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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" or "the Company") 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 9 December 2005, Mvela Group is pleased to announce that it has concluded a written agreement with Incwala Resources (Proprietary) Limited ("Incwala") to dispose of its 38 147 209 ordinary shares in Mvela Resources Limited ("Mvela Resources")("the sale shares"), representing 22,9% of the issued share capital of Mvela Resources, and to assign its rights and obligations ("the management rights and obligations") in terms of the management agreement between Mvela Group and Mvela Resources ("the management agreement"), in one indivisible transaction ("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 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, rather than in other listed investment companies such as Mvela Resources. Upon the implementation of the merger of the businesses and assets of Mvelaphanda Holdings (Proprietary) Limited ("Mvela Holdings") and Rebserve Holdings Limited in December 2004, Mvela Group"s single largest investment was in Mvela Resources, itself a mining and resources investment company which trades at a substantial discount to its net asset value. Following the disposal, Mvela Group"s investments will comprise primarily investments in operating companies, with strong earnings growth and cash generating potential. This will enhance Mvela Group"s position as South Africa"s leading black controlled, owned and managed diversified group with a range of investments in quality operating companies and cash generative operations. The board of Mvela Group believes that such a change will deliver steady growth in Mvela Group"s intrinsic net asset value and a resultant increase in the rating ascribed to Mvela Group by the market, particularly in the context of eliminating the multiple entry points in respect of certain investments as a result of the listings of both Mvela Group and Mvela Resources. As a result of the BEE shareholder requirements of certain of the underlying investments held by Mvela Resources, Mvela Group has hitherto been restricted from pursuing its own growth and expansionary investment strategy, including restricting Mvela Group"s ability to raise capital. Following the disposal, Mvela Group will have the flexibility to pursue the numerous attractive investment and other opportunities currently being presented to Mvela Group for the benefit of all shareholders. The volatility in earnings and share price performance which can be exhibited by companies in the resources sector, and in particular Mvela Resources, has resulted in increased volatility in the Mvela Group share price from time to time, and is inconsistent with the profile of Mvela Group"s other investments and operations. The recent rise in the Mvela Resources share price as a result of the recent increase in the gold price creates an opportunity for Mvela Group to realise this investment at a fair value. The cash proceeds received from the disposal will provide Mvela Group with significant "fire-power" and the necessary financial resources for Mvela Group to conclude major BEE and/or value enhancing transactions in future. 2.2 Terms of the disposal In terms of the disposal Mvela Group will sell to Incwala the sale shares and assign the management rights and obligations with effect from 31 December 2005. The purchase consideration payable by Incwala for the sale shares is R763 million, which amounts to R20 per sale share. The purchase consideration is required to be settled in cash on fulfilment of the conditions precedent referred to in 3 below and will bear interest from 1 April 2006, if not paid by that date, at a rate of 8.5% per annum. The purchase consideration of R20 per sale share represents a 2% discount to the 30 day volume weighted average price (VWAP) at which Mvela Resources shares traded on the JSE Limited up to 6 December 2005, being the date on which Mvela Group received a written offer from Incwala 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 audited 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 Group"s net asset value per ordinary share and net tangible asset value per ordinary share at 30 June 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 the After the disposal disposal % (cents) (cents) Change Earnings per ordinary share 123.0 87.9 (28.5) Headline earnings per 135.5 100.4 (25.9) ordinary share Fully diluted headline 135.5 100.4 (25.9) earnings per ordinary share Net asset value per 647.2 620.5 (4.1) ordinary share Net tangible asset value 493.9 467.2 (5.4) per ordinary share Notes: 1. The pro forma financial effects are based on Mvela Group"s audited results for the year ended 30 June 2005 (the "Before the disposal" column), which included R120 million of equity accounted earnings from Mvela Resources for the six month period from 31 December 2004 (being the effective date from which the investment in Mvela Resources was accounted for by Mvela Group) to 30 June 2005. 2. The "After the disposal" column is calculated on the following basis: - The 22,9% interest in Mvela Resources was sold with effect from 31 December 2004; - The cash proceeds from the disposal were received on 31 December 2004; - Interest was earned on the cash proceeds received at an after tax rate of 4.2% per annum for the period 1 January 2005 to 30 June 2005; and - Mvela Group"s rights to receive management fees in terms of the management agreement ceased on 31 December 2004. 3. CONDITIONS PRECEDENT Incwala has concluded its due diligence investigation of Mvela Resources to its satisfaction, and the disposal has been approved by the respective boards of directors of Mvela Group and Incwala. The disposal remains subject to, inter alia, the following conditions precedent: - the obtaining (by 31 March 2006) of all consents and/or approvals and/or waivers required in respect of the disposal, from all relevant parties to Mvela Resources" material underlying investments; - the obtaining (by 31 May 2006) of the necessary regulatory approvals, including approval by the Competition Authorities; and - the obtaining (by 31 March 2006) of the approval of the Mvela Resources board for the assignment of the management agreement to Incwala, and the formal assignment by Mvela Group of the management rights and obligations to Incwala. Mvela Holdings will provide its co-operation and assistance to Incwala in obtaining the consents referred to above and on an ongoing basis. Any investment or other opportunities accruing to Mvela Holdings from this co-operation between Mvela Holdings and Incwala will be offered by Mvela Holdings to Mvela Group at cost. 4. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT The cautionary announcement dated 9 December 2005 is hereby withdrawn. A further announcement will be made upon fulfilment (or otherwise) of the conditions precedent. Sandton 22 December 2005 Sponsor: Deutsche Securities Attorneys: Werksmans Date: 22/12/2005 10:30:15 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
