SENS Note - 15 July 2010
MTN proposed BBE transaction
 
Since its incorporation in South Africa in 1994, MTN has been at the forefront of empowerment and remains fully committed to the principles of broad-based black economic empowerment ("BEE"). MTN also embraces the principles of BEE enshrined in the codes of good practice on Broad-Based Black Economic Empowerment ("codes"). The proposed MTN BEE transaction ("MTN BEE transaction") is designed to provide long-term, sustainable benefits to participants in the MTN BEE transaction ("BEE participants") and is envisaged to run for a duration of six years from the date of implementation of the MTN BEE transaction ("empowerment period"). The MTN BEE transaction is anticipated to equate to 4% of MTN's issued ordinary share capital on a fully diluted basis, but may be scaled down depending on the level of equity raised from the BEE participants. MTN's South African operations comprise 22.9% of the value of MTN (based on MTN's South African operations relative contribution to MTN's earnings before interest, tax, depreciation and amortisation ("EBITDA") for the year ended 31 December 2009). Therefore, on an illustrative basis, using EBITDA contribution as a simple proxy for value, a BEE transaction in respect of 4% of MTN's issued ordinary share capital will effectively equate to 29.1% of MTN's South African operations (after adjusting for 40% mandated investments in MTN in terms of the codes and assuming 100% flow-through black ownership in the MTN BEE Transaction). When combined with previous BEE initiatives the effective indirect ownership in MTN's South African operations would be beyond 30%. In addition to the MTN BEE transaction, MTN will also issue approximately 0.1% of its issued ordinary share capital on a fully diluted basis to an employee share ownership plan ("ESOP"), for the benefit of eligible MTN employees. Management and directors of MTN will not participate in this scheme.

Rationale for and principles of the MTN BEE transaction BEE is integral to the ethos of MTN and MTN believes that broad-based BEE participation is important to its future success as a group. MTN has been guided primarily by the following principles in structuring the MTN BEE transaction:
  • the vesting of full voting and economic rights to the BEE participants from inception;
  • achieving a sustainable and robust BEE transaction at a realistic economic cost (inclusive of any dilution) to MTN's shareholders;
  • broadening MTN's South African BEE ownership by structuring the MTN BEE transaction through an offer to the black public. This initiative will augment the many initiatives to date including most recently, the Asonge scheme facilitated by the National Empowerment Fund in 2007; and
  • acting as far as possible within the letter and spirit of the codes and their requirements for the empowerment of South African businesses.

Financial effects of the MTN BEE transaction and ESOP
The financial effects have been calculated using the transaction share price and are based on the calculation date.
Before and after:
  • Net asset value per share: 3 797.9 & 3 763.7
  • Tangible net asset value per share: 1 770.8 & 1 751.3
  • Basic earnings per share: 791.4 & 649.1
  • Diluted earnings per share: 781.5 & 633.0
  • Headline earnings per share: 803.2 & 660.9
  • Adjusted headline earnings per share: 754.3 & 612.3
  • Weighted average number of shares in issue ( million): 1 851.3 & 1 864.7
  • Weighted average diluted number of shares in issue (million): 1 860.3 & 1 894.5
  • Number of shares in issue (million): 1 840.5 & 1 854.0

Conditions precedent
The implementation of the proposed MTN BEE transaction is subject to the fulfilment or (where permitted) waiver of the following conditions precedent:
  • subscriptions in terms of the BIC public offer are at least R424.9 million;
  • the opening of bank accounts into and out of which the initial MTN BEE transaction proceeds will flow on and immediately prior to the closing date;
  • BIC opening a securities account with a central securities depository participant acceptable to the funders, in which the dematerialised MTN shares held by BIC will be recorded;
  • signing of the transaction agreements on behalf of each of the parties thereto;
  • * fulfilment or waiver of all the suspensive conditions to the transaction agreements, as provided for in the relevant transaction agreements;
  • * MTN being satisfied that the conditions precedent to subscriptions under the preference share funding agreements have been met or waived (other than any condition precedent relating to mechanical implementation steps which are required to be effected prior to implementation of the preference share funding agreements in accordance with the agreement entitled "implementation agreement" entered into between, inter alia, MTN, BIC, BFC, and the funders, which agreement provides, inter alia, for the implementation before and on the closing date of the implementation agreement and certain of the other transaction agreements ("implementation agreement"));
  • BIC having adopted a new memorandum and articles of association in a form and substance satisfactory to MTN;
  • * BIC approving by special resolution the entry into and due performance by it of its obligations under the relevant transaction agreements;
  • * the board of directors of each of BIC and BFC approving the signature and implementation of the transaction agreements to which they are a party;
  • the requisite majority of MTN shareholders approving all the resolutions required to effect the MTN BEE transaction and the ESOP;
  • * the special resolutions having been duly registered by the registrar of companies;
  • * the MTN board having passed a resolution in which it furnishes the confirmations contemplated in section 38(2A)(a) of the Companies Act;
  • * the MTN board obtaining a fairness opinion from an independent expert;
  • the JSE having consented to the admission to listing of the MTN tranche 1 subscription shares and the MTN tranche 2 subscription shares;
  • * BIC not being in unremedied breach of any of the warranties or undertakings given by BIC to MTN in terms of the transaction agreements or its undertakings in the implementation agreement; and
  • * if the new companies act comes into operation or will come into operation as contemplated in section 225 of the new companies act at any time prior to the closing date, MTN not having delivered a notice recording that it is of the view that the BIC public offer is or may be adversely affected by the coming into operation of the new companies act.

Circular and general meeting
The circular to MTN shareholders pertaining to the MTN BEE transaction will be posted to MTN shareholders on or about Wednesday, 28 July 2010. A notice convening a general meeting of MTN shareholders ("notice") to be held in the Auditorium, Phase II, 216, 14th Avenue, Fairland, Roodepoort, 2195, South Africa at 14:00 on Friday, 20 August 2010, will form part of the circular. The resolutions required to be approved by MTN shareholders at the general meeting will be set out in the notice. Dates and times mentioned in this announcement are subject to change, and will be released on SENS and published in the South African press. The circular will also be available on MTN's website (www.mtn.com).
 
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