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Avgold/ Harmony - Announcement regarding a scheme of arrangement to be proposed

Release Date: 26/03/2004 15:18:38      Code(s): AVG HAR
Avgold/ Harmony - Announcement regarding a scheme of arrangement to be proposed 
by Harmony between Avgold and its shareholders, and withdrawal of cautionary    
announcement                                                                    
Avgold Limited                                                                  
(Registration number 1990/007025/06)                                            
(Incorporated in the Republic of South Africa)                                  
JSE share code: AVG                                                             
ISIN: ZAE000012175                                                              
("Avgold")                                                                      
Harmony Gold Mining Company Limited                                             
(Registration number 1950/038232/06)                                            
(Incorporated in the Republic of South Africa)                                  
JSE share code: HAR                                                             
ISIN: ZAE000015228                                                              
("Harmony")                                                                     
Announcement regarding a scheme of arrangement to be proposed by Harmony between
Avgold and its shareholders, and withdrawal of cautionary announcement          
1.   Introduction                                                               
Shareholders of Avgold and Harmony (collectively "shareholders") are referred to
the joint cautionary announcements published by Harmony, Anglovaal Mining       
Limited ("Avmin") and African Rainbow Minerals & Exploration Investments        
(Proprietary) Limited ("ARMI") on 13 November 2003, 19 December 2003 and 30     
January 2004, regarding a range of indivisible transactions which, if           
implemented, will result in the creation of the largest black controlled mineral
resources company in South Africa. As part of these transactions, Harmony has   
entered into an agreement with Avmin in terms of which Avmin will, subject to   
the fulfilment of certain conditions precedent, dispose of its entire           
shareholding of 286 305 263 ordinary shares in Avgold, representing 42,1% of    
Avgold"s issued share capital, to Harmony ("the Avgold share exchange           
agreement"), in exchange for Harmony shares in the ratio of one Harmony share   
for every 10 Avgold shares held.                                                
2.   Rationale                                                                  
Harmony wishes to acquire 100% of the issued share capital of Avgold and has    
therefore proposed a scheme of arrangement ("the scheme") in terms of section   
311 of the Companies Act 61 of 1973, as amended, ("the Act"), between Avgold and
its shareholders, other than Harmony ("Avgold minority shareholders"), to       
acquire all the Avgold shares other than those held by Harmony or to be acquired
by Harmony from Avmin.  The scheme consideration is in the same ratio as the    
ratio offered to Avmin in terms of the Avgold share exchange agreement.         
Following the implementation of the scheme, Avgold will become a wholly-owned   
subsidiary of Harmony and the listing of the Avgold shares on the JSE Securities
Exchange South Africa will be terminated.                                       
If the scheme becomes operative, Avgold minority shareholders will receive one  
fully paid Harmony share for every 10 Avgold shares held.                       
Harmony currently holds 11,4% of the issued share capital of Avgold and         
following the implementation of the Avgold share exchange agreement, Harmony    
will hold 53,5% of the issued share capital of Avgold.  This will constitute an 
affected transaction as defined in section 440A(1) of the Act and as a result,  
Harmony will be required to extend a mandatory offer to the Avgold minority     
shareholders in terms of the Securities Regulation Code on Takeovers and Mergers
and the Rules of the Securities Regulation Panel ("the SRP Code").  This        
mandatory offer must be on the same terms and conditions, mutatis mutandis, as  
those offered to Avmin under the Avgold share exchange agreement.               
If the scheme does not become operative due to the non-fulfilment of the        
conditions to which it is subject and the Avgold share exchange agreement       
becomes unconditional, Harmony will make a mandatory offer to the Avgold        
minority shareholders in terms of Rule 8.1 of the SRP Code on the same terms and
conditions offered under the scheme.  The Harmony shares comprising the         
consideration under such offer will first have to be registered under the U.S   
Securities Act of 1933, as amended.  Harmony has undertaken to the Securities   
Regulation Panel to use its best endeavours to procure registration of the      
Harmony shares comprising the offer consideration with the Securities Exchange  
Commission in the U.S as a matter of urgency to enable it to make such mandatory
offer without undue delay.  No offer is being made hereby nor will such offer be
made unless and until an offer document containing the terms of the mandatory   
offer is posted to Avgold shareholders.                                         
3.   Conditions precedent                                                       
The scheme is subject to the fulfilment of the following conditions precedent:  
3.1  the Avgold share exchange agreement becoming unconditional in accordance   
with its terms;                                                                 
the approval by the Competition Authorities in terms of the Competition Act 89  
of 1998,  as amended;                                                           
the High Court of South Africa granting an order convening a meeting ("scheme   
meeting") of Avgold minority shareholders at which those shareholders entitled  
to vote at the scheme meeting ("scheme members"), will consider and vote on the 
scheme;                                                                         
3.4  the approval of the scheme by a majority representing not less than 75% of 
the votes exercisable by the scheme members present and voting, either in person
or by proxy, at the scheme meeting;                                             
3.5  the High Court of South Africa sanctioning the scheme; and                 
3.6  a certified copy of the Order of Court sanctioning the scheme being        
registered by the Registrar of Companies in terms of the Act.                   
4.   Financial effects of the scheme                                            
The table below sets out the illustrative financial effects of the scheme based 
on the unaudited historical information of Avgold and Harmony. These financial  
effects are for illustrative purposes only and may not give a true picture of   
new Harmony"s financial position and results of operations.                     
