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SAH - South African Coal Mining Holdings Limited - Firm intention to make an

Release Date: 31/03/2010 17:18:02      Code(s): SAH
SAH - South African Coal Mining Holdings Limited - Firm intention to make an    
offer received from JSW Energy                                                  
SOUTH AFRICAN COAL MINING HOLDINGS LIMITED                                      
(Incorporated in the Republic of South Africa)                                  
(Registration number:  1994/009012/06)                                          
Share code:  SAH      ISIN:  ZAE000102034                                       
("SACMH" or "the Company")                                                      
AND TO PROVIDE FINANCE TO REOPEN THE MINE                                       
1    INTRODUCTION                                                               
1.1  Shareholders are referred to previous announcements by SACMH, the latest   
    being dated 30 March 2010, that SACMH regularly receives unsolicited offers 
    to buy or invest in its business. The SACMH board ("the Board") undertook   
    that all serious offers in respect of which the Board has received          
satisfactory external proof of funding will be submitted to shareholders    
    for consideration as soon as practically possible.                          
1.2  The Board has received a letter from JSW containing a firm intention to    
    lend funds to SACMH to enable it to discharge its liability to The Standard 
Bank of South Africa (Proprietary) Limited ("SBSA"), to provide new funding 
    to reopen the mine and to make an offer to acquire a stake in the issued    
    ordinary shares of SACMH, being all the shares save for those held by Royal 
    Bafokeng Capital (Pty) Limited ("Royal Bafokeng") and Mainsail 55 (Pty) Ltd 
("Mainsail"). If concluded, the transaction will be an affected transaction 
    as defined by the Securities Regulation Code and Rules ("SRP Code") of the  
    Securities Regulation Panel ("SRP").                                        
1.3  Details of the offer and the conditions precedent to which it is subject   
are set out below.                                                          
1.4  This announcement summarizes the information provided in the letter of firm
    intention to make the offer addressed to the Board.                         
1.5  The offer is contained in a letter from JSW dated 10 March 2010, which was 
modified with some technical corrections by amending letters on 18, 24, 25  
    and 30 March 2010. JSW has indicated their intention to make further        
    revisions to the offer, which can be expected by the end of next week.      
2    THE OFFER                                                                  
2.1  The offeror:                                                               
    JSW is a public company incorporated in India, listed on both the Bombay    
    Stock Exchange and the National Stock Exchange. It is part of the JSW Group 
    which operates in the steel, power, cement, software and infrastructure     
sectors. Its revenue for the year ended 31 March 2009 was in excess of USD  
    3.6 billion.                                                                
    JSW has since 2000 developed, constructed and operated power plants. It is  
    a coal-off taker and not a coal trader.                                     
JSW owns no shares in SACMH. The offer is extended by JSW or its nominee    
    (hereafter jointly referred to as "JSW").                                   
2.2  The offer:                                                                 
    JSW notified the Board of its firm intention to:                            
2.2.1     lend to SACMH sufficient funds to enable it to discharge its liability
         to SBSA, the largest secured financiers of SACMH, provided that        
         contemporaneously on discharging the liability, SBSA:                  
    -    transfers to JSW its 71.8 million shares in SACMH; and                 
-    cedes to JSW all its securities held by SBSA for SACMH`s indebtedness  
         (including SACMH shares pledged to SBSA by Royal Bafokeng) without any 
         further consideration; and                                             
2.2.2     make an offer to acquire all the issued shares of SACMH, save for     
those held by Royal Bafokeng and Mainsail, in respect of which shares  
         JSW reserves the right to make an offer at some future date at a       
         predetermined value ("the JSW Offer").                                 
         It is intended that SBSA would receive 71.8 million shares in SACMH as 
a result of the conversion of R40 million of its debt into equity in   
         terms of the section 311 compromise with creditors in South African    
         Coal Mining (Breyten) (Pty) Limited ("Breyten"), ("the Breyten         
         Compromise"), the subsidiary of SACMH in which the SBSA debt resides.  
Sanction by the High Court of the Breyten Compromise is outstanding.   
         No agreement has been reached with SBSA in respect of 2.2.1 above.     
2.3       Manner of giving effect to the offer                                  
2.3.1     JSW will advance an amount  of R70 million to SACMH to enable it to   
discharge its liability to SBSA, provided that contemporaneously       
    -    SBSA transfers to JSW its 71.8 million shares in SACMH; and            
    -    SBSA cedes to JSW all its securities held by SBSA for SACMH`s          
indebtedness including pledged shares to it without any further        
2.3.2     JSW shall be entitled to appoint the majority of directors on the     
2.3.3     JSW will commence normalizing the position of SACMH to resume mining  
         operations forthwith upon acquiring the minority shares;               
2.3.4     To implement the JSW Offer, JSW intends to propose a scheme of        
         arrangement in terms of section 311 of the Companies Act, 1973 ("the   
Act") between SACMH and all the ordinary shareholders of SACMH other   
         than Royal Bafokeng and Mainsail for JSW to acquire all those shares,  
         which will number 157.4 million shares and comprise 29.07% of the      
         total issued share capital of SACMH ("the Scheme"). The purchase       
consideration will be 25 cents per share payable once the Scheme       
         becomes operative. The JSW Offer will be made in accordance with the   
         SRP Code.                                                              
2.3.5     Alternatively to the Scheme, JSW will make a general offer to all     
SACMH`s shareholders, other than Royal Bafokeng and Mainsail, to       
         acquire all of their shares at 25 cents per share, on the basis that   
         should it be accepted by shareholders in respect of 90% or more of the 
         ordinary shares that are the subject matter of the general offer, then 
JSW reserves the right to invoke the provisions of section 440(K) of   
         the Act to compulsorily acquire those ordinary shares in respect of    
         which the general offer was not accepted.                              
