30 Aug 2019

PN 1 MCG Offer and PN Scheme announcement

Phuthuma Nathi Investments (RF) Limited
(incorporated in the Republic of South Africa)
(Registration number: 2006/015187/06)
EESE Share Code: EXPN1

THE PROPOSED EXCHANGE BY SHAREHOLDERS OF PHUTHUMA NATHI INVESTMENTS (RF) LIMITED (“PN1”) AND SHAREHOLDERS OF PHUTHUMA NATHI INVESTMENTS 2 (RF) LIMITED (“PN2”) (COLLECTIVELY “PN”) OF UP TO 20% OF THEIR HOLDINGS IN PN FOR SHARES IN MULTICHOICE GROUP LIMITED (“MULTICHOICE” OR “MCG”) (“MCG OFFER”) AND PROPOSED ACQUISITION BY PN1 OF ALL THE SHARES IN PN2 BY WAY OF A SCHEME OF ARRANGEMENT (“SCHEME”)

1. Introduction and rationale

1. MCG Offer

On Monday, 21 January 2019, MultiChoice issued its pre-listing statement (“PLS”) in relation to its listing on the Johannesburg Stock Exchange (“JSE”) on 27 February 2019. In the PLS, MultiChoice announced its intention to make an offer to shareholders of PN1 and PN2 (“PN shareholders”) to exchange up to 20% of their shares in PN that are listed on the Equity Express Securities Exchange (“EESE”) for shares in MCG. The purpose of the MCG Offer is to provide PN shareholders with an opportunity to gain exposure to the rest of MCG’s assets while providing additional liquidity to PN shareholders through the JSE listed MultiChoice shares. This reinforces MCG’s commitment to broad, socio-economic transformation in South Africa by providing opportunities to historically disadvantaged groups and allowing PN shareholders to participate in potential future value creation.

2. Scheme

PN1 and PN2 currently hold a combined 25% shareholding in MultiChoice South Africa Holdings Proprietary Limited (“MCSA”). PN1 holds 16.7% of MCSA’s ordinary shares, while PN2 holds 8.3% of MCSA’s ordinary shares. The Scheme involves a simplification of the current PN structure whereby PN1 will acquire the entire issued share capital of PN2. PN2 will therefore become a wholly-owned subsidiary of PN1 and will be delisted from EESE. PN1 will continue to be listed on EESE. The combination of the PN entities will result in one listed entity with a single share price, simplifying the administrative burden leading to a reduction of ongoing costs of administration relative to the underlying asset base and allow MCSA to improve its direct B-BBEE ownership percentage.

The Scheme is separate to the MCG Offer and the MCG Offer is not conditional on the outcome of the Scheme.

PN1 shareholders are not required to take any action in relation to the Scheme.

2. Description of MultiChoice

Since launching the first pay-TV operation outside the United States in 1986, MultiChoice has grown into the leading video entertainment operator on the African continent. Today, MCG entertains over 15.1 million households in 50 countries across multiple platforms, including digital satellite and terrestrial television, as well as over-the-top video entertainment services.

3. Details of the transactions

3.1 MCG Offer

In terms of the Proposed Acquisition an exchange ratio of 0.97 MCG shares for every 1 PN share will be applied. The exchange ratio was based on a 90-day volume weighted average price for MCG on the JSE and Phuthuma Nathi 1 on EESE, taking into account that PN is trading cum-div.

This will result in MCG acquiring up to 9,000,000 ordinary shares in PN1 (“PN1 shares”) and up to 4,500,000 ordinary shares in PN2 (“PN2 shares”) and issuing up to 13,095,000 MCG ordinary shares in consideration to participating PN shareholders. This will constitute no more than 3% of the issued share capital of MCG prior to the implementation of the MCG Offer and will potentially increase MCG’s total stake in MCSA up to 80% from 75% currently. The costs of brokerage for an accepted offer will be borne by the PN shareholder. Including brokerage costs, a PN shareholder will receive 0.957 MCG shares for every 1 PN share.

Participation in the Proposed Acquisition is completely voluntary and PN shareholders are not obliged to participate in the Proposed Acquisition. As MCG’s shares are listed on the JSE, they can be sold to any investor, whereas PN shares can only be sold to qualifying black South African investors in terms of the PN entities’ Memoranda of Incorporation (“MOI’s”).

The MCG Offer will be available to all PN shareholders who hold more than 20 shares, and is expected to open on Wednesday, 25 September 2019 and close on Monday, 28 October 2019. The Proposed Acquisition will be effective from Tuesday, 29 October 2019, following the closing of the MCG Offer.

