Adcock Ingram Integrated Report 2016

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128 | Integrated Report 2016
ANNUAL FINANCIAL STATEMENTS (continued)
D. REVISED BLACK ECONOMIC EMPOWERMENT (BEE) TRANSACTION
The scheme was revised, with the intention to form a more meaningful participation for BEE participants and to provide Adcock Ingram with
increased BEE ownership credentials, as part of its continued efforts to embrace broad-based equity participation.
Adcock Ingram shareholders sold 25 842 960 or approximately 15% of their shares (scheme shares) in proportion to their shareholding, to Ad-
Izinyosi (RF) Proprietary Limited (Ad-I) in exchange for 25 842 960 securities in AdBEE (RF) Limited (AdBEE) on 17 July 2015. Thus, for every one share
contributed to the scheme, a shareholder received one security in AdBee, entitling the holder to a pro rata portion of the Ad-I indebtness (the
obligation to pay the value of an Adcock Ingram share on the JSE calculated on a rolling 30-day traded VWAP immediately preceding the end of the
transaction. Refer to significant accounting judgements and estimates disclosure in accounting policy.
The Bophelo Trust and Blue Falcon invested 15% (R5,4 million and R14,7 million respectively) of the proceeds received from Bidvest in Ad-I.
BEE PARTICIPANTS
The shareholders of Ad-I, the entity which participates on behalf of strategic partners and holds the shares on behalf of the BEE beneficiaries, are as follows:
• CIH Projects (Pty) Limited (26,67%)
• Blue Falcon 64 Proprietary Limited (26,67%)
• BDH Group Proprietary Limited (26,67%)
• Bophelo Trust (20,00%)
The following table illustrates the movement in units issued to employees during the year:
Equity-settled
2016
Number
Issued and outstanding at the end of the year 4 024 200
Available for future distribution to qualifying employees 1 144 392
No shares have vested at the end of the year and none are exercisable.
KEY TERMS AND CONTRACTUAL OBLIGATIONS
The key terms and contractual obligations of the scheme shares and securities are as follows:
• the scheme shares will not be entitled to participate in any dividend distributions during the transaction period;
• AdBee securities are listed on the Main Board of the JSE in the “Specialist Securities – Other Securities” sector as an Asset Based Security
under the share code “ADE”;
• whatever Ad-I may be entitled to receive from Adcock Ingram (other than dividend distributions), as the holder of the scheme shares, is
deemed to be renounced to AdBEE and onward renounced by AdBEE to the securities holders;
• Ad-I issued one A redeemable preference share and one B redeemable preference share with no par value respectively to Adcock Ingram
Holdings Limited and AdBEE;
• preference shares are not entitled to vote unless a resolution is proposed for a distribution of any nature to Ad-I shareholders;
• if the Adcock Ingram share price is below R36,00 per share during the empowerment period of four years, the directors of AdBEE can
convene a meeting of the AdBEE securities holders to decide whether they should waive the AdBEE resolutive condition or not;
• if the Adcock Ingram share price is below R72,00 per share at the 4th anniversary, the Ad-I indebtedness to the holders of the securities
will be calculated using the 30-day VWAP of the Adcock Ingram share price before this date, but not less than a minimum price of R52,00
per share and not more than R72,00 per share;
• If the Adcock Ingram share price is above R72,00 per share at the 4th anniversary, the Ad-I indebtedness shall be settled and the
remaining Adcock Ingram shares in Ad-I released from the pledge;
• If the Adcock Ingram share price is below R52,00 per share at the 4th anniversary, the scheme will be cancelled and the shares in Ad-I
released from the pledge; and
• AdBEE will assume the obligation of Ad-I to the securities holders to settle the scheme consideration.
SHARE CALL OPTIONS
• 8 000 000 share call options in Adcock Ingram Holdings Limited were allocated to shareholders in proportion to the scheme shares
tendered, entitling the holders thereof to subscribe for Adcock Ingram shares;
• call options may be exercised at the strike price of R72,00 per Adcock Ingram share, at any time within the 30-day period prior to the
transaction end date; and
• R20,8 million was incurred as a once-off cost for the call options. The call options are fair valued using a Black-Scholes-Merton model
taking into account the expected volatility, expected dividend yield, spot and strike price of the option, the exercise date and the risk-free
interest rate of the call option.
For further details of the scheme arrangements, refer to “Circular To Adcock Shareholders” issued 28 May 2015 which could be found on
the investors’ section on
ANNEXURE B – SHARE-BASED PAYMENT PLANS CONTINUED