| Thu 29 Jul 2004, 15:01 | | DETAILED TERMS ANNOUNCEMENT AND A RENEWAL |
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REBSERVE/MVELA HOLDINGS - DETAILED TERMS ANNOUNCEMENT AND A RENEWAL OF
REBSERVE`S CAUTIONARY ANNOUNCEMENT
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`)
DETAILED TERMS ANNOUNCEMENT BY REBSERVE AND MVELA HOLDINGS ON THE PROPOSED
MERGER OF REBSERVE AND MVELA HOLDINGS, AND A RENEWAL OF REBSERVE`S CAUTIONARY
ANNOUNCEMENT
1. Introduction
Further to the joint announcement by Rebserve and Mvela Holdings on SENS on
10 May 2004 (`the initial terms announcement`), the boards of directors of
Rebserve and Mvela Holdings are pleased to announce that a merger agreement
(`the Merger Agreement`) has been signed between Rebserve and Mvela
Holdings. As control of Rebserve will pass to Mvela Holdings on
implementation of the merger, the proposed merger also entails a reverse
takeover of Rebserve by Mvela Holdings, resulting in the creation of a
truly empowered, broad based, black-controlled, owned and managed,
diversified South African group. On implementation of the Merger, Rebserve
will change its name to Mvelaphanda Group Limited (`New Mvela`). (The
merger and reverse takeover are hereinafter collectively referred to as
`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, excluding the
upstream oil, energy and oil trading businesses, and other minor assets
owned by Mvela Holdings, for a total purchase price of R1 546.425 million.
Rebserve will issue/transfer 213 775 000 Rebserve shares to Mvela Holdings
and assume R50 million of Mvela Holdings` debt in discharge of the purchase
price.
Tokyo Sexwale, Mikki Xayiya, Mark Willcox and Stephen Levenberg have
undertaken, free of any monetary consideration, that all of their future
business undertakings anywhere in the world (other than in the upstream
oil, energy and oil trading 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.
The Merger is subject to certain conditions precedent as set out in
paragraph 4 below.
2. Revised terms of the Merger
2.1 Previous valuations of Mvela Holdings and Rebserve
Details of the valuations and terms of the Merger contained in the
initial Memorandum of Understanding signed between the parties, were:
Previous valuation of Rebserve shares
A total value of R8.50 was ascribed to each Rebserve share,
comprising:
* a merger share price of R7.00 per Rebserve share;
* a special cash dividend of 75 cents per Rebserve share; and
* a capitalisation issue to all existing Rebserve shareholders,
prior to the issue/transfer of Rebserve shares to Mvela Holdings,
on the basis of 10.71428 new Rebserve shares at R7.00 per share,
credited as fully paid, for every 100 existing Rebserve shares
held (equivalent in value to 75 cents per Rebserve share).
Previous valuation of Mvela Holdings
The value of the net assets of Mvela Holdings to be acquired by
Rebserve was R1 780 million, comprising:
* Mvela Holdings` businesses, assets and goodwill at a market value
of R1 930 million; and
* debt of Mvela Holdings to be assumed by Rebserve of R150 million,
equating to a net asset value of R1 780 million.
2.2 Revised valuations of Mvela Holdings and Rebserve
As a result primarily of changes in market conditions since the
initial terms announcement, the terms of the Merger have, by
agreement, been revised as follows:
Revised valuation of Rebserve shares
A total value of R8.60 has been ascribed to each Rebserve share,
comprising:
* a merger share price of R7.00 per share (`Merger Share Price`);
* a special cash dividend which has been increased to 110 cents
(previously 75 cents) per Rebserve share; and
* a capitalisation issue to all existing Rebserve shareholders
prior to the issue/transfer of Rebserve shares to Mvela Holdings,
on the basis of 7.14286 new Rebserve shares at R7.00 per share,
credited as fully paid, for every 100 existing Rebserve shares
held (equivalent in value to 50 cents (previously 75 cents) per
Rebserve share) (`Capitalisation Issue`).
