UNDERTAKING TO ACQUIRE SHARES IN ITS SUBSIDIARY COMPANY, JOHNNIC HOLDINGS LIMITED

1.   INTRODUCTION

Shareholders are informed that in terms of an agreement entered into between   HCI and Coronation Asset Management Proprietary) Limited (“Coronation”) finalised on 27 June, 2008, HCI has undertaken to acquire from Coronation its  28.6% shareholding in Johnnic (the “Acquisition”) for a consideration of       R16.75 per Johnnic ordinary share (the “Purchase Price”).  HCI is considering  concluding the Acquisition in terms of section 440A of the Companies Act,      1973 (Act 61 of 1973), as amended (“the Potential Offer”). The purpose of      this announcement is to provide information on the Acquisition in terms of     the JSE Listings Requirements.

2.   RATIONALE

Prior to the Acquisition, HCI held a 67% interest in Johnnic. HCI has  embarked on a strategy to increase its shareholding in Johnnic when an appropriate opportunity arises. The HCI board of directors believes that the   Acquisition may also provide an opportunity to delist Johnnic and create a  single entry point for the HCI group.

3.   BUSINESS OF JOHNNIC

Johnnic is an investment holding company with interests in gaming, hotel and   exhibition businesses. Johnnic is listed on the JSE Limited and comprises the  following major investments:

–    100% Gallagher Estate and properties;

–    30.2% interest in Suncoast Casino through Durban Add-Ventures;

–    9.5% effective interest in the Tsogo Sun Group; and

–    90.5% interest in Montauk Energy Capital.

4.   THE ACQUISITION

4.1.   Introduction

In terms of the Acquisition, HCI will acquire the entire shareholding of Coronation of 47 654 721 ordinary shares in Johnnic.

4.2.  The Purchase Consideration

HCI will pay R16.75 for every Johnnic ordinary share held by Coronation, totalling R798 million (the “Purchase Consideration”), and will settle     the Purchase Consideration as follows:

4.2.1.    a cash settlement of R720 million; and

4.2.2.    993 542 HCI ordinary shares.
4.3. Pro forma financial effects of the Acquisition on HCI shareholders for the 12 month period ended 31 March 2008  The table below illustrates the unaudited pro forma financial effects of the Acquisition based on the published, audited results for the 12 month  period ended 31 March 2008. The preparation of the unaudited pro forma  financial effects is the responsibility of the directors of HCI. The unaudited pro forma financial effects have been prepared for illustrative  purposes only to provide information on how the Acquisition may have  impacted on HCI`s results and financial position before and after the Acquisition and due to the nature thereof may not give a fair reflection   of HCI`s results and financial position.

12 months ended   Before the    After the           Change                      31 March 2008     Acquisition   Acquisition2,3                                                                  ,4                                        (R)           (R)                 (%)
Headline earnings 702.10        673.65              -4.05%                      per share                                                                 Earnings per      562.95        529.66              -5.91%                      share                                                                           Net asset value   2 375.92      2 356.02        5   -0.84%                      per share                                                                 Net tangible      1 471.46      1 199.41        5   -18.49%                     asset value per                                                                 share

 

Notes:

The financial effects are indicative only and have been based on the assumptions set out below:
1.     The “Before the Acquisition” column for the 12 months ended  31 March 2008 reflects the published HCI audited financial results for the 12 months ended 31 March 2008.

2.      The “After the Acquisition” column has been adjusted for the effects of the Acquisition by HCI.

3.      Calculations for the “After the Acquisition” column have been  based on the assumption that the Acquisition was effected on 1 April  2007 for income statement purposes and on 31 March 2008 for balance  sheet purposes.

4.       The “After the Acquisition” column assumes that the consideration  is funded by the issue of 993,542 HCI ordinary shares at a price of  R78.72 per HCI share, R340 million of group cash resources and  raising debt funding of R380 million, assuming an average interest  rate on call funds of 7.84%, an average debt funding rate of 11.29%  and a South African corporate tax rate of 28%.

5.      For purposes of calculating Net asset value per share and Net tangible asset value per share “After the Acquisition”, it was       assumed that the excess paid over the net book value of the assets acquired relates to goodwill which is not impaired.
5.   CATEGORISATION

In terms of the JSE Listings Requirements the Acquisition is categorised as a  category two transaction.

6.   POTENTIAL OFFER TO REMAINING MINORITY SHAREHOLDERS IN JOHNNIC

The HCI board of directors is considering making the Potential Offer to all Johnnic minority shareholders on the following basis:

–    R16.75 per Johnnic ordinary share in cash; or

– R15.11 in cash and 0.02084876 HCI ordinary shares for every Johnnic  ordinary share held.

Further details in this regard will be provided in due course.