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Mgx Holdings Limited - Disposal And Acquisition Announcement
Release Date: 13/02/2004 17:00:01 Code(s): MGX
MGX Holdings Limited - Disposal And Acquisition Announcement
MGX Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/012697/06)
Share code: MGX
ISIN: ZAE000009262
DISPOSAL AND ACQUISITION ANNOUNCEMENT
1. INTRODUCTION
The board of directors ("the board") is pleased to announce:
- the disposal by MGX Holdings Limited and its wholly-owned subsidiary, MGX
Holdings UK Limited, (collectively, "MGX" or "the Company") of their combined
shareholding equal to 80.4% of the issued share capital in Didata Limited
("Didata UK") and all rights and benefits attached to the claims that MGX may
have against Didata UK to Copia Capital Partners ("Copia") in exchange for a
purchase consideration of GBP3.0 million, subject to the conditions precedent
set out in paragraph 0 below being fulfilled ("the Didata UK disposal"); and
- the acquisition by MGX of 5 million shares in EC-Hold Limited ("EC-Hold")
from Cycad Financial Holdings Limited ("Cycad"), subject to the conditions
precedent set out in paragraph 0 below being fulfilled, in exchange for:
a purchase consideration of R7.0 million and a further consideration of R0.5
million to be paid to Cycad in respect of its legal costs; and
- the irrevocable and unconditional waiver and abandonment by Cycad of any
claims that it may have had against MGX and the withdrawal of the action it had
instituted against MGX ("the acquisition of EC-Hold shares").
2. THE DIDATA UK DISPOSAL
As has been announced previously, MGX is in the process of implementing a
recovery plan to return to profitability. Pursuant to the recovery plan, MGX has
entered into an agreement for the Didata UK disposal. The proceeds from the
Didata UK disposal will be used by MGX to settle a R20 million interest-bearing
loan extended to it by the South African Private Equity Trust III and Capital
Africa Limited and the Company"s interest-bearing debt to Standard Bank Group
Limited. Both creditors hold either specific security or guarantees from MGX
entitling them to these proceeds. Both creditors have retained the right to
realise their security under certain conditions should shareholders not approve
the sale. Conversely, the creditors have approved the Didata UK disposal.
2.1 IMPORTANT TERMS AND CONDITIONS
The important terms and conditions of the Didata UK disposal are set out below.
2.1.1 Effective date
The effective date of the Didata UK disposal will be the first business day
after the fulfilment or waiver of the last of the conditions precedent set out
in paragraph 0 below ("the effective date"). It is expected that the effective
date will be 30 April 2004.
2.1.2 Purchase consideration
The purchase consideration for the Didata UK disposal of GBP3.0 million was paid
into an interest-bearing escrow account managed by Copia"s solicitors on 30
January 2004 and will be transferred to MGX after the effective date.
Copia shall pay to MGX an additional:
- GBP0.5 million should it sell the shares acquired in terms of the Didata UK
disposal or should Didata UK sell a pro rata portion of the business for more
than GBP5 million within three years of the completion date, which is the latter
of 31 January 2004 or the effective date; or
- GBP0.3 million should it sell the shares acquired in terms of the Didata UK
disposal or should Didata UK sell a pro rata portion of the business for more
than GBP5 million after three years but within five years of the effective date.
2.1.3 Voetstoots and warranties
MGX has not provided any warranties, whether express, implied or tacit, to Copia
in respect of the Didata UK disposal, except that MGX is the owner the Didata UK
shares and claims.
2.1.4 Conditions precedent
The Didata UK disposal is subject to the fulfilment of the following conditions
precedent:
- confirmation by the independent adviser to the board that the Didata UK
disposal is fair and reasonable with respect to MGX shareholders;
- conclusion of a Licence Agreement between Didata UK and MGX whereby MGX
will grant Didata UK the right to use its intellectual property on substantially
the same terms as was included in a draft agreement prepared in December 2001;
- receipt of all regulatory approvals and consents as may be required from
the JSE Securities Exchange South Africa ("JSE") and the Exchange Control
Department of the South African Reserve Bank;
- Didata UK having taken transfer of the property owned by Rivendell Limited;
and
- delivery of irrevocable undertakings from shareholders of MGX, who
collectively hold not less than 50.1% of all votes exercisable to attend the
general meeting and approve or ratify the resolutions as may be necessary to
effect the Didata UK disposal, or, failing which, the requisite majority of
shareholders of MGX present at the general meeting and eligible to vote
approving the resolutions as may be necessary to effect the Didata UK disposal.
2.2 FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the Didata UK
disposal on the net asset value ("NAV") and tangible NAV ("TNAV") per MGX share,
headline earnings per share ("HEPS") and earnings per share ("EPS"), based on
MGX"s results for the financial year ended 30 June 2003. The pro forma financial
effects have been prepared for illustrative purposes only to provide information
of how the Didata UK disposal may have impacted on the results and financial
position of MGX. Because of their nature, the pro forma financial effects may
not give a fair reflection of MGX"s financial position after the Didata UK
disposal or the effect on future earnings.
