| Wed 13 Aug 2003, 17:12 | | The Disposal Of Mgx"s 95% Interest In Mgx Software |
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MGX Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
("MGX" or "the Company")
Code: MGX
ISIN: ZAE000009262
THE DISPOSAL OF MGX"S 95% INTEREST IN MGX SOFTWARE FUTURES (PROPRIETARY) LIMITED
1. INTRODUCTION
MGX holds 95% of the issued share capital of MGX Software Futures (Proprietary)
Limited ("Software Futures") ("the MGX interest in Software Futures") and
Hollard Insurance Company Limited ("Hollard") holds the remaining 5% interest in
the issued share capital of Software Futures ("the Hollard interest in Software
Futures").
Further to the cautionary announcement dated 12 August 2003, shareholders are
advised that:
- MGX has entered into an agreement with Kerbyn (Cape) 7 (Proprietary) Limited
("Kerbyn"), subject to the conditions precedent set out in paragraph 3.10, to
sell to Kerbyn the MGX interest in Software Futures ("the agreement");
- provided that Hollard agrees to be bound by the terms and conditions of the
agreement, the Hollard interest in Software Futures will also be sold by Hollard
to Kerbyn in terms of the agreement; and
- the purchase price for 100% of the issued share capital in Software Futures is
R20 million,
(collectively, "the Software Futures disposal").
Software Futures is a business software specialist focusing on developing
software for corporate organisations. Kerbyn is a special purpose vehicle owned
by a Western Cape based consortium consisting of:
- a structured finance house, Brown Brothers Holdings Limited; and
- Kopano ke Matla (Proprietary) Limited, an investment company of Cosatu.
2. RATIONALE FOR THE SOFTWARE FUTURES DISPOSAL
MGX is in the process of implementing a recovery plan to return the MGX Group to
profitability and its primary objectives are to:
use the proceeds from the sale of several of MGX"s operating subsidiaries and
- commercial properties to reduce the interest-bearing debt of the Company;
- refinance the interest-bearing debt of the Company to a position which can be
sustained by the remaining operating subsidiaries of MGX;
- create a structure for the capitalisation of the remaining interest-bearing
debt of the Company; and
- create a smaller group which can be rebuilt into a profitable business.
Pursuant to the recovery plan, MGX has entered into the agreement for the
Software Futures disposal.
3. IMPORTANT TERMS AND CONDITIONS
The important terms and conditions of the Software Futures disposal are set out
below.
3.1 Effective date
The effective date of the Software Futures disposal is the last day of the
calendar month in which the last of the conditions precedent, set out in
paragraph 3.10, have been fulfilled ("the effective date").
It is expected that the effective date will be no later than 30 September 2003.
3.2 Purchase price
The purchase price consists of R20 million ("the purchase price") which will be
allocated as follows:
- to the MGX interest in Software Futures, an estimated amount of R7.59 million,
being the value of the claims that MGX and its subsidiaries had on loan account
against Software Futures at 30 June 2003, plus 95% of the balance thereafter,
being an estimated R11.79 million; and
- to the Hollard interest in Software Futures, 5% of the balance remaining after
MGX"s interest in Software Futures has been paid for, estimated to be R620 637.
Once the Software Futures disposal has been implemented, it is estimated that
MGX will receive R19.38 million, exclusive of any interest received in terms of
paragraph 3.4. The funds received by MGX from the Software Futures disposal will
be used by MGX to reduce the Company"s interest-bearing debt by the estimated
amount of R19.38 million.
3.3 Settlement of the purchase price
Details of the settlement of the purchase price of R20 million are set out
below.
3.3.1 Payment on the effective date
On the effective date, Kerbyn will pay R10 million ("the effective date
payment"), of which amount an estimated R9.88 million will be paid to MGX and
the balance of R121 000 will be paid to Hollard.
3.3.2. Payment 90 days after the effective date
90 days after the effective date:
- R8 million will be paid by Kerbyn, of which amount MGX will receive
R7.6 million and Hollard the balance of R400 000; and
- the remaining portion of the purchase price of R2 million will be paid
by Kerbyn, of which amount MGX will receive R1.9 million and Hollard
the balance of R100 000, unless MGX receives a valid warranty notice
from Kerbyn alleging that the net asset value ("NAV") of Software
Futures on 30 June 2003 was less than the warranted R20 million,
whereupon the amount of such warranty claim, not exceeding R2 million,
will be set off against the balance of R2 million,
(collectively, "the 90 days after the effective date payment").
