In an announcement published on SENS on 15 December 2008 and in the press on 17 December 2008, MTN shareholders were advised that MTN and the Government Employees Pension Fund ("GEPF"), represented by the Public Investment Corporation Ltd ("PIC"), had entered into a memorandum of understanding recording the salient terms and conditions for the proposed acquisition of Newshelf 664 (Pty) Ltd ("Newshelf") by MTN from the Alpine Trust ("AT"), the acquisition and settlement of the funding obligations outstanding to PIC in Newshelf from PIC and the specific repurchase by MTN of the MTN ordinary shares ("MTN shares") held by Newshelf ("Newshelf acquisition").
MTN shareholders are advised that a due diligence investigation in respect of Newshelf has been finalised on behalf of MTN, the approval of the South African competition authorities for the acquisition of Newshelf has been secured and all agreements necessary to implement the proposed Newshelf Acquisition ("transaction agreements") were entered into on Thursday, 26 March 2009 and that, subject to the fulfilment of the conditions precedent set out below ("conditions precedent"), the Newshelf acquisition will be implemented.
Overview of the Newshelf acquisition
Through a series of inter-conditional transactions, MTN will acquire Newshelf from AT and then acquire and settle the funding obligations outstanding to PIC in Newshelf in consideration for the issue of 213.9 million new MTN Shares and R787 million (plus interest) in cash. MTN will then repurchase the MTN shares owned by Newshelf ("Newshelf's MTN shares"). The value of the MTN Shares to be issued and repurchased (as described above) has been calculated using the same MTN share price. The net effect of the Newshelf acquisition on the shareholding of MTN would be to reduce the total number of MTN shares in issue by approximately 1.6%.
Detailed transaction steps
The following transactions are inter-conditional so that none of them will be implemented unless the others become unconditional and are implemented.
- Acquisition and redemption of preference shares MTN will acquire all of the preference shares in Newshelf's share capital, namely the one redeemable B participating preference share with a par value of R1.00 ("B Participating Pref") and the 214 300 cumulative redeemable B preference shares with a par value of R0.01 each ("B Redeemable Prefs", the B Participating Pref and the B Redeemable Prefs are hereinafter collectively referred to as the "B Prefs"), from PIC through (i) the specific issue of approximately 111.5 million new MTN Shares ("B Prefs Consideration Shares") to PIC at an issue price of R91.67 per MTN Share (a discount of 0.3% to the 30-day VWAP on the date that the issue price was determined) and (ii) a cash payment of R387 million (equal to the dividend per MTN share declared by MTN on 11 March 2009 multiplied by the total number of MTN shares to be issued to PIC pursuant to the Newshelf Acquisition) plus interest. The R387 million cash payment will accrue interest at a call deposit rate from the date of payment by MTN of the dividend to the Closing Date (as defined in paragraph 4.3 below). The amount payable for the B Prefs may also be increased by up to R65 million (payable in cash) for assumed liabilities in Newshelf which do not materialise following the implementation of the Newshelf acquisition. The B Prefs consideration shares equate to approximately 6.1% of MTN's issued ordinary share capital on a fully diluted basis. Following MTN's acquisition of the B Prefs, Newshelf will redeem the B Prefs on loan account as contemplated in the B Prefs Redemption agreement.
- Acquisition of Newshelf issued share capital AT has granted a call option to PIC ("Newshelf Equity option"), in terms of which PIC (or any person to whom PIC has transferred the option) is entitled to acquire the entire issued ordinary share capital of Newshelf ("Newshelf Equity") from AT for R1.00. Immediately after the B Prefs have been redeemed, MTN will acquire the Newshelf Equity option from PIC for R1.00. After MTN has acquired the Newshelf Equity option, that option will be exercised by MTN and MTN will, pursuant to such exercise, acquire the Newshelf Equity from AT for an amount equal to Newshelf's residual net asset value of R1.00. Newshelf will then become a wholly-owned subsidiary of MTN and the articles of Newshelf will be amended to comply with Schedule 10 of the JSE Listings Requirements.
