| Tue 2 Nov 2010, 17:02 | | MVG/MVGP - Mvelaphanda Group Limited - Proposed restructuring of Mvela Group`s |
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MVG MVGP
MVG
MVG/MVGP - Mvelaphanda Group Limited - Proposed restructuring of Mvela Group`s
broad-based Black Economic Empowerment ("BEE") ownership initiative
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Ordinary share code: MVG
Ordinary share ISIN: ZAE000060737
Preference share code: MVGP
Preference share ISIN: ZAE000073540
("Mvela Group" or "the Company")
Proposed restructuring of Mvela Group`s broad-based Black Economic Empowerment
("BEE") ownership initiative in order to compensate the BEE shareholders for
their inability to participate in corporate actions undertaken by Mvela Group
as well as to enhance and secure Mvela Group`s BEE credentials ("BEE
transaction")
1. INTRODUCTION AND RATIONALE FOR THE BEE TRANSACTION
In June 2007 Mvela Group facilitated the participation of broad-based BEE
shareholders in the Company`s growth and development, in terms of its
commitment to promoting BEE at all levels of the South African economy,
through the creation, and allotment and issue, by Mvela Group of 124 425 055
redeemable option holding shares of R0.001 each in the share capital of Mvela
Group ("BEE shares") to four BEE trusts created for the benefit of strategic
BEE groupings, women`s groupings and charitable organisations and the
employees and senior management of the Group ("the BEE trusts") in equal
proportions.
Subsequent to the implementation of aforementioned transaction, Mvela Group
undertook a corporate action namely, the unbundling of Mvela Group`s shares in
Health Strategic Investments Limited to Mvela Group`s ordinary shareholders
("Health unbundling"). Further, Mvela Group is in the process of seeking
approval for the implementation of the proposed unbundling of Mvela Group`s
shares in Mvelaserve Limited to Mvela Group`s ordinary shareholders
("Mvelaserve unbundling"). The BEE trusts did not participate in the Health
unbundling and will not participate in the Mvelaserve unbundling. Therefore,
Mvela Group intends to compensate the BEE trusts for their inability to
participate in the Health unbundling and Mvelaserve unbundling as well as to
enhance and secure Mvela Group`s BEE shareholding credentials by creating 151
798 568 additional BEE shares ("additional BEE shares") and allotting and
issuing same to the BEE trusts, pro rata to their current holding of the BEE
shares in issue.
2. THE BEE TRANSACTION
The BEE transaction involves the following:
- Varying the option strike price of the 124 425 055 BEE shares in issue
("existing BEE shares"), as follows:
The current strike price of R17.50 is to be adjusted pursuant to the Health
unbundling.
The distribution to Mvela Group shareholders in respect of the Health
unbundling was R4.62 per Mvela Group ordinary share on Monday, 23 August 2010.
The strike price will be adjusted to R12.88 to take the Health unbundling into
account.
Similarly, the strike price will be adjusted upon the implementation of the
Mvelaserve unbundling, the details of which are contained in the circular
which was posted to Mvela Group shareholders on Wednesday, 27 October 2010. A
combined general meeting of Mvela Group shareholders, in which Mvela Group`s
shareholders will vote on the ordinary and/or special resolutions required to
implement the Mvelaserve unbundling, will take place on or about 18 November
2010. The Mvelaserve unbundling is scheduled to take place on or about Friday,
3 December 2010, at which point the further adjustment to the BEE shares
strike price may take place.
- The creation of the additional BEE shares by Mvela Group in its authorised
share capital and the specific issue for cash by Mvela Group of the additional
BEE shares to the BEE trusts in equal proportions and at an issue price of
R0.001 (0.1 cent) per additional BEE share. The additional BEE shares will be
of the same class and have the same rights, privileges and restrictions as the
existing BEE shares including the adjustment to the strike price due to the
Mvelaserve unbundling.
