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MVG/MVGP - Mvela Group - Proposed implementation of a BBBEE Ownership Initiative
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Ordinary share code: MVG
Ordinary share ISIN: ZAE000060737
Preference share code: MVGP
Preference share ISIN: ZAE000073540
("Mvela Group" or "the Company")
PROPOSED IMPLEMENTATION OF A BROAD-BASED BLACK ECONOMIC EMPOWERMENT OWNERSHIP
INITIATIVE TO ENHANCE AND SECURE MVELA GROUP`S BEE CREDENTIALS
1. INTRODUCTION
Mvela Group wishes to facilitate the participation of broad-based Black
Economic Empowerment ("BEE") shareholders in the Company in order to
enhance and secure Mvela Group`s BEE credentials, maximise the BEE
scorecard points achieved by Mvela Group and its subsidiaries ("the Group")
in terms of the Codes of Good Practice on Black Economic Empowerment,
issued under Section 9(1) of the Broad-Based Black Economic Empowerment
Act, 2003 (Act 53 of 2003) ("the BBBEE Act"), as amended ("the Codes"), and
in terms of its commitment to promoting BEE at all levels of the South
African economy ("the BEE transaction").
2. RATIONALE FOR THE BEE TRANSACTION
Mvela Group has an inclusive philosophy towards BEE and believes that broad-
based community and employee participation in Mvela Group is critical to
its future success. With less than 10% of companies listed on the JSE
Limited ("the JSE") being black-controlled, there is still a long way to go
to achieve the economic balance for which the BEE initiatives were
originally designed.
Mvela Group believes that it has a leading role to play in the on-going
transformation of the South African economy through the participation of
black people and black organisations in Mvela Group. At the time of the
merger of the business and assets of Mvelaphanda Holdings (Proprietary)
Limited ("Mvela Holdings") and Rebserve (now Mvela Group), implemented on
13 December 2004, Mvela Group announced its intention to facilitate further
participation (equivalent to approximately 15% - 20% of Mvela Group`s
issued share capital) in Mvela Group by black people, including employees
of Mvela Group, community groups, youth groups, people with disabilities
and women`s groups.
In February 2007, the Department of Trade and Industry finalised the Codes
and set the criteria to be met by South African companies to ensure that
commercial and sustainable solutions are found to the challenges of BEE.
With the Codes now published, Mvela Group is able to address Mvela Group`s
BEE credentials and initiatives to maximise the BEE scorecard points
achieved by Mvela Group, including maximising the "bonus points", in terms
of the Codes. Maximising the BEE scorecard points is an important element
in securing new business and contracts for Mvela Group`s subsidiaries.
BEE deal flow is still expected to be a major driver of mergers and
acquisitions in South Africa in the foreseeable future, including the
consolidation of BEE groups and the "secondary trade" in BEE transactions.
Mvela Group, as a major black-owned, controlled and managed diversified
group, currently enjoys a competitive advantage over other BEE groups as a
result of, inter alia, its strong BEE credentials. Securing and enhancing
these BEE credentials is critical to the on-going success of Mvela Group
and its ability to attract new investment opportunities.
Notwithstanding the requirements of the Codes, certain of Mvela Group`s
underlying investments require that Mvela Group`s BEE shareholding remains
above 50% until March 2011. The BEE transaction provides an opportunity to
secure and increase the long-term BEE shareholding in Mvela Group, and will
provide capacity in the short to medium-term for Mvela Group to raise
additional capital through the issue of new ordinary shares in Mvela Group
("Mvela Group ordinary shares"), should this be required, without
compromising Mvela Group`s BEE credentials. In this regard, the convertible
perpetual cumulative preference shares in Mvela Group ("Mvela Group
perpetual preference shares") already issued may be converted into Mvela
Group ordinary shares after 4 November 2009. Based on the current number of
Mvela Group ordinary shares in issue, the conversion of the Mvela Group
perpetual preference shares into Mvela Group ordinary shares will result in
an approximate 11% dilution in Mvela Group`s BEE shareholding. At the time
of issuing the Mvela Group perpetual preference shares, it was anticipated
that Mvela Group would be required to implement a share-based transaction
before November 2009 to counter the dilutive effect of the conversion of
the Mvela Group perpetual preference shares.