2.3.6     JSW intends entering into a "put and call" agreement with Royal       
Bafokeng and Mainsail, in terms of which Royal Bafokeng and Mainsail   
         will be entitled to put their 130.3 million remaining shares in SACMH  
         to JSW. JSW shall have the right to call on Royal Bafokeng and         
         Mainsail to sell to JSW all their remaining shares in SACMH. No party  
may exercise its rights until after 14 December 2010. . The purchase   
         consideration shall be 25 cents per share plus interest.               
2.3.7     If the Scheme is successful or the general offer becomes              
         unconditional, application will be made to the JSE Limited ("JSE") to  
terminate the listing of the shares of SACMH on the JSE.               
2.3.8     JSW intends approaching SBSA, Royal Bafokeng and Mainsail to enter    
         into an agreement to record the terms and conditions contained in      
         JSW`s letter.                                                          
2.4       Conditions precedent                                                  
2.4.1     The JSW Offer is subject to inter alia the following conditions       
    -    legal and financial due diligence investigations; on 18 March 2010     
SACMH was informed by JSW`s attorneys that this condition could be     
         modified provided that JSW receives a certificate from the board of    
         directors of SACMH confirming that the information disclosed in        
         connection with a number of matters were true and correct;             
-    the consent of the Competition Authorities;                            
    -    receipt of all regulatory approvals required from the Exchange Control 
         Department of the South African Reserve Bank, the SRP, the Department  
         of Mining and the JSE;                                                 
-    receipt of all regulatory approvals required under Indian Securities   
         Exchange Law and Regulations;                                          
    -    Court sanction of the Breyten Compromise;                              
    -    agreement with SBSA in respect of paragraph 2.2.1;                     
-    the "put and call" agreement with Royal Bafokeng and Mainsail referred 
         to in 2.3.6 above;                                                     
    -    Royal Bafokeng and Mainsail waiving their rights to dispose of their   
         shares in SACMH;                                                       
-    delivery of audited financial statements of SACMH and all its          
         subsidiaries for the financial years ended 2008 and 2009, as well as   
         management accounts.                                                   
2.4.2     The Scheme shall inter alia be subject to the following conditions    
    -    the approval of the scheme by SACMH shareholders entitled to vote      
         ("Scheme Members") at the meeting of scheme members ("the Scheme       
         Meeting") convened by the High Court of South Africa ("the Court"),    
representing not less than three-fourths of the votes exercisable by   
         Scheme Members present and voting, either in person or by proxy, at    
         the Scheme Meeting on or before a certain date to be agreed to;        
    -    the Scheme being sanctioned by the Court;                              
-    a certified copy of the order of the Court sanctioning the Scheme      
         being registered by the Registrar of Companies in terms of the Act;    
    -    the Scheme becoming unconditional.                                     
2.4.3     If the Scheme does not become operative, and JSW elects to make the   
         general offer, then the general offer shall inter alia be subject to   
         the condition precedent that JSW receives acceptances in respect of    
         not less than 90% of the issued shares, other than shares held by      
Royal Bafokeng and Mainsail.                                           
2.5       Funding of the JSW Offer                                              
         Confirmation has been provided to the Board and the SRP that           
         sufficient resources are available to JSW to satisfy full acceptance   
of the JSW Offer by the IDBI Bank of India. The IDBI Bank is a large   
         public sector bank in India. As the confirmation was provided by a     
         foreign bank JSW was requested to supply confirmation from a South     
         African Bank that JSW has sufficient resources, or that JSW`s foreign  
bank is of acceptable standing and that the board could accept their   
         confirmation regarding JSW`s resources.                                
2.6       Period                                                                
         The JSW`s Offer is open for acceptance by the Board until Friday, 23   
April 2010.                                                            
2.7       Approvals, consents and undertakings received                         
         The Board is not aware of any approvals, consents and undertakings     
         received by JSW at the date of making the JSW Offer. SBSA however      
informed the Board that it has entered into an agreement with Shanduka 
         Coal (Proprietary) Limited ("the Potential Preferred Offeror") to sell 
         SBSA`s secured claim against SACMH to the Potential Preferred Offeror  
         and to grant the Potential Preferred Offeror a period of exclusivity   
in respect thereof.                                                    
3         OPINION AND RECOMMENDATIONS                                           
    On 18 March 2010 the Board received and accepted a proposal from the        
    Potential Preferred Offeror. Due to the time constraints in this proposal,  
the Board obtained telephonic approval from the SRP to evaluate and         
    recommend the proposal from the Potential Preferred Offeror prior to        
    obtaining an opinion from an external adviser as required by the SRP Code.  
    After having evaluated the terms and conditions of the proposal by the      
Potential Preferred Offeror (set out in a separate announcement), the Board 
    believed that it was in the best interests of the Company and its           
    stakeholders to recommend the proposal received from the Potential          
    Preferred Offeror to its shareholders.                                      
The Board is of the opinion that the JSW Offer, as it stands currently, is  
    less attractive to SACMH and its stakeholders than the offer by the         
    Potential Preferred Offeror. The Board has therefore decided not to         
    recommend the current JSW Offer to its shareholders.                        
The Board will appoint an external adviser to evaluate all offers received  
    and to make appropriate recommendations to the Board and SACMH              
31 March 2010                                                                   
Exchange Sponsors                                                               
Date: 31/03/2010 17:18:02 Supplied by www.sharenet.co.za                     
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