3. CREATION OF THE ADDITIONAL BEE SHARES
Shareholder approval for the creation of the additional BEE shares
In order to implement the BEE transaction, it is necessary to:
- amend the memorandum and articles of association of Mvela Group in order to
amend the rights, privileges and restrictions attaching to the BEE shares and
increase the authorised share capital of the Company;
- place all the additional BEE shares under the control of the directors of
Mvela Group ("Directors" or "Board") and authorise the Directors to allot and
issue the additional BEE shares to each of the BEE trusts;
- authorise the Company to provide financial assistance to the BEE trusts to
enable the BEE trusts to subscribe for the additional BEE shares; and
- place the authorised but unissued Mvela Group ordinary shares, resulting
from the redemption of the BEE shares, under the control of the Directors;
such shares to be allotted and issued to the holders of the BEE shares in the
event that all or any of the options attaching to the BEE shares are
exercised.
The details of a general meeting of Mvela Group ordinary shareholders to be
held for this purpose are set out in paragraph 7 below.
4. CONDITIONS PRECEDENT
The BEE transaction is subject to the fulfilment or waiver, as the case may
be, by no later than 17:00 on 4 February 2011 (or such later date as Mvela
Group and the BEE trusts may agree in writing), of the following conditions
precedent contained in the subscription agreement:
- the passing by each BEE trust of resolutions (i) amending its trust deed in
order to authorise and empower each such BEE trust to subscribe for the
additional BEE shares, exercise all of the rights and obligations in respect
of the subscription agreement and do any and all things related or ancillary
thereto, (ii) approving the subscription by each of the BEE trusts for the
additional BEE shares (iii) authorising a trustee or trustees of each BEE
trust, on behalf of each such BEE trust, to sign and/or despatch all documents
and notices to be signed and/or despatched by each BEE trust in connection
with the subscription agreement or otherwise and the conclusion of the
addendum to the trust deed of each of the BEE trusts and the lodgement of such
with the Master of the North Gauteng High Court, Pretoria;
- the passing of all of the resolutions relating to the BEE transaction by
Mvela Group ordinary shareholders at the general meeting; and
- the registration of such resolutions, where required, by the Companies and
Intellectual Property Office (CIPRO).
5. PRO FORMA FINANCIAL INFORMATION
The table below sets out the financial effects of the BEE transaction on Mvela
Group`s unaudited earnings per ordinary share, headline earnings per ordinary
share, fully diluted earnings per ordinary share and fully diluted headline
earnings per ordinary share for the financial year ended 30 June 2010, as well
as Mvela Group`s net asset value ("NAV") per ordinary share and net tangible
asset value ("NTAV") per ordinary share as at 30 June 2010 assuming that the
Mvelaserve unbundling occurs and does not occur.
These pro forma financial effects have been prepared for illustrative purposes
only and, because of their nature, may not fairly present the actual financial
effects on Mvela Group.
The Directors are responsible for the preparation of the pro forma financial
information.
Pro forma financial effects assuming Mvelaserve unbundling does not occur:
- Effects of the specific issue
Effects
of the Post
Health Health
Before unbundling unbundling
(cents) (cents) (cents)
Earnings per ordinary share 212.7 (174.5) 38.2
Headline earnings per ordinary share 238.5 (180.4) 58.1
Diluted earnings per ordinary share 192.5 (154.3) 38.2
Diluted headline earnings per
ordinary share 215.0 (156.9) 58.1
NAV per ordinary share 1 015.1 (505.4) 509.7
NTAV per ordinary share 832.0 (483.8) 348.2
Diluted number of ordinary shares in
issue (`000) 465 484 62 115 527 599
Diluted weighted number of ordinary
shares in issue (`000) 465 307 62 115 527 422
Weighted number of ordinary
shares (`000) 406 962 120 460 527 422
Post Health
Effects unbundling
of the and
specific specific
issue issue Change
(cents) (cents) (%)
Earnings per ordinary share (1.1) 37.1 (2.88)
Headline earnings per ordinary share (1.1) 57.0 (1.89)
Diluted earnings per ordinary share (1.1) 37.1 (2.88)
Diluted headline earnings per ordinary share (1.1) 56.9 (1.89)
NAV per ordinary share (0.3) 509.4 (0.06)