The BEE transaction addresses the items outlined above by:
- securing Mvela Group`s BEE shareholding as a competitive advantage in
attracting BEE deal flow, acting as a consolidator of BEE transactions
and participating in the "secondary trade" in BEE transactions;
- ensuring that the level of Mvela Group`s BEE shareholding is
maintained above 50% in the short to medium-term, in line with the
requirements of certain of Mvela Group`s investments;
- minimising the impact of the dilution of Mvela Group`s BEE credentials
as a result of the conversion of the Mvela Group perpetual preference
shares into Mvela Group ordinary shares;
- maximising the BEE scorecard points achieved by the Group in terms of
the Codes;
- facilitating further participation in Mvela Group`s share capital by
broad-based BEE participants; and
- allowing employees and management of the Group to become shareholders
in Mvela Group and participate in the anticipated continued growth of
Mvela Group.
3. THE BEE TRANSACTION
3.1 Overview
The BEE transaction will be implemented through the creation and specific
issue for cash ("the specific issue") by Mvela Group of 124 425 055
redeemable option-holding shares ("the BEE shares") to four trusts ("the
BEE trusts") created for the benefit of strategic BEE groupings, women`s
groupings, charitable organisations and the employees of the Group
(collectively, "the BEE shareholders"). The terms and conditions upon which
the BEE trusts will subscribe for the BEE shares are contained in a
subscription agreement ("the subscription agreement") to be entered into by
Mvela Group and the BEE trusts once the BEE trusts are registered.
Each BEE share will have an option attached to it allowing the holder of
the BEE share to subscribe for one Mvela Group ordinary share ("the
option") at a strike price equal to:
- R12.00, escalating at 10% per annum from the date of issue of the BEE
share to the fourth anniversary of the date of issue, subject to a
minimum of R17.50; or
- if the 30-day Volume Weighted Average Price at which Mvela Group
ordinary shares traded on the JSE on the business day immediately
preceding the date on which the option is exercised or deemed to be
exercised ("the 30-day VWAP") is greater than R25.00, the sum of
R17.50 and 50% of the amount by which the 30-day VWAP exceeds R25.00
("the option strike price").
The Mvela Group ordinary shares issued pursuant to the exercise of the
options will represent 20% of Mvela Group`s current fully diluted issued
ordinary share capital, calculated on the basis that all of the Mvela Group
perpetual preference shares are converted into Mvela Group ordinary shares
in accordance with their terms, and that all of the options are exercised.
Each BEE share will rank pari passu with a Mvela Group ordinary share in
terms of notices and voting (other than in respect of the restrictions
imposed by the JSE as set out in paragraph 3.6 below). The trustees of the
BEE trusts will exercise the votes relating to the BEE shares in meetings
of Mvela Group shareholders.
Pursuant to the issue of the BEE shares, 20% (calculated on a fully diluted
basis as set out above) of Mvela Group`s issued share capital will be held
and voted (subject to the restrictions imposed by the JSE as set out in
paragraph 3.6 below) by the BEE trusts, the beneficiaries of which will
represent a broad base of BEE individuals and organisations.
As a result of the restrictions contained in the subscription agreement and
the trust deeds of the BEE trusts relating to the sale and/or
transferability of the BEE shares, the Mvela Group ordinary shares to be
issued pursuant to the exercise of the options and the rights/interests of
the beneficiaries of the BEE trusts (collectively "the BEE rights"), the
BEE rights will continue to be held by the BEE trusts, and/or eligible key
individuals and/or eligible BEE companies, at least until 31 December 2014.
