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Mvelaphanda Group Limited - Acquisition Announcement
Mvelaphanda Group Limited
(formerly Rebserve Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Share code: MVG & ISIN: ZAE000060737
("Mvela" or "the company")
ACQUISITION OF A FURTHER EFFECTIVE 24.7% INTEREST IN BATHO BONKE CAPITAL
(PROPRIETARY) LIMITED, EQUATING TO A FURTHER EFFECTIVE 2.47% INTEREST IN ABSA
GROUP LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement dated 8 September 2005, Mvela is pleased
to announce that it has reached agreement with Mvelaphanda Holdings
(Proprietary) Limited ("Mvela Holdings") and representatives of Batho Bonke
Capital (Proprietary) Limited ("Batho Bonke") to acquire a further effective
24.7% interest in Batho Bonke ("the acquisition"), equating to a further
effective 2.47% interest in Absa Group Limited ("Absa").
2. DETAILS OF THE ACQUISITION
2.1 Rationale
In terms of the merger ("the Merger") of the businesses and assets of
Mvela Holdings and Rebserve Holdings Limited, Mvela acquired a 20%
interest in Batho Bonke from Mvela Holdings. Batho Bonke owns 73 152
300 cumulative option-holding preference shares with a par value of
R2.00 each in Absa ("the Absa preference shares"). Each Absa
preference share entitles the holder to subscribe for one Absa
ordinary share at a strike price ranging between R48 and R69 between 1
July 2007 and 30 June 2009. The new Absa ordinary shares subscribed
for by the holders of the Absa preference shares will represent 10% of
the enlarged issued share capital of Absa.
Mvela has previously stated its intention of acting as a
`consolidator" of BEE transactions. The consolidation of BEE
transactions involves the acquisition by larger BEE groups of
interests in South African corporates held by smaller BEE entities, in
exchange for cash and/or shares in the larger BEE groups. This
consolidation will allow Mvela to increase its interests in large
South African corporates such as Absa, while simultaneously increasing
the broad-based BEE shareholding in Mvela and contributing to
empowerment by realising value for the smaller BEE entities.
The recently concluded acquisition by Barclays Bank PLC ("Barclays")
of a controlling stake in Absa, together with the re-rating of the
banking sector on the JSE Limited ("JSE"), has resulted in Absa
becoming a more valuable and material asset to Mvela, with the value
of Mvela"s interest in Absa having increased substantially since this
interest was acquired by Mvela at the time of the Merger.
The board of Mvela believes that the prospects of Absa as a long-term
investment, especially under the control of Barclays, are attractive.
Mvela has in the circumstances decided to acquire a further effective
beneficial interest in Batho Bonke, thereby increasing its leveraged
investment exposure to Absa.
2.2 Terms of the acquisition
In terms of the acquisition, Mvela will purchase a further effective
24.7% interest in Batho Bonke (comprising an effective interest in 18
050 000 Batho Bonke shares) from Mvela Holdings, equivalent to a
further effective 2.47% interest in Absa. Following the acquisition,
Mvela"s effective interest in Batho Bonke will increase to 44.7%,
equivalent to an effective 4.47% interest in Absa.
The purchase consideration payable by Mvela in terms of the
acquisition is R25.55 per Batho Bonke share, amounting to R461 million
in aggregate ("the aggregate purchase price"), and has been determined
with reference to the value of the underlying Absa preference shares
held by Batho Bonke, as well as the Absa share price. The aggregate
purchase price of R461 million represents a 30% discount ("the
acquisition discount"), equivalent in value to R202 million (after
providing for capital gains tax), to the market value of the Batho
Bonke shares on 6 September 2005 ("the reference date"), being the
reference date which was utilised for the purpose of calculating
Mvela"s intrinsic net asset value of R8.75 per Mvela ordinary share,
as referred to in Mvela"s reviewed results for the year ended 30 June
2005 ("the 2005 results") published on 8 September 2005.
The Absa share price and the value per Batho Bonke share were
determined with reference to the closing price of R92.40 at which Absa
shares traded on the JSE on 26 September 2005. On this basis each
Batho Bonke share was valued at R37.85 on that date, before the
acquisition discount referred to in the preceding paragraph. The
closing Mvela ordinary share price on 26 September 2005 was R7.98.
The purchase price will be settled by Mvela issuing 33.9 million new
Mvela ordinary shares ("the consideration shares"), credited as fully
paid, at a price of R8.00 per Mvela ordinary share, and by the payment
of R190 million in cash. Application will be made to the JSE for the
listing of the consideration shares.
Had the consideration shares been issued at the intrinsic net asset
value of R8.75 per Mvela ordinary share prevailing on the reference
date, the resultant acquisition discount would have been 27% (after
providing for capital gains tax).