NTAV per ordinary share (0.3) 347.9 (0.08)
Diluted number of ordinary shares in
issue (`000) 527 599
Diluted weighted number of ordinary
shares in issue (`000) 527 422
Weighted number of ordinary shares (`000) 527 422
- Effect of the exercise of the options
Effects
of the Post
Health Health
Before unbundling unbundling
(cents) (cents) (cents)
Earnings per ordinary share 212.7 (174.5) 38.2
Headline earnings per ordinary share 238.5 (180.4) 58.1
Diluted earnings per ordinary share 192.5 (154.3) 38.2
Diluted headline earnings per
ordinary share 215.0 (156.9) 58.1
NAV per ordinary share 1 015.1 (505.4) 509.7
NTAV per ordinary share 832.0 (483.8) 348.2
Diluted number of ordinary shares in
issue (`000) 465 484 62 115 527 599
Diluted weighted number of ordinary
shares in issue (`000) 465 307 62 115 527 422
Weighted number of ordinary
shares (`000) 406 962 120 460 527 422
Post Health
Effects unbundling
of the and
exercise exercise
of the of the
options options Change
(cents) (cents) (%)
Earnings per ordinary share 6.4 44.6 16.75
Headline earnings per ordinary share (0.4) 57.7 (0.68)
Diluted earnings per ordinary share 6.4 44.6 16.75
Diluted headline earnings per ordinary share (0.4) 57.7 (0.68)
NAV per ordinary share 267.3 777.0 52.43
NTAV per ordinary share 322.8 671.0 92.69
Diluted number of ordinary shares in
issue (`000) 527 599
Diluted weighted number of ordinary
shares in issue (`000) 527 422
Weighted number of ordinary shares (`000) 527 422
Pro forma financial effects assuming Mvelaserve unbundling occurs:
- Effects of the specific issue
Post Health
Effects Effects unbundling
of the of the and
Health Mvelaserve Mvelaserve
Before unbundling unbundling unbundling
(cents) (cents) (cents) (cents)
Earnings per ordinary
share 212.7 (170.6) 158.4 200.5
Headline earnings per
ordinary share 238.5 (170.6) (40.7) 27.2
Diluted earnings
per ordinary share 192.5 (149.2) 157.2 200.5
Diluted headline earnings
per ordinary share 215.0 (149.2) (38.6) 27.2
NAV per ordinary share 1 015.1 (437.3) (219.9) 357.9
NTAV per ordinary share 832.0 (437.3) (76.6) 318.1
Diluted number of ordinary
shares in issue (`000) 465 484 62 115 527 599
Diluted weighted number
of ordinary shares
in issue (`000) 465 307 62 115 527 422
Weighted number of
ordinary shares (`000) 406 962 120 460 527 422
Post Health
unbundling,
Mvelaserve
Effects unbundling
of the and
specific specific
issue issue Change
(cents) (cents) (%)
Earnings per ordinary share - 200.5 -
Headline earnings per ordinary share - 27.2 -
Diluted earnings per ordinary share - 200.5 -
Diluted headline earnings per ordinary share - 27.2 -
NAV per ordinary share (0.3) 357.6 (0.08)
NTAV per ordinary share (0.3) 317.8 (0.09)
Diluted number of ordinary shares
in issue (`000) 527 599
Diluted weighted number of ordinary shares
in issue (`000) 527 422
Weighted number of ordinary shares (`000) 527 422
- Effect of the exercise of the options
Post Health
Effects Effects unbundling
of the of the and
Health Mvelaserve Mvelaserve
Before unbundling unbundling unbundling
(cents) (cents) (cents) (cents)
Earnings per ordinary
share 212.7 (170.6) 158.4 200.5
Headline earnings
per ordinary share 238.5 (170.6) (40.7) 27.2
Diluted earnings
per ordinary share 192.5 (149.2) 157.2 200.5
Diluted headline
earnings per
ordinary share 215.0 (149.2) (38.6) 27.2
NAV per ordinary share 1 015.1 (437.3) (219.9) 357.9
NTAV per ordinary share 832.0 (437.3) (76.6) 318.1
Diluted number of
ordinary shares
in issue (`000) 465 484 62 115 527 599
Diluted weighted number
of ordinary shares
in issue (`000) 465 307 62 115 527 422
Weighted number of
ordinary shares (`000) 406 962 120 460 527 422
Post Health
unbundling,
Mvelaserve
Effects unbundling
of the and
exercise exercise
of the of the
options options Change
(cents) (cents) (%)
Earnings per ordinary share (55.0) 145.5 (27.43)
Headline earnings per ordinary share 4.6 31.8 16.81
Diluted earnings per ordinary share (55.0) 145.5 (27.43)
Diluted headline earnings per ordinary share 4.6 31.8 16.91
NAV per ordinary share 192.2 550.1 53.71
NTAV per ordinary share 205.9 524.0 64.74
Diluted number of ordinary shares
in issue (`000) 527 599
Diluted weighted number of ordinary shares
in issue (`000) 527 422
Weighted number of ordinary shares (`000) 527 422
Notes and assumptions:
1. The Mvela Group financial information reflected in the "Before" column has
been extracted from the audited annual results of Mvela Group for the year
ended 30 June 2010.