3.2 Salient terms of the BEE shares
Salient terms of the BEE shares are set out in the table below:
Issuer: Mvela Group
Description: Redeemable option-holding shares with a par
value of R0.001 (0.1 cent) each
Issue date: Monday, 11 June 2007
Issue size: 124 425 055 BEE shares
Issue price: R0.001 (0.1 cent) per BEE share
Option strike price: Each BEE share confers on its registered
holder the right and option to subscribe for
one Mvela Group ordinary share at a strike
price equal to:
R12.00, escalating at 10% per annum from the
date of issue of the BEE share to the fourth
anniversary of the date of issue, subject to a
minimum of R17.50; or
if the 30-day VWAP is greater than R25.00, the
sum of R17.50 and 50% of the amount by which
the 30-day VWAP exceeds R25.00.
Option period and Options may be exercised in lots of 100 at any
exercise dates: time during the period commencing on the first
business day immediately following the fourth
anniversary of the date of issue of the BEE
shares and ending at 16:00 on the fifth
anniversary of the date of issue of the BEE
shares ("final option exercise date") (such
period being "the option period") by notice in
writing to the company secretary (accompanied
by payment of the option strike price).
Options not validly exercised by the final
option exercise date will lapse.
Effectiveness of the Notices to exercise the options may be
exercise notices: delivered to the company secretary at any time
during the option period, but such notices
shall be deemed to become effective in respect
of each complete lot of 100 options exercised
only on 1 March, 1 June, 1 September or 1
December during the option period ("option
exercise date") (or if any of the option
exercise dates is not a business day, the
immediately succeeding business day, or if
that day falls within a "closed period" in
respect of the Company, the first business day
immediately following expiry of the relevant
closed period).
Redemption date and The BEE shares are automatically redeemable on
price: the option exercise date immediately following
the valid exercise of the option or on the
final option exercise date when the option
lapses. The BEE shares are redeemable by Mvela
Group at the par value (being R0.001 (0.1
cent) per BEE share).
Rights to dividends: From the date of issue until the option
exercise date, the holders of BEE shares ("BEE
shareholders") shall have no right to receive
any dividend out of the profits of Mvela
Group.
Voting rights: Each of the BEE shares shall have the same
rights as the holders of Mvela Group ordinary
shares with respect to the receiving of
notices and voting (subject to the JSE`s
restrictions set out in paragraph 3.6 below)
at meetings of Mvela Group shareholders.
Rights with respect If:
to capital the issued shares of the Company are
restructuring: consolidated or sub-divided or in any other
way reorganised; or
the share capital of the Company is reduced in
any manner whatsoever; or
the Company carries out any corporate action
which involves any payment to its
shareholders, a rights issue or any capital
raising exercise;
then the board of directors of Mvela Group
("the directors" or "the Board") may, in their
discretion, vary the terms of the options or
issue further options to existing BEE
shareholders, subject to confirmation by the
Company`s auditors that any such adjustment is
reasonable and fair to all Mvela Group
shareholders.
Transferability and No BEE share shall be transferred in the share
listing of the BEE register of the Company without prior written
shares: approval of the directors. At no stage shall
any of the BEE shares be listed on the JSE or
on any recognised stock exchange.
3.3 The BEE trusts
3.3.1. Selection of the beneficiaries of the BEE trusts
The criteria for determining the beneficiaries of the BEE trusts has
been based on Mvela Group`s inclusive philosophy towards BEE and
belief that community and employee participation in Mvela Group is
critical to its future success, as well as the guidelines set out in
the Codes.
The criteria established by Mvela Group for the selection of the
beneficiaries of the BEE trusts are that:
- beneficiaries of each of the BEE trusts should be predominantly
black people, as defined in the BBBEE Act;
- beneficiaries of The Mvelaphanda Group Strategic Partners BEE
Trust ("the Strategic BEE Trust") and The Mvelaphanda Group Black
Women`s Trust ("the Women`s Trust") are to be predominantly
companies/organisations;
- the key individuals of the BEE companies/organisations should
have demonstrated entrepreneurial and leadership qualities;
- all staff and management of the Group should be afforded the
opportunity to participate in the BEE transaction; and
- where possible, new entrants (i.e. BEE companies/organisations
who would not normally have access to such investment
opportunities) should be given an opportunity to participate in
the BEE transaction.
