SENS Note - 15 December 2008
MTN - proposed acquisition & BEE transaction
 
MTN currently obtains its equity ownership points in terms of the codes from the 13.1% shareholding which Alpine trust through Newshelf 664 (Pty) Ltd holds in MTN. The Newshelf structure was established independently of MTN in 2002 prior to and independent of the promulgation of the codes. Alpine trust was designed to be unwound in December 2008 and the trustees intend to unwind Alpine trust on or as soon as possible after 22 December 2008 which may lead to a significant reduction in the number of MTN ordinary shares held by or for the benefit of historically disadvantaged South Africans.

MTN and Public Investment corporation Ltd have entered into a memorandum of understanding subject to the fulfilment or waiver of the conditions precedent referred to in paragraph 0 below recording the salient terms and conditions of a transaction.The purpose of the Newshelf acquisition is to facilitate the orderly unwind of the Newshelf structure and minimise the dilutionary impact of the BEE transaction on earnings going forward. As part of the BEE transaction MTN intends to perpetuate the success of the Newshelf structure by providing an opportunity for Alpine trust beneficiaries to continue their long term relationship with MTN by reinvesting a material portion of their benefits from the Newshelf structure in the BEE transaction.This BEE transaction will comprise between 5% and 6% of MTN's issued ordinary share capital. MTN's South African operations comprise 29.5% of the value of MTN.

Newshelf Acquisition
  • Steps to be undertaken prior to the Newshelf Acquisition: In terms of an agreement reached between PIC, Newshelf and Alpine trust, Newshelf will acquire sufficient MTN ordinary shares on loan account from PIC to enable Newshelf to declare these same MTN Shares as a dividend in specie to Alpine trust.The number of MTN shares will be based on the net asset value of Newshelf on the date of declaration determined with reference to the 20 trading day volume weighted average price of an MTN share on or about 19 December 2008. AT beneficiaries will receive these MTN shares The dividend in specie to Alpine trust beneficiaries will be declared on or about 22 December 2008 and distributed early in 2009. After declaration of the dividend PIC will be granted call option rights to acquire the entire issued ordinary share capital of Newshelf from Alpine trust for its residual nominal value. The exercise of the call option rights acquired by PIC is subject to the approval of the relevant South African competition authorities. MTN has agreed in principle to acquire the entire issued ordinary share capital of Newshelf or the call option rights from PIC for its residual nominal value. The Newshelf acquisition will be effected by way of a specific issue of shares in acquisition or settlement of the liabilities in Newshelf and the specific repurchase of the 243.5 million MTN shares owned by Newshelf and will be concluded in 2009 subject to the fulfilment or waiver of the conditions precedent referred to in paragraph 5 below. By acquiring the entire issued ordinary share capital of Newshelf, MTN will indirectly acquire Newshelf's MTN shares owned by Newshelf and indirectly assume all of the funding obligations outstanding in Newshelf. MTN will effectively acquire Newshelf at a discount to the market value of Newshelf's MTN shares of approximately 10% based on the reference price. MTN intends to apply a significant portion of this discount to offer future participants in the BEE transaction an incentive to invest in that transaction. As part of the Newshelf acquisition MTN will facilitate the acquisition and/or settlement of all outstanding funding obligations in Newshelf to PIC (estimated to be R21.8 billion on 27 February 2009 based on the reference price) through the payment of R400 million in cash and the issue to PIC of 213.8 million new MTN shares for the balance of the obligations to PIC, equivalent to approximately 11.5% of MTN's issued share capital. The number of new MTN shares to be issued to PIC will be determined with reference to the 20 trading day VWAP of an MTN share five business days prior to the posting of the circular to MTN shareholders for the approval of the Newshelf acquisition and related transactions. On a purely indicative basis assuming a BEE VWAP of R110, the number of shares to be issued will be 213.3 million and at a BEE VWAP of R70, the number of shares to be issued will be 216.5 million and repurchase and cancel Newshelf's 243.5 million MTN shares. Post the implementation of the Newshelf acquisition the total number of MTN shares in issue will reduce by approximately 1.6%.

Conditions precedent
The implementation of the Newshelf acquisition will be subject to inter alia, the following conditions:
  • obtaining MTN shareholder approval for the Newshelf acquisition effected by way of the specific issue of shares in acquisition or settlement of the liabilities in Newshelf and the specific repurchase of Newshelf's MTN shares. For the purposes of this approval both Newshelf and PIC will be precluded from voting as they are related parties.
  • the conclusion of a due diligence investigation by MTN in respect of Newshelf to MTN`s satisfaction
  • the conclusion and implementation of the requisite legal agreements
  • obtaining the requisite JSE approvals and other regulatory approvals to the extent required
  • obtaining the approval of the South African competition authorities for the Newshelf acquisition.

Fairness opinion
The Newshelf acquisition will constitute a related party transaction
An independent professional expert will be appointed by MTN to opine on whether the terms and conditions of the Newshelf acquisition are fair to MTN shareholders.

Further announcement and documentation
A further announcement will be made in late January 2009 that will provide the final terms of the Newshelf acquisition based on actual MTN share prices. It is envisaged that a circular to MTN shareholders will be posted during February 2009.
 
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