Revised valuation of Mvela Holdings
Subject to any adjustment in the purchase price as contemplated in
paragraph 2.4 below, the value of the net assets of Mvela Holdings to
be acquired by Rebserve has been adjusted as follows:
* the valuation of Mvela Holdings` businesses, assets and goodwill
has been reduced by R384 million to R1 546 million; and
* the debt of Mvela Holdings to be assumed by Rebserve has been
reduced by R100 million to R50 million, equating to a net asset
value of R1 496.425 million.
The revised terms of the Merger have resulted in a reduction in the
total cost to Rebserve of the assets of Mvela Holdings (including the
assumption of debt) of R402 million - comprising the reduction in the
purchase price of Mvela Holdings` assets by R384 million, and the
increase in the total value ascribed to each Rebserve share of 10
cents per Rebserve share to R8.60 per Rebserve share.
2.3 Purchase price and discharge thereof
The purchase price will be discharged as follows:
* Rebserve will issue 197 071 197 new Rebserve shares at the Merger
Share Price to Mvela Holdings;
* a wholly owned subsidiary of Rebserve will transfer 16 703 803
Rebserve shares (after the Capitalisation Issue) which are
currently held as treasury shares, to Mvela Holdings at the
Merger Share Price; and
* Rebserve will assume R50 million of Mvela Holdings` debt.
There will be a total of 404 638 696 Rebserve shares in issue after
implementation of the Merger.
The total number of Rebserve shares to be issued/transferred by
Rebserve to Mvela Holdings in discharge of the purchase price has
decreased from approximately 255 million Rebserve shares at the time
of the initial terms announcement, to approximately 214 million
Rebserve shares. On completion of the Merger, Mvela Holdings will own
52.8% of the issued share capital of New Mvela (assuming that there is
no adjustment to the purchase price as contemplated in paragraph 2.4
below) before the black economic empowerment (`BEE`) ownership is
increased to approximately 70% of New Mvela as contemplated in
paragraph 8 below.
Mvela Holdings has provided such indemnities and warranties as are
usual in a transaction of this nature.
2.4 Purchase price adjustment
The Merger Agreement provides that should any of the transactions
relating to the acquisition of effective equity interests by Mvela
Holdings in each of ABSA Group Limited (`ABSA`), African Life
Assurance Company Limited (`Aflife`) and/or Afrox Healthcare Limited
(`Afrox Healthcare`) (collectively `the Target Rights`) not be
implemented in accordance with their present terms on or before 31
October 2004, or are only partially implemented on or before 31
October 2004, with the result that the effective interest in any of
the Target Rights which is acquired by Mvela Holdings is less than the
effective interests presently expected, the purchase price payable by
Rebserve will automatically be reduced on a Rand for Rand basis by the
value ascribed to the relevant transaction (if not implemented at all)
or on a pro rata basis if one or more of the transactions is only
partially implemented.
The Merger Agreement further provides that if either or both of the
ABSA and/or Afrox transactions are not implemented as detailed above,
with the result that the number of Rebserve shares to be allotted and
issued and/or transferred to Mvela Holdings pursuant to the Merger
would be reduced to such number as would result in Mvela Holdings
thereafter holding less than 50.1% of the entire issued share capital
of New Mvela, there shall nevertheless be allotted and issued and/or
transferred to Mvela Holdings, such number of Rebserve shares which
would thereafter result in Mvela Holdings holding not less than 50.1%
of New Mvela`s issued share capital, and
* the shareholders of Mvela Holdings will be liable to pay to
Rebserve a cash amount equal to the shortfall in value (`the
Issue of Shares for Cash`); or
* Mvela Holdings will have the right to transfer to Rebserve such
assets as are agreed upon by Rebserve at values which are agreed
upon by Rebserve having an aggregate value equal to the value of
the transaction in question; or
* Rebserve will have the right and option to require Mvela Holdings
to sell to Rebserve (`the Share Buy-Back`) or its nominated
subsidiary, for an aggregate purchase price of R1, such number of
Rebserve shares as is equal to the value of the transaction/s
which has/have not been implemented divided by the Merger Share
Price.
As at the date of this announcement, most of the conditions precedent
to the acquisition of the effective equity interests by Mvela Holdings
in each of ABSA and Aflife have been fulfilled, and such transactions
are in the process of being implemented. The acquisition of the
effective interest in Afrox Healthcare by Mvela Holdings is still
subject to approval by the Competition Tribunal.
In order to ensure that the resultant BEE shareholding in New Mvela is
at least 50.1% it is anticipated that the Share Buy-Back will only be
implemented if the Issue of Shares for Cash is not implemented.
3. Financial effects of the Merger on Rebserve
The table below sets out the pro forma financial effects of the Merger on
Rebserve`s unaudited earnings per share, headline earnings per share, fully
diluted headline earnings per share, net asset value per share and net
tangible asset value per share for the six months ended 31 December 2003.
These financial effects have been prepared for illustrative purposes only
and, because of their nature, may not give a true reflection of Rebserve`s
financial position and performance.
Pro forma
after
acquisition
Before of the Increase/
the Target
Merger Assets (Decrease)
(Note 2) (Note 3) (%)
Earnings per share (cents) 52.4 14.6 (72.1)
Headline earnings per share (cents) 56.8 19.3 (66.0)
Fully diluted headline earnings per share 56.7 19.3 (66.0)
(cents)
Net asset value per share (cents) 534.1 522.8 (2.1)
Net tangible asset value per share (cents) 356.2 364.5 2.3
Pro
forma
after
Pro forma the
after Issue
implemen- ofShares
tation
of the Increase/ for Cash Increase/
Merger (Decrease) (Decrease)
(Note 4) (%) (Note 5) (%)
Earnings per share (cents) 9.9 (81.1) 15.2 (71.0)
Headline earnings per share 19.5 (65.7) 19.3 (66.0)
(cents)
Fully diluted headline 19.4 (65.8) 19.3 (66.0)
earnings per share (cents)
Net asset value per share 545.4 2.1 545.4 2.1
(cents)
Net tangible asset value per 370.1 3.9 407.2 14.3
share (cents)
Notes:
1. For the purposes of the financial effects a distinction has been drawn
between the Target Assets (comprising the assets owned by Mvelaphanda
Holdings at 29 February 2004, being the most recent financial year end of
Mvela Holdings, to be acquired by Rebserve) and the Target Rights. The
acquisitions of the Target Rights by Mvela Holdings had not been
implemented at 29 February 2004.
2. The financial effects are based on the reviewed results of Rebserve for the
six months ended 31 December 2003, which were published in the press on 23
February 2004.
3. The pro forma financial effects after the acquisition of the Target Assets
are calculated on the following basis:
Earnings per share, headline earnings per share and fully diluted headline
earnings per share:
(i) The special cash dividend of 110 cents per Rebserve share,
totalling R212 million (including STC) was paid out of existing
cash resources, on 1 July 2003. Interest from 1 July 2003 to 31
December 2003, calculated at an after tax rate of 5.6% per annum,
was forfeited on the amount of R212 million paid out;
(ii) The Capitalisation Issue was implemented on 1 July 2003;
(iii) The costs associated with the Merger totalling R29.4 million were
paid in cash on 1 July 2003 and charged against the share premium
account. Interest from 1 July 2003 to 31 December 2003,
calculated at an after tax rate of 5.6% per annum, was forfeited
on the amount of R29.4 million. The employees and operating costs
of Mvelaphanda Administration Services (Proprietary) Limited to
be assumed by Rebserve were assumed with effect from 1 July 2003;
(iv) The debt of R50 million was assumed by Rebserve on 1 July 2003.
Interest incurred for the period 1 July 2003 to 31 December 2003
was calculated at an average after tax rate of 8.05% per annum;
(v) The acquisition by Rebserve of the Target Assets was concluded on
1 July 2003 and the purchase price payable by Rebserve was
settled by the issue/transfer of new/existing Rebserve shares on
1 July 2003. The financial effects of these acquisitions are
based on the audited results of the Target Assets for the year
ended 29 February 2004 which have been consolidated, other than
for Mvelaphanda Resources Limited (`Mvelaphanda Resources`), in
respect of which the financial effects are based on the reviewed
interim results of Mvelaphanda Resources for the six months ended
31 March 2004 which have been equity accounted.
(vi) Fair value gains/losses on financial instruments have been
recognised in the statement of changes in equity.
Net asset value and net tangible asset value per share:
(vii) Net asset value per share and net tangible asset value per share
are calculated on the assumption that the transactions referred
to in 3(i) to 3(vi) had been implemented on 31 December 2003.
4. The pro forma financial effects after the implementation of the Merger are
calculated on the following basis:
Earnings per share, headline earnings per share and fully diluted headline
earnings per share:
(i) The transactions referred to in 3(i) to 3(vi) were concluded as
described above.
(ii) The underlying transactions comprising the Target Rights were
concluded on 30 June 2003. The acquisition by Rebserve of the
Target Rights was concluded on 1 July 2003 and the purchase price
payable by Rebserve was settled by the issue/transfer of Rebserve
shares on 1 July 2003. The investments in the Target Rights have
been accounted for using the equity method and are based on the
specific financial terms of the individual transactions in
respect of the acquisition by Mvela Holdings of its equity
interest in ABSA and Aflife, and on the interim results of Afrox
Healthcare for the six months ended 31 March 2004.
(iii) The purchase price of R3.2 billion paid by the BEE Consortium for
the purchase of Afrox Healthcare was funded partly by bank loans
and partly by an issue of new preference shares at an average
after tax cost of between 7.4% and 9.2% per annum.
Net asset value and net tangible asset value per share:
(iv) The transactions referred to in 3(vii) were concluded as
described above.
(v) The transactions referred to in 4(ii) and 4(iii) were implemented
on 31 December 2003.
5. The pro forma financial effects after the Issue of Shares for Cash are
calculated on the following basis:
Earnings per share, headline earnings per share and fully diluted headline
earnings per share:
(i) The transactions referred to in 3(i) to 3(vi) were concluded as
described above.
(ii) The underlying transactions comprising the Target Rights were not
concluded on 30 June 2003 and the Target Rights were not acquired
by Rebserve. As contemplated in 2.4 above, new Rebserve shares
were issued on 1 July 2003 to Mvela Holdings in exchange for a
cash amount equal to the value of the Target Rights. Interest
from 1 July 2003 to 31 December 2003, calculated at an after tax
rate of 5.6% per annum, was earned on the cash amount received.
Net asset value and net tangible asset value per share:
(iii) The transactions referred to in 3(vii) were concluded as
described above.
(iv) The transactions referred to in 5(ii) above were implemented on
31 December 2003.
4. Conditions Precedent
The implementation of the Merger is subject, inter alia, to the fulfilment
of the following conditions precedent:
* the Merger Agreement becoming unconditional in accordance with its
terms;
* the finalisation of reciprocal due diligence investigations by
Rebserve and Mvela Holdings;
* the obtaining of the necessary regulatory approvals, including
approval by the Competition Authorities;
* the passing by the shareholders of Rebserve of all necessary ordinary
and special resolutions which are required to implement the Merger and
the registration of such special resolutions by the Registrar of
Companies;
* the securing of all consents and/or approvals which are 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
* Mvela Holdings delivers to Rebserve written consents and waivers, duly
executed by the requisite third parties, in terms of which such third
parties (where applicable) consent to the transfer of the Mvela
Holdings assets to New Mvela, waive certain pre-emptive rights over
such Mvela Holdings` assets and release certain securities held over
such Mvela Holdings` assets.
5. Special Dividend and Capitalisation Issue
Rebserve will declare and pay a special cash dividend of 110 cents per
Rebserve share to all existing Rebserve shareholders, prior to the
issue/transfer of the Rebserve shares to Mvela Holdings. Rebserve will also
make a capitalisation issue out of its existing capital and/or reserves to
all existing Rebserve shareholders, prior to the issue/transfer of the
Rebserve shares to Mvela Holdings, on the basis of 7.14286 new Rebserve
shares at R7.00 per share, credited as fully paid, for every 100 existing
Rebserve shares held (equivalent in value to a further 50 cents per
Rebserve share).
The salient dates for payment of the special cash dividend and the
Capitalisation Issue will be announced on SENS and in the press once all
conditions precedent have been fulfilled.
6. Waiver of mandatory offer
As a consequence of the issue/transfer of the Rebserve shares pursuant to
the Merger, Mvela Holdings will control more than 50% of the issued share
capital of Rebserve and will accordingly be the controlling shareholder of
Rebserve. The Merger is, in effect, a reverse takeover of Rebserve by Mvela
Holdings and will constitute an `affected transaction` in terms of the
Securities Regulation Code on Take-overs and Mergers (`the Code`). Mvela
Holdings is therefore obliged to make an offer to all existing Rebserve
shareholders to acquire all of their Rebserve shares for the same or a
comparable consideration.
However, the Securities Regulation Panel (`SRP`) has confirmed that it has
dispensed with the requirement for Mvela Holdings to make such a mandatory
offer provided that a majority of independent Rebserve shareholders pass an
ordinary resolution to waive Mvela Holdings` obligation to make such an
offer at a general meeting in terms of Rule 8.7 of the Code.
As a result of Mvela Holdings acquiring control of more than 50% of
Rebserve pursuant to the Merger, should Mvela Holdings acquire further
Rebserve shares in the future, it will not be required to make a mandatory
offer to Rebserve minorities in terms of the Code.
No Rebserve shareholders will be precluded from voting by the SRP as all
Rebserve shareholders are considered to be independent. However, the
directors of Rebserve who hold shares in Rebserve have agreed not to vote
their shares at the general meeting of Rebserve shareholders convened for 3
September 2004 (`the General Meeting`).
7. Change of name, reconstitution of the board, service and restraint
agreements
Subject to the requisite approvals being received, and the implementation
of the Merger, it is proposed that:
* Rebserve changes its name to `Mvelaphanda Group Limited`; and
* the Rebserve board of directors will be reconstituted to reflect the
new shareholding structure. The resultant board is as follows:
Executive directors
Tokyo Sexwale Executive Chairman
Mikki Xayiya Executive Deputy Chairman
Stephen Levenberg Chief Executive Officer
Yolanda Cuba Deputy Chief Executive Officer
Mark Willcox Chief Investment Officer
Brett Till Chief Financial Officer
Jackie Mphafudi Chief Operating Officer
Non-executive directors
Bryan Hopkins *
Oyama Mabandla *
Louisa Mojela *
David Moshapalo *
Mpumi Nxumalo *
Ramesh Patel *
Carl Stein
* Independent non-executive directors
Tokyo Sexwale, Mikki Xayiya, Stephen Levenberg and Mark Willcox have signed
service and restraint agreements (for no monetary consideration in respect
of such restraints) with New Mvela.
Will Paskins, Mackie Brodie and Kuseni Dlamini will resign as directors of
Rebserve. Will Paskins will remain Chief Executive of Rebserve Limited, the
major operating subsidiary of Rebserve.
8. Future capital raising and introduction of broad-based HDSA shareholders
New Mvela will, within a period of three to six months after implementation
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 such capital raising, New Mvela will consider
introducing additional broad-based historically disadvantaged South African
shareholders into New Mvela in order to ensure that the BEE profile of New
Mvela is retained and enhanced, as set out below.
Mvelaphanda Holdings is a broad-based black empowerment company with a
proven history of delivering value to its broad-based stakeholders. It is
the stated intention of Mvela Holdings to facilitate further participation
(`the HDSA Trust Investment`) in New Mvela by black people (as defined in
section 1 of the Broad-Based Black Economic Empowerment Act 53 of 2003)
(`HDSA`), after the implementation of the Merger. In this regard Mvela
Holdings will facilitate the formation and financing of a trust (`the HDSA
Trust`) for the benefit of HDSA employees of New Mvela, HDSA community
groups, HDSA youth groups, people with disabilities and HDSA women`s groups
(`the HDSA Groups`).
It is intended that, subject to all necessary shareholder, JSE and other
regulatory approvals:
* the HDSA Trust will acquire between 15% and 20% of the issued share
capital of New Mvela by way of an issue of new Mvela shares (`the BEE
Shares`) by New Mvela for cash, and on the basis that the maximum
dilution to existing New Mvela shareholders will be within accepted
norms of between 2% to 4% dilution;
* it is proposed that the initial trustees of the trust will be Xolela
Mangcu (Executive Director of the Steve Biko Foundation), Faith
Khanyile-Nkosi (Director of Women`s Development Businesses Investment
Holdings), Brigalia Bam (the Chairperson of the Independent Electoral
Commission), David Moshapalo (proposed non-executive director of New
Mvela) and certain of the executive directors of New Mvela (`the
Trustees`). The Trustees` responsibilities will include overseeing
the formation, operation and administration of the Trust, identifying
HDSA groups who will be entitled to benefit from the Trust, and
ensuring that the economic benefits of the Trust are transferred to
the identified HDSA Groups on an ongoing basis as they become due;
* Mvela Holdings will retain the right to vote the BEE shares for a
period of five years from the date on which the BEE shares are issued,
but Mvela Holdings will not derive any economic or financial benefit
from the BEE shares;
* this initiative should increase the BEE ownership of New Mvela to a
level of approximately 70%.
While it is envisaged that the inclusion of additional broad-based HDSA
shareholders in New Mvela will contribute towards the upliftment of
previously disadvantaged individuals who were excluded from the mainstream
economy in South Africa, New Mvela will also derive certain commercial
benefits from the increased HDSA participation. In particular, New Mvela is
likely to be exposed to a greater number of broad-based BEE transactions,
and upon and in the event that the HDSA shareholding in New Mvela is
diluted as a result of the growth in New Mvela, there will be a lesser risk
that the HDSA shareholding will be diluted below 50.1%.
Further details of the proposed HDSA Trust Investment will be announced in
due course.
9. Opinions and recommendations
Rand Merchant Bank, a division of FirstRand Bank Limited, the independent
financial adviser to Rebserve, has considered the terms and conditions of
the Merger and is of the opinion that they are fair and reasonable to the
shareholders of Rebserve and has advised the board of directors of Rebserve
accordingly.
The board of directors of Rebserve is of the opinion that the Merger is
fair and reasonable to Rebserve shareholders and recommends that Rebserve
shareholders vote in favour of the ordinary and special resolutions
necessary to approve the Merger to be proposed at the General Meeting.
The directors of Rebserve have agreed not to vote their Rebserve shares at
the General Meeting.
10. Timetable and General Meeting of Rebserve shareholders
A circular, including the revised pre-listing statement of Rebserve, will
be posted to Rebserve shareholders on or about 30 July 2004. The General
Meeting of Rebserve shareholders will be held on 3 September 2004, at which
Rebserve shareholders will be requested to vote on the ordinary and special
resolutions necessary to implement the Merger.
11. Renewal of cautionary announcement
Rebserve shareholders are advised to continue to exercise caution when
dealing in Rebserve shares until a further announcement is made.
Sandton
29 July 2004
Financial adviser and transaction sponsor to Rebserve
UBS
Financial advisers to Mvela Holdings
JP Morgan
ABSA, Corporate Merchant Bank, Corporate Finance, ABSA Bank Limited, Reg.
No.1986/004794/06
Iklwa
Independent adviser to Rebserve
Rand Merchant Bank, Corporate Finance, A division of FirstRand Bank Limited,
Attorneys to Rebserve
Werksmans Incorporated, Registration number 1990/007215/21.
Attorneys to Mvela Holdings
Hofmeyr Herbstein & Gihwala Incorporated, Registration number 1997/001523/21.
Auditors and reporting accountants to Rebserve
Fisher Hoffman PKF (Jhb) Inc. (Registration number 1994/001166/21)
Chartered Accountants (SA) Registered Accountants and Auditors
Auditors and reporting accountants to Mvela Holdings
Charles Orbach & Company, Charted Accountants (SA) Registered Accountants and
Auditors
Sponsor to Rebserve
Deutsche Securities, Member of the Deutsche Bank Group,
Deutsche Securities (SA) Proprietary) Limited
Registration number 1995/011798/07