3.2 Scheme

In terms of the Scheme, an exchange ratio of 1 PN1 share for every 1 PN2 share held will be applied. This will result in PN1 issuing 22,500,000 ordinary shares in consideration to PN2 shareholders. This will constitute 50% of the issued share capital of PN1 prior to the implementation of the Scheme.

Shareholders who hold PN2 ordinary shares at close of business on Friday, 11 October 2019 will be eligible to vote on the Scheme resolution at the PN2 shareholders meeting to be held on Monday 21 October 2019 at 12h00 at MultiChoice City, 144 Bram Fischer Drive, Ferndale, Randburg, South Africa. If the Scheme resolution is passed by the requisite majority of PN2 shareholders at the PN2 shareholders’ meeting; and all other Scheme conditions precedent are fulfilled or waived, the expected operative time of the Scheme will be 08h00 on Tuesday, 5 November 2019.

4. Participation in the MCG Offer

4.1 Details on how to participate in the MCG Offer

If a PN Shareholder elects to decline or ignore the MCG Offer, there will be no further actions required.

PN Shareholders can accept the MCG Offer in one of the following ways;

Contact the Phuthuma Nathi call centre on 0860 116 226 during weekdays (excluding public holidays) from 07:00 to 18:00 during the MCG Offer Period commencing at 09:00 on Wednesday, 25 September 2019 until 14:00 on Monday, 28 October 2019.
OR

Use the online offer platform to indicate that you are accepting the MCG Offer and how many PN Shares you are tendering into the MCG Offer. To make use of this platform, PN shareholders are required to register for the service, at www.EESE.co.za. You will use your username and password to login to the platform. A user guide explaining how to use the online process will be available on the Phuthuma Nathi and MultiChoice Group websites. This platform will be available from 09:00 on Wednesday, 25 September 2019 until 14:00 on Monday, 28 October 2019.
OR

Complete the Acceptance and Transfer Form (pink) attached to the Offer Circular to accept the MCG Offer. The completed form must be submitted to be received before 14:00 on Monday, 28 October 2019 as no late deliveries will be accepted:
Singular System

PO Box 785261

Sandton

2146

The Phuthuma Nathi contact center is available to assist PN shareholders with matters relating to the MCG Offer on 086 011 6226.

5. Conditions precedent

5.1 MCG Offer

The Proposed Acquisition will be subject to the fulfilment or waiver of the following conditions by no later than 17h00 (South African time) on 25 October 2019, or such later date as MCG may determine in its sole discretion:

the PN1 shareholders having adopted by special resolution at a meeting of the PN1 shareholders the proposed amendments to the PN1 MOI, which amendments propose to, inter alia, amend the restriction on who may hold PN1 shares to allow MCG to acquire the PN1 shares;
the PN2 shareholders having adopted by special resolution at a meeting of the PN2 shareholders the proposed amendments to the PN2 MOI, which amendments propose to, inter alia, amend the restriction on who may hold PN2 shares to allow MCG to acquire the PN2 shares; and
application having been made and granted for the listing of the MCG consideration shares on the JSE.
5.2 Scheme

The Scheme must be approved by a special resolution, in accordance with section 115 of the Companies Act, at the PN2 shareholders’ meeting. In order to be approved, the Scheme resolution must be supported by at least 75% of voting rights exercised thereon. PN2 may in certain circumstances not proceed to implement the Scheme resolution, despite the fact that it will have been adopted at the PN2 shareholders’ meeting, without the approval of the court. Such approval, if required, is also a Scheme condition precedent. A brief overview of section 115(3) is contained in the Scheme circular.

A PN2 shareholder who is eligible to vote at the PN2 shareholders’ meeting is entitled to seek relief under section 164 of the Companies Act if that PN2 shareholder notified PN2 in advance in writing of its intention to oppose the Scheme resolution, was present at the PN2 shareholders’ meeting, voted against the Scheme resolution and thereafter complied with the procedural requirements of section 164 of the Companies Act, which includes sending a demand to the company as contemplated in section 164(5) of the Companies Act. An explanation of the PN2 shareholder appraisal rights is contained in the Scheme circular.

The implementation of the Scheme is subject to the fulfilment or waiver of various conditions on or before 17h00 on Thursday, 24 October 2019, (or such later date and/or time as may be agreed in writing between the PN entities) including but not limited to:

all regulatory approvals including Takeover Regulatory Panel approval, consents or waivers necessary in respect of the Scheme being obtained;
the Scheme resolution being proposed at the PN2 shareholders’ meeting and adopted by a majority representing not less than 75% of the votes exercised by Scheme shareholders present and entitled to vote;
the Scheme resolution not being opposed by 15% or more of the voting rights exercised on such resolution or, should the resolution be opposed by 15% or more of the voting rights exercised on it, no person who voted against the Scheme resolution requiring PN2 to seek the approval of the Court;
if the Scheme resolution is opposed by 15% or more of the voting rights exercised on such resolution, and a person who voted against the Scheme resolution requires PN2 to seek the approval of the Court and PN2 waives the aforementioned Scheme condition precedent, PN2 not electing to treat the Scheme resolution as a nullity. This condition may be waived by PN2 on condition that the Court approves the Scheme resolution;
no leave being granted by the Court, to any person who voted against the Scheme resolution and who applied to the Court for a review of the Scheme. This condition may be waived by PN2 on condition that the Court approves the Scheme;
within the period prescribed, PN2 shareholders which in aggregate represent more than 3% of the PN2 Shares as at the Last Practicable Date have not exercised their appraisal rights under section 164 of the Companies Act;
PN1 having adopted by special resolution a new memorandum of incorporation in a form and substance satisfactory to PN2;
PN1 Shareholders approving by special resolution the entry into and due performance by PN1 of its obligations under the Scheme, and PN2 having received a certified copy of such resolution, or relevant extracts from the minutes of the meeting at which such resolution was passed; and
the PN1 Board approving or ratifying in writing the Scheme and the transactions contemplated pursuant thereto.
An announcement will be released on EESE News as soon as possible after the fulfilment, waiver or non-fulfilment, as the case may be, of the Scheme conditions precedent.

6. Directors’ responsibility statement

The board of directors of PN1, individually and collectively accepts full responsibility for the

accuracy of the information contained in this announcement to the extent that it relates solely to PN1. In addition, the board of directors of PN1 certifies that to the best of its knowledge and belief, the information contained in this announcement solely pertaining to PN1 is true and, where appropriate, does not omit anything that is likely to affect the importance of the information contained herein solely pertaining to PN1, and that all reasonable enquiries to ascertain such information has been made.

7. Timeline and key dates

7.1 MCG Offer

Activity 2019
Announcement of proposed transaction on EESE (by PN1 and PN2) and JSE (by MCG) Friday, 30 August
Finalise posting of Prospectus and Offer circular and separate announcements by MCG, PN1 and PN2 regarding the Prospectus and Offer circular Friday, 20 September
Opening of MCG Offer Wednesday, 25 September

Activity 2019
PN1 and PN2 separate shareholders’ meeting to vote on amendments to the MOIs Monday, 21 October
Closing of MCG Offer Monday, 28 October
Listing of additional MCG shares on the JSE and implementation of the MCG Offer Tuesday, 29 October
The key dates pertaining to the MCG Offer are outlined in the table below.

7.2 Scheme

The key dates pertaining to the Scheme are outlined in the table below.

Activity 2019
Last day to trade and record date to be eligible to vote at the PN2 shareholders’ meeting, being the Voting Record Date Friday, 11 October
PN2 shareholders’ meeting to be held at 12h00 at MultiChoice City, 144 Bram Fischer Drive, Ferndale, Randburg, South Africa Monday,21 October
Company to send notice of the passing of the Scheme Resolution, in terms of section 164(4) of the Companies Act Tuesday, 22 October
Expected Scheme LDT, being the last day to trade PN2 shares on EESE in order to be recorded in the Register on the Scheme Consideration Record Date to receive the Scheme Consideration Friday, 1 November
Expected Scheme Consideration Record Date, being the date on which Scheme Participants must be recorded in the Register to receive the Scheme Consideration, by close of trade Friday, 1 November
Expected Operative Time of the Scheme at 08h00 on Tuesday, 5 November
8. Further announcements

The final number of PN shares acquired and MCG shares to be issued in consideration of the acquisition of the PN shares will be announced following the closing of the MCG Offer.

Randburg

30 August 2019

Financial Adviser and JSE Sponsor to MCG

Rand Merchant Bank (A division of FirstRand Bank Limited)

Legal and Tax Adviser to MCG and PN

Webber Wentzel

Independent Reporting Accountant and Auditors

PricewaterhouseCoopers

Financial Adviser to PN for the purposes of the MCG Offer and Independent Expert to PN2 for the purposes of the Scheme

Tamela Holdings Proprietary Limited

Transfer Secretaries

Singular Systems

For more detailed information, please go to our FAQs page.

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