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Mvela Group - Disposal and withdrawal of cautionary announcement MVELAPHANDA GROUP LIMITED (Incorporated in the Republic of South Africa) (Registration number 1995/004153/06) Ordinary share code: MVG & ISIN: ZAE000060737 Preference share code: MVGP & ISIN: ZAE000073540 ("Mvela Group") DISPOSAL OF MVELA GROUP"S 22,9% INTEREST IN MVELAPHANDA RESOURCES LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION Further to the cautionary announcement dated 30 June 2006, Mvela Group is pleased to announce that it has concluded an agreement with Mvelaphanda Holdings (Proprietary) Limited ("Mvela Holdings") to dispose of Mvela Group"s 38 147 209 ordinary shares in Mvelaphanda Resources Limited ("Mvela Resources") ("the sale shares"), representing 22.9% of the issued share capital of Mvela Resources, to Mvela Holdings, for a cash consideration of R1.183 billion, equivalent to R31 per sale share ("the disposal"). 2. DETAILS OF THE DISPOSAL 2.1 Rationale Mvela Group"s strategy is to grow shareholder value (as measured primarily by intrinsic net asset value) through a combination of quality investments and cash generative operations. This strategy involves the acquisition of equity interests (comprising quality investments and/or operating businesses) primarily in operating companies. Mvela Resources is a listed investment holding company which has historically traded at a discount to its underlying net asset value. This is as a result of, inter alia, the relatively illiquid nature of the investments held by Mvela Resources, the restrictions imposed on such investments, and the complex structuring of certain of these investments. Furthermore, the volatility of the financial and share price performance of Mvela Resources is not consistent with Mvela Group"s investment strategy. These factors have to date negatively impacted on the discount at which Mvela Group"s ordinary shares have traded relative to Mvela Group"s intrinsic net asset value, have restricted Mvela Group from pursuing its own growth and expansionary investment strategy, and might, depending on the future BEE requirements of Mvela Resources, result in the diversion of Mvela Group"s capital away from other investment opportunities in the future. As a result of the abovementioned factors, the board of directors of Mvela Group ("the board") has concluded that it is in the best interests of Mvela Group to dispose of its interest in Mvela Resources. Having considered alternative offers and strategies to achieve such a disposal, the board further determined that the disposal thereof to Mvela Holdings represents the transaction with the lowest execution risk, given the restrictions on and consents required to implement any such disposal. The proceeds from the disposal will be used to pursue Mvela Group"s strategy of investing in quality investments and cash generative businesses. Should such opportunities not present themselves within a reasonable period the board of Mvela Group will review the use of such proceeds in the context of maintaining and enhancing shareholder value. 2.2 Terms of the disposal In terms of the disposal, Mvela Group will sell the sale shares to Mvela Holdings with effect from 1 July 2006. The purchase consideration payable by Mvela Holdings for the sale shares is R1.183 billion, equivalent to R31 per sale share. The purchase consideration, plus interest at the applicable overnight call deposit rate calculated thereon from 21 July 2006 until the date of payment, will be settled in cash upon fulfilment of the remaining conditions referred to in 5 below. Payment of the purchase consideration and the interest thereon has been guaranteed in full by an irrevocable and unconditional guarantee and undertaking to pay, received by Mvela Group from Absa Bank Limited on behalf of Mvela Holdings. The purchase consideration of R31 per sale share exceeds the 30 day volume weighted average price (VWAP) of R30.94 at which Mvela Resources shares traded on the JSE Limited up to 30 June 2006, being the date on which Mvela Group received a written offer from Mvela Holdings relating to the disposal. 2.3 Financial effects of the disposal The table below sets out the pro forma financial effects of the disposal on Mvela Group"s unaudited earnings per ordinary share, headline earnings per ordinary share, fully diluted earnings per ordinary share and fully diluted headline earnings per ordinary share for the six months ended 31 December 2005, as well as Mvela Group"s net asset value per ordinary share and net tangible asset value per ordinary share at 31 December 2005. These pro forma financial effects 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 Group. The directors of Mvela Group are responsible for the preparation of the pro forma financial effects. Before After % change the the disposal disposal (cents) (cents)
Earnings per ordinary share 185.8 187.3 0.8 Headline earnings per 185.4 135.6 (26.9) ordinary share Fully diluted earnings per 163.7 165.1 0.9 ordinary share Fully diluted headline 163.4 119.5 (26.9) earnings per ordinary share Net asset value per ordinary 847.3 848.6 0.2 share Net tangible asset value per 695.0 696.3 0.2 ordinary share Notes: 1. The figures in the column "Before the disposal" are extracted from Mvela Group"s unaudited interim results for the six months ended 31 December 2005 which were published on SENS on 7 March 2006.