Mvela Group has appointed the first trustee of each of the BEE trusts.
The first trustee will assist Mvela Group in identifying beneficiaries
of the Strategic BEE Trust and the Women`s Trust who meet the above-
mentioned criteria in order to maximise Mvela Group`s transformation
objectives.
It is envisaged that the beneficiaries of the BEE trusts will comprise
community groups, youth groups, people with disabilities, women`s
groups and the directors, executives, management and staff of the
Group.
In line with the spirit of the BEE transaction, Mvela Holdings and the
directors of Mvela Group who are also directors and shareholders of
Mvela Holdings ("the Mvela Holdings directors") will not participate,
directly or indirectly, in any of the BEE trusts or the BEE
transaction.
3.3.2 Profile of the BEE trusts
The proposed profiles of the BEE trusts and the beneficiaries thereof
are set out below:
BEE trusts Number of BEE First Profile of
shares trustee beneficiaries
allocated
Strategic 31 106 264 Zwelibanzi The beneficiaries of
BEE Trust Malinga the Strategic BEE Trust
(Director of will be BEE
Hofmeyr companies/organisations
Attorneys) whose key individuals
have demonstrated
entrepreneurial and
leadership qualities,
and who engender the
true spirit of
empowerment and
transformation, and
eligible charitable
organisations.
The initial
organisations which
have been identified as
beneficiaries of the
Strategic BEE Trust
are:
Langa Investments
(Proprietary) Limited;
Mazolo Holdings
(Proprietary) Limited;
and
Ulutsha Development
Trust.
Women`s 31 106 264 Zwelibanzi The beneficiaries of
Trust Malinga the Women`s Trust will
(Director of comprise women`s groups
Hofmeyr and eligible charitable
Attorneys) organisations.
The initial
organisations which
have been identified as
beneficiaries of the
Women`s Trust are:
Intuthuko Youth Trust;
and
Masechaba Veteran
Women`s Trust.
The 31 106 263 Zwelibanzi The beneficiaries of
Mvelaphanda Malinga the Management Trust
Group (Director of will be the executive,
Management Hofmeyr senior and middle
Trust ("the Attorneys) management of Mvela
Management Group and its
Trust") subsidiaries,
comprising
approximately 2 000
employees in total,
including certain of
the executive directors
of Mvela Group, but
specifically excluding
the Mvela Holdings
directors.
Approximately 60% of
the beneficiaries of
the Management Trust
will be black people.
The 31 106 264 Zwelibanzi The beneficiaries of
Mvelaphanda Malinga the Employee Trust will
Group (Director of be all employees of
Employee Hofmeyr Mvela Group and its
Trust ("the Attorneys) subsidiaries who would
Employee not qualify as
Trust") beneficiaries of the
Management Trust,
comprising
approximately 22 000
employees in total, of
which approximately 90%
are black people.
Each of the BEE trusts will have five trustees. The composition of the
boards of trustees of each of the BEE trusts is set out below:
BEE trusts Composition of the board of trustees
Strategic BEE Trust and The first trustee is Zwelibanzi
Women`s Trust Malinga.
The first trustee shall procure the
appointment of the board of trustees,
which shall be constituted as follows:
* one trustee appointed by Mvela
Group, who is an employee of the
Group;
* one trustee appointed by Mvela
Group from amongst the beneficiaries,
or the shareholders or officers of the
beneficiaries; and
* three independent black persons
to be approved by the beneficiaries of
the trust and appointed by the first
trustee.
At all times, all of the trustees will
be black persons and, in respect of
the Women`s Trust, three of the
trustees will be black women.
Employee Trust and The first trustee is Zwelibanzi
Management Trust Malinga.
The first trustee shall procure the
appointment of the board of trustees,
which shall be constituted as follows:
* one trustee shall be a black
person, who is an employee of the
Group;
* one independent trustee appointed
by Mvela Group; and
* three trustees who are black
persons, elected by the beneficiaries
of the trust from amongst themselves.
It is anticipated that all of the beneficiaries and trustees of the
BEE trusts will be identified/appointed, and the participation rights
of the beneficiaries of the BEE trusts allocated, by 30 June 2007.
