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African Oxygen Limited - Disposal of interest in Life Healthcare

Release Date: 07/09/2006 07:39:01      Code(s): AFX
African Oxygen Limited - Disposal of interest in Life Healthcare                
African Oxygen Limited                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number 1927/000089/06)                                            
Share code: AFX                                                                 
ISIN code: ZAE000067120                                                         
("Afrox" or the "Company")                                                      
Disposal of interest in Life Healthcare                                         
1.  Introduction                                                                
Shareholders are advised that the Company has reached agreement to sell its     
entire interest in its associate, Life Healthcare Group Holdings (Proprietary)  
Limited ("Life Healthcare"), to Business Venture Investments No 813 (Pty)       
Limited ("BEE Consortium 2"), for a total consideration of ZAR 850 million ("the
proposed transaction"). BEE Consortium 2 is a company owned by Brimstone        
Investment Corporation Limited ("Brimstone"), Mvelaphanda Strategic Investments 
(Proprietary) Limited ("Mvelaphanda"), Life Healthcare management (via the Ammed
Trust) and Life Healthcare employees (via the Life Healthcare Employees Trust). 
Other participating shareholders in Life Healthcare, namely Old Mutual Life     
Assurance Company (South Africa) Limited ("OMLACSA") , various entities in the  
FirstRand Group (collectively "RMB") and Life Healthcare management through the 
Ammed Trust are entitled to acquire a part of the sale interest from BEE        
Consortium 2. It has been agreed that the sale interest will be acquired        
directly by Brimstone, Mvelaphanda, OMLACSA, the Ammed Trust and RMB ("the      
Purchasers") in agreed proportions. Afrox"s interest in Life Healthcare         
*    17,000 (20.00%) of Life Healthcare"s issued ordinary shares;               
*    4,391 (29.28%) of Life Healthcare"s issued N ordinary shares;              
*    A shareholders loan with a face value of ZAR 200,446,428; and              
*    259.282 class A preference shares.                                         
Life Healthcare was previously known as Business Venture Investments No 790     
(Pty) Ltd and was the purchaser of the entire share capital of Afrox Healthcare 
Limited as of 23 March 2005. Life Healthcare is the holding company of Life     
Healthcare Group (Pty) Ltd ("LHG"), a private healthcare service provider in    
South Africa.  LHG"s operations include private hospitals, sameday surgical     
centres and healthcare services companies.                                      
Afrox has been released from any and all claims arising from the Restatement of 
Merger and Cooperation Agreement.                                               
The effective date of the sale transaction shall be Friday, 29 September 2006,  
on which date the purchase price shall be paid and the sale implemented and all 
risk and benefit in the sale interest shall pass to the Purchasers, save only   
that the Class A preference shares shall be sold ex any dividends which have    
accrued in respect of the period ending on 30 September 2006.                   
2.  Rationale for the transaction                                               
Afrox acquired this minority shareholding for ZAR 375 million in March 2005, in 
order to facilitate the purchase by Life Healthcare of Afrox Healthcare (as it  
was then known), and had made known its intention to dispose of this            
shareholding in the short to medium term.  This transaction will allow Afrox to 
realise a substantial return on its investment in Life Healthcare, and completes
the process of divesting Afrox"s healthcare interests and focusing on its core  
Industrial Gas, Welding, LPG and Safety business.  Furthermore, the transaction 
will allow Afrox to realise cash for its equity accounted investment while      
enhancing the empowerment credentials of Life Healthcare.                       
3.  Details of the purchase consideration                                       
Upon completion of the transaction on 29 September 2006, Afrox will receive     
total consideration of ZAR 850 million in cash.  Afrox has received bank        
guarantees or letters of undertaking from the Purchasers for the total purchase 
The proceeds of the transaction will be used to reduce interest bearing debt and
to assist in funding current capital expenditure programmes.                    
4.  Pro-forma financial effects of the transaction                              
The table below sets out the illustrative financial effects of the proposed     
transaction on Afrox shareholders.  The unaudited pro-forma financial effects   
have been prepared for illustrative purposes only, and because of their nature  
may not give a fair reflection of Afrox"s financial position nor of the effect  
on future earnings after completion of the transaction.  The pro forma financial
effects are the responsibility of the directors of Afrox.                       
                             Unaudited before   Pro-forma          % Change     
the                after the                        
                            transaction(1)     transaction                      
Basic earnings per share     93.5               198.1              112%         
(cents) (2) (6 months ended                                                     
31 March 2006)                                                                  
Headline earnings per share  93.7               82.0               -12%         
(cents)(2)(6 months ended 31                                                    
March 2006)                                                                     
Net asset value ("NAV") per  583.4              699.6              20%          
share (cents)(3)                                                                
Net tangible asset value     569.0              685.2              20%          
("NTAV") per share                                                              
Number of shares in issue    308,568            308,568            -            
Weighted average number of   308,568            308,568            -            
shares in                                                                       
issue ("000)                                                                    
Based on the unaudited published consolidated interim results of Afrox for the  
six months ended 31 March 2006.                                                 
For purposes of adjustments to earnings per share and headline earnings per     
share it was assumed that:                                                      
*    the transaction was effected on 1 October 2005;                            
*    all income and expenses associated with the investment in Life Healthcare  
     were eliminated;                                                           
*    transaction costs of R6,5 million were paid;                               
*    the net disposal consideration was used to reduce borrowings, and interest 
on the surplus cash was earned at a pre-tax rate of 6.75% for the six month
*    a tax rate of 29% was applied where applicable; and                        
*    CGT at a rate of 14.5 % was calculated on the capital gain on disposal of  
the investment.                                                            
For purposes of adjustments to net asset value per share and net tangible asset 
value per share it was assumed that:                                            
*    the transaction was effected on 31 March 2006;                             
*    all assets and liabilities associated with the investment in Life          
     Healthcare were eliminated;                                                
*    the net proceeds, after payment of the transaction costs and CGT was       
     received on 31 March 2006; and                                             
*    NTAV was calculated after deducting goodwill and intangible assets from the
     ordinary shareholders funds.                                               
07 September 2006                                                               
Financial advisers to Afrox: JPMorgan                                           
Transaction sponsor: J.P. Morgan Equities Limited                               
Date: 07/09/2006 07:39:10 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             

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