Avgold       Pro forma new   % Change                   
                        "before"1    Harmony 6 / 7                              
     Basic earnings                                                             
     per Avgold share   (20,0)       (0.1)           100                        
(cents) 2                                                                  
     Headline earnings                                                          
     per Avgold share   (20.0)       (12.8)         36                          
     (cents)  2                                                                 
Net asset value                                                            
     per Avgold share   316.6        717.1           127                        
     (cents) 3                                                                  
     Net tangible                                                               
asset value per    316.6        544.7           72                         
     share (cents) 3                                                            
     Weighted average                                                           
     number of shares                                                           
in issue           678,0        67.8                                       
     (million)4                                                                 
     Number of shares                                                           
     in issue           680.1        68.0                                       
(million)5                                                                 
Notes:                                                                          
1. The "Avgold before" financial information has been extracted without         
adjustment from Avgold"s published unaudited quarterly financial results for the
six months ended 31 December 2003.                                              
2. The basic and headline earnings per share effects are based on the assumption
that the scheme was implemented on 1 July 2003.                                 
3. The net asset value per share and the net tangible asset value per share     
effects are based on the assumption that the scheme was implemented on 31       
December 2003.                                                                  
4. The Avgold "before" weighted average number of shares in issue is based on   
the weighted average number of Avgold shares in issue during the 6-month period 
ended 31 December 2003.  The pro forma new Harmony number of shares is based on 
the weighted average number of new Harmony shares in issue during the period    
attributable to an Avgold shareholder on the ratio of one Harmony share for     
every ten Avgold shares owned.                                                  
5. The Avgold "before" number of shares in issue is based on the number of      
Avgold shares in issue at 31 December 2003.  The pro forma new Harmony number of
shares in issue is based on the new Harmony shares in issue after the scheme    
attributable to an Avgold shareholder on the ratio of one Harmony share for     
every ten Avgold shares owned.                                                  
6. Pro forma new Harmony:                                                       
The pro forma new Harmony basic and headline earnings per share are based on the
assumption that the following transactions were effective 1 July 2003:          
* The merger between Harmony and ARMgold;                                       
* the acquisition of a total effective interest of 34,5% in Avmin;              
* the Avgold share exchange;                                                    
* the Avmin Acquisitions*; and                                                  
* the scheme.                                                                   
7. The pro forma new Harmony net asset value per share is based on the          
assumption that the following transactions were effective 31 December 2003:     
* the merger between Harmony and ARMgold;                                       
* the acquisition of a total effective interest of 34,5% in Avmin;              
* the Avgold share exchange; and                                                
* the Avmin Acquisitions*.                                                      
*inter alia, the acquisition by Avmin of ARMI"s holding of 35 002 396 Harmony   
shares and ARMI"s holding of the entire issued share capital of African Rainbow 
Minerals Platinum (Proprietary) Limited.                                        
5.   Voting undertakings                                                        
Allan Gray Investment Management has furnished an undertaking to advise its     
clients, who held 157 303 650 Avgold shares on 19 February 2004 representing    
23,1% of the issued share capital of Avgold, to vote in favour of the scheme at 
the scheme meeting.                                                             
6.   Opinions and recommendations                                               
6.1  Merrill Lynch South Africa (Pty) Limited ("Merrill Lynch") has been        
appointed by the board of directors of Avgold as the independent advisor to     
advise the board of directors on whether the terms and conditions of the scheme 
are fair and reasonable to Avgold shareholders other than Harmony.  Merrill     
Lynch has reviewed and considered the terms and conditions of the scheme and,   
subject to the provisions contained in its opinion letter, Merrill Lynch is of  
the opinion that the terms and conditions of the scheme are fair and reasonable 
to Avgold shareholders other than Harmony.  The text of this letter will be     
disclosed in the circular referred to in paragraph 7 below.                     
6.2  The board of directors of Avgold has also appointed an independent         
committee ("the Independent Committee") to consider the terms and conditions of 
the scheme and it has advised the board of directors that it is of the opinion  
that the terms and conditions of the scheme are fair and reasonable to Avgold   
shareholders other than Harmony.                                                
6.3  The board of directors has considered the terms and conditions of the      
scheme as well as the opinions of Merrill Lynch and the Independent Committee   
and is of the opinion that the terms and conditions of the scheme are fair and  
reasonable.  Accordingly, the board of directors recommends that scheme members 
vote in favour of the scheme.                                                   
7.   Documentation                                                              
Subject to the High Court granting leave to convene the scheme meeting, a       
further announcement will be published by Harmony and Avgold giving the salient 
dates of the scheme and documentation containing full details of the scheme will
be posted to Avgold shareholders.                                               
8.   Withdrawal of cautionary announcement                                      
Avgold shareholders are advised that the cautionary announcements referred to in
paragraph 1 above are withdrawn.                                                
26 March 2004                                                                   
Johannesburg                                                                    
Independent advisor and sponsor to Avgold                                       
Merrill Lynch South Africa (Pty) Limited                                        
Attorneys to Avgold                                                             
Deneys Reitz Inc.                                                               
Reporting accountants                                                           
PricewaterhouseCoopers Inc.                                                     
Independent technical advisor                                                   
Steffen, Robertson and Kirsten                                                  
Financial advisor to Harmony                                                    
JP Morgan Chase Bank                                                            
Sponsor to Harmony                                                              
JP Morgan Equities Limited                                                      
Attorneys to Harmony                                                            
Cliffe Dekker Inc.                                                              
Date: 26/03/2004 03:18:46 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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