Each of the BEE trusts will be responsible for raising the capital
required to subscribe for the BEE shares, either by way of loans or
donations. In this regard, and in order to facilitate the subscription
for the BEE shares by the Employee Trust and the Management Trust,
Mvela Group will donate R31 106 to each of the Employee Trust and the
Management Trust to be used by these trusts to subscribe for the BEE
shares allotted to them.
The trustees of each of the BEE trusts will decide when (during the
option period) to exercise the options. At the time of exercising the
options and subscribing for the Mvela Group ordinary shares to be
issued pursuant thereto, each of the BEE trusts will arrange the
necessary finance to fund the option strike price payable per Mvela
Group ordinary share on such terms as the trustees of the respective
BEE trusts may deem fit.
It is anticipated that the exercise of the options and the financing
of the option strike price will be arranged by the BEE trusts and not
the individual beneficiaries of the BEE trusts. Once the options have
been exercised and the Mvela Group ordinary shares acquired, the
beneficiaries of each of the BEE trusts will be entitled to the
economic benefits that flow from the Mvela Group ordinary shares
allocated to them, subject to the terms and conditions of the funding
arranged by each of the BEE trusts to finance the option strike price.
3.3.3 Allocation of the BEE shares to the beneficiaries
The allocation of the BEE shares to the BEE trusts and the
beneficiaries thereof will be the responsibility of an allocation
committee, comprising the members of the remuneration committee and
the audit committee of the Board. Both committees comprise
predominantly of independent non-executive directors. To the extent
that a member of the allocation committee qualifies for an allocation
of rights in any of the BEE trusts, such member will recuse himself
from the committee for purposes of the approval of his allocation. A
communication and education strategy will be implemented to inform all
employees of the Group of the BEE transaction and the rights allocated
to them by the Employee Trust or the Management Trust.
3.4 Resultant shareholding structure
For the economic and voting interests of Mvela Group shareholders
(calculated on a fully diluted basis assuming that all of the Mvela Group
perpetual preference shares are converted to Mvela Group ordinary shares in
accordance with their terms, and that all of the options are exercised)
following the issue of the BEE shares, and the exercise of the options,
please refer to the announcement to be published in the press on Tuesday,
15 May 2007.
3.5 Conditions precedent to the BEE transaction
The BEE transaction is subject to the fulfilment of the following
suspensive conditions:
- the signing of the subscription agreement by Mvela Group and the BEE
trusts;
- the passing of the resolutions relating to the BEE transaction by
Mvela Group ordinary shareholders at the general meeting referred to
in 7 below; and
- the registration of such resolutions, where required, by the Registrar
of Companies in South Africa.
3.6 Restrictions relating to the BEE shares in terms of the Listings
Requirements
Rule 4.24 of the Listings Requirements of the JSE ("the Listings
Requirements") provides that: "Where shareholders are required to vote in
terms of the Listings Requirements, the votes of shareholders of unlisted
securities will not be taken into account in determining either a quorum or
for approval of any resolution considered at any general/annual general
meeting."
Notwithstanding the aforegoing and that the BEE shares will be unlisted,
the JSE has granted Mvela Group dispensation from the provisions of Rule
4.24 of the Listings Requirements and has ruled that the BEE shares will be
entitled to vote at Mvela Group shareholder meetings on the following
basis:
3.6.1 the BEE shares are being created and issued for the sole purpose of
facilitating the BEE shareholding in Mvela Group;
3.6.2 the BEE shareholders may not veto any resolution that would otherwise
have been passed, or not, by Mvela Group shareholders;
3.6.3 Mvela Group, as newly constituted pursuant to the BEE transaction, may
not take account of the unlisted BEE shares when categorising a
proposed transaction under Section 9 of the Listings Requirements;
3.6.4 notwithstanding point 3.6.3 above, the BEE shareholders may cast their
vote on such categorised transactions, and wherever shareholder
approval is required (but subject to paragraph 3.6.2 above and the
Memorandum and Articles of Association of Mvela Group ("the Memorandum
and Articles")), the votes attaching to each class of shares are to be
afforded equal rank and all such votes are to be regarded
collectively;
3.6.5 no further issues of the unlisted BEE shares may occur following the
creation and issue of such unlisted BEE shares in terms of the BEE
transaction;
3.6.6 the unlisted BEE shares must be held in escrow with Mvela Group`s
attorneys and, if certificated, must be restrictively endorsed as not
transferable;
3.6.7 the terms of the unlisted BEE shares as contained in Memorandum and
Articles, and in any agreement relating to the issue of the unlisted
BEE shares, must also conform to the provisions of the South African
Companies Act, 1973 (Act 61 of 1973), as amended;
3.6.8 neither the Memorandum and Articles nor any agreement are to contain
any special minority protections in favour of the BEE shareholders;
and
3.6.9 the existence of the unlisted BEE shares must be finite.