The acquisition will result in -
* Mvela Holdings (which will enter into a voting pool agreement
with the other sellers of Batho Bonke shares), controlling an
additional 33.9 million Mvela ordinary shares (8% of the
resultant issued Mvela ordinary shares), thereby enhancing the
BEE credentials of Mvela; and
* the value of Mvela"s effective investment in Absa increasing to
30% of Mvela"s intrinsic net asset value, based on the closing
Absa share price on the reference date.
2.3 Financial effects of the acquisition
The table below sets out the pro forma financial effects of the
acquisition on Mvela"s reviewed earnings per ordinary share, headline
earnings per ordinary share and fully diluted headline earnings per
ordinary share for the year ended 30 June 2005, as well as Mvela"s net
asset value per ordinary share and net tangible asset value per
ordinary share at 30 June 2005. These pro forma financial effects are
the responsibility of the directors of Mvela and have been prepared
for illustrative purposes only and, because of their nature, may not
give a true reflection of the actual financial effects on Mvela.
Before the After the
acquisition acquisition %
(cents) (cents) increase
Earnings per ordinary share 123.0 159.5 29.6
Headline earnings per ordinary 135.5 170.7 26.0
share
Fully diluted headline earnings 135.5 170.7 26.0
per ordinary share
Net asset value per ordinary 647.2 696.9 7.7
share
Tangible net asset value per 493.9 555.5 12.5
ordinary share
Number of ordinary shares in 403.2 437.1 8.4
issue (millions)
Weighted average number of 306.3 340.2 11.1
shares in issue (millions)
Notes:
i. The pro forma financial effects are based on Mvela"s reviewed results
for the year ended 30 June 2005 (the "Before the acquisition" column).
ii. The "After the acquisition" column is calculated on the following
basis:
* The effective 24.7% interest in Batho Bonke was acquired on 1 July
2004.
* The consideration shares to be issued and the cash amount to be paid
in settlement of the purchase price were effected on 1 July 2004.
* Interest income calculated at an after tax rate of 3.9% was foregone
on the cash portion of the purchase price.
* The new effective interest in Batho Bonke was valued at the
directors" valuation of the Batho Bonke shares based on the closing
Absa share price on the reference date.
* The fair value gain arising on the acquisition, being the difference
between the purchase price and the directors" valuation of the Batho
Bonke shares acquired on the reference date, has been accounted for in
the income statement.
As a result of the acquisition, Mvela"s intrinsic net asset value per
ordinary share will increase by 5% to R9.16, compared to the intrinsic
net asset value per ordinary share of R8.75 on the reference date, as
published in the 2005 results, and based on the closing Absa share
price on the reference date.
2.4 Related party transaction
Mvela Holdings is the vendor in terms of the acquisition. Mvela
Holdings is a material shareholder in Mvela and consequently, the
acquisition is considered to be a related party transaction in terms
of the Listing Requirements of the JSE.
Accordingly -
* Mvela Holdings and its associates will be taken into account in
determining a quorum at the general meeting in relation to the
acquisition, but their votes will not be taken into account in
determining the results of the voting at such general meeting;
and
* PKF (Jhb) Inc. has been appointed to advise the board of Mvela
on whether the terms and conditions of the acquisition are fair
and reasonable to Mvela shareholders. Their report in this regard
will be included in the circular to shareholders referred to in 3
below.
2.5 Conditions precedent to the acquisition
The acquisition is subject, inter alia, to the fulfillment of the
following conditions precedent:
* the conclusion of formal legal agreements by the parties
recording the terms of the acquisition;
* the successful completion of a due diligence investigation to
the satisfaction of Mvela;
* the obtaining of all consents and/or approvals which may be
required, including from Absa, for the implementation of the
acquisition;
* the passing of all necessary ordinary resolutions required to
implement the acquisition by the shareholders of Mvela; and
* the successful implementation of the proposed capital raising
by Mvela, details of which were announced by Mvela on SENS on 8
September 2005 and in the announcement issued simultaneously with
this announcement.
3. CIRCULAR TO SHAREHOLDERS
A circular containing, inter alia, further details in relation to the
acquisition and a notice of a general meeting of Mvela shareholders to approve
the acquisition will be posted to Mvela shareholders in due course.
4. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement dated 8 September 2005 is hereby withdrawn.
Sandton
28 September 2005
Transaction sponsor
Standard Bank
Lead sponsor
Deutsche Securities
Member of the Deutsche Bank Group
Auditors and reporting accountants
PKF Worldwide
Attorneys
Werksmans
Incorporated
(Registration number 1990/007215/21)
Date: 28/09/2005 10:44:12 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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