Sunday, September 27, 2020

PI discloses structures to raise necessary capital

In an attempt to explore investment opportunities in South Africa, First Sun Alliance tied the knot with South African-based KIH Group.

The two, together with BDO Spencer Steward, provide share administration, legal, accounting, company secretarial and marketing and sales function required to ensure the success of BPI, the brainchild of the engagement.

In creating a myriad of business opportunities, locally and internationally, BPI will work with First Sun Alliance’s brokerage network and expertise in financial wealth creation, and with the KIH Group’s franchising network.

KIH Group is an administration and management company that creates business opportunities for local and international entrepreneurs and investors, primarily in the South African Real Estate market.

According to the Managing Director for KIH Group, Douglas Seton, this is the first operation beyond the South African border.

“Although these are largely uncharted waters, the principle remains the same,” Seton said. “KIH Group creates the company, provides the share administration, legal accounting, company secretarial, marketing and sales function required to ensure the success of any such regional initiative.”

Seton added that the committee guides the fund up to the first Annual General Meeting (AGM), at which time, a directorate is chosen by the shareholders, adding that the Group’s representatives will be part of the steering committee and the committee will be assisted through the intricacies of managing a public company.

Seton said that the Group project team has already commenced the screening process and will perform the necessary due diligence on selected projects. “Secondary projects are generally far more numerous and there are already at least a dozen which look very promising,” he intoned. “These are assets that show considerable potential growth. Secondary assets are generally placed in private companies and syndicated. This allows current owners to remain involved and investors to take up individual holdings in projects they are particularly bullish about,” he said.

He also added that a lot of the individual value in a KIH Group fund rests in participation in secondary asset syndications.

Seton said that the fund follows a fixed pattern of raising the capital.

“A company with an authorized capital share of 1000 shares is acquired, this may be a South African registered company with 100% ownership of a Botswana subsidiary or primarily Botswana registered,” he added.

Seton said that BPI would offer 200 founder memberships at P75 000 each, all-inclusive, thus making 20% of the company’s share capital.

“A founder member can be an individual or a legal entity. Once the founder memberships have been taken up, the authorized capital of BPI will be increased to 10 000 000 shares which will convert a founder member’s share holding to 10,000 shares. This will equate to a total of 2 000 000 shares which will translate to a founder member share price of P7.50,” he said.

He said after 15% has been deducted, P12 750 000 will have been raised by BPI via founder memberships with access of up to P50 000 000 of surety, adding that “the cost of 15% comprises of 5% commission to the franchisees, 5% to KIH Group and the remaining 5% will be allocated to the steering directorate of BPI to use towards the start up cost of the company.”

He said a private offer can be made for a further 1 000 000 shares.

“The private offer price is related to the inherent value in the sum of primary and secondary assets held by the fund and should be in the region of P15.00. The private offer will conclude with the public offer on launching prospectus. This should be at about P25.00 per share plus 20% (P30) which is the administration costs of preparing and branding a prospectus, and this first prospectus is limited to 1 000 000 shares,” Seton said.

He continued to say, “Financial institutions may require personal sureties in addition to the security of an asset. Personal sureties allowing BPI to gear a primary asset limited to P250 000. Options to this value will be issued to founders prepared to stand surety. These share options will be issued at the launch price of the next public offer currently projected at P25 per share.”

Based on this scenario, BPI will have raised a capital of P25 500 000 from the founder members and private offers, plus a further P25 000 000 from the first prospectus. Once all share options have been exercised there will be a further P50 000 000 of capital in BPI.

Furthermore 40% of the authorized capital will be available for release in public offerings.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.