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Edcon Board recommends R25 billion offer from Bain Capital

08 February 2007

The Board of Directors of Edcon today announced it had unanimously recommended to shareholders an offer from Bain Capital to acquire its entire ordinary share capital at R46 per share. In line with its commitment to value creation for shareholders, the Board brings to a close a global auction process. The total value of the transaction will be R25 billion. Completion of the transaction will result in the de-listing of Edcon shares from the JSE Limited.
Shareholders will receive the purchase consideration in cash. This offer is final in the absence of a superior proposal.

The offer price represents a premium of 51.3% over the closing share price of R30.40 on 16 October 2006, the day before Edcon issued a cautionary announcement regarding discussions with private equity parties.

Bain Capital has proactively reaffirmed its commitment to Edcon's Staff Empowerment Trust, iShare Yethu, and will on completion establish a new scheme with the full support of the Trustees of the Empowerment Trust. This new scheme replicates the benefits to participants of the original scheme and continues to reinforce Edcon's commitment to Broad-Based Black Economic Empowerment.

"We see this offer as an exceptional opportunity for shareholders to realise substantial value from their investment in Edcon," said non-executive chairman, Selwyn MacFarlane. "Following a comprehensive auction among global private equity firms, and receipt of a preliminary fair-and-reasonable opinion from PricewaterhouseCoopers, the Edcon Board of Directors unanimously recommended Bain Capital's bid to shareholders."

MacFarlane said the benefit of input and advice from highly-skilled external and independent professional advisors (Caliburn) and attorneys (Werksmans) was critical to a proper assessment of the merits of the transaction.

He further commented, "We are absolutely delighted that a global fund of the calibre of Bain Capital has demonstrated its confidence in South Africa by making this long term investment. This substantial capital inflow by a global private equity firm is unprecedented in South Africa and bears testimony to our country becoming a notable participant in the international community. It also represents a fundamental belief in the strength of our economy."

Steve Zide, a Managing Director of Bain Capital, added: "We are pleased to be a part of the next phase of the growth of Edcon. The company is a leader in the retail and business communities in South Africa and its brands enjoy iconic status throughout the country. We have been greatly impressed by the world class quality of the Edcon business, its systems and their people. Our belief in the growth potential of the South African economy is a significant factor in our investment decision."

Bain Capital supports the existing Edcon management team, who will be offered the opportunity to make personal investments in the company. Management believes their partnership with such a significant global investor will ensure the continuity, resources and retail experience to enhance our leading position.

As one of the largest private equity investors in the world, Bain Capital brings not only extensive stability and financial resources, but also an impressive track record of retail and consumer experience. Bain Capital has been an active investor in such market leading retailers as Staples Office Products, Toys "R" Us, Burger King, and Domino's Pizza.

Dwight Poler, a Managing Director of Bain Capital said, "Edcon's leading market position, reflects its compelling proposition to the rapidly growing South African consumer base and fits very well into our long-term portfolio. We look forward to working with the management and the employees of Edcon and to a long-term presence in the South African market and business community."

Edcon's CEO, Steve Ross, highlighted the opportunity for continuity in the base business, with incremental support for its growth.  He said the transition from a public to private company will not affect employees as Edcon forges ahead with ‘business as usual', reaffirming the company's focus on skills development, leadership development and other initiatives which have made Edcon the retail sector's employer of choice for the past few years.

"For our employees, customers, suppliers, landlords and the communities in which we operate, we think the international financial and strategic resources of our new global partners, Bain Capital, will enable us to reach new heights as a committed employer and corporate citizen," concluded Ross. "Bain Capital recognises the value of the Edcon's brands in the market and will actively seek to enhance its leading position. Our customers can look forward to best-of-breed international retail expertise, which should enhance their shopping experiences and loyalty to our brands."

The transaction will be funded with a firmly committed financing package of long-term debt and equity, which provide a patient source of capital to accommodate the company's growth. Barclays plc and Absa Capital are providing the debt financing. Citigroup, Credit Suisse and Standard Bank supported Bain Capital in the transaction. A detailed circular will be sent to shareholders by the end of March 2007.

The offer will be effected through a scheme of arrangement in terms of Section 311 of the Companies Act 61 of 1973. This requires inter alia approval from 75% of shareholders present and voting at the meeting. The transaction is also conditional on approvals from the Competition Authorities, the JSE Limited the Namibian Stock Exchange, the Securities Regulation Panel and the South African Reserve Bank.


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