3.4 Interest
If the effective date occurs after 15 September 2003 due to Kerbyn not
discharging its obligations in respect of the fulfilment of the conditions
precedent set out in paragraph 3.10 relating to it, then those portions of the
purchase price, which would be payable in terms of the:
- effective date payment described in paragraph 3.3.1, will bear interest a
the publicly quoted annual prime rate at which The Standard Bank of South
Limited lends on unsecured overdraft ("the prime rate") plus 2% from
- 15 September 2003 until the date of payment thereof; and
90 days after the effective date payment described in paragraph 3.3.2,
will bear interest at the prime rate plus 2% from 13 December 2003 until
the date of payment thereof.
If any amount, other than the purchase price or any portion thereof, is not paid
on the due date thereof, then such amount will bear interest at the prime rate
plus 2% compounded in arrears.
3.5 Write-off of MGX"s claims against Software Futures
MGX will write-off and extinguish all the claims that it had on loan account
against Software Futures prior to the effective date.
3.6 Voetstoots and warranties
Save for certain limited warranties provided to Kerbyn, the most important of
which being that:
- the NAV of Software Futures at 30 June 2003 was not less than R20 million; and
- MGX is the owner of the MGX interest in Software Futures and is entitled to
sell it to Kerbyn,
the Software Futures disposal is voetstoots.
MGX will not be liable for any claim by Kerbyn for a breach of warranty by MGX
to the extent that the whole or part of such claim exceeds, in aggregate, the
amount of R2 million.
3.7 Assignment of the RentWorks operating leases
MGX and Kerbyn have undertaken to procure the assignment of the RentWorks
operating leases from MGX to Kerbyn with effect on and from the effective date,
subject to obtaining the consent in writing from RentWorks.
3.8 Due diligence
Kerbyn will be entitled to conduct a confirmatory due diligence investigation in
respect of the assets and liabilities of Software Futures solely for the
purposes of verifying that the NAV of Software Futures at 30 June 2003 was not
less than R20 million. The due diligence investigation commenced on Monday, 11
August 2003 and will end on Tuesday, 19 August 2003.
3.9 MGX"s election to terminate
If Kerbyn delivers to MGX a notice of breach of warranty, prior to the effective
date, in respect of any amount exceeding R2 million, MGX will be entitled to
terminate the Software Futures disposal.
3.10 Conditions precedent
The Software Futures disposal is subject to the fulfilment of the following
conditions precedent:
- MGX procuring Hollard"s written agreement to be bound to the agreement for the
Software Futures disposal;
- Kerbyn procuring and delivering to MGX security for all of Kerbyn"s
obligations in terms of the agreement;
- the approval of the board of MGX;
- the approval of the MGX Banking Consortium;
- MGX and Kerbyn procuring the written consent to the assignment of the
RentWorks operating leases;
- MGX obtaining irrevocable undertakings from the requisite majority of
independent shareholders of MGX, in writing, to vote in favour of the Software
Futures disposal in compliance with the JSE Securities Exchange South Africa"s
("JSE") special dispensation in this regard discussed in paragraph 4; and
- the necessary approvals of the competition authorities.
It is expected that the conditions precedent will all be fulfilled prior to 30
September 2003.
4. RATIFICATION
Provided MGX can obtain irrevocable undertakings from the requisite majority of
independent shareholders of MGX to vote in favour of the resolution necessary to
ratify the Software Futures disposal, MGX has obtained special dispensation from
the JSE to request MGX shareholders to ratify the Software Futures disposal
rather than obtain shareholder approval. MGX is in the process of obtaining the
necessary irrevocable undertakings from MGX shareholders.
5. CAUTIONARY ANNOUNCEMENT
MGX shareholders are advised to continue to exercise caution when dealing with
their MGX shares until such time as a further announcement containing the
financial effects of the Software Futures disposal ("the financial effects") and
the important dates and times in respect of the general meeting of shareholders
relating to the Software Futures disposal ("the important dated and times") is
published. A further announcement relating to financial effects and the
important dates and times will be published before 22 August 2003 and a circular
containing full details of the Software Futures disposal and the general meeting
will be posted to shareholders on 25 September 2003.
13 August 2003
Sandton
Merchant bank and sponsor Attorneys
SCMB Webber Wentzel Bowens
(A division of The Standard
Bank of South Africa Limited)
(Registration number
1962/000738/06)
Date: 13/08/2003 05:07:40 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
