| Wed 2 May 2007, 16:57 | | CNL - Control Instruments - Acquisition and furthe |
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CNL
CNL
CNL - Control Instruments - Acquisition and further cautionary announcement
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1964/003987/06)
Share code: CNL
ISIN: ZAE000001665 ("Control Instruments" or "the Group")
ACQUISITION OF DISTRIBUTION RIGHTS AND THE FLEET TELEMATICS,
DATA MANAGEMENT ANDCOMMERCIAL VEHICLE OUTFITTING BUSINESSES (FM EUROPE,
DATATRAK UK AND ONE-STOP-SHOP) FROM SIEMENS VDO TRADING
1. INTRODUCTION
Investec Bank Limited is authorised to announce that agreement has been
reachedbetween Control Instruments and Siemens VDO Trading ("Siemens VDO"),
whereby Control Instruments will acquire the distribution rights in respect
of FM Europe and the businesses and assets of Datatrak UK and One-Stop-Shop
("the FM Business") from Siemens VDO. The agreement is subject to the
fulfillment of certain conditions precedent.
2. NATURE OF BUSINESS
FM Europe holds the worldwide distribution rights (excluding the USA and
sub-Saharan Africa) for the FM range of products that are developed and
manufactured by Control Instruments and for which Control Instruments owns
the Intellectual Property. FM Europe, based in Donaueschingen, Germany,
manages and supports the sale and distribution of the FM products through
the Siemens VDO network.
Datatrak UK is a vehicle tracking, fleet management and vehicle telematics
business based in the UK. It has its own proprietary communication network
covering the whole of the United Kingdom. A large portion of the business`
revenue is derived from its annuity subscriber base of approximately 18 000
customers.
One-Stop-Shop is a specialised vehicle fitment business focusing on non-
standard solutions for commercial vehicles, including the installation of
fleet management products. It is based in the UK.
3. RATIONALE FOR THE ACQUISITION
Control Instruments has designed and developed the FM range of fleet
management products, which have been successfully distributed by Siemens
VDO on a worldwide basis (in over 40 countries), for more than ten years.
Control Instruments` strategy has been to have a greater degree of control
over the global distribution of its FM products. The distribution of these
products is not core to Siemens VDO. Control Instruments` believes that its
strategy will
result in a greater focus and therefore greater market penetration,
particularly in the key fleet management markets of North America, the
United Kingdom and continental Europe.
The Group`s acquisition of Tripmaster in the United States in March 2006
combined with this transaction means that Control Instruments will own the
principal distributor for its products in each of these key fleet
management markets. The Group will continue to use Siemens VDO`s regional
and sub-regional distribution networks, but will also be free to expand its
distribution through other channels.
The acquisition of Datatrak UK and One-Stop-Shop enables the Group to use
the United Kingdom as its primary European base within a profitable and
cash generating structure.
The United Kingdom and continental European markets will be managed through
Datatrak UK, with technical and sales support continuing to be provided out
of Germany. North America is managed through Tripmaster in Dallas and sales
and distribution to Australasia, Africa, the Middle East and South America
will bemanaged from South Africa.
As part of this transaction, Control Instruments will also have the right
to use the VDO brand name on its FM products for a two year period.
Control Instruments` existing relationship with Siemens VDO in respect of
the distribution of automotive products into the sub-Saharan African
aftermarket remains unaffected by this transaction and will be extended for
a further ten years.
4. SALIENT TERMS OF THE ACQUISITION
4.1 The purchase consideration of GBP5.045 million ("the consideration") is
payable in two equal instalments. The first GBP2.545 million is payable on
theeffective date and the balance of the purchase price is payable on the
first anniversary of the effective date (or earlier, at Control
Instruments` election). The effective date is expected to be on or around
30 June 2007.
4.2 The final purchase consideration will be adjusted, up or down, based on
the net working capital at the effective date.
4.3 Warranties and indemnities normal in transactions of this nature have
been provided by Siemens VDO.
4.4 The acquisition will be effective from the effective date.
4.5 Control Instruments will use a combination of debt, equity and vendor
finance to finance the transaction. Full details will be announced in due
course.
5. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The unaudited pro forma financial effects set out below have been prepared
for illustrative purposes only to assist Control Instruments shareholders
to assess the impact of the acquisition on the earnings per share ("EPS"),
headline earnings per share ("HEPS"), net asset value ("NAV") per share and
tangible net asset value ("TNAV") per share of Control Instruments. The
unaudited pro forma financial effects are based on Control Instruments`
reviewed provisional results for the year ended 31 December 2006 and the FM
Business` unaudited management accounts for the year ended 30 September
2006.
These unaudited pro forma financial effects have been disclosed in terms of
the JSE Limited ("JSE") Listings Requirements and because of their nature
may not fairly present Control Instruments` financial position, changes in
equity,results of operations or cash flows. The unaudited pro forma
financial effects are the responsibility of the directors of Control
Instruments and are provided for illustrative purposes only.
Before After Change
the the
acquisition acquisition
Cents Cents %
EPS 60.8(i) 74.7(ii) 23.0
HEPS (0.7)(i) 13.3(ii) >100.0
NAV per share 349.0(iii) 348.0(iv) (0.2)
TNAV per share 77.0(iii) 29.0(iv) (62.2)
Notes:
i) The EPS and HEPS, as set out in the "Before the acquisition" column of
the table, are based on the reviewed provisional income statement of
Control Instruments for the year ended 31 December 2006 and 93 247 420
weighted average number of shares in issue.
ii) The EPS and HEPS, as set out in the "After the acquisition" column of
the table, are based on the combined unaudited income statements of Control
Instruments and the FM Business for the years ended 31 December 2006 and
30 September 2006 respectively; 93 247 420 weighted average number of
shares in issue; a Rand/GBP exchange rate of 14.2; and the assumptions that
the acquisition became effective at the beginning of the twelve-month
period; the consideration was paid at the beginning of the twelve- month
period; and an interest rate of 12.0% nominal annual compounded quarterly
is applicable on the term loan facilities.
iii) The NAV and TNAV per share, as set out in the "Before the acquisition"
column of the table, are based on the reviewed provisional balance sheet of
Control Instruments at 31 December 2006 and 100 434 208 shares in issue.
iv) The NAV and TNAV per share, as set out in the "After the acquisition"
column of the table, are based on the combined unaudited balance sheets of
Control Instruments and the FM Business at 31 December 2006 and
30 September 2006
respectively; 100 424 208 shares in issue; a Rand/GBP exchange rate of
14.2; andthe assumptions that the acquisition became effective at the end
of the twelve-month period; and the consideration was paid at the end of
the twelve-month period.
v) The difference between the consideration, including directly
attributable transactions costs of R1.40 million, and the net asset value
of R25.20 million has provisionally been treated as goodwill. Post
completion of the acquisition Control Instruments may identify fair value
adjustments on assets and recognise other intangible assets, as required by
IFRS 3: Business Combinations, which would reduce the goodwill.
vi) Transaction costs of approximately R2.00 million were assumed to have
been
paid in cash at the end of the twelve-month period. Of these costs, R1.40
million was capitalised and R0.60 million was expensed.
6. CONDITIONS PRECEDENT TO THE ACQUISITION
The acquisition is subject to certain conditions precedent, including South
African Reserve Bank approval being obtained.
The last day upon which the conditions precedent are capable of being
fulfilled is 30 June 2007. This date may be extended by Siemens VDO in its
discretion.
7. CATEGORISATION OF THE ACQUISITION
The acquisition has been categorised as a category 3 transaction in terms
of section 9.5(b) of the JSE Listings Requirements.
8.FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement dated 13 March 2007, shareholders
are advised that the Group is in advanced stages of negotiations for the
merger of all its fleet management interests, including those being
acquired from SiemensVDO, with an independent third party with a view to
the separate listing of the merged entity and the unbundling of the Group`s
interest in this business to its shareholders.
Further details of this transaction, if successfully concluded, should be
announced before the end of May 2007.
Shareholders are therefore advised to continue exercising caution when
dealing in the Company`s securities until a full announcement is made.
Cape Town
2 May 2007
Sponsor:
Investec Bank Limited
Attorneys:
Jan S de Villiers
Date: 02/05/2007 16:57:27 Produced by the JSE SENS Department.
