STEINHOFF/MEGACOR - PROPOSED SCHEME OF ARRANGEMENT

STEINHOFF INTERNATIONAL HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 98/03951/06)
("STEINHOFF")
MEGACOR HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 96/17594/06)
("MEGACOR")

PROPOSED SCHEME OF ARRANGEMENT PURSUANT TO WHICH MEGACOR WILL BE CONSTITUTED A
WHOLLY-OWNED SUBSIDIARY OF STEINHOFF
INTRODUCTION AND TERMS OF THE SCHEME

FURTHER TO THE CAUTIONARY ANNOUNCEMENT PUBLISHED ON 1 OCTOBER 1998,

SHAREHOLDERS ARE ADVISED THAT THE DIRECTORS OF STEINHOFF HAVE RESOLVED TO
PROPOSE A SCHEME OF ARRANGEMENT IN TERMS OF SECTION 311 OF THE COMPANIES ACT,
1973, AS AMENDED, BETWEEN MEGACOR AND ITS SHAREHOLDERS, OTHER THAN STEINHOFF
AFRICA HOLDINGS (PROPRIETARY) LIMITED ("SCHEME MEMBERS"), WHICH, IF

IMPLEMENTED, WILL RESULT IN MEGACOR EFFECTIVELY BECOMING A WHOLLY-OWNED
SUBSIDIARY OF STEINHOFF ("THE SCHEME"). SUBJECT TO THE RELEVANT CONDITIONS
PRECEDENT, DETAILS OF WHICH ARE SET OUT BELOW, SCHEME MEMBERS WILL BE ENTITLED
TO RECEIVE ONE STEINHOFF ORDINARY SHARE ("SCHEME CONSIDERATION SHARES") FOR
EVERY THREE MEGACOR ORDINARY SHARES ("SCHEME SHARES") HELD AT A RECORD DATE TO
BE ANNOUNCED IN DUE COURSE.

THE EXCHANGE RATIO OF 1:3 HAS BEEN DETERMINED ON THE BASIS OF THE FOLLOWING
RELATIVE VALUES:

-  450 CENTS PER STEINHOFF SHARE WHICH APPROXIMATES THE VOLUME WEIGHTED AVERAGE
TRADED PRICE OF 454 CENTS PER SHARE SINCE STEINHOFF'S LISTING ON THE

JOHANNESBURG STOCK EXCHANGE ("THE JSE") ON 23 SEPTEMBER 1998 TO 23 OCTOBER
1998; AND

-  150 CENTS PER MEGACOR SHARE, BEING A VALUE WHICH IS AT A PREMIUM OF 24% TO
THE VOLUME WEIGHTED AVERAGE TRADED PRICE PER MEGACOR SHARE OF 121 CENTS PER
SHARE OVER THE 30 TRADING DAYS UP TO 23 OCTOBER 1998.

THE SCHEME CONSIDERATION SHARES WILL, UPON THEIR ISSUE, RANK PARI PASSU IN ALL
RESPECTS WITH STEINHOFF'S THEN EXISTING ORDINARY SHARES IN ISSUE.
RATIONALE FOR THE SCHEME

FOLLOWING THE ACQUISITION BY STEINHOFF OF DE FACTO CONTROL OF MEGACOR IN AUGUST
1998, THE BENEFITS OF THE RESULTANT STRATEGIC PARTNERSHIP ARE ALREADY EVIDENT
IN MEGACOR'S CURRENT TRADING PERFORMANCE. OF PARTICULAR IMPORTANCE ARE
MEGACOR'S ENHANCED EXPORT EARNINGS PROSPECTS BROUGHT ABOUT BY UTILISING
STEINHOFF'S EXTENSIVE EUROPEAN MARKETING AND DISTRIBUTION NETWORK AND THE
MANAGEMENT DEPTH CONTRIBUTED BY STEINHOFF'S REPRESENTATIVES ON MEGACOR'S BOARD.
HOWEVER, IN ORDER TO OPTIMISE EFFICIENCIES AND FULLY EXPLOIT THE SYNERGISTIC
AND RATIONALISATION BENEFITS THAT MAY BE REALISED BETWEEN STEINHOFF AND
MEGACOR, AND TO AVOID SITUATIONS WHERE A CONFLICT OF INTEREST MAY ARISE, IT IS
CONSIDERED APPROPRIATE THAT MEGACOR BE CONSTITUTED A WHOLLY-OWNED SUBSIDIARY OF
STEINHOFF. THE RECENT LISTING OF STEINHOFF ON THE JSE HAS FURTHERMORE CREATED
THE CAPACITY TO ACHIEVE THIS OBJECTIVE WHILST, AT THE SAME TIME, AVAILING
MEGACOR SHAREHOLDERS WITH THE OPPORTUNITY OF:

-  EXCHANGING THEIR SCHEME SHARES, ON FAVOURABLE TERMS, FOR THE SCHEME
CONSIDERATION SHARES WHICH INHERENTLY HAVE SUPERIOR RAND-HEDGE QUALITIES;
-  REMAINING INDIRECTLY INVESTED IN MEGACOR; AND

-  SHARING IN THE BENEFITS OF STEINHOFF AS A FULLY INTEGRATED WORLD-CLASS
FURNITURE AND HOUSEHOLD PRODUCTS MANUFACTURER AND DISTRIBUTOR. IN THIS REGARD
THE ACQUISITION BY STEINHOFF OF THE SAWMILL AND TIMBER INTERESTS REFERRED TO
BELOW, IS PARTICULARLY RELEVANT.
FINANCIAL EFFECTS

SET OUT BELOW ARE THE ESTIMATED FINANCIAL EFFECTS ON A SCHEME MEMBER WHO HOLDS
300 MEGACOR SHARES:
                             BEFORE      AFTER
                             (300        (100
                             MEGACOR     STEINHOFF

                             SHARES)     SHARES)        CHANGE

                     NOTES   (R)         (R)            %

MARKET VALUE             1   300,00      400,00         33,3
TANGIBLE NET

ASSET VALUE              2   243,09      170,78         (29,8)
FORECAST EARNINGS

(AS PUBLISHED)           3   59,10       31,90          (46,0)
FORECAST EARNINGS
(NOTIONALLY FULLY
TAXED IN

THE CASE OF MEGACOR)     4   42,12       31,18          (26,0)
EXPLANATORY NOTES

1.  BASED ON THE CLOSING MARKET PRICES OF 100 CPS AND 400 CPS PER MEGACOR AND
STEINHOFF SHARE RESPECTIVELY ON 23 OCTOBER 1998, BEING THE LAST PRACTICABLE
DATE BEFORE THE FINALISATION OF THIS ANNOUNCEMENT.

2.  BASED ON THE TANGIBLE NET ASSET VALUE ("NAV") OF MEGACOR AS AT 30 JUNE 1998
OF 81,03 CPS, ADJUSTED FOR THE ACQUISITION OF STEINHOFF EXPORT (SOUTH AFRICA)
(PROPRIETARY) LIMITED AND THE ISSUE OF SHARES FOR CASH AS DETAILED IN THE
CIRCULAR TO MEGACOR SHAREHOLDERS DATED 5 AUGUST 1998. THE "AFTER" NAV IS BASED
ON STEINHOFF'S PRO FORMA NAV OF 170,78 CPS AS AT 31 AUGUST 1998 ASSUMING THAT
THE SCHEME HAS BEEN IMPLEMENTED ON THAT DATE. (NOTE: THE BALANCE SHEETS OF THE
FOREIGN SUBSIDIARIES OF STEINHOFF WERE CONVERTED AT AN EXCHANGE RATE OF
R2,75/DM FOR THE PURPOSES OF INCLUSION IN THE PRO FORMA BALANCE SHEET OF
STEINHOFF INCLUDED IN ITS PROPSECTUS DATED 9 SEPTEMBER 1998.)

3.  BASED ON MEGACOR'S FORECAST EARNINGS FOR THE YEAR ENDING 30 JUNE 1999 OF
19,7 CPS AND STEINHOFF'S ANNUALISED PRO FORMA FORECAST EARNINGS AFTER THE
SCHEME OF 31,9 CPS FOR THE FIRST TWELVE MONTHS AFTER ITS LISTING ON THE JSE.
4.  BASED ON MEGACOR'S FORECAST EARNINGS FOR THE YEAR ENDING 30 JUNE 1999
(NOTIONALLY ADJUSTED FOR A FULL TAX RATE OF 35%) OF 14,04 CPS AND STEINHOFF'S
PRO FORMA FORECAST EARNINGS AFTER THE SCHEME OF 31,18 CPS FOR THE FIRST TWELVE
MONTHS AFTER ITS LISTING ON THE JSE.
CONDITIONS PRECEDENT

THE IMPLEMENTATION OF THE SCHEME IS CONDITIONAL UPON:

-  THE NECESSARY DOCUMENTATION BEING APPROVED BY THE RELEVANT REGULATORY
AUTHORITIES;

-  THE APPROVAL OF THE SCHEME BY THE REQUISITE MAJORITY OF SCHEME MEMBERS AT
THE SCHEME MEETING AND THE SANCTIONING OF THE SCHEME BY THE HIGH COURT;
-  THE GRANTING OF A LISTING FOR THE SCHEME CONSIDERATION SHARES; AND

-  THE REGISTRATION OF THE RELEVANT ORDER OF COURT BY THE REGISTRAR OF
COMPANIES.

