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Mvelaphanda Group Limited - Proposed Capital Raising
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")
Proposed Capital Raising
1. INTRODUCTION
Further to the announcement dated 8 September 2005, Mvela intends to raise
approximately R500 - R600 million through the issue of convertible, perpetual,
cumulative, preference shares ("preference shares") by way of a private
placement ("the proposed capital raising").
Mvela has appointed The Standard Bank of South Africa Limited to manage and
underwrite the proposed capital raising, which is expected to take place in
October 2005.
The Mvela board of directors has given careful consideration to alternative
methods of raising capital, including various debt and equity instruments. The
Mvela board believes that the preference shares are appropriate for Mvela in
that:
* they constitute permanent capital (if not redeemed by Mvela) while still
preserving Mvela"s black economic empowerment ("BEE") shareholder
credentials;
*they provide efficient funding, as the capital raised will be used to
finance equity investments;
* the annual cashflow requirement for payment of the preference dividends
is relatively low;
* the instrument results in financial flexibility which should enhance the
strength of Mvela"s balance sheet; and
* they are attractive instruments for investors as they combine a
relatively high yielding preference share with an optional equity exposure
to growth in the Mvela ordinary share price.
2. RATIONALE FOR THE PROPOSED CAPITAL RAISING
The strategy of Mvela is to grow shareholder value (as measured primarily by
intrinsic net asset value) by utilising its BEE credentials and the solid
platform which has now been established through the combination of quality
investments with steady cash-generative businesses, in order to participate in
the continued transformation of the South African economy by actively pursuing
and implementing value-enhancing and/or BEE transactions.
BEE deal flow is expected to be a major driver of mergers and acquisitions in
South Africa in the foreseeable future. Mvela, as a major black-owned,
controlled and managed diversified group, is well-positioned to benefit from
this anticipated increase in merger and acquisition activity.
The proceeds from the proposed capital raising will be applied, inter alia, as
follows -
* Mvela incurred debt and utilised its operating cash resources in
disbursing R100 million of proprietary capital in relation to the company"s
leveraged investment in Life Healthcare Group (Proprietary) Limited ("Life
Healthcare").
* Mvela has a leading role to play, strategically, as a `consolidator" of
BEE transactions. The consolidation of BEE transactions involves the
acquisition by larger BEE groups of interests in South African corporates
currently 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, while simultaneously
increasing the broad-based BEE shareholding in Mvela and realising value
for the smaller BEE entities. Opportunities in this regard are currently
under consideration by Mvela and shareholders are referred to the
announcement issued simultaneously with this announcement relating to the
acquisition by Mvela of a further effective 2.47% of Absa Group Limited,
which includes a cash component payable by Mvela of R190 million.
* In certain of Mvela"s investments, including inter alia Life Healthcare,
options currently vest in favour of Mvela to increase its stake in such
investments, and it is considered opportune to raise capital to enable
Mvela to have the resources available to follow its rights in these
instances.
* Opportunities also exist to expand Mvela"s operating businesses,
including the opportunities currently being pursued by the company"s
facilities management division, locally and offshore. Such contracts are,
by their nature, large and may require material capital investment on
inception. Decisions on the possible awarding of these contracts are
awaited.
3. SALIENT TERMS OF THE PREFERENCE SHARES
The salient terms of the preference shares are set out below.
Issue Price: R10 per preference share.
First Conversion Date: The fourth anniversary of the date of
issue of the preference shares, or
such other date as may be determined
by the directors.
Final Conversion Date: The fifth anniversary of the date of
issue of the preference shares, or
such other date as may be determined
by the directors.
Preference Dividend: If declared, six monthly, calculated
in arrears.
Preference Dividend Rate: To be determined by the directors at
the time of issuing the preference
shares.
Conversion: The preferences shares will be
convertible into Mvela ordinary
shares at the election of the holder,
at any time, from the first
conversion date to the final
conversion date, subject to certain
restrictions.
Conversion Price: To be determined by the directors at
the time of issuing the preference
shares. The conversion price will be
at a premium to the market price of
Mvela ordinary shares immediately
prior to the issue of the preference
shares. The conversion price will be
subject to adjustment upon the
happening of certain events.
Issuer"s Redemption Option: The preference shares will be
redeemable by the company (to the
extent that conversion has not taken
place), semi-annually after the Final
Conversion Date.
Perpetual: Should a preference shareholder elect
not to convert its preference shares
and should the company not redeem all
the issued but unconverted preference
shares, such remaining preference
shares will continue to exist as
preference shares in perpetuity.
4. UNAUDITED PRO FORMA FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the proposed capital
raising 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, and 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 or the actual terms of the
preference shares.
Pro forma Pro forma
Reviewed after the after the
year issue conversion
ended of the of the
30 June Preference % Preference %
2005 shares change shares change
Net asset value per 647.2 639.9 (1.1) 683.0 5.5
ordinary share
(cents)
Net tangible asset 493.9 486.7 (1.5) 546.8 10.7
value per ordinary
share (cents)
Number of ordinary 403.2 403.2 456.5 13.2
shares in issue
(millions)
Weighted average
number of shares in
issue (millions) 306.3 306.3 306.3 -
Notes:
i. The "Reviewed year ended 30 June 2005" column is Mvela"s reviewed
results for the year ended 30 June 2005, which were published in the press
on 9 September 2005.
ii. The "Pro forma after the issue of the Preference shares" column of the
table is calculated using the following assumptions:
* 52 000 000 preference shares were issued on 1 July 2004 at an issue
price of R10 per preference share, amounting to R520 million of
capital raised (before expenses).
*Interest was earned on a net amount of R500 million (after deducting
share issue expenses) at an after tax rate of 4.6% per annum.
* Preference dividends were paid on the preference shares on 31
December 2004 and 30 June 2005 at a rate of 5.50% per annum.
iii. The "Pro forma after the conversion of the Preference shares "
column of the table is calculated using the following assumptions:
* The transactions set out in (ii) above were implemented as detailed
above.
* The 52 000 000 preference shares converted into 50 731 707 ordinary
shares on 30 June 2005 at a conversion price of R10.25 per preference
share.
iv. The percentage change columns are calculated with reference to the
"Reviewed year ended 30 June 2005" column.
5. FURTHER DOCUMENTATION
A circular convening a general meeting of Mvela shareholders and containing
further information relating to the proposed capital raising will be posted to
Mvela shareholders on or about 3 October 2005.
6. SALIENT DATES AND TIMES 2005
General meeting of shareholders to create and to Tuesday, 25 October
approve the issue of the preference shares, to be
held at 10:00, on
Results of the general meeting published on SENS Tuesday, 25 October
on
Results of the general meeting announced in the Wednesday, 26 October
press on
Notes:
1. The above dates and times are subject to change. Any change will be
published on SENS and in the press.
2. Unless otherwise indicated, all times are South African times.
Sandton
28 September 2005
Investment Bank and 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 10:45:12 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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