| Tue 10 Apr 2007, 9:00 | | MCU - m Cubed - Disposal of AOS Fund Services Limi |
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MCU
MCU
MCU - m Cubed - Disposal of AOS Fund Services Limited and M Cubed
Capital Management (Guernsey) Limited
M CUBED HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1998/014568/06)
Share code: MCU & ISIN: ZAE000033353
("m Cubed" or "the Company")
DISPOSAL OF AOS FUND SERVICES LIMITED AND m CUBED CAPITAL
MANAGEMENT (GUERNSEY) LIMITED
1. INTRODUCTION
1.1. Shareholders are advised that m Cubed, after due
consideration of all alternative offers and proposals, has agreed
to the disposal of the entire issued share capital of AOS Fund
Services Limited ("AOSFS") and M3 Capital Management (Guernsey)
Limited ("m Cubed Guernsey") to PSG Fund Management Holdings
(Proprietary) Limited ("PSG Fund Management"), a subsidiary of PSG
Group Limited ("PSG") subject to the conditions precedent set out
in paragraph 7 below.
1.2.The disposal consideration for AOSFS which is estimated to be
R2 million will be equivalent to 80% of the net asset value
of AOSFS at the effective date. The disposal consideration
for m Cubed Guernsey will be approximately R4,2 million which
represents the net asset value of m Cubed Guernsey of R6,7
million at the effective date, less a dividend declared by m
Cubed Guernsey to m Cubed of R5,5 million plus an additional
amount of R3 million ("the final consideration"). In summary
the conclusion of this transaction will enable m Cubed to
effectively realise in aggregate R11,7 million from its two
Guernsey businesses which compares favourably with the
previous disposal transaction negotiated which failed as the
buyer did not manage to obtain necessary regulatory approval
to conclude the disposal transaction.
1.3.This announcement is for information purposes only and no
action is required by m Cubed shareholders with regards to
the disposals.
2. DETAILS OF THE BUSINESSES
AOSFS provides outsourcing services to offshore clients and
unitised liability outsourced administration services to
internal and external clients. m Cubed Guernsey carries out
the business of managing mutual funds.
3. RATIONALE FOR THE DISPOSALS
The disposals represent a continuation of the process of
unlocking and realising value for m Cubed shareholders, by
the disposal by the Company of its businesses.
The AOSFS and m Cubed Guernsey business operations which
currently lack critical mass to be viable on a standalone
basis will be sold to PSG Fund Management that currently has
similar existing business operations in Guernsey enabling PSG
Fund Management to effectively manage these business
operations on a viable and more cost effective basis than m
Cubed is able to.
Furthermore the businesses of AOSFS and m Cubed Guernsey are
at risk due to various factors. These include fund managers
being able to withdraw funds on a three day notice period,
the previous failed disposal of AOSFS and m Cubed Guernsey
and the possible negative perceptions by clients and in the
marketplace (resulting from previous cautionary announcements
issued by m Cubed) which could impact on both the retention
of funds and the ability to obtain new business.
4. RELATED PARTY TRANSACTION
PSG owns approximately 30% of the issued share capital of m
Cubed. In terms of the JSE Limited ("JSE") Listings
Requirements, the disposal is regarded as a small related
party transaction and requires written confirmation from an
independent professional expert confirming the fairness and
reasonableness of the terms of the disposals to m Cubed
shareholders ("fair and reasonable opinion").
BDO QuestCo (Proprietary) Ltd, acting as independent
professional expert to m Cubed, has considered the terms and
conditions of the disposal of AOSFS and m Cubed Guernsey and
is of the opinion that, at the date of issue of its opinion
letter, the terms and conditions of the disposals are fair
and reasonable to the m Cubed shareholders. The text of the
letter relating to the fair and reasonable opinion is
available for inspection at the registered office of m Cubed
for a period of 28 days from the date of this announcement.
5. PARTICULARS OF THE DISPOSALS
5.1. Subject matter of the disposals
The disposals will take place by means of a sale of shares
transaction and the entire issued share capital of both AOSFS and
m Cubed Guernsey will be sold by m Cubed to PSG Fund Management,
subject to the conditions precedent set out in 7 below.
5.2. Disposal consideration
An amount of R3,2 million, made up of approximately R2 million for
AOSFS and R1,2 million for part payment of the m Cubed Guernsey
disposal, will be settled in cash within seven days of the
fulfilment or waiver of the conditions precedent as set out in 7
below.
The final consideration amounting to R3 million will be settled in
cash 12 months after the effective date, provided that the assets
of m Cubed Guernsey have not reduced to less than 85% of the asset
value (excluding negative market movements) on the effective date.
Should the assets of m Cubed Guernsey reduce to less than 85% of
the asset value thereof at the effective date then the final
consideration will be adjusted pro-rata to the percentage drop in
value of the assets at the effective date.
6. EFFECTIVE DATE
The effective date of the disposal of AOSFS and m Cubed Guernsey
is 1 March 2007.
7. CONDITIONS PRECEDENT
The disposals are subject to the fulfilment or waiver of the
following conditions precedent:
7.1 approval of the disposals by the Financial Services Board;
7.2 approval of the disposals by the Guernsey Financial Services
Commission;
7.3 approval of the disposals by the South African Reserve Bank;
7.4 PSG Fund Management obtaining control of m Cubed Guernsey
from the effective date, by means of the conclusion of a
management agreement; and
7.5 acceptance in writing by PSG Fund Management of the asset
values of m Cubed Guernsey.
8. FINANCIAL EFFECTS
The pro forma financial effects of the transaction are presented
for illustrative purposes only and because of their nature may not
give a fair reflection of m Cubed`s financial position nor of the
effect on future earnings after the transaction. Set out below are
the unaudited pro forma financial effects of the transaction,
based on the reviewed consolidated financial results of m Cubed
for the six months ended 31 August 2006. The directors of m Cubed
are responsible for the preparation of the unaudited pro forma
financial effects.
Reviewed Pro forma Change
before the after the (%)
disposal disposal
(cents)(1) (cents)
Earnings per share 1,1 0,8 (24,6)%
Headline earnings 1,0 0,8 (21,8)%
per share
Net asset value per 41,3 40,9 (1,0)%_
share
Net tangible asset 40,4 40,9 1,2 %
value per share
Notes:
1. Extracted from the reviewed consolidated interim
financial results of m Cubed for the six months ended 31
August 2006.
2. The earnings and headline earnings per share figures in
the "Pro forma after the disposal" column have been
calculated on the basis that the disposals were effected
on 1 March 2006 and based on a weighted average number
of 737,925 million m Cubed shares in issue.
3. The net asset value and net tangible asset value per
share figures in the "Pro forma after the disposal"
column have been calculated on the basis that the
disposals were effected on 31 August 2006.
4. For the purposes of the pro forma financial effects it
has been assumed that the final consideration of R3
million has been received on 1 March 2006 for the
purposes of the income statement effects and 31 August
2006 for the purposes of the balance sheet effects.
5. Interest was calculated at a post tax rate of 5,5% per
year on the net cash effects of the disposals.
6. Taxation was calculated at a corporation tax rate of
29%.
As a result of the disposal of other m Cubed businesses during the
past two years, the board wishes to advise shareholders that the
historical earnings generated by AOSFS and m Cubed Guernsey are
not sustainable and may be adversely affected by the prior
disposals. The disposal of AOSFS and m Cubed Guernsey has been
undertaken with this reality in mind.
Cape Town
5 April 2007
PSG Capital Limited
Sponsor to mCubed
Date: 10/04/2007 09:00:01 Produced by the JSE SENS Department.
