Acquisition by BEE

RNS Number:1210C
Brait S.A.
19 August 2004

Brait S.A.
Societe Anonyme
(Incorporated in Luxembourg)
(RC Luxembourg B-13861)
JSE share code: BAT   ISIN: LU0011857645
("Brait")


ACQUISITION BY BLACK ECONOMIC EMPOWERMENT SHAREHOLDERS OF 26% OF BRAIT SOUTH
AFRICA LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT



INTRODUCTION

Brait is an investment group focusing on private equity, specialised funds
management and corporate finance services. The group has a primary listing in
Luxembourg and secondary listings in London and Johannesburg.

Brait has substantial operations in South Africa, which are conducted through
its wholly- owned subsidiary Brait South Africa Limited ("Brait South Africa").

Since the mid 1990's Brait has actively facilitated Black Economic Empowerment
("BEE") through its private equity transactions; financing and corporate finance
mandates on a number of BEE transactions, enterprise development, and internally
through its employment equity strategy.

Brait is pleased to be able to continue its transformation initiatives and
announce the details of the sale of a 26% stake in Brait South Africa to a BEE
grouping through a special purpose company ("Brait's BEE Partner") ("the
transaction").

This transaction offers new opportunities for Brait South Africa by unifying its
interests with a new generation of South African entrepreneurs and dealmakers.
This partnership will significantly enhance the capacity of Brait South Africa
to grow in a multi-faceted and diverse economy.

The transaction also promotes sustainable and meaningful black participation and
management in an important sector of the South African economy magnified by
Brait South Africa managing over R4 billion of private equity capital and its
resultant influence in the South African economy.

TRANSACTION

Background

Brait has concluded an agreement ("sale agreement") with Brait's BEE Partner in
terms of which Brait has sold to Brait's BEE Partner 26% of its equity and loan
claims in Brait South Africa. The members of Brait's BEE Partner comprise the
following entities:

* Norho Financial Services (Proprietary) Limited ("Norho");

* Africa Vanguard Capital (Proprietary) Limited ("Africa Vanguard");

* Representative Investments (Proprietary) Limited ("Representative"); and

* Orono Trading 25 (Proprietary) Limited, which intends to change its name to
Usante Capital (Proprietary) Limited ("Usante").

Brait and Brait's BEE Partner have been in discussion with each other for over a
year and have a history of business co-operation which pre-dates the discussions
concerning this transaction. There are already several concurrent opportunities
that Brait South Africa is engaged in with its new equity partners. This has
been an important driver for generating the mutual respect and enthusiasm for
the transaction proposed herein.

In addition to the sale agreement, a shareholders agreement has been concluded
between Brait South Africa and Brait's BEE Partner. A similar agreement has been
effected between the members of Brait's BEE Partner.

Rationale

The primary drivers of the transaction for Brait South Africa are:

* A new BEE equity partner - Brait South Africa has a proud record of BEE
development through the transactions it has facilitated and promoted and in
which its private equity activities have invested capital. The next step in this
track record is the transfer of 26% of the ownership of Brait South Africa to a
BEE Partner which shares Brait South Africa's entrepreneurial and business
values.

* Building new generation South African companies - This transaction enhances
Brait's position to accelerate its facilitation of corporate transactions which
bring together a focus on performance and transformation and empowerment.

* Value adding opportunity - This transaction brings to Brait South Africa an
exciting value adding partnership offering diverse opportunities. The broadening
economic base in South Africa, which has been precipitated by the political and
social changes in the country, has generated new private equity deal flow,
corporate finance transactions and fund management mandates. Access to these
opportunities requires alliances, skills and networks, which are strongly
resident in the members of Brait's BEE Partner. Brait South Africa intends to
draw on the skill and talent of Brait's BEE Partner members, so that all parties
and stakeholders can achieve their maximum potential for the partnership and
this transaction.

* Financial Sector Charter compliance - The nature and ownership of the newly
structured Brait South Africa immediately exceeds the long-term direct black
ownership goals set out in the Financial Sector Charter. As importantly, the
owners of Brait's BEE Partner are all South African black citizens, men and
women who have contributed substantial capital relative to their means to the
transaction. The owners of Brait's BEE Partner are made up of a broad base of
previously disadvantaged individuals and a new generation of black business
leaders who have the capacity to make a real contribution to Brait South Africa;
and

* Equitable transformation - Brait is firmly committed to facilitating
transactions, which generate transformation in the South African economy, and
result in sustained added value. Brait's ability to achieve this end is enhanced
by the transaction which will therefore also benefit a broad base of South
African citizens.

