EDGR.zw | Circular to Shareholders: Renounceable Rights Offer

THE PROPOSED TRANSACTION

The Board is proposing a Renounceable Rights Offer to recapitalize Edgars by way of a rights offer of 274,745,630 (Two hundred and seventy- four million, seven hundred and forty five thousand, six hundred and thirty) ordinary shares of a nominal value of ZWL$0.01 (1 ZWL Cent) each, at a Rights Offer price of ZWL$0.2548 (25.48 ZWL Cents) per share, on the basis of five (5) new ordinary shares for every six (6) ordinary shares in issue as at the Record Date. The Rights Offer shares represent 45.66% of the Company’s enlarged ordinary share capital post the proposed Rights Offer.

RATIONALE FOR THE TRANSACTION

In order to maintain the sustainable growth and profitability of the businesses going forward, the Board has decided to raise and inject additional capital into the business so as to:

1. Intensify productivity of existing footprint;
2. Widen and deepen product portfolio offered by the Group’s credit and financial services;
3. Ensure sufficient depth and breadth of inventories;
4. Productivity improvements through digitization leveraging on
   1. Data science & analytics for customer retention and increased market share;
   2. Introduction of online shopping;
   3. Customer facing digital interactive platforms; and
   4. Enhanced planning tools and manufacturing capacity
5. Refurbishment initiatives at stores; and
6. Extend geographical footprint through the commissioning of new sites.

APPLICATION OF FUNDS RAISED THROUGH THE RENOUNCEABLE RIGHTS OFFER

Set out below is a breakdown of the application of the funds expected to be raised through the proposed Renounceable Rights Offer.

CONDITIONS PRECEDENT

The Renounceable Rights Offer contemplated herein is subject to the following Conditions Precedent:

• Approval by the members of Edgars of the Resolutions at the EGM to be held on Tuesday, 16 June, in terms of the EGM notice set out in this Circular;
• Approval of the Transaction by the Exchange Control department at the Reserve Bank of Zimbabwe for the issuance of shares to non-resident shareholders.

CONSEQUENCES OF NOT IMPLEMENTING THE RENOUNCEABLE RIGHTS OFFER

If the Renounceable Rights Offer is not implemented as outlined in this Circular, Edgars will be unable to effectively compete in the market. The company will face significant capital expenditure constraints, high finance costs and unmet working capital requirements, in detail:

• The Company will be limited in capacity to write new business under Edgars Financial Services;
• The company will continue to experience operating inefficiencies from inefficient and unproductive methods; and
• The Company will continue to have higher than desired leverage, which will negatively affect its profitability.

DOCUMENTS AVAILABLE FOR INSPECTION

The following documents or copies thereof will be available for inspection by Edgars Shareholders at the registered office of Edgars, Corner 9th Avenue and Herbert Chitepo Street, Bulawayo and at the office of Transfer Secretaries during normal business hours for the duration of the Renounceable Rights Offer:

• The Memorandum and Articles of Association of Edgars;
• The Audited Financial Statements of Edgars as at 52 weeks to the 6th of January 2020 and Audited Financials for the periods 2017 to 2019;
• The written experts’ consents referred to in Paragraph B.18 of this Circular;
• The Underwriting Agreement;
• The Underwriter’s comfort letter;
• The original signed copy of this Circular to Shareholders; and
• The full Reporting Accountant’s Report.

Important dates and times