2. The "After the disposal" column is calculated on the following basis: - The 22,9% interest in Mvela Resources was sold with effect from 1 July 2005;
- The cash proceeds from the disposal were received on 1 July 2005; - Interest was earned on the net cash proceeds received at an after tax rate of 4.2% per annum for the period 1 July 2005
to 31 December 2005; and - The profit on disposal of the sale shares (calculated based on the carrying value of the Mvela Resources investment at 30 June 2005 and after deducting transaction costs and
capital gains tax) of R209 million has been adjusted in the calculation of headline earnings per ordinary share and fully diluted headline earnings per ordinary share. 3. RELATED PARTY TRANSACTION Mvela Holdings is the purchaser of the sale shares. Mvela Holdings is also a material shareholder in Mvela Group. Consequently, the disposal is considered to be a "related party transaction" in terms of the Listing Requirements of the JSE Limited. Accordingly- - Mvela Holdings` votes will not be taken into account in determining the results of the voting at the general meeting of Mvela Group shareholders referred to in 6 below; and - PKF Corporate Finance (Proprietary) Limited has been appointed to advise the board on whether the terms and conditions of the disposal are fair and reasonable to Mvela Group shareholders. Their report in this regard will be included in the circular to Mvela Group shareholders referred to in 6 below. 4. IRREVOCABLE UNDERTAKINGS TO SUPPORT THE DISPOSAL Mvela Group has received irrevocable written undertakings from ordinary shareholders of Mvela Group who on 13 July 2006 held approximately 124 million Mvela Group ordinary shares, representing approximately 60% of the issued ordinary shares of Mvela Group (excluding Mvela Group ordinary shares held by related parties and their associates, and other excluded parties (collectively "the non-voting shareholders)), to vote in favour of the disposal at the general meeting of Mvela Group shareholders referred to in 6 below. In order to be passed, the relevant resolutions to be proposed at such general meeting will require a simple majority, being 50.1% of the votes of those shareholders present and entitled to vote thereat (i.e. excluding the non-voting shareholders) to be cast in favour thereof. 5. CONDITIONS The disposal has been approved by the boards of directors of Mvela Group and Mvela Holdings but will remain subject only to the fulfilment of the following resolutive conditions by 30 September 2006: - the approval by the JSE Limited of a circular to be sent to Mvela Group shareholders; and - the approval by Mvela Group shareholders (excluding the non-voting shareholders) of the disposal at a general meeting of Mvela Group shareholders to be convened for that purpose. 6. CIRCULAR TO MVELA GROUP SHAREHOLDERS A circular containing, inter alia, further details in relation to the disposal and a notice of a general meeting of Mvela Group shareholders to approve the disposal, which general meeting is expected to be held before the end of August 2006, is being prepared and will be sent to Mvela Group shareholders in due course. 7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT The cautionary announcement dated 30 June 2006 is hereby withdrawn. Sandton 18 July 2006 Merchant bank and transaction sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited) Sponsor Deutsche Securities SA (Pty) Limited Reporting accountants PKF (Jhb) Inc. Independent advisor to Mvela Group PKF Corporate Finance (Pty) Limited Attorneys to Mvela Group Bowman Gilfillan Attorneys to Mvela Holdings Hofmeyr Herbstein & Gihwala Inc. Financier and financial advisor to Mvela Holdings Absa Capital Date: 18/07/2006 08:28:08 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
