via their ZAR X market participant, will need to go through a simple
validation process to determine if they are qualified investors (black or black entities) or unqualified investors.
Computershare has been appointed as BayHill TIP’s validation agent to oversee this process. Further information
in this regard can be found in paragraph 4 of this listing circular, as well as in Annexure 6.
The investment committee of BayHill TIP has over 115 years of collective experience in capital allocation and
deal-making. The committee members’ experience includes listed equity (sell and buy side), portfolio management
(listed and private equity), BEE funding and transacting, corporate finance, advisory, asset allocation and
investment strategy.
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The full names, business addresses, qualifications, positions and experience of the investment committee members
are contained in paragraph 2.2.1 of the listing circular.
The investment committee is responsible for all investment decisions and is supported by BayHill Capital,
who acts as the investment advisor to the investment committee. While both the investment committee and
investment advisor are responsible for originating deal flow, the investment advisor will also be responsible for:
– researching and proposing investment opportunities and deal structures to the investment committee;
– monitoring and evaluating current investments and making relevant recommendations;
– monitoring and evaluating the entire investment portfolio of BayHill TIP and making recommendations to
the investment committee regarding the composition thereof; and
– implementing the decisions of the investment committee.
BayHill Capital is not only supported by its own executives, but is also able to draw on the expertise within
Citadel, a minority shareholder in BayHill Capital. Citadel manages in excess of R45 billion of assets.
2.3 Investment strategy
The investment objective is to create a diversified portfolio with multiple return drivers, both in the listed and
unlisted BEE space. It is envisaged that over time the portfolio will diversify to greater than 20 listed (and listed-
related BEE structures) and unlisted holdings, weighted so that listed-facing exposure comprises the core of the
portfolio.
Initially, the portfolio may have periods of high concentration as the balance sheet grows and allows for
diversification. The balance sheet will have to grow through acquisitions to provide the targeted level of
diversification.
Given that most BEE investments are typically locked in for five to seven years, they will be evaluated over such
a time frame, not relative to the equity market, but in accordance with an absolute return framework.
Hence, investments will require long-term growth prospects, but will also be acquired at attractive valuations
(including BEE discounts where appropriate), and will be carefully targeted and evaluated using the investment
skills and established networks of its experienced board of directors, the investment committee and the investment
advisor. BayHill TIP will generally seek to acquire meaningful minority equity interests that confer negative
control and board representation in established businesses. BayHill TIP may also, in certain cases, seek to acquire
majority interests or passive minority interests.
Exposure to listed companies will typically take the form of a locked in BEE scheme that will have its unique
characteristics (timeframe, gearing, unique covenants, etc.). Each listed investment will be analysed according
to its unique characteristics and the BEE discount associated with such, as well as on the merit of the underlying
business. BayHill TIP will also invest in and support black industrialists and other empowerment opportunities,
including private equity and listed companies.
As such, BayHill TIP’s investments may include listed equity securities, unlisted or over-the-counter equity
securities, appropriate funds, special purpose vehicles, derivatives of such securities and direct investments in
listed or unlisted businesses including black industrialists. In order to maximise the yield on its unutilised cash
resources, the company will invest these funds in a prudent combination of bank deposits, suitable short-term
money market instruments and market-facing protected equity strategies.
BayHill TIP will seek to build a portfolio of investments that meet the criteria set out above while also providing
an appropriate level of diversification across different industries and sectors. It is the directors’ intention that no
single investment should constitute in excess of 33.3% of the overall value of the investment portfolio. There may
be times when this threshold is breached, but it is not intended that such breach will continue for an extended
period.
While playing the role of a strategic investor in the underlying firms, BayHill TIP:
– may exit investments where the economic rationale for the investment deteriorates;
– will assist in driving transformation within the underlying investments; and
– will apply corporate and governance oversight and intervention as appropriate.
Where appropriate, BayHill TIP will act as a strategic BEE investor in the businesses in which it invests and will
actively play a role in setting, monitoring and influencing transformation objectives. It will also seek to play a
role in contributing to the firm’s prospects, especially in smaller firms where it can meaningfully aid in building
the firm’s business.
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2.4 Investment Advisor Fees
2.4.1 Investment advice fee
The investment advisor fee, calculated at 1% per annum (excluding VAT) of the gross value of the
BayHill TIP investment portfolio, will be calculated by BayHill TIP and paid monthly in arrears by
BayHill TIP to BayHill Capital.
2.4.2 Performance fee
A performance fee of 10% per annum (excluding VAT) of the outperformance of the performance
benchmark, being CPI plus 4%, calculated over a five-year rolling period, on a high-watermark basis and
paid monthly by BayHill TIP to BayHill Capital based on the following formulae:
After five years have elapsed from the date of listing, the following formula shall apply:
Performance fee = {[(Change in the IFRS-calculated net asset value per BayHill TIP ordinary share (net
of costs) over the preceding 60 months less CPI plus 4% over the preceding 60 months)*0.1]/60}*the
average number of BayHill TIP ordinary shares in issue over the 60-month period.
