Page 7 - AMANGO MODEL ANSWER 2

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than them (US27,174m against USD4000m); so their past successes in integrating smaller business
may not be a ‘walk in the park’ this time around. We therefore, anticipate some serious integration
problems, and in any event, if despite them having hired our previous CEO, still they could not find
synergies that are better than what they have tabled, it is likely that no better synergies could be

found; so, our shareholders run a risk of accepting the 50% premium, become part of the VR group,
only to find the synergies cannot be realized and their share value collapses. We would have failed
in our overarching duty to work in their best interest!

Recommendation: Reject the offer and activate a takeover defence strategy immediately.

Justification: The revenue synergies are not large enough to justify the premium and if we were to
include the cost synergies, we will be accepting that our shareholders will realise value through a

series of potentially unethical practices that could damage our brand!

Actions: Send a mail to VR, rejecting the offer and get ready to launch an attack campaign against

VR for making public statements about synergies that are not backed by the numbers; or for putting
forward cost synergy proposals that are potentially unethical. We could also report them to the
competition authorities in South Africa -raising job loss and potential market dominance concerns.
Meet with PIC particularly, and reassure them of our long-term commitment to South Africa,

including our desire to rather do a spin-off of our non-core assets and create a new mining
champion, listed on the JSE, to meet their domestic socio-economic and political concerns. Assure
them we are about to announce a return to our old dividend pay-out policies which will see a 34%
appreciation of their 15% holding, and that we are executing to restore our investment grade. Do a

similar charm offensive with other major shareholder blocks!

B2. CORPORATE RECONSTRUCTION AND RE-ORGANISATION

The dithering over our strategic direction remains a strategic weakness and a strategic threat. In the
light of falling commodity prices, market value and damage to our balance sheet, we took a strategic

decision to radically restructure and dispose some key segments. The recent recoveries in
commodities and, our share prices, together with major repairs to our balance sheet may indicate
that the strategic rationale for this direction may no longer be sound. Yet, we are right in the middle

of negotiations in respect of major disposals. If in six months, it turns out we had already done
enough to regain our status, we will have a problem of having unnecessarily disposed major assets
and damaged long-term shareholder value. If we don’t, and the rating agencies decide to not restore
us to investment grade, it would be because they are still not satisfied with our recent financial
performance, and we would have walked out of the current negotiations. We will be forced to re-start

the negotiations (if still possible), all this will create even more strategic uncertainty, impacting on our

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www.charterquest.co.za | Email: thecfo@charterquest.co.za