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MICROmega - The related party disposal by MICROmega MICROMEGA HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1998/003821/06) Share code: MMG & ISIN: ZAE000034435 ("MICROmega" or "the Company") THE RELATED PARTY DISPOSAL BY MICROMEGA OF 50% OF THE ISSUED SHARE CAPITAL OF MICROMEGA REVENUE MANAGEMENT SOLUTIONS (PTY) LIMITED ("THE DISPOSAL") THE DISPOSAL Shareholders are advised that an agreement has been concluded for the disposal of 50% of the issued share capital of MICROmega Revenue Management Solutions (Pty) Limited ("MRMS"), to Mzimkhulu Financial Investments (Pty) Limited ("Mzimkhulu"). Negotiations, whilst recently concluded, were initiated in June 2004 and the delay in execution was a result of the internal corporate restructuring within MRMS, as well as the need to identify and adopt the correct funding mechanisms for Mzimkhulu. Consequently the effective date of this transaction is 1 January 2005. RATIONALE FOR THE DISPOSAL MRMS is South Africa"s largest revenue management service provider to Local Government. The business has been in existence for more than thirty years and boasts a client base that includes three of the six Metropolitans. MRMS generates approximately 26% of the total revenue of MICROmega. Over the past eighteen months MICROmega has invested some ten million Rand in transforming and reorganising the internal operations of MRMS. The net result is a reduction in fixed operating costs and a material enhancement in operating margins. MRMS employs 244 people, and the company is pleased to report that it has concluded its internal transformation programme with the staff complement now represented by 203 previously disadvantaged individuals. In an effort to ensure that shareholder value is received through this transaction, MICROmega sought out investors that had extensive knowledge and experience in both Local Government and revenue management. This is best illustrated by the fact that two of the four directors representing Mzimkhulu"s interests in MRMS are ex municipal revenue managers. Furthermore, MRMS has had an active working relationship with Mzimkhulu for the past eighteen months and members of Mzimkhulu have been represented on the main board of MICROmega since 2004. This transaction represents an ongoing process within MICROmega to ensure sustainability and sound economic growth in earnings. THE PURCHASE CONSIDERATION Mzimkhulu will acquire 50% of the issued share capital of MRMS for a purchase consideration of R32.5 million. The consideration shall be funded by the MICROmega Empowerment Fund. The MICROmega Empowerment Fund was created in 2004 to support empowerment initiatives and transformation within the MICROmega group of companies. The Fund is a division of MICROmega. The funds advanced to Mzimkhulu bear interest at the prime lending rate as calculated by First National Bank from time to time, and shall be repaid by Mzimkhulu over a seven year period. PRO FORMA FINANCIAL EFFECTS Notes Before After % change Headline earnings per share 1& 2 6.01 6.55 8.98% (cents) Net asset value per share 3 98.29 125.67 27.85% (cents) Net tangible asset value per 3 64.22 91.92 43.13% share (cents) Weighted number of shares in 89 280 89 280 - issue (`000) Number of shares in issue 92 355 92 355 - (`000) Earnings per share before 4 R3 496 disposal(`R 000) 1 232 Net interest accrued (`R 000) R25 101 Net capital profit on 5 (R 751) disposal (R`000) R29 078 Minorities interest(R"000) Earnings per share after disposal(R"000) Notes The figures in the "Before" column were extracted from the published unaudited results of MICROmega for the six months ended 30 June 2005. The headline earnings per share calculation in the "After column is based on the following assumptions: - The disposal was effective 1 January 2005. - MICROmega had a weighted average number of shares of 89 280 169 in issue during the period. Net asset value and net tangible value per share are based on the following assumptions: - The net asset value and net tangible value in the "Before" column on the published unaudited balance sheet at 30 June 2005 was R90.7 million and R59.3 million respectively. - The net asset value and net tangible value in "After column at 30 June after the disposal was R116.3 million and R84.8 million respectively. The earnings per share in the "Before column were extracted from the published unaudited results of MICROmega for the six months ended 30 June 2005. Minorities interest in the "After" column represents Mzimkhulu"s 50% interest in MRMS. APPLICATION OF PROCEEDS The proceeds from the disposal will be utilised in a manner that will ensure sustainable economic growth in earnings. CONDITIONS PRECEDENT The purchase is conditional upon the following conditions precedent: - the approval of the disposal by shareholders of MICROmega in general meeting by no later than 31 December 2005; and - the approval of the relevant authorities. OPINIONS, CONSENTS AND RECOMMENDATIONS In accordance with the Listings Requirements of the JSE Limited, PKF (JHB) Inc. have been appointed to consider the terms and conditions of the disposal, and their opinion will be available in the circular to shareholders. The directors of MICROmega are of the opinion that the terms and conditions of the disposal are fair and reasonable to shareholders, and recommend that shareholders vote in favour of the resolutions to be proposed at the general meeting. The directors holding shares have all indicated their intention to vote in favour of all the resolutions at the general meeting in respect of their own holdings of MICROmega shares. RELATED PARTY TRANSACTION The transaction is classified as a related party transaction in terms of the JSE Listings Requirements, as Messrs Seabi and Mpanza are directors of MICROmega Holdings Limited, and Messrs Mageza and Makgamatha are directors of MICROmega Revenue Management Solutions (Pty) Limited. All four of the afore-mentioned are directors and equal shareholders of Mzimkhulu Financial Investments (Pty) Limited. SALIENT DATES AND TIMES 2005 Circular and notice of general meeting posted on Tuesday, 29 November Last day for lodging form of proxy by 10:00am on Monday, 12 December General meeting of MICROmega shareholders to be held at 10:00am on Wednesday, 14 December Results of general meeting released on SENS Wednesday, 14 December Results of general meeting published in the press on Thursday, 15 December CIRCULAR TO SHAREHOLDERS AND GENERAL MEETING The general meeting will be convened for 10:00am on Wednesday, 14 December 2005 in the boardroom of MICROmega Holdings Limited, Block C, Chislehurston Office Park, 19 Impala Road, Chislehurston, Sandton 2196 for the purpose of considering, and if deemed fit, passing with or without modification, the resolutions required to approve and implement the disposal. A circular to shareholders detailing the transaction will be posted to shareholders on or about 29 November 2005. SANDTON 8 November 2005 Sponsor LPC Manhattan Moela (Pty) Limited Date: 09/11/2005 04:30:05 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