2. The pro forma adjustments to the statement of comprehensive income have
been calculated on the assumption that the Health unbundling, Mvelaserve
unbundling, specific issue and exercise of the BEE options were implemented on
1 July 2009.
3. The pro forma adjustments to the statement of financial position have been
calculated on the assumption that the Health unbundling, Mvelaserve
unbundling, specific issue and exercise of the BEE options were implemented on
30 June 2010.
4. Any conversion of Mvela Group convertible perpetual cumulative preference
shares ("Mvela Group preference shares") into Mvela Group ordinary shares
prior to the finalisation date of the BEE transaction will have no impact on
the financial effects as set out above, as the financial effects have been
formulated on a fully diluted basis.
5. Preference dividends of R30 million which have been paid, have been added
back to the total comprehensive income attributable to ordinary shareholders
in the statement of comprehensive income.
6. Assumed conversion of Mvela Group preference shares in the ratio of 2.22:1,
i.e. 120 460 000 new ordinary shares.
7. In the statement of comprehensive income all adjustments are considered to
have a continuing effect, except for the adjustments detailed in notes 11 to
14 below.
8. The pro forma adjustments relating to the Health unbundling and the
Mvelaserve unbundling are consistent with the adjustments as detailed in the
circular posted to Mvela Group shareholders on Wednesday, 27 October 2010.
Notes relating to the specific issue, being the specific issue for cash of the
additional BEE shares to the BEE trusts
9. 151 798 568 BEE shares were issued on 1 July 2009 at an issue price of 0.1
cent per BEE share, amounting to R151 800.
10. Mvela Group has donated R151 800 to the BEE trusts.
11. (a) The options attached to the BEE shares, assuming the Mvelaserve
unbundling does not occur, have been valued at R0.029 per option based on the
30-day volume weighted average price ("VWAP") at the last practicable date per
Mvela Group ordinary share.
(b) The options attached to the BEE shares, assuming the Mvelaserve unbundling
does occur, have been valued at R0.0000059 per option based on the 30-day VWAP
at the last practicable date per Mvela Group ordinary share less the
Mvelaserve distribution per share. The Mvelaserve distribution per share has
been assumed to be R3.70 per share, being its intrinsic net asset value
calculation per share published in the Mvela Group annual results for the year
ended 30 June 2010.
12. In accordance with IFRS 2: Share-based Payment, the additional cost
associated with the BEE shares issued in June 2007 have been included in the
cost of the BEE transaction due to the modification of the strike price. The
said cost is R2.7 million assuming the Mvelaserve unbundling does not occur
and R522 assuming the Mvelaserve unbundling does occur.
13. The cost to Mvela Group for the options relating to the BEE shares issued
to the Management Trust and the Employee Trust have been recognised over the
period of the service conditions applicable to the beneficiaries of these
trusts, in accordance with IFRS 2: Share-based Payment. The said cost is R1.1
million assuming the Mvelaserve unbundling does not occur and R212 assuming
the Mvelaserve unbundling does occur.
