| Thu 30 Aug 2007, 16:12 | | DLG - Dialogue - Acquisition by Dialogue of a cont |
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DLG
DLG
DLG - Dialogue - Acquisition by Dialogue of a controlling interest in CallForce
Direct (Pty) Limited and reminder of cautionary announcement
Dialogue Group Holdings Limited
(formerly Africa`s Best 364 Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/039219/06)
Share code: DLG & ISIN: ZAE000083820
("Dialogue" or "the Group")
ACQUISITION BY DIALOGUE OF A CONTROLLING INTEREST IN CALLFORCE DIRECT (PTY)
LIMITED AND REMINDER OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Bridge Capital is authorised to announce that Dialogue has entered into
agreements dated 28 August 2007 to acquire a 51% interest in CallForce
Direct (Pty) Limited ("CallForce Direct") from the existing shareholders
for a maximