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MVG / MVGP - Mvela Group - Proposed Acquisition
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share: ISIN: ZAE000060737
Preference share: ISIN: ZAE000073540
("Mvela Group" or "the Company")
Proposed acquisition by Mvela Group of a minimum of 25.1% and a maximum of
30% interest in the issued share capital of Opco, a company which will be
formed to hold the media and entertainment assets of Johnnic Communications
Limited ("Johncom"), from client portfolios currently managed or advised by
Allan Gray Limited ("Allan Gray") ("AG Portfolios")
1. Introduction
Further to the cautionary announcement dated 25 October 2007, Mvela
Group, together with its empowerment partners, is pleased to announce
it has concluded an agreement with Allan Gray to acquire a minimum of
25.1% and a maximum of 30% interest in Opco when its unbundled from
Johncom and independently listed on the main board of the JSE Limited
("the JSE") ("the acquisition"); subject to the fulfilment of
conditions precedent outlined in section 5 of this announcement.
2. Opco formation and unbundling
On 11 April 2007, Johncom announced the intention to form Opco, an
entity to house the directly-held operating media and entertainment
assets of Johncom and list it separately. Opco will exclude:
- Johncom`s effective 37.79% (listed and unlisted) stake in
Caxton and CTP Publishers and Printers Limited ("Caxton");
- Johncom`s effective 38.56% stake in Electronic Media
Network Limited ("M-Net") and SuperSport International
Holdings ("SuperSport") (which is the subject of a disposal
to Naspers Limited ("Naspers")) or the gross number of
Naspers shares received in consideration for M-Net
SuperSport, whichever the case may be; and
- Any listed shares and cash (other than as referred to in
section 4 below).
Opco will be listed following its unbundling from Johncom (the
"unbundling"). Announcement of the timing of the unbundling is
expected to be made following approval by the Competition Tribunal of
Johncom`s sale of its interest in M-Net and SuperSport to Naspers and
approval for the listing of Naspers "N" shares by the JSE.
3. Rationale for the acquisition
Mvela Group`s strategy is to grow shareholder value (as measured
primarily by intrinsic net asset value) through the combination of
quality investments and cash generative operations.
This strategy involves the acquisition of interests (comprising
quality investments and/or operating businesses) primarily in
operating companies where Mvela can have strategic influence over the
investment.
The acquisition would give Mvela Group strategic influence over a
unique range of operating media and entertainment assets.
Opco as constituted is one of the premier media companies in South
Africa, with arguably the best print assets and a strong range of
businesses in media, retail, books and maps, home entertainment, music
and distribution. This portfolio of assets cannot be easily
replicated.
Opco is ideally positioned to benefit from the development of the
South African media and entertainment sector. Mvela Group believes
Opco has a number of value enhancing initiatives to consider which
will be fully considered after completion of the acquisition.
While Mvela Group`s shareholding will assist Opco with respect to its
empowerment ownership, this is not an empowerment transaction per se.
It is expected that Opco will implement an appropriate BEE transaction
once unbundled from Johncom and independently listed.
The board of Mvela Group believes that the acquisition will positively
contribute to the delivery of growth in Mvela Group`s intrinsic net
asset value and ultimately improve the return earned on the Group`s
capital employed.
4. Terms of the acquisition
Following the unbundling and listing of Opco, AG Portfolios are
anticipated to hold a direct interest of at least 30% of the ordinary
issued shares of Opco ("the acquisition shares").
Mvela Group intends to acquire a minimum of 25.1% and a maximum of 30%
of Opco which will be subject to the fulfilment of the conditions
precedent, by acquiring the acquisition shares from AG Portfolios
immediately following Opco`s unbundling and independent listing.
Allan Gray has undertaken to maintain the AG Portfolios` holdings in
the acquisition shares subject to changes or loss of client funds
and/or mandates.
The purchase consideration payable by Mvela Group for the acquisition
shares will be calculated when Opco is a separately listed entity. It
will be calculated as follows:
- R1,413,000,000 cash; plus
- the amount by which the aggregated net cash holdings of
Opco exceed R50 million (or less the amount by which the
aggregated net cash holdings of Opco are less than R50
million); plus
- the purchase price paid in cash for any acquisition of any
asset approved by the Johncom Board after 25 October 2007;
plus
- interest on the above amounts at 75% of the prime overdraft
rate as quoted by Absa Bank Limited. ("The purchase
consideration")
For the purposes of calculating the above, net cash shall include all
bank, money market and cash balances after deducting interest-bearing
debt and shareholder loans.
To the extent that the acquisition shares are less than the 30%
interest in Opco, the purchase consideration will be reduced
proportionately. To the extent that the AG Portfolios hold more than
the acquisition shares, these excess shares will be excluded from the
acquisition.
5. Conditions precedent
The acquisition has been approved by the board of directors of Mvela
Group. The acquisition remains subject to, inter alia, the following
conditions precedent being fulfilled by the earliest of the dates
below or close of business on 29 February 2008:
- To the extent required, approval by Mvela Group shareholders
in general meeting. Mvelaphanda Holdings (Proprietary)
Limited has approximately 40% of the voting shares and has
irrevocably undertaken to vote in favour of the acquisition;
- the obtaining of the necessary regulatory approvals,
including approval by the Competition Authorities;
- the formation, unbundling and listing of Opco by no later
than 29 February 2008;
- the acquisition shares, following the formation, unbundling
and listing of Opco, constituting at least 25% of Opco`s
then issued ordinary share capital;
- No material changes to the authorised and issued share
capital of Johncom, including any derivative rights and
similar interests, prior to the unbundling and listing of
Opco, that would impact the value of Opco by more than 10%
(either upwards or downwards). Should this occur, Mvela
Group and Allan Gray shall agree the purchase consideration
upwards or downwards, as the case may be; and
- Opco being unbundled and listed in substantially the same
form as described in section 2 above.
6. Financial effects of the acquisition
The pro-forma financial information for Opco will be published by
Johncom on the unbundling. The pro-forma financial effects of the
acquisition on Mvela Group will be published in a further announcement
at that time.
7. Cautionary announcement
Shareholders are advised to continue to exercise caution when dealing
in Mvela Group`s securities until pro-forma financial effects are
published. A further announcement will be made upon fulfilment (or
otherwise) of the conditions precedent.
Sandton
30 October 2007
Financial adviser
Masazane Capital
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 30/10/2007 12:00:00 Supplied by www.sharenet.co.za
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