Before the Pro forma
Didata UK After the Change
disposal Didata UK (%)
(cents) disposal
(cents)
NAV per share (361.41) (329.83) 8.74
TNAV per share (489.16) (438.15) 10.43
HEPS (383.77) (369.10) 3.82
EPS (1 054.35) (1 022.30) 3.04
Notes:
(1) The NAV and TNAV per MGX share, Before the Didata UK disposal, have been
extracted from MGX"s final financial results for the twelve months to 30 June
2003 and calculated based on 66.598 million MGX shares in issue, assuming that
the Didata UK disposal had not yet been implemented.
(2) The NAV and TNAV per MGX share, After the Didata UK disposal, have been
calculated based on 66.598 million MGX shares in issue, assuming that the Didata
UK disposal had been implemented on 30 June 2003.
(3) The HEPS and EPS per MGX share, Before the Didata UK disposal, have been
extracted from MGX"s final financial results for the twelve months to 30 June
2003 and calculated based on a weighted average of 66.589 million MGX shares in
issue, assuming that the Didata UK disposal had not yet been implemented.
(4) The HEPS and EPS per MGX share, After the Didata UK disposal, have been
calculated based on a weighted average of 66.589 million MGX shares in issue,
assuming that the Didata UK disposal had been implemented on 30 June 2002 and
the cash portion of the purchase consideration that MGX will receive was used to
settle interest-bearing liabilities at an average after-tax rate of 17.2% for
the twelve months to 30 June 2003. An exchange rate of R12.39 : GBP1 was used to
translate the purchase consideration of GBP3.0 million. The interest has been
assumed to have no tax effect as the Company is not in a tax-paying position.
2.3 RELATED PARTY TRANSACTION
As Copia holds more than 10% of Didata UK shareholders" voting rights with
regard to a wide range of issues in terms of the Subscription and Shareholders
Agreement dated 9 May 2002 between the shareholders of Didata UK, Copia is
classified as a material shareholder in Didata UK in terms of the Listings
Requirements of the JSE. Consequently, the Didata UK disposal is a related party
transaction in terms of the Listings Requirements of the JSE. Accordingly,
written confirmation from an independent professional expert acceptable to the
JSE Listings Division, as to whether the terms and conditions of the Didata UK
disposal are fair and reasonable to MGX shareholders, is required.
2.4 INDEPENDENT ADVISER"S OPINION
Deloitte & Touche Corporate Finance has been appointed by MGX to act as an
independent adviser to the board to advise it on whether the terms and
conditions of the Didata UK disposal are fair and reasonable to the shareholders
of MGX. The substance of such advice will be included in a circular to MGX
shareholders.
3. THE ACQUISITION OF EC-HOLD SHARES
In June 2002, pursuant to an agreement between MGX and Cycad Financial Holdings
Limited ("Cycad") concluded in September 2000 in terms whereof MGX offered to
purchase 5 million ECHold shares from Cycad, MGX issued summons against Cycad
for delivery of the ECHold shares at a purchase consideration of R1.00 per
ECHold share. Cycad defended the action, stating that its acceptance of the
offer was subject to any appropriate regulatory procedures, including the
Securities Regulation Code on Take-overs and Mergers ("the Code") which required
MGX"s offer to be not less than the highest price paid by MGX within the
preceding three months of the offer. Cycad simultaneously instituted a counter
claim against MGX for payment of R2.40 per ECHold share against delivery of the
5 million ECHold shares.
Furthermore, in March 2002, the Securities Regulation Panel ("SRP") ruled that
for the purposes of the Code and the Rules of the SRP, MGX and the Trustees for
the Time Being of the Mandy Rebecca Price Trust ("the Price Trustees") had acted
in concert for the purposes of entering into an affected transaction and had
obtained control (as defined in the Code) of ECHold. Accordingly, MGX and the
Price Trustees were ordered jointly and severally to make an unconditional offer
to all persons, other than themselves, to purchase all such person"s shares in
ECHold at R2.40 per share. As MGX refused to comply with the ruling of the SRP,
a summons, issued by the High Court of South Africa, was served on MGX on 28
July 2003 to compel MGX to comply with the SRP"s 2002 ruling ("the SRP action"),
which MGX has defended.
In the context of the action between MGX and Cycad concerning the terms of the
alleged agreements between them and the subsequent action by the SRP against MGX
and the Price Trustees, MGX, without conceding that there is any merit in
Cycad"s claim for a price higher than 100 cents per share, and in the interest
of avoiding further litigation between MGX and Cycad, agreed to settle the
dispute.
3.1 IMPORTANT TERMS AND CONDITIONS
The important terms and conditions of the acquisition of EC-Hold shares are set
out below.
3.1.1 Effective date
The effective date of the acquisition of EC-Hold shares will be the first
business day after the fulfilment or waiver of the last of the conditions
precedent set out in paragraph 0 below. It is expected that the effective date
will be 30 April 2004.
3.1.2 Purchase consideration
The purchase consideration for the acquisition of EC-Hold shares is ZAR7.0
million paid to Cycad against delivery of the share certificates in respect of
the acquisition of EC-Hold shares together with duly completed share transfer
forms in respect thereof and on fulfilment of the conditions precedent as set
out in paragraphs 0 below. A further consideration of ZAR0.5 million will be
paid to Cycad in respect of Cycad"s legal costs in respect of the action.
3.1.3 Voetstoots and warranties
Cycad has not provided any warranties, whether express, implied or tacit, to MGX
in respect of the acquisition of EC-Hold shares, except that Cycad is the owner
of the ECHold shares, which shares are unencumbered and are not subject to any
pre-emptive rights.
3.1.4 Waiver and withdrawal
Cycad has irrevocably and unconditionally waived and abandoned any right or
entitlement it may have had subsequent to any ruling of the Witwatersrand Local
Division of the High Court of South Africa with respect to the SRP action, the
directors and employees of MGX and the Price Trustees. Cycad will further file a
notice of withdrawal of the action.
3.1.5 Conditions precedent
The acquisition of EC-Hold shares is subject to the fulfilment of the delivery
of irrevocable undertakings from shareholders of MGX, who collectively hold not
less than 50.1% of all votes exercisable to attend the general meeting and
approve or ratify the resolutions as may be necessary to effect the acquisition
of EC-Hold shares or, failing which, the requisite majority of shareholders of
MGX present at the general meeting and eligible to vote approving the
resolutions as may be necessary to effect the acquisition of EC-Hold shares.
3.2 FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the acquisition of
EC-Hold shares on the NAV and TNAV per MGX share, HEPS and EPS, based on MGX"s
results for the financial year ended 30 June 2003. The pro forma financial
effects have been prepared for illustrative purposes only to provide information
of how the acquisition of EC-Hold shares may have impacted on the results and
financial position of MGX. Because of their nature, the pro forma financial
effects may not give a fair reflection of MGX"s financial position after the
acquisition of EC-Hold shares or the effect on future earnings.
Before the Pro forma
acquisition After the Change
of ECHold acquisition (%)
shares of ECHold
(cents) shares
(cents)
NAV per share (361.41) (372.67) (3.12)
TNAV per share (489.16) (500.43) (2.30)
HEPS (383.77) (385.70) (0.50)
EPS (1 054.35) (1 056.28) (0.18)
Notes:
(1) The NAV and TNAV per MGX share, Before the acquisition of EC-Hold shares,
have been extracted from MGX"s final financial results for the twelve months to
30 June 2003 and calculated based on 66.598 million MGX shares in issue,
assuming that the acquisition of EC-Hold shares had not yet been implemented.
(2) The NAV and TNAV per MGX share, After the acquisition of EC-Hold shares,
have been calculated based on 66.598 million MGX shares in issue, assuming that
the acquisition of EC-Hold shares had been implemented on 30 June 2003 and the
acquired shares are worthless.
(3) The HEPS and EPS per MGX share, Before the acquisition of EC-Hold shares,
have been extracted from MGX"s final financial results for the twelve months to
30 June 2003 and calculated based on a weighted average of 66.589 million MGX
shares in issue, assuming that the acquisition of EC-Hold shares had not yet
been implemented.
(4) The HEPS and EPS per MGX share, After the acquisition of EC-Hold shares,
have been calculated based on a weighted average of 66.589 million MGX shares in
issue, assuming that the acquisition of EC-Hold shares had been implemented on
30 June 2002 and the cash portion of the purchase consideration that MGX will
pay was financed by interest-bearing liabilities at an average after-tax rate of
17.2% for the twelve months to 30 June 2003. The interest has been assumed to
have no tax effect as the Company would be unable to deduct the interest against
any taxable income.
4. IMPORTANT DATES AND TIMES OF THE DIDATA UK DISPOSAL AND THE ACQUISITION OF
EC-HOLD SHARES
Last day to lodge the form of proxy for the general meeting, by 9:00, on Monday,
26 April 2004
- General meeting of shareholders, on Thursday, 29 April 2004
- Results of the general meeting published on SENS, on Thursday, 29 April
2004
- Results of the general meeting published in the press, on Friday, 30 April
2004
Notes:
- These dates and times are subject to amendment. Any such amendment will be
published on SENS and in the press.
- If the date of the general meeting is adjourned or postponed, the form of
proxy must be received by the transfer secretaries of MGX by not later than 48
hours prior to the time of the adjourned or postponed general meeting.
5. GENERAL MEETING AND CIRCULAR TO SHAREHOLDERS
A circular containing full details of the Didata UK disposal and the acquisition
of EC-Hold shares and convening a general meeting of shareholders to be held at
9:00 on Thursday, 29 April 2004 will, subject to approval of the JSE, be posted
to shareholders on Wednesday, 7 April 2004.
6. CAUTIONARY ANNOUNCEMENT
MGX shareholders are reminded that the listing of the MGX share on the JSE is
currently suspended. In the event that the suspension of the listing of MGX is
lifted, MGX shareholders are advised to exercise caution in dealing with their
MGX shares until such time as further announcements ("the further
announcements") relating to the continued restructuring of MGX are published.
13 February 2004
Sandton
Merchant Bank and Sponsor
Standard Corporate and Merchant Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Reporting accountants and auditors
Deloitte & Touche