Purchase Consideration

The purchase consideration payable by Brait's BEE Partner to acquire its 26%
equity interest and loan claims in Brait South Africa amounts to R123.8 million
at the announcement date, inclusive of interest thereon from the effective date,
31 January 2004.

At 17 August 2004, the purchase price represents a 25.6% premium to the tangible
net asset value of Brait South Africa and a 1,4% relative premium to the
attributable market value of Brait South Africa based on the underlying Brait
market price.

The purchase consideration will be paid in cash and is fully funded by the
direct capital contributions of Brait's BEE Partner and the financiers to the
transaction.

Brait's BEE Partner and the financiers have performed a due diligence of Brait
South Africa to their satisfaction. Brait South Africa has similarly performed a
limited due diligence on its new BEE Partner members to its satisfaction.

Financing Arrangements

The financiers have agreed terms for a six year funding agreement with Brait's
BEE Partner. The lead financier to the transaction is Old Mutual Life Assurance
Company (South Africa) Limited ("Old Mutual"). Negotiations with additional
financiers are ongoing, but have not reached conclusion. Brait has agreed to
provide bridge finance on the same terms and conditions as are applicable to Old
Mutual, with the intention of laying off its investment in due course.

The six-year business and financial plan for Brait South Africa indicates that
it will generate sufficient cash distributions to its shareowners on their
investments to enable Brait's BEE Partner to substantially settle the
outstanding obligation to the financiers at the end of the six year financing
term.

In the absence of other liquidity alternatives being developed, Brait's BEE
Partner has been granted put options commensurate with the funding agreement, at
net asset value. Additionally Brait has a call option in certain circumstances.

Key outcomes of the financing structure are as follows:

* The purchase consideration is settled outright without any deferral thereby
allowing full immediate transfer of economic ownership to Brait's BEE Partner;

* The financing is on an arm's length basis;

* The financing minimizes the dilution for Brait South Africa shareowners; and

* The funding term and the business plan is linked so as to ensure that the
financiers can be settled with minimal dilution of Brait's BEE Partner interest.



Structure of the transaction

Diagrams reflecting the simplified Brait group structure before the transaction,
the transaction structure and resultant simplified Brait group structure have
been set out in the announcement published in the press on 20 August 2004.



The new shareholding structure of Brait South Africa is as follows:

* Brait will retain 74% of the issued share capital and shareholders claims in
Brait South Africa;

* Brait's BEE Partner will acquire 26% of the issued share capital and
shareholders claims in Brait South Africa;

* The respective members of Brait's BEE Partner will hold the following
effective interests in Brait South Africa:

                                     Effective holding in Brait

                                            South Africa %

 Norho                                           7.25

 Africa Vanguard                                 7.25

 Representative                                  5.00

 Usante                                          6.50

 Total                                          26.00

Undertakings

Brait's BEE Partner and its members will actively participate in Brait South
Africa's activities and its management. Executives of Brait's BEE Partner have
committed to provide substantial time, contacts and skills to further the growth
of the business of Brait South Africa and in turn, Brait South Africa will apply
all its resources to develop its partners.

In terms of the agreement between Brait and Brait's BEE Partner:

* Brait's BEE Partner will have the right to appoint four of its executives to
serve as non-executive directors on the Brait South Africa board;

* There are currently eleven members on the Brait South Africa board. They will
now be joined by the following initial Brait BEE Partner board appointees:
Messrs Bheki Sibiya (who will also chair Brait South Africa), Mandla Ngcobo,
Sandile Zungu and Ms Kagiso Chikane. In addition, Mr Vivian Reddy has accepted
an invitation by Brait South Africa to join the board;

* All the directors appointed by Brait's BEE Partner have concluded restraint of
trade agreements with Brait South Africa while in office as a director, and for
a further two years after resignation; and

* Brait's BEE Partner will not be entitled to dispose of its interest in Brait
South Africa until the expiry date of a minimum lock-up period of six years.

