| Tue 15 May 2007, 7:01 | | UCS - Establishing |
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UCS
UCS
UCS - Establishing, Financing And Intended Unbundling Of A Product Company
UCS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/002253/06)
JSE code: UCS
ISIN: ZAE000016150
("UCS" or "the company")
ANNOUNCEMENT REGARDING THE ESTABLISHING, FINANCING AND INTENDED UNBUNDLING OF A
PRODUCT COMPANY
1. INTRODUCTION
1.1 Shareholders of UCS ("shareholders") are herewith informed of the intention
of the board of directors of UCS ("the Board") to dispose of certain
proprietary products and related intellectual property (collectively, "the
IP"), currently held by wholly owned subsidiaries of the company, to a new
company ("Product Co") and to unbundle UCS` interests in Product Co by
means of a dividend distribution, in specie, to shareholders ("the Proposed
Transaction").
1.2 The purpose of the Proposed Transaction is to:
- establish a separate and independent software product business with
its primary focus being to create a leading brand and product suite
for selected verticals in the global retail industry, to be sold
through a global channel of appropriately selected and trained
dealers;
- allow Product Co to leverage off existing UCS software, intellectual
property and products and in so doing enable such products to reach
their true global potential;
- allow Product Co to operate free from the inherent limitations
currently imposed by virtue of UCS` exercising control over the IP and
UCS thereby being seen as a competitor (or potential competitor) to
the envisaged distribution channels of Product Co;
- create an arm`s length partner who will require an outsourced product
development contract with UCS Software Manufacturing (Pty) Ltd to
maintain and enhance the IP and the products;
- shelter UCS from the significant financial investment required in the
early phases of Product Co`s set-up, during which time Product Co is
envisaged to report losses, as it builds the international
distribution channel and continues to invest in product development to
adequately position the products for the selected foreign markets; and
- create significant additional value to UCS Group shareholders, which
would not be achieved otherwise, i.e. by UCS retaining the IP inhouse.
1.3 Although the exact parameters of the Proposed Transaction have not been
finalised yet, the Board has deemed it appropriate to provide shareholders
with insight into the Proposed Transaction at this stage.
2. BROAD PARAMETERS OF THE PROPOSED TRANSACTION
2.1 The Board has requested an independent valuation of the underlying value of
the IP ("IP Value"). The current (indicative) IP Value, as at 31 March
2007 and to be confirmed closer to the implementation date of the Proposed
Transaction ("the Implementation Date"), is R110.9 million. The IP had a
book value as at 31 March 2007 of R46 million and generated revenue for the
six months ended 31 March 2007 of R7.2 million. The book value of the IP
will continue to grow by the quantum of development costs to be incurred
post 31 March 2007, up to the Implementation Date.
2.2 It is envisaged that UCS will dispose of the IP to Product Co at an amount
equal to the IP Value (as at the Implementation Date), in return for
Product Co issuing shares to UCS.
2.3 Product Co would require further capitalisation in order to meet its
internal funding requirements and it is envisaged that UCS would provide
such funding, which is estimated to be in the region of R100 million ("the
Funding Requirement").
2.4 It is furthermore envisaged that UCS would, subsequent to having disposed
of the IP and having provided the Funding Requirement to Product Co, then
proceed to unbundle its entire interest in Product Co to shareholders by
means of a dividend in specie. Assuming that the actual IP Value and the
actual Funding Requirement (to be determined at the Implementation Date)
are equal to the amounts referred to above, the indicative relative value
of the Proposed Transaction equates to approximately 69.8 cents per UCS
share (on the basis of 302 040 004 UCS shares in issue and to be issued
(including outstanding share options) as at 31 March 2007).
2.5 It is not the intention of the Board that Product Co be listed on the JSE
Limited ("JSE") or any other stock exchange within its first three years of
trading following the Implementation Date. As such, the Board is
contemplating a possible cash alternative to the proposed distribution in
specie ("the Cash Underpin"). A decision with regards to the Cash Underpin
will be made upon the Board`s assesment of, inter alia, UCS` own funding
and cash flow requirements and prevailing circumstances closer to the
Implementation Date.
3. OPINIONS
Irrespective of the provisions of the JSE`s Listings Requirements
applicable to the Proposed Transaction, the Board undertakes, in the event
that the Proposed Transaction is implemented or proposed to shareholders,
to provide shareholders with an independent opinion on the fairness and
reasonableness of the Proposed Transaction, the IP Value and, if
applicable, the Cash Underpin.
4. FINANCIAL EFFECTS
Once the IP Value, the Funding Requirement, the Cash Underpin (if
applicable) and the terms and conditions pertaining to the Proposed
Transaction have been finalised, the pro forma financial effects of the
Proposed Transaction on shareholders will be communicated in a detailed
announcement and, if required, a circular to shareholders.
5. CATEGORISATION OF THE TRANSACTION
In terms of the JSE`s Listings Requirements, the Proposed Transaction
currently appears to be classified as a "category 3" transaction. However
this may change at the time of finalisation of the Proposed Transaction.
Shareholders will be informed of the specific requirements at the time of
publication of the detailed announcement contemplated in paragraph 4 above.
Johannesburg
15 May 2007
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Date: 15/05/2007 07:01:01 Produced by the JSE SENS Department.
