| Tue 27 Nov 2007, 13:15 | | MVG / MVGP - Mvela Group - Proposed Acquisition |
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MVG / MVGP - Mvela Group - Proposed Acquisition
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1995/004153/06
Ordinary share code: MVG
Preference share code: MVGP
Ordinary share ISIN: ZAE000060737
Preference share ISIN: ZAE000073540
("Mvela Group" or "the Company")
Financial effects of the proposed acquisition by Mvela Group of a
25.5% shareholding in the issued share capital of Opco, a company
which will be formed to hold the operating media and entertainment
assets of Avusa Limited (previously named Johnnic Communications
Limited) ("Avusa"), and withdrawal of cautionary
1. Introduction
Further to the cautionary announcement dated 30 October 2007 in
which Mvela Group announced that it had, together with its
strategic partners, concluded an agreement with Allan Gray Limited
("Allan Gray") to acquire a 30% shareholding in Opco ("the
acquisition"), Mvela Group is pleased to announce that it will be
acquiring a 25.5% shareholding in Opco with its strategic partners
acquiring the remaining 4.5%. Opco will be formed when the
operating media and entertainment assets of Avusa are unbundled
from Avusa and independently listed on the main board of the JSE
Limited ("the JSE"); subject to the fulfilment of conditions
precedent outlined in section 5 of the cautionary announcement
dated 30 October 2007. The composition of the strategic partners is
currently being finalized and will be made known at the time of the
listing of Opco.
2. Financial effects of the acquisition
The table below sets out the pro forma financial effects of the
acquisition on Mvela Group`s audited earnings per ordinary share
("EPS"), headline earnings per ordinary share ("HEPS") and fully
diluted headline earnings per ordinary share ("DHEPS") for the year
ended 30 June 2007, as well as Mvela Group`s net asset value per
ordinary share ("NAV") and net tangible asset value per ordinary
share ("NTAV") at 30 June 2007. The directors of Mvela Group are
responsible for the preparation of these pro forma financial
effects below, which 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.
Before the After the % Change
acquisition acquisition
(cents) (cents)
Earnings per ordinary 280.2 273.7 (2.4%)
share
Headline earnings per 304.8 282.5 (7.9%)
ordinary share
Fully diluted 242.8 227.0 (7.0%)
headline earnings per
ordinary share
Net asset value per 1 166.2 1 160.2 (0.5%)
ordinary share
Net tangible asset 992.0 986.1 (0.6%)
value per ordinary
share
Notes:
The pro forma financial effects are based on Mvela Group`s audited
results for the year ended 30 June 2007 (the "Before the
acquisition" column).
The pro forma EPS, HEPS and DHEPS in the "After Column" are based
on the assumption that the acquisition was implemented on 1 July
2006, with the purchase consideration of R1.201 billion (85% of the
total purchase consideration of R1.413 billion based on Mvela Group
acquiring a 25.5% shareholding in Opco with its strategic partners
acquiring the remaining 4.5%) in cash being paid on that day,
funded 50% from Mvela Group`s cash resources and 50% from debt. In
calculating the EPS, HEPS and DHEPS, the following basis was used:
- The Opco attributable earnings to ordinary shareholders that
were used to equity account Mvela Group`s 25.5% shareholding in
Opco were based on calculated Opco attributable earnings to
ordinary shareholders for the period ended 30 June 2007. These
were calculated by adding half of Opco`s 30 September 2007
results to Opco`s audited results for the 12 months ended 31
March 2007 and subtracting half of Opco`s 30 September 2006
results; and
- In calculating the Opco attributable earnings to ordinary
shareholders, share based payments, results from disposed
operations and exceptional items were excluded and it was
assumed that the effective tax rate is 29%. Minority
shareholder`s interest, which was deducted from the calculated
profit after tax for Opco to derive the attributable earnings to
ordinary shareholders, was calculated based on Avusa`s published
minority interests relative to Avusa`s published profit after
tax.
The pro forma NAV and NTAV in the "After Column" are based on the
assumption that the acquisition was implemented on 1 July 2006 and
that the acquisition consideration of R1.201 billion in cash was
paid on that day, funded 50% from Mvela Group`s cash resources and
50% from debt. Mvela Group is currently in discussions with
financial institutions to optimise the funding structure of the
acquisition.
3. Rationale for the acquisition
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 where Mvela can have strategic influence over
the investment.
The acquisition would give Mvela Group strategic influence over a
unique range of operating media and entertainment assets which it
believes will outperform in the medium to long term.
Opco as constituted is one of the premier media companies in South
Africa, with arguably the best print assets and a strong range of
businesses in media, retail, books and maps, home entertainment,
music and distribution. This portfolio of assets cannot be easily
replicated.
Opco is ideally positioned to benefit from the development of the
South African media and entertainment sector. Mvela Group believes
Opco has a number of value enhancing initiatives to consider which
will be fully considered after completion of the acquisition.
While Mvela Group`s shareholding will assist Opco with respect to
its empowerment ownership, this is not an empowerment transaction
per se. It is expected that Opco will implement an appropriate BEE
transaction once unbundled from Avusa and independently listed.
The board of Mvela Group believes that the acquisition will
positively contribute to the delivery of growth in Mvela Group`s
intrinsic net asset value in the medium to long term and ultimately
improve the return earned on the Group`s capital employed.
4. Withdrawal of cautionary announcement
The cautionary announcement dated 30 October 2007 is hereby
withdrawn. A further announcement will be made upon fulfilment (or
otherwise) of the conditions precedent.
Sandton
27 November 2007
Financial adviser
Masazane Capital
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 27/11/2007 13:15:23 Produced by the JSE SENS Department.
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