Performance fees paid in the initial five years of BayHill TIP’s existence (before the above formula can
apply) shall only become effective after twelve calendar months from listing and the rolling period used
for calculation shall be prorated on the following formula:
Performance fee = {[(Change in the IFRS-calculated net asset value per BayHill TIP ordinary share over
the preceding X months less CPI plus 4% over the preceding X months)*0.1]/X}*the average number of
BayHill TIP ordinary shares in issue over the period of X months,
where X = number months since listing.
By way of example, if after 36 months, the IFRS net asset value per share has grown from R1.00 to R1.50,
per BayHill TIP ordinary share, while CPI+4% would imply a required hurdle of the share growing from
R1.00 to R1.33, then the performance fee would be calculated as R1.50 less R1.33 equalling R0.17, to
be multiplied by 10%, which would give a R0.017 performance fee per BayHill TIP ordinary share.
As BayHill TIP has been listed for 36 months, the R0.017 is divided by 36 to give a performance fee
of R0.00047 per BayHill TIP ordinary share in issue. The total nominal performance fee would be
calculated as R0.00047 multiplied by the average number of BayHill TIP ordinary shares in issue over
the 36-month period.
For further information on the fee structure, please see the salient points of the investment advice and
service level agreement as detailed in Annexure 5 of this listing circular.
2.5 Operational costs
Where BayHill Capital provides any operational services to BayHill TIP, BayHill Capital will recover those
expenses from BayHill TIP on a cost recovery basis. However, as it is not the intention to burden BayHill TIP
with expenses in the early phases of BayHill TIP’s existence, BayHill Capital may elect not to recover expenses
born by it on behalf of BayHill TIP as BayHill Capital deems fit.
2.6 Gearing
BayHill TIP may use prudent levels of gearing, supported by well-considered fundamentals, in its underlying
investments in order to realise its investment objectives outlined in paragraph 2.1 above. The nature and extent
of gearing used in each case will be determined by the cash-generation ability of the investment.
Gearing will, where appropriate, be ring-fenced to specific transactions in order to mitigate risk at a BayHill TIP
balance sheet level.
2.7 Dividends
BayHill TIP is a capital-raising and investment entity designed to offer shareholders long-term capital appreciation
through the growth in the NAV of its underlying investments. As such, the board does not intend to declare
regular dividends but may choose to pay dividends, at some time in the future.
BayHill TIP’s ability to pay dividends is a function of the dividends received from portfolio companies, which
is not anticipated in the short term and over which BayHill TIP has limited direct control. Furthermore, the
current intention of the Board is that cash raised by BayHill TIP through realisations would be either reinvested
or returned to shareholders by way of a share repurchase.
BayHill TIP may revise its dividend policy from time to time.
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3. PROSPECTS
In terms of investment pipeline, the board is confident that significant scale and scope of opportunities exist in the
market segment being targeted and has identified a number of opportunities. Having already identified a pipeline of
potential acquisition targets, it is the company’s intention to make its first significant investment within the six-month
period following its listing on ZAR X.
4. DETAILS OF THE PRIVATE PLACEMENT
The private placement will be constituted by the issue of approximately 50 000 000 shares at an issue price of R1.00
per share.
Investors should note that the main purpose of the private placement is to allow the company to establish a presence
in the listed space in order to use its paper to acquire investments in listed BEE schemes and to acquire various seed
investments. BayHill TIP will undertake to raise further cash through various issues of shares once the company is
listed.
There are no convertibility or redemption provisions relating to the private placement shares being offered in terms
of the private placement. Private placement shares will be issued in dematerialised form only. No fractions of private
placement shares will be issued pursuant to the private placement. The private placement will not be underwritten. The
listing is not conditional on raising a minimum amount in terms of the private placement.
5. STATEMENT AS TO LISTING ON ZAR X
ZAR X has granted BayHill TIP a listing of all of its issued shares on ZAR X under ISIN: ZAEZ00000042 with effect
from the commencement of trade on Tuesday, 24 April 2018.
6. ACTION REQUIRED
Applications for private placement shares must be made by invited investors in accordance with paragraph 18 of this
listing circular and by completing the application form and the validation form which accompanies this listing circular.
7. FURTHER COPIES OF THE LISTING CIRCULAR
The listing circular may be obtained on the company’s website at www.bayhillcapital.co.za and on the ZAR X website
at www.zarx.co.za from Friday, 23 February 2018.
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SALIENT DATES AND TIMES
The definitions and interpretations commencing on page 9 of this listing circular apply to these important dates and times:
2018
Opening date of the private placement (09:00) Tuesday, 3 April
2
Closing date of the private placement (12:00) Friday, 13 April
Results of the private placement released on ZAPS on Friday, 20 April
Notification of allotments on or from Friday, 20 April
3
Segregated depository accounts updated and credited in respect of dematerialised shareholders Tuesday, 24 April
BayHill TIP shares listed on ZAR X from the commencement of trade (09:00) Tuesday, 24 April
Notes
(1) All references to dates and times are to local dates and times in South Africa. These dates and times are subject to amendment. Any such amendment
will be released on ZAPS.
(2) Invited investors must advise the CSDP of their acceptance of the private placement shares in the manner and cut-off time stipulated by the CSDP.
(3) CSDPs effect payment on a delivery-versus-payment basis.
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