4. CREATION OF THE BEE SHARES
4.1 Shareholder approval for the creation of the BEE shares
In order to implement the BEE transaction, it is necessary to:
- amend the Memorandum and Articles to increase the authorised share
capital of Mvela Group and to incorporate the rights, privileges and
restrictions attaching to the BEE shares therein;
- place all the authorised but unissued BEE shares under the control of
the directors; and
- place the authorised but unissued Mvela Group ordinary shares
resulting from the redemption of the BEE shares under the control of
the directors, to be allotted and issued to the holders of the BEE
shares in the event that all or any of the options are exercised.
Details of a general meeting of Mvela Group ordinary shareholders to be
held for this purpose are set out in paragraph 7 below.
5. PRO FORMA FINANCIAL INFORMATION
The pro forma financial effects of the BEE transaction 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 2006, as
well as Mvela Group`s net asset value per ordinary share and net tangible
asset value per ordinary share at 31 December 2006 are set out in the table
below.
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 are responsible for the preparation of the pro forma
financial effects.
Unaudited Pro forma % Pro forma %
six months after the Change after the Change
ended specific exercise
31 Dec 2006 issue of the
options
Earnings per 166.8 150.4 (9.8) 141.8 (15.0)
ordinary share
(cents)
Heading earnings 187.0 170.6 (8.8) 157.6 (15.7)
per ordinary
share (cents)
Fully diluted 151.5 120.0 (20.8) 131.7 (13.1)
earnings per
ordinary share
(cents)
Fully diluted 169.4 134.4 (20.7) 146.1 (13.8)
headline earnings
per ordinary
share (cents)
Net asset value 1 058.2 846.3 (20.0) 1 207.3 14.1
per ordinary
share (cents)
Net tangible 898.1 718.3 (20.0) 1 079.2 20.2
asset value per
ordinary share
(cents)
Notes:
1. The "Unaudited six months ended 31 December 2006" column of the table
is Mvela Group`s unaudited interim results for the six months ended 31
December 2006, which were published in the press on 7 March 2007.
2. The "Pro forma after the specific issue" column of the table is
calculated using the following assumptions:
- 124 425 055 BEE shares were issued on 1 July 2006 at an issue
price of 0.1 cent per BEE share, amounting to R124 425 of capital
raised;
- interest was earned on the amount of R124 425 at an after-tax
rate of 6% per annum;
- the options attached to the BEE shares have been valued at R1.04
per option based on the price at which Mvela Group ordinary
shares traded on the JSE on 28 February 2007 of R11.30;
- the cost to Mvela Group of the options relating to the BEE shares
issued to the Employee Trust and the Management Trust has been
recognised over the period of the service conditions applicable
to the beneficiaries of these trusts, in accordance with AC 503,
Accounting for BEE Transactions;
- the cost to Mvela Group of the options relating to the BEE shares
issued to the Women`s Trust and the Strategic BEE Trust has been
recognised immediately on the date of issue of the BEE shares
(the option grant date) in the income statement in accordance
with AC 503, Accounting for BEE Transactions; and
- fully diluted earnings per ordinary share and fully diluted
headline earnings per ordinary share have been prepared on the
basis set out above and assuming that the options were exercised
on 1 July 2006 at an option strike price of R17.50 and the
subscription proceeds of R2.177 billion arising on the exercise
of the options were received by Mvela Group on 1 July 2006.