14. The cost to Mvela Group for the options relating to the BEE shares issued
to the Women`s Trust and the Strategic BEE Trust have been recognised
immediately on the date of issue of the BEE shares in the statement of
comprehensive income, in accordance with IFRS 2: Share-based Payment. The said
cost is R2.2 million assuming the Mvelaserve unbundling does not occur and
R425 assuming the Mvelaserve unbundling does occur.
15. The fully diluted number of shares in issue in both the statement of
comprehensive income and the statement of financial position do not include
the additional BEE shares as they do not have a dilutive effect on the current
share and strike price.
16. Transaction costs of R1.5 million, which are non-deductible for income tax
purposes, have been expensed to share premium.
Notes relating to the exercise of the options
17. 151 798 568 BEE shares were issued on 1 July 2009 at an issue price of 0.1
cent per BEE share, amounting to R151 800.
18. Mvela Group has donated R151 800 to the BEE trusts.
19. (a) Options were exercised in respect of 276 223 622 BEE shares at an
option strike price of R12.88 per share, assuming the Mvelaserve unbundling
does not occur.
(b) Options were exercised in respect of 276 223 622 BEE shares at an option
strike price of R9.18 per share assuming the Mvelaserve unbundling does occur.
20. (a) The subscription proceeds of R3,557 billion arose on the exercise of
the options assuming the Mvelaserve unbundling does not occur.
(b) The subscription proceeds of R2,535 billion arose on the exercise of the
options assuming the Mvelaserve unbundling does occur.
21. Interest was earned on the subscription proceeds in the statement of
comprehensive income at a return of 6% per annum, being the average rate
earned by Mvela Group on fixed deposit and is considered taxable.
22. Transaction costs of R1.5 million, which are non-deductible for income tax
purposes have been expensed to share premium.
6. OPINIONS AND RECOMMENDATIONS
6.1 Independent professional expert`s opinion
The Board has appointed PKF Corporate Finance (Pty) Ltd ("PKF") as the
independent professional expert to advise the Board on the terms and
conditions of the BEE transaction, being the proposed adjustment to the strike
price and the creation of additional BEE shares and specific issue thereof to
the BEE trusts. PKF has considered the terms and conditions of the BEE
transaction and is of the opinion that they are fair to Mvela Group
shareholders.
6.2 Director`s recommendation
The Board is of the opinion that the terms and conditions of the BEE
transaction are fair and reasonable to Mvela Group shareholders. Accordingly,
the Board recommends that Mvela Group ordinary shareholders vote in favour of
the special and ordinary resolutions to authorise, approve and implement the
BEE transaction.
The Directors with direct and/or indirect interests in Mvela Group, and who
are not precluded from voting, intend to vote in favour of the special and
ordinary resolutions to be proposed at the general meeting.
7. GENERAL MEETING
A general meeting of Mvela Group ordinary shareholders will be held at 11:00
on Thursday, 25 November 2010 at the Melrose Arch Hotel, High Street, Melrose
Arch, Johannesburg at which ordinary shareholders will be asked to consider
and, if deemed fit, pass the ordinary and special resolutions required to
authorise, approve and implement the BEE transaction.
8. CIRCULAR TO MVELA GROUP SHAREHOLDERS
A circular setting out the full details of the BEE transaction will be posted
to Mvela Group shareholders on or about Wednesday, 3 November 2010.
Johannesburg
2 November 2010
Reporting accountants and auditors
PFK CHARTERED ACCOUNTANTS & BUSINESS ADVISERS
Legal adviser to Mvela Group
DLA CLIFFE DEKKER HOFMEYR
Sponsor to Mvela Group
Deutsche Bank
Deutsche Securities (SA) (Proprietary) Limited
(A non-bank member of the Deutsche Bank Group)
Independent professional expert
PFK CORPORATE FINANCE
Date: 02/11/2010 17:02:01 Produced by the JSE SENS Department.
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