EOH issues final rights offer to BEE partner Lebashe
JSE-listed technology services group EOH has issued final terms of its rights offer and its specific issue of shares to its strategic investment partner Lebashe Investment Group.
This, as the company looks to raise funds to reduce its legacy debt.
In a statement, the technology services firm says on 13 December 2022 at the company’s extraordinary general meeting, EOH shareholders voted unanimously for EOH to proceed with the rights offer.
The combined capital raise from the rights issue and specific issue will amount to R600 million.
EOH says it has received irrevocable undertakings from existing shareholders representing 30% of the issued shares to follow their rights in full.
According to the firm, the rights offer issue price of R1.30 represents a discount of approximately 30% to the theoretical ex-rights price (TERP) which is in line with the average discount to TERP of the last ten rights offers of similar sized offerings relative to market capitalisations.
It explains that given the structure of the rights issue, all existing shareholders who follow their rights will experience no dilution in their shareholding.
The proceeds of the rights offer and specific issue will be used to settle the majority of the senior bridge facility, reducing interest payments by approximately R100 million per annum.
Further, it adds, Standard Bank of South Africa(acting through its Corporate and Investment Banking division), has, subject to a successful conclusion of the capital raise and fulfilment of conditions precedent, approved new long-term facilities of R700 million and general banking facilities of R500 million to replace the existing debt, which significantly reduces the margin above JIBAR that EOH pays.
This brings the facilities in line with normal corporate facilities available in the market and significantly reduces the onerous administration of a four-lender syndicate, says the company
EOH Group CEO Stephen van Coller says: “We are excited to have secured the success of the capital raise through the support of our major shareholders and interested underwriters.
“In the context of the legacy issues that the existing business has had to solve, namely the significant debt burden complicated by rising and onerous interest rates, repayments to OEMs and the Special Investigating Unit, the significant support shown by existing and new shareholders is testament to the turnaround of EOH and the quality of the underlying core remaining businesses. It was always a strategic imperative to fix the capital structure of the business in order to take full advantage of the opportunities EOH has through its leading technology offerings and world class skills base.
“The rights issue and the resultant refinancing of the debt package as outlined will normalise the capital structure for EOH as promised to the market.”
EOH notes that it is pleased to report that the rights issue has been de-risked through the support of major shareholders providing irrevocable undertakings to follow their rights, as well as underwriting commitments from both existing and new shareholders to subscribe for any shares not taken up by EOH shareholders.
Over and above their commitment to follow their rights, it says Lebashe has signed an irrevocable undertaking to subscribe for R100 million new EOH shares, being 76 923 077 shares at the rights offer issue price of R1.30.
Lebashe’s shareholding in EOH after the rights issue and specific issue will be approximately 23.5%.
Andrew Mthembu, chairman of the EOH board, says: “I am extremely proud of this team and thrilled by the vote of confidence in EOH demonstrated by all stakeholders, including our existing shareholders, the underwriters and our now single banker.
“EOH has a strong investment case and I urge shareholders to consider following their rights and maintain their economic interest in EOH. I would particularly like to thank the Lebashe Investment Group for their continued support and belief in EOH. As a board, we are looking forward to this next stage of our journey unhindered by the large legacy debt and interest burden and focusing on the growth of the business for the first time in many years.”
Megan Pydigadu, EOH CFO, adds: “Securing the success of the rights issue and capital raise will bring significant and immediate benefits to EOH. We will save approximately R100 million per annum in interest charges based on current interest rates, freeing up resources to invest in numerous exciting growth opportunities.”