Brait's BEE Partner has undertaken, inter alia to support Brait South Africa
regarding:

* the achievement of Brait South Africa's transformation initiatives, including
employment of staff, appointment of directors, as well as the appointment of
service providers and suppliers;

* identifying business opportunities for Brait South Africa and marketing Brait
South Africa to such prospects; and

* securing mandates for Brait South Africa to manage capital and to render
corporate finance services.

Brait's BEE Partner has committed to Brait South Africa that, for the duration
of its shareholding in Brait South Africa, the Brait BEE Partner will:

* qualify as a black company;

* ensure at least 50,1% of the individuals constituting its management and board
will be black people;

* ensure at least 50,01% of its ultimate beneficial and registered ownership
will be those people listed below and that such persons will remain ultimately
entitled to at least 50.01% of the profits, dividends and other gains from the
26% shareowners interest in Brait South Africa; and

* ensure the ultimate beneficial and registered owners of Brait's BEE Partner
members which are trusts or other entities established for social purposes, will
remain solely dedicated to such purposes.

Brait South Africa and Brait's BEE Partner will identify black people for full
time appointments as employees, with two immediate appointments at executive
committee level and, eventually as executive directors of Brait South Africa.

BRAIT'S BEE PARTNER MEMBERS

The initial Brait BEE Partner board appointees to Brait South Africa are:

* Bheki Sibiya - (Chairman designate of Brait South Africa) - B.Admin (UZ), MBA
(Western Michigan University). Chief Executive of Business Unity South Africa,
previously President of the Black Management Forum ("BMF"), serves as a board
member of the Institute People Management ("IPM") and the SA Board Personnel
Practice. Mr Sibiya has agreed to commit 25% of his time to his activities at
Brait which include his active Chairmanship of Brait South Africa, supporting
its transformational activities and serving on portfolio company boards with a
view to leveraging Brait's position to enhance business and transformational
goals.

* Sandile Zungu - BSc (Mechanical Engineering) (UCT), MBA (UCT), PGL (Harvard).
Chairman of Denel and Africa Vanguard Holdings, which is the holding company of
his business interests. Director of Sarhwu Investment Holdings, Clover Holdings,
Edcon, Viamax Fleet Solutions, Trade and Investment Kwa-Zulu Natal (TIK) and New
Africa Capital (which houses METLIFE). Advisory Board member of the UCT Graduate
School of Business and a member of the World Economic Forum in his capacity as
Global Leader for Tomorrow.

* Mandla Ngcobo - LL.B Natal University (Durban), LLM in Company Law (Wits).
Admitted attorney of the High Court. Group Legal Executive at Telkom. Member of
the Telkom Pension Fund, Audit & Risk and Operating Committees.

* Kagiso Chikane - B.A. (Unin), UED (Unin), B.Ed (Wits), B.A.Hons (Unisa), M.A.
(University of Wisconsin-Madison, USA). Coordinator for Human Language
Technologies at the Council for Scientific and Industrial Research (CSIR).
Former lecturer at Visa University, Boston University (USA). Visiting scholar at
Massachusetts Institute of Technology (MIT), USA. Serves as non-executive
director on various boards.

* Vivian Reddy - Chairman of Edison Corporation. Entrepreneur and community
philanthropist. Serves on many community boards and the Orphans of Aids Trust.

The underlying membership of Brait's BEE Partner is made up of the following
groups and people:

Norho

Norho is headed by Bheki Sibiya and includes several successful business men and
women, and entrepreneurs, namely, Swazi Tshabalala, Bobby Malabie, Owen Maubane
and Moeketsi Setai.

Africa Vanguard

This group is lead by Sandile Zungu and includes Sindi Mabaso and Geoffrey Nzau
who are all successful entrepreneurs and business people. The group also
consists of community investors in The Mfundo Vanguard Social Development Trust,
The Africa Vanguard Rural Development Trust, the Africa Vanguard Education Trust
and The National Association of People Living with HIV/AIDS.

Representative

Mandla Ngcobo represents these participants who include Professor Charles
Okeahalam and Sello Mahlangu. All are respected business leaders.