3. The "Pro forma after the exercise of the options" column of the table
is calculated using the following assumptions:
- 124 425 055 BEE shares were issued prior to, and redeemed on, 1
July 2006;
- the options in were exercised on 1 July 2006;
- the subscription proceeds of R2.177 billion arising on the
exercise of the options were received by Mvela Group on 1 July
2006; and
- interest was earned on the amount of R2.177 billion at an after-
tax rate of 6% per annum.
4. The percentage change columns are calculated with reference to the
"Unaudited six months ended 31 December 2006" column".
The minimum option strike price of R17.50 per Mvela Group ordinary
share is equivalent to a premium of 24% to Mvela Group`s intrinsic net
asset value per Mvela Group ordinary share at 23 February 2007 of
R14.07, as published in Mvela Group`s unaudited interim results for
the six months ended 31 December 2006, and is equivalent to a premium
of 55% to the price of Mvela Group ordinary shares on the JSE of
R11.30 on 28 February 2007. The option exercise price may represent a
discount or a premium to the price of Mvela Group ordinary shares at
the date on which the options are exercised.
Had the options been exercised at the minimum option strike price of
R17.50 on 23 February 2007, Mvela Group`s intrinsic net asset value
per Mvela Group ordinary share at 23 February 2007 of R14.07 (as
published in Mvela Group`s unaudited interim results for the six
months ended 31 December 2006), would have increased to R14.75.
For purposes of calculating the pro forma financial effects, Mvela
Group has valued each option at R1.04, equating to a total value of
R129.4 million. The dilution in value to Mvela Group shareholders as a
result of the BEE transaction is approximately 2.3% of Mvela Group`s
market capitalisation of R5.7 billion on 28 February 2007, and is in
line with accepted norms for transactions of this nature.
6. OPINIONS AND RECOMMENDATIONS
6.1 Independent professional expert`s opinion
The Board has appointed PKF Corporate Finance (Proprietary) Limited ("PKF")
as the independent professional expert to advise the Board on the terms and
conditions of the BEE transaction. PKF has considered the terms and
conditions of the BEE transaction and is of the opinion that they are fair
and reasonable to Mvela Group shareholders.
6.2 Directors` recommendation
The Board is of the opinion that the terms and conditions of the BEE
transaction are fair and reasonable to Mvela Group shareholders.
Accordingly, the Board recommends that Mvela Group ordinary shareholders
vote in favour of the resolutions to authorise, approve and implement the
BEE transaction.
The directors with direct and/or indirect interests in Mvela Group, and who
are not precluded from voting, intend to vote in favour of the resolutions
to be proposed at the general meeting.
7. GENERAL MEETING
A general meeting of Mvela Group ordinary shareholders will be held at
11:00 on Wednesday, 6 June 2007 at the registered office of Mvela Group,
Hunts End, 36 Wierda Road West, Wierda Valley, Sandton at which ordinary
shareholders will be asked to consider and, if deemed fit, pass the
ordinary and special resolutions required to approve and implement the BEE
transaction.
In terms of the Listings Requirements of the JSE Limited, Mvela Group
ordinary shares held by the Share Incentive Scheme and any Mvela Group
ordinary shares held by directors (and their associates) who will
participate in the BEE transaction will not be entitled to vote at the
general meeting.
8. CIRCULAR TO MVELA GROUP SHAREHOLDERS
A circular setting out the full details of the BEE transaction will be
posted to Mvela Group shareholders on Monday, 14 May 2007.
Sandton
14 May 2007
Investment Bank and transaction sponsor
Standard Bank
Attorneys
Bowman Gilfillan
Sponsor
Deutsche Securities
Auditors and reporting accountants
PKF
Independent professional expert
PKF Corporate Finance
Transaction advisor
Afropulse Group
Date: 14/05/2007 15:23:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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