- Settlement of the Bridge Facility Immediately after MTN has acquired the Newshelf Equity, it will settle, on behalf of Newshelf, the bridge facility ("Bridge Facility") extended to Newshelf by GEPF, partially through a cash payment of R400 million (plus interest) and partially through the specific issue of approximately 102.4 million new MTN shares ("bridge facility consideration shares") to PIC. The bridge facility consideration shares will be issued at a price equal to: - the balance outstanding on the Bridge Facility on the day immediately prior to the date on which the last of the conditions precedent are fulfilled or, where permitted, waived ("Closing Date"), less the R400 million cash payment and any interest payable thereon, - divided by the number of bridge facility consideration shares. The bridge facility consideration shares equate to approximately 5.6% of MTN's issued ordinary share capital on a fully diluted basis. The R400 million cash payment will accrue interest at the Johannesburg Interbank Acceptance Rate ("JIBAR") from 21 March 2009 to the closing date.
- Specific repurchase of Newshelf's MTN Shares Newshelf's MTN Shares currently constitute approximately 13.0% of MTN's entire issued ordinary share capital. After the proposed acquisition by MTN of the Newshelf Equity, MTN will, through its subsidiaries, hold more than 10% of its total issued ordinary share capital as treasury shares. As a result, MTN's subsidiaries will in terms of the relevant provisions of the Companies Act, 1973 (Act 61 of 1973), as amended ("Companies Act") have no capacity to purchase further MTN shares to hold as treasury shares. To create capacity for such further purchases, the Board has resolved that MTN should, subject to the requirements of the Companies Act and the JSE Listings Requirements, repurchase Newshelf's MTN shares ("specific repurchase") at the closing price of an MTN Share on the business day immediately prior to the closing date ("transaction price"), which shares will then be cancelled and delisted from the JSE and restored to the status of authorised but unissued shares, thereby resulting in MTN's subsidiaries holding no treasury shares and reducing the total number of MTN shares in issue by approximately 243.5 million shares. The net effect on shareholding of the Newshelf acquisition will therefore be a reduction of approximately 1.6% in the total number of MTN shares in issue. The specific repurchase will be effected by using a combination of MTN's share capital and premium (in an aggregate amount of R3 381 966 783) and retained earnings as contemplated in the MTN share repurchase agreement concluded between MTN and Newshelf. The specific repurchase will be effected as an intra-group transaction and as such will not require any external funding. Accordingly, the specific repurchase will have no financial effect on MTN, other than in respect of transaction costs that are normally incurred in transactions of this nature.
Conditions precedent
The implementation of the proposed Newshelf acquisition is subject to the fulfilment or (where permitted) waiver of the following conditions precedent:
- amending the B Participating Pref's terms in the articles of Newshelf to the extent required for the implementation of the Newshelf acquisition;
- PIC not being in unremedied breach of any of the warranties, representations or the interim undertakings given by PIC to MTN in terms of the transaction agreements;
- obtaining MTN shareholder approval for all the inter-conditional resolutions required to effect the Newshelf acquisition (as set out in the notice of general meeting referred to below) and the registration of those resolutions, if required, by the Registrar of Companies;
- Webber Wentzel attorneys certifying to MTN and PIC that the special resolutions referred to above have been registered by the Registrar of Companies;
- the shareholders of Newshelf passing a special resolution in terms of section 228 of the Companies Act approving, inter alia, the sale of Newshelf's MTN Shares to MTN, and such special resolution being registered by the Registrar of Companies; and
- the JSE consenting to the admission to listing of the MTN shares to be issued to PIC as set out above.
Circular and general meeting
The circular to MTN shareholders pertaining to the proposed Newshelf Acquisition will be posted to MTN shareholders on or about 6 April 2009. A notice convening a general meeting of MTN shareholders to be held in the Auditorium, Phase II, 216 - 14th Avenue, Fairland, Roodepoort, 2195, South Africa at 14.00 on Tuesday, 5 May 2009, will form part of the circular. The circular will also be available on MTN's website at www.mtn.com.
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