| Mon 10 May 2004, 13:23 | | Joint announcement by Mvela Holdings and Rebserve |
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Rebserve/Mvela Holdings - Joint announcement by Mvela Holdings and Rebserve
REBSERVE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Share code: RBV ISIN: ZAE000034484
("Rebserve")
MVELAPHANDA HOLDINGS(PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/021524/07)
("Mvela Holdings")
Joint announcement by Mvela Holdings and Rebserve regarding the creation of
South Africa"s pre-eminent black-controlled, owned and managed diversified
industrial group, by the proposed merger of Mvela Holdings and Rebserve, and a
further cautionary announcement by Rebserve
1. Introduction
Further to the Rebserve cautionary announcements dated 23 February and 5
April 2004, the boards of directors of Rebserve and Mvela Holdings are
pleased to announce that they have reached agreement in principle and have
signed a memorandum of understanding containing the salient terms and
conditions of a proposed merger between Mvela Holdings and Rebserve,
utilising Rebserve as the vehicle for the merger. As control of Rebserve
will pass to Mvela Holdings, the proposed transaction also entails a
reverse takeover of Rebserve by Mvela Holdings, pursuant to which Rebserve
will change its name to Mvelaphanda Group Limited ("New Mvela"), resulting
in the creation of a truly empowered black-controlled South African group.
(The merger and reverse takeover are hereinafter collectively referred to
as "the Merger".)
The Merger will establish a platform for the rapid growth and expansion of
New Mvela into a major black-owned, controlled and managed diversified
industrial group with an initial value after the Merger of more than R3
billion.
New Mvela will combine the stature and reputation of the Mvela Holdings
brand and team and the prospect of substantial Black Economic Empowerment
("BEE") deal flow at the most active stage of the transformation of the
South African economy, with the solid cash-generative base, track record
and proven operational and transactional skills of Rebserve and its
management.
Tokyo Sexwale, Mikki Xayiya, Mark Willcox and Stephen Levenberg have
undertaken that all of their future business undertakings anywhere in the
world (other than in the upstream oil and energy sectors) will, for a
minimum period of three years from 1 April 2004, on the basis of a right of
first refusal in favour of New Mvela, be conducted solely and exclusively
through New Mvela. As a result New Mvela is expected to benefit
considerably from strong deal flow and significant BEE opportunities.
Mining and resource transactions will continue to be housed in Mvelaphanda
Resources Limited, in which New Mvela will hold a material interest.
The Merger is subject to certain conditions precedent as set out in 9
below.
2. Overview of Mvela Holdings
Mvela Holdings is a BEE company which presently holds investments in a
range of companies covering primarily the mining and resources, financial
services, property, healthcare, information technology, telecommunications
and general industrial sectors. Under the chairmanship of Tokyo Sexwale,
Mvela Holdings has emerged as one of the leading BEE companies in South
Africa.
The strategy of Mvela Holdings is to contribute to the meaningful
participation of historically disadvantaged persons in South Africa"s
economy, by seeking to add significant value to the assets over which it
has influence. Mvela Holdings has an outstanding track record and a proven
ability to secure, and deliver on, major BEE transactions.
Mvela Holdings has an inclusive philosophy towards empowerment and believes
that community and other BEE group participation is critical to its future
success. Its stakeholder profile reflects its commitment to ensuring that
grassroots communities benefit from its assets and investments.
The businesses and assets to be acquired by Rebserve pursuant to the Merger
include, inter alia, the following material investments:
Mvelaphanda Resources Limited
A 23% (28.5% when aggregated with a voting pool arrangement conferring
voting rights on Mvela Holdings) holding in Mvelaphanda Resources Limited,
a resources investment and operating company, which is the second largest
black mining group in South Africa and listed on the JSE Securities
Exchange South Africa ("JSE"). Mvelaphanda Resources Limited holds
investments in, inter alia, GFI-SA Mining South Africa (Proprietary)
Limited (a subsidiary of Gold Fields Limited), Northam Platinum Limited and
Trans Hex Group Limited.
ABSA Group Limited
As announced in the press by ABSA Group Limited ("ABSA") on 6 April 2004,
Mvela Holdings is the leading participant in the Batho Bonke consortium,
which consortium has acquired 10% of ABSA through the consortium"s holding
of voting redeemable preference shares in ABSA and the options attaching to
these voting redeemable preference shares.
Abvest Associates Limited
Mvela Holdings presently holds an effective 30% (13.4% directly and 16.6%
via compulsory convertible debentures) of Abvest Associates Limited
("Abvest"). Abvest is the South African institutional investment business
of ABSA.
Property assets
A 50% holding in the Broll Property Group (Proprietary) Limited, South
Africa"s leading property management group; a 25% interest in ApexHi
Management Trust which manages ApexHi Properties Limited; and, a 37.5%
holding in Mvelaphanda Property Development Holding Company (Proprietary)
Limited.
Afrox Healthcare Limited
As part of a BEE consortium Mvela Holdings will (subject to final approval
by the Competition Tribunal) acquire an effective 37.5% interest in Afrox
Healthcare Limited.
