| Mon 20 Aug 2007, 16:20 | | SBG - Simeka BSG - Acquisition Of Premium Ideas (P |
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SBG
SBG
SBG - Simeka BSG - Acquisition Of Premium Ideas (PTY) LTD And Further
Cautionary Announcement
SIMEKA BSG LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: SBG ISIN code: ZAE000074878
("Simeka BSG" or "the company")
ACQUISITION OF PREMIUM IDEAS (PTY) LTD ("PREMIUM IDEAS") AND FURTHER
CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Simeka BSG shareholders are advised that Simeka BSG has concluded an
agreement for the acquisition of 91,24% of the issued share capital of
Premium Ideas ("the PI acquisition") for a purchase consideration of up to
R135,163,150.00 ("consideration price").
The effective date of the acquisition is 1 June 2007.
PREMIUM IDEAS
Premium Ideas provides fulfilment and packaging solutions for high-
security, high-value smart card applications of all cards, cell phones,
DVDs, CDs and related products as well as scratch vouchers.
RATIONALE
Simeka BSG wishes to maximise the synergies between Premium Ideas and other
businesses owned or controlled by Simeka BSG, in particular Motoma
Mithratech (Pty) Ltd and to some extent Spec Systems which offer secure
printing solutions for smart cards and scratch vouchers. This will enable
the group to secure in house a larger portion of the value chain, with the
positive impact on profitability expected to be reflected in the May 2008
annual results and going forward. The operating and profit margins on
Premium Idea`s long-term contracts are not expected to decline from the
previous years.
The acquisition adds further depth and management capacity to Simeka BSG`s
"Assembly and Manufacturing" cluster. It is intended, on integration of
Premium Ideas, to rebrand this cluster as "Secure Print and Payment
Solutions".
Specifically the acquisition will allow Simeka BSG to:
- Extend its service to existing clients by offering an end-to-end
printing and fulfilment solution for smart cards and scratch vouchers;
capitalise on Premium Idea`s long-established client base of major
corporates, specifically in the telecommunications arena, to cross-
sell the group`s full range of services and products;
- leverage Premium Ideas` strong presence in Nigeria and its growth
opportunities in the rest of Africa; and
- take advantage of existing licensing rights held by Premium Ideas in
Nigeria.
This transaction will enhance Simeka BSG`s BEE profile as the majority
shareholding of Premium Ideas is black owned.
TERMS OF THE ACQUISITION
The purchase consideration for Premium Ideas is a maximum of
R135,163,150.00 to be settled as follows:
- within 30 days of the transaction becoming unconditional ("the
Transaction date"):
- R40,000,000.00 in cash
- R33,989,284.00 to be paid by the issue of 19,989,706 Simeka BSG shares
at a price of R1,70 per share;
within 30 days of the approval of the audited financials of Premium Ideas
for the financial year ended 30 June 2008, subject to the under mentioned
terms:
- a maximum of R27,978,568 in cash;
- a maximum of R33,989,284 to be paid by the issue of 19,530,676 Simeka
BSG shares at a price of R1,70 per share;
The purchase consideration shall be reduced in the event that any of the
following events take place prior to 30 June 2008:
- if the major contract is terminated prior to its 3 year term for any
reason, then the purchase consideration will be adjusted in relation
to the loss of profits at an operating margin of 20% unless such lost
contract is substituted; and/or
- the gross revenue earned by Premium Ideas in terms of the major
contract is less than R90 million for the financial year ended 30 June
2008, in which case the purchase consideration shall be reduced by the
percentage by which the gross revenue target is not achieved; and/or
- the operating margin for the work done in respect of the major
contract for the financial year ended 30 June 2008 is less than 20%,
in which case the purchase consideration shall be reduced by the
percentage by which the operating margin target is not achieved; and
- Premium Ideas has not made up the above shortfalls from other sources
of revenue during the said financial years.
CONDITIONS TO THE ACQUISITION
The acquisition is subject to the following conditions:
- the net asset value assumed on acquisition shall not be less than
R20,000,000.00;
- the satisfactory completion of a due diligence by Simeka BSG;
- the requisite regulatory approvals including the JSE Limited, the SRP
and the competition authorities;
- the conclusion of employment and restraint of trade agreements by key
executives of Premium Ideas; and
- the major and material contracts in Premium Ideas being valid, binding
and in force for at least 3 years.
FINANCIAL EFFECTS OF THE MERGER
A detailed announcement in respect of the financial effects of the PI
acquisition will be published on SENS on completion of the due diligence to
the satisfaction of Simeka BSG.
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution when dealing in the
company`s shares, pending further announcements including detailed
financial effects of the PI acquisition.
Rosebank
20 August 2007
Designated advisor
Java Capital (Proprietary) Limited
Date: 20/08/2007 16:20:31 Produced by the JSE SENS Department.
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