| Tue 18 Jul 2006, 8:28 | | Mvela Group - Disposal and withdrawal of cautionar |
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MVG MVGP
MVG
Mvela Group - Disposal and withdrawal of cautionary announcement
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Ordinary share code: MVG & ISIN: ZAE000060737
Preference share code: MVGP & ISIN: ZAE000073540
("Mvela Group")
DISPOSAL OF MVELA GROUP"S 22,9% INTEREST IN MVELAPHANDA RESOURCES LIMITED AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement dated 30 June 2006, Mvela Group is
pleased to announce that it has concluded an agreement with Mvelaphanda
Holdings (Proprietary) Limited ("Mvela Holdings") to dispose of Mvela
Group"s 38 147 209 ordinary shares in Mvelaphanda Resources Limited ("Mvela
Resources") ("the sale shares"), representing 22.9% of the issued share
capital of Mvela Resources, to Mvela Holdings, for a cash consideration of
R1.183 billion, equivalent to R31 per sale share ("the disposal").
2. DETAILS OF THE DISPOSAL
2.1 Rationale
Mvela Group"s strategy is to grow shareholder value (as measured
primarily by intrinsic net asset value) through a combination of
quality investments and cash generative operations. This strategy
involves the acquisition of equity interests (comprising quality
investments and/or operating businesses) primarily in operating
companies.
Mvela Resources is a listed investment holding company which has
historically traded at a discount to its underlying net asset value.
This is as a result of, inter alia, the relatively illiquid nature of
the investments held by Mvela Resources, the restrictions imposed on
such investments, and the complex structuring of certain of these
investments. Furthermore, the volatility of the financial and share
price performance of Mvela Resources is not consistent with Mvela
Group"s investment strategy.
These factors have to date negatively impacted on the discount at
which Mvela Group"s ordinary shares have traded relative to Mvela
Group"s intrinsic net asset value, have restricted Mvela Group from
pursuing its own growth and expansionary investment strategy, and
might, depending on the future BEE requirements of Mvela Resources,
result in the diversion of Mvela Group"s capital away from other
investment opportunities in the future.
As a result of the abovementioned factors, the board of directors of
Mvela Group ("the board") has concluded that it is in the best
interests of Mvela Group to dispose of its interest in Mvela
Resources. Having considered alternative offers and strategies to
achieve such a disposal, the board further determined that the
disposal thereof to Mvela Holdings represents the transaction with the
lowest execution risk, given the restrictions on and consents required
to implement any such disposal.
The proceeds from the disposal will be used to pursue Mvela Group"s
strategy of investing in quality investments and cash generative
businesses. Should such opportunities not present themselves within a
reasonable period the board of Mvela Group will review the use of such
proceeds in the context of maintaining and enhancing shareholder
value.
2.2 Terms of the disposal
In terms of the disposal, Mvela Group will sell the sale shares to
Mvela Holdings with effect from 1 July 2006.
The purchase consideration payable by Mvela Holdings for the sale
shares is R1.183 billion, equivalent to R31 per sale share.
The purchase consideration, plus interest at the applicable overnight
call deposit rate calculated thereon from 21 July 2006 until the date
of payment, will be settled in cash upon fulfilment of the remaining
conditions referred to in 5 below. Payment of the purchase
consideration and the interest thereon has been guaranteed in full by
an irrevocable and unconditional guarantee and undertaking to pay,
received by Mvela Group from Absa Bank Limited on behalf of Mvela
Holdings.
The purchase consideration of R31 per sale share exceeds the 30 day
volume weighted average price (VWAP) of R30.94 at which Mvela
Resources shares traded on the JSE Limited up to 30 June 2006, being
the date on which Mvela Group received a written offer from Mvela
Holdings relating to the disposal.
2.3 Financial effects of the disposal
The table below sets out the pro forma financial effects of the
disposal 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 six months ended 31 December 2005, as well as Mvela Group"s
net asset value per ordinary share and net tangible asset value per
ordinary share at 31 December 2005. These pro forma financial effects
have been prepared for illustrative purposes only and, because of
their nature, may not give a true reflection of the actual financial
effects on Mvela Group. The directors of Mvela Group are responsible
for the preparation of the pro forma financial effects.
Before After % change
the the
disposal disposal
(cents) (cents)
Earnings per ordinary share 185.8 187.3 0.8
Headline earnings per 185.4 135.6 (26.9)
ordinary share
Fully diluted earnings per 163.7 165.1 0.9
ordinary share
Fully diluted headline 163.4 119.5 (26.9)
earnings per ordinary share
Net asset value per ordinary 847.3 848.6 0.2
share
Net tangible asset value per 695.0 696.3 0.2
ordinary share
Notes:
1. The figures in the column "Before the disposal" are extracted
from Mvela Group"s unaudited interim results for the six months
ended 31 December 2005 which were published on SENS on 7 March
2006.
2. The "After the disposal" column is calculated on the following
basis:
- The 22,9% interest in Mvela Resources was sold with effect
from 1 July 2005;
- The cash proceeds from the disposal were received on 1 July
2005;
- Interest was earned on the net cash proceeds received at an
after tax rate of 4.2% per annum for the period 1 July 2005
to 31 December 2005; and
- The profit on disposal of the sale shares (calculated based
on the carrying value of the Mvela Resources investment at
30 June 2005 and after deducting transaction costs and
capital gains tax) of R209 million has been adjusted in the
calculation of headline earnings per ordinary share and
fully diluted headline earnings per ordinary share.
3. RELATED PARTY TRANSACTION
Mvela Holdings is the purchaser of the sale shares. Mvela Holdings is also
a material shareholder in Mvela Group. Consequently, the disposal is
considered to be a "related party transaction" in terms of the Listing
Requirements of the JSE Limited. Accordingly-
- Mvela Holdings` votes will not be taken into account in determining
the results of the voting at the general meeting of Mvela Group
shareholders referred to in 6 below; and
- PKF Corporate Finance (Proprietary) Limited has been appointed to
advise the board on whether the terms and conditions of the disposal
are fair and reasonable to Mvela Group shareholders. Their report in
this regard will be included in the circular to Mvela Group
shareholders referred to in 6 below.
4. IRREVOCABLE UNDERTAKINGS TO SUPPORT THE DISPOSAL
Mvela Group has received irrevocable written undertakings from ordinary
shareholders of Mvela Group who on 13 July 2006 held approximately 124
million Mvela Group ordinary shares, representing approximately 60% of the
issued ordinary shares of Mvela Group (excluding Mvela Group ordinary
shares held by related parties and their associates, and other excluded
parties (collectively "the non-voting shareholders)), to vote in favour of
the disposal at the general meeting of Mvela Group shareholders referred to
in 6 below. In order to be passed, the relevant resolutions to be proposed
at such general meeting will require a simple majority, being 50.1% of the
votes of those shareholders present and entitled to vote thereat (i.e.
excluding the non-voting shareholders) to be cast in favour thereof.
5. CONDITIONS
The disposal has been approved by the boards of directors of Mvela Group
and Mvela Holdings but will remain subject only to the fulfilment of the
following resolutive conditions by 30 September 2006:
- the approval by the JSE Limited of a circular to be sent to Mvela
Group shareholders; and
- the approval by Mvela Group shareholders (excluding the non-voting
shareholders) of the disposal at a general meeting of Mvela Group
shareholders to be convened for that purpose.
6. CIRCULAR TO MVELA GROUP SHAREHOLDERS
A circular containing, inter alia, further details in relation to the
disposal and a notice of a general meeting of Mvela Group shareholders to
approve the disposal, which general meeting is expected to be held before
the end of August 2006, is being prepared and will be sent to Mvela Group
shareholders in due course.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement dated 30 June 2006 is hereby withdrawn.
Sandton
18 July 2006
Merchant bank and transaction sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Sponsor
Deutsche Securities SA (Pty) Limited
Reporting accountants
PKF (Jhb) Inc.
Independent advisor to Mvela Group
PKF Corporate Finance (Pty) Limited
Attorneys to Mvela Group
Bowman Gilfillan
Attorneys to Mvela Holdings
Hofmeyr Herbstein & Gihwala Inc.
Financier and financial advisor to Mvela Holdings
Absa Capital
Date: 18/07/2006 08:28:08 AM Produced by the JSE SENS Department