Other strategic investments
Mvela Holdings also has a number of other strategic investments which will
be included in the Merger. Details of these investments will be provided in
the circular and pre-listing statement to be posted to Rebserve
shareholders in due course.
Excluded assets
The Merger excludes all upstream oil and energy assets and the oil trading
business of Mvela Holdings, but includes any potential downstream
opportunities in these sectors.
3. Rationale for the Merger
Rebserve has always recognised BEE as a strategic imperative, having
initially concluded a significant BEE transaction in 1997. Since 2003, it
has been the expressed intention of Rebserve to materially increase its BEE
shareholding, and Rebserve has actively pursued opportunities and
initiatives in this regard.
The Merger is the result of these initiatives and presents a unique
opportunity in the context of the transformation of the South African
economy to merge the country"s pre-eminent BEE group with one of South
Africa"s leading services groups. The Merger will result in a real,
effective, active and ungeared BEE shareholding of more than 55% at
inception, which is not dependent on future share price performance or the
ability to raise funds.
Implementation of the Merger will have the following anticipated benefits
for the respective parties:
For Rebserve
- Transforming Rebserve, via New Mvela, into South Africa"s leading
black-controlled, owned and managed diversified industrial group, and
the only large services player in South Africa with such BEE
credentials;
- Increasing the profile of the Rebserve group generally and its
attractiveness to investors;
- Avoidance of the typical BEE discount or dilution of Rebserve
shareholder value which would be inherent in alternative BEE
transactions;
- Increasing both deal flow and opportunities to acquire new businesses;
- Creating a platform for future growth;
- Providing a major boost in business opportunities and new contracts
for all companies in the Rebserve group, particularly where a
significant BEE shareholding is a prerequisite;
- Integrating certain of the Mvela Holdings assets into the Rebserve
operating structures;
- Creating new opportunities for Rebserve"s businesses to provide
services to many of Mvela Holdings" investments, particularly in the
mining sector;
- Increasing the range of services offered by Rebserve group companies,
particularly in the property services sector;
- Diversifying the range of services offered by the Rebserve group to
include professional and financial services;
- Preventing the loss of contracts by Rebserve group companies as a
result of inadequate BEE;
- Fast-tracking current Rebserve operational opportunities; and
- Converting Rebserve into a ground floor investment in one of South
Africa"s most broad-based empowerment groups at the "initial public
offering" ("IPO") stage.
For Mvela Holdings
- The Merger effectively comprises the "IPO" of Mvela Holdings;
- Charters and legislation are increasingly driving the need for
enhanced operational capacity and access to capital in relation to BEE
groups and the Merger comprises a quantum leap for Mvela Holdings in
both these respects;
- Establishing a platform for future large transactions as the Mvela
Holdings base has been progressively stepped up;
- Providing access to capital to fund accelerated growth and harness new
deal opportunities;
- Acquisition of the proven operational and management expertise and
skills of Rebserve;
- Increasing Mvela Holdings" ability to exercise greater operational
influence over its assets; and
- Creating the opportunity for participation by a wider range of local
and international investors in the success of Mvela Holdings.
4. Salient features of the Merger
The Merger will be achieved by Rebserve acquiring, with effect from 1 July
2004, all of the businesses and assets of Mvela Holdings at market value,
excluding the upstream oil, energy and oil trading assets owned by Mvela
Holdings.
Valuation of Rebserve shares
For the purposes of the Merger, a total value of R8.50 has been ascribed to
each Rebserve share held by existing shareholders, on the basis that:
- Rebserve shares will be valued at R7.00 per share ("Merger Share
Price"), being the average volume weighted average price ("VWAP") at
which Rebserve shares traded for the 30 days prior to 20 February 2004
(being the last business day prior to publication by Rebserve of the
initial cautionary announcement relating to the Merger). The 60 day
VWAP price at the same date was R6.86 per share;
- Rebserve will in addition declare and pay a special cash dividend of
75 cents per Rebserve share out of its reserves at 30 June 2004 to all
existing Rebserve shareholders, prior to the issue of new Rebserve
shares to Mvela Holdings; and
- Rebserve will also make a capitalisation share award out of its
existing capital and/or reserves, equivalent to 75 cents per Rebserve
share, to all existing Rebserve shareholders, prior to the issue of
new Rebserve shares to Mvela Holdings, on the basis of 10.7 new
Rebserve shares at R7.00 per share, credited as fully paid, for every
100 existing Rebserve shares held.
Subject to completion of the Merger, it is anticipated that the special
cash dividend and the capitalisation share award will be declared in August
2004 and paid/credited in September 2004. Mvela Holdings will not
participate in the special cash dividend, nor the capitalisation share
award, referred to above.
The total value of R8.50 (comprising the Merger Share Price of R7.00, the
special dividend of 75 cents and the capitalisation share award of 75
cents) per Rebserve share received by Rebserve shareholders represents a
premium of 21.4% to the Merger Share Price.
Valuation of Mvela Holdings
The value of the net assets of Mvela Holdings to be acquired by Rebserve,
and hence the purchase consideration payable by Rebserve to Mvela Holdings,
will be approximately R1 780 million.
Rebserve will issue approximately 255 million new Rebserve shares at the
Merger Share Price to Mvela Holdings in settlement of the purchase
consideration.
The purchase consideration, and resultant number of new Rebserve shares to
be issued in settlement thereof, will be subject to an adjustment in the
event that, following the conclusion of the due diligence investigation
referred to in 9 below, it is ascertained that such adjustment is required.
On completion of the Merger, Mvela Holdings will own more than 55% of the
combined group (excluding the shares held by a subsidiary of Rebserve as
treasury stock), and before the increase in BEE participation as a result
of the proposed empowerment warrant referred to in 8 below.
5. Resultant Group structure
The investments and operations of New Mvela will be classified initially in
four divisions, with the existing Rebserve businesses comprising the
largest portion of the services division.
The resultant group structure of New Mvela is presented in the diagram
below.
6. Change in control
Pursuant to the Merger, and as a consequence of the issue of the new
Rebserve shares, Mvela Holdings will control more than 50% of the total
number of issued shares of Rebserve and will accordingly become the
controlling shareholder of Rebserve. The transaction is in effect a reverse
takeover of Rebserve by Mvela Holdings and will therefore constitute an
affected transaction in terms of the Securities Regulation Code on Take-
overs and Mergers ("the Code"). This obliges Mvela Holdings to make a
mandatory offer to all existing shareholders of Rebserve.
However, the Securities Regulation Panel ("SRP") has indicated that,
subject to it being satisfied with the circular to be sent to Rebserve
shareholders, it will dispense with the requirement for a mandatory offer
to be made. This is also subject to the condition that a majority of
independent Rebserve shareholders vote in favour of an ordinary resolution
to waive the right to such mandatory offer at a meeting of Rebserve
shareholders in terms of Rule 8.7 of the Code. Rebserve intends to propose
such a waiver at the general meeting, which will be convened to pass the
resolutions required to implement the Merger.
7. Financial effects
Detailed financial effects of the Merger will be published in due course.
It is anticipated that the Merger will result in a decrease in Rebserve"s
earnings per share, headline earnings per share and diluted headline
earnings per share, and that it will result in an increase in Rebserve"s
net asset value per share, prior to the special dividend of 75 cents per
share, the capitalisation share award of 75 cents per share and the costs
associated with the Merger.
8. Future Capital Raising
New Mvela will, on completion of the Merger, contemplate a capital-raising
programme in order to raise capital to fund New Mvela"s anticipated strong
deal flow over the medium term. In the context of the capital raising, New
Mvela will consider issuing an empowerment warrant (in addition to any
other form of capital raising) in order to ensure that the BEE profile of
New Mvela is retained and enhanced.
9. Conditions Precedent
The implementation of the Merger is subject, inter alia, to the fulfilment
of the following conditions precedent:
- the signing of a formal agreement(s) in respect of the Merger;
- the obtaining of the necessary regulatory approvals, including
approval by the JSE, the Competition Commission/Tribunal and the SRP;
- the satisfactory completion of reciprocal due diligence investigations
by both Rebserve and Mvela Holdings, including a detailed valuation of
Mvela Holdings" investments;
- the passing by the shareholders of Rebserve and Mvela Holdings of all
necessary ordinary and special resolutions which are required by
Rebserve and Mvela Holdings to implement the Merger;
- the securing of all consents and/or approvals which are or may be
required to ensure that none of the material agreements (as agreed
between Rebserve and Mvela Holdings) to which either Rebserve or Mvela
Holdings are parties are capable of being cancelled, amended or
otherwise varied as a result of or pursuant to the implementation of
the Merger; and
- the signing of separate service and restraint agreements between New
Mvela and each of Tokyo Sexwale, Mikki Xayiya, Stephen Levenberg and
Mark Willcox.
10. Change of name and reconstitution of the Rebserve board
Subject to the requisite approvals being obtained, and implementation of
the Merger, it is proposed that Rebserve changes its name to Mvelaphanda
Group Limited. The Rebserve board of directors will also be reconstituted
to reflect the new shareholding structure inter alia by the appointment of
Tokyo Sexwale (as Executive Chairman), Mikki Xayiya (as Executive Deputy
Chairman), and Mark Willcox and Yolanda Cuba as executive directors of New
Mvela. Stephen Levenberg will remain an executive director of New Mvela,
and as such, integrally involved in its senior leadership.
11. Further cautionary announcement
An announcement containing further details of the Merger, including
financial effects, will be made in due course.
Rebserve shareholders are advised to continue to exercise caution when
dealing in Rebserve shares until a further announcement is made.
Sandton
10 May 2004
Financial adviser to Rebserve and transaction sponsor
UBS
Financial advisers to Mvela Holdings
JP Morgan
ABSA
Corporate Bank
Corporate Finance
(Registration number 1986/004794/06)
Iklwa
Attorneys to the Merger
Werksmans
ATTORNEYS
Sponsor to Rebserve
Deutsche Securities
Member of the Deutsche Bank Group
Deutsche Securities (SA)(Properties) Limited
(Registration number 1995/011798/07)
Date: 10/05/2004 12:48:38 PM Produced by the JSE SENS Department
