Proposed Demerger of MPSA

The demerger endorses MPSA’s own strategy and provides shareholders with a clear benefit as both businesses would be able to take better advantage of their respective growth opportunities.

4/8/2011 --- Mondi Group announced its intention to separate its interest in Mondi Packaging South Africa (MPSA) via a demerger whereby all the ordinary shares in MPSA held by Mondi Limited will be distributed to the Mondi Limited ordinary shareholders. MPSA would be listed under a new name on the securities exchange operated by the JSE Limited (JSE).

MPSA’s future growth plans, particularly with respect to its rigid plastics business, are constrained by the Mondi Group’s differing strategic focus. The demerger endorses MPSA’s own strategy and provides shareholders with a clear benefit as both businesses would be able to take better advantage of their respective growth opportunities.

David Hathorn, CEO of Mondi Group, said:

“This is the right time to demerge MPSA, for both Mondi Group and MPSA. Whilst Mondi Group has been a very supportive owner, this move will give MPSA the flexibility it needs to develop its core growth areas. MPSA is unique within the Group as no other part of Mondi produces rigid plastics or cartonboard and therefore the Board felt that MPSA would be best placed to take advantage of the considerable opportunities available to it as an independent entity.”

MPSA’s revenue in 2010 from continuing operations was R5.7 billion (€591 million), of which R4.4 billion (€455 million) was related to paper (including recovered paper collection; packaging and industrial papers such as cartonboard and containerboard; and corrugated packaging operations) and R1.3 billion (€136 million) was related to plastics (including PET bottles and closures; large injection moulded containers; styrene trays, fast food containers and clear plastic films; and other rigid plastic containers). Currently, Mondi owns 70% of MPSA, the Shanduka Group owns 25% and Mondi Employee Investment Company Limited (a Mondi Employee Share Option Plan) owns 5%. The shareholders have agreed to a recapitalisation of MPSA ahead of its listing, with a view to creating a long term capital structure for the business based on net debt of around 2 times current earnings before interest, tax, depreciation and amortisation. The recapitalization would result in Mondi’s equity interest in the business increasing to around 90%. Shanduka Group would reduce its interest in MPSA to around 10% just before the demerger and has committed to stay invested in MPSA for at least 180 days following its listing.

As part of the proposed demerger, Mondi Group intends to undertake a “matching action” (for the purposes of the Mondi Group’s DLC structure agreements) by way of a share consolidation of Mondi Limited ordinary shares. The matching action is intended to have, as far as practicable, an equivalent but not necessarily identical economic effect on Mondi plc ordinary shareholders to the economic effect of demerging MPSA ordinary shares to Mondi Limited ordinary shareholders. The size of the Mondi Limited share consolidation would be based on the volume weighted average share prices of MPSA and the Mondi Group (Mondi plc and Mondi Limited) traded during a period, to be determined, following the demerger and listing of MPSA.

The demerger and the matching action require various third party approvals and are also subject to the approval of both Mondi plc and Mondi Limited shareholders. Mondi intends to announce further details of the proposed demerger and matching action during May 2011, at which time all relevant documents, including MPSA's pre-listing statement, would be made available.

The outcome of the proposed demerger may have a material effect on the price of Mondi Group’s securities. Accordingly, shareholders are advised to exercise caution when dealing in their Mondi Group shares until a further announcement is made.

Rothschild is acting as financial adviser to Mondi Group and Rand Merchant Bank is acting as financial adviser to MPSA.