WITH REGARD TO THE APPROVAL REQUIRED FROM THE SCHEME MEMBERS, THE HOLDERS OF
MORE THAN 50% OF THE SCHEME SHARES HAVE UNDERTAKEN TO VOTE ALL OF THEIR SCHEME
SHARES IN FAVOUR OF ALL THE RELEVANT RESOLUTIONS TO BE PROPOSED AT SUCH MEETING
FAIR AND REASONABLE STATEMENT

STANDARD CORPORATE AND MERCHANT BANK ("SCMB") HAS BEEN REQUESTED TO CONDUCT AN
ASSESSMENT OF THE TERMS OF THE SCHEME IN ORDER TO ADVISE SCHEME MEMBERS AS TO
THE FAIRNESS AND REASONABLENESS THEREOF. THE WRITTEN OPINION OF SCMB IN THIS
REGARD WILL BE INCORPORATED IN THE PUBLIC DOCUMENTATION PERTAINING TO THE
SCHEME.
TERMINATION OF MEGACOR'S LISTING

UPON THE SCHEME BECOMING OPERATIVE, MEGACOR WILL BECOME A WHOLLY-OWNED
SUBSIDIARY OF STEINHOFF. AS A CONSEQUENCE MEGACOR'S LISTING ON THE JSE WILL BE
TERMINATED.
GENERAL

DOCUMENTATION RELATING TO THE SCHEME WILL, SUBJECT TO THE APPROVAL OF THE JSE
AND THE SECURITIES REGULATION PANEL ("SRP"), BE DISPATCHED TO SCHEME MEMBERS IN
DUE COURSE. IT IS ANTICIPATED THAT THE HIGH COURT WILL GRANT LEAVE TO CONVENE
THE SCHEME MEETING DURING THE EARLY PART OF DECEMBER 1998, WITH THE SCHEME
MEETING TO BE HELD ON OR ABOUT 15 JANUARY 1999.

ACQUISITION OF BRAECROFT TIMBERS (PROPRIETARY) LIMITED ("BRAECROFT")

IT WAS STATED IN MEGACOR'S PRE-LISTING STATEMENT DATED 5 AUGUST 1998 THAT A
SAWMILL AND TIMBER DIVISION WOULD BE ACQUIRED TO RENDER MEGACOR A SELF
SUFFICIENT FULLY INTEGRATED OPERATOR IN THE FURNITURE INDUSTRY. GIVEN

STEINHOFF'S SIMILAR NEEDS TO SECURE AN INTERNAL RESOURCE FROM WHICH A

SUBSTANTIAL PORTION OF THE LARGER GROUP'S RAW TIMBER REQUIREMENTS CAN BE
SATISFIED, AND AS A RESULT OF THE ABOVE PROPOSED SCHEME OF ARRANGEMENT, IT WAS
AGREED BETWEEN STEINHOFF AND MEGACOR THAT STEINHOFF AFRICA HOLDINGS

(PROPRIETARY) LIMITED WILL ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL OF BRAECROFT
WITH EFFECT FROM 1 JULY 1998, FOR A PURCHASE CONSIDERATION OF R17 MILLION.
BRAECROFT, WHICH OPERATES CERTAIN SAWMILLING INTERESTS SUPPLIED BY ITS OWN PINE
PLANTATIONS (WHICH WILL COMPLY WITH FSC STANDARDS), HAS LONG BEEN A STRATEGIC
SUPPLIER OF RAW TIMBER TO MEGACOR. THE ABSORPTION OF MEGACOR INTO STEINHOFF
THROUGH THE SCHEME, WILL THUS CAUSE THE LARGER GROUP TO BE IN A POSITION TO
FULLY EXPLOIT THE SYNERGIES TO BE BROUGHT ABOUT BY THE STEINHOFF/MEGACOR GROUP
BECOMING LARGELY INDEPENDENT AND SELF-SUFFICIENT IN THE SOURCING OF ITS TIMBER
REQUIREMENTS.
EPPINDUST               WESTMEAD
28 OCTOBER 1998         28 OCTOBER 1998
MERCHANT BANKS
THE BUSINESS BANK
A NEW FORCE IN MERCHANT BANKING
STANDARD CORPORATE AND MERCHANT BANK

(A DIVISION OF THE STANDARD BANK OF SOUTH AFRICA LIMITED)
(REGISTRATION NUMBER 62/00738/06)
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