Usante

Vivian Reddy, Kagiso Chikane and Pinky Moabi are the lead investors in this
group who include a large block of professionals in industry, regional
government, as well as broader community beneficiaries. Emakhaya Investments
(Pty) Ltd is also an investor and represents some twenty female professionals.

PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION ON BRAIT

The pro forma financial effects of the transaction for Brait shareowners are
summarized in the table below.

The pro forma information has been disclosed in terms of the Listings
Requirements of the stock exchanges in Luxembourg, Johannesburg and London. It
is provided for illustrative purposes only and does not constitute any
representation of the future financial position of Brait.

It is important to note that in absolute terms, the transaction has a minimal
financial impact on Brait in the short term. This is reflected in the net asset
value changes and the quantum changes in earnings per share. The percentage
changes in the earnings per share information are significantly distorted by the
low base against which earnings are measured in the 2004 results. Accordingly
shareowners are advised to exercise caution in their analysis of the pro forma
results.

                                          Before(2)           After(3)        %
                                 US cents per share US cents per share   change
                                        31 Mar 2004        31 Mar 2004

Basic earnings per share
- continuing profit (before capital item
   and after taxation)(1)                      17.0               17.3      1.8
- headline earnings                             6.5               10.1     55.4
- attributable earnings                         2.0                5.6    180.0

Diluted earnings per share
                                                                                
- continuing profit (before capital item
   and after taxation)(1)                      16.2               16.5      1.9
- headline earnings                             6.2                9.6     54.8
- attributable earnings                         1.9                5.4    184.2
Net asset value per share                      99.2               99.9      0.7
Tangible net asset value per share             99.2               99.9      0.7

Notes:

(1) Attributable earnings per share from continuing operations (excluding
capital items) have been included in the earnings per share disclosure. This
compares the sustainable performance of Brait's operating activities during the
year against the Brait group's key earnings performance measurement targets.

(2) Extracted without modification from the audited annual financial statements
of Brait for the year ended 31 March 2004.

(3) Key assumptions applied in the pro forma results:

* A disposal consideration of R123.8 million as at the announcement date;

* For income statement purposes it has been assumed that the disposal
consideration was paid on 1 April 2003;

* A yield of 1.31% per annum in US dollars on the net proceeds realised by Brait
from the transaction as from 1 April 2003 to 31 March 2004;

* An average R/$ exchange rate of 7.15 for the year ended 31 March 2004 in
respect of Brait South Africa's income;

* The release of a pro- rata portion of the currency hedge charged in the
financial year ending 31 March 2004 against Brait South Africa's tangible assets
which is no longer required as a consequence of this transaction;

* Taxation has been provided where applicable;

* For net asset value and tangible net asset value purposes, it has been assumed
that the disposal consideration was paid on 31 March 2004; and

* All the calculations are based on 102.3 million Brait ordinary shares in issue
(89.6 million weighted average shares net of treasury and share scheme shares).

PROCEEDS OF THE TRANSACTION

It is anticipated that the net proceeds from the transaction will be applied to
Brait's operations.

SUSPENSIVE CONDITIONS AND REGULATORY APPROVALS

The transaction is conditional upon funding and shareholders agreements and
approval of various regulatory authorities. In terms of the Listings
Requirements of the stock exchanges in Luxembourg, Johannesburg and London, it
is not necessary for Brait to prepare any circular which contains further
details of the transaction.

WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

Shareowners are referred to the cautionary announcements dated 7 April 2004, 20
May 2004 and 1 July 2004 and are advised that based on the detail of the
transaction contained in this announcement, caution is no longer required to be
exercised by shareowners when dealing in their Brait securities.

Luxembourg

19 August 2004



Corporate advisor to Brait
   BRAIT



Lead sponsor to Brait
   Deloitte & Touche Sponsor Services (Pty) Ltd
  (Incorporated in the Republic of South Africa)
  (Registration number 1996/000034/07)



Co-sponsor to Brait
   Brait Sponsors (Proprietary) Limited
  (Registration number 2000/031069/07)



Financial advisor to Brait's BEE Partner
   MOTY CAPITAL PARTNERS



Legal advisor to Brait
   MJK KING inc.
   Attorneys



Financial advisor to Old Mutual
   OLD MUTUAL
   ASSET MANAGERS



Lead financier
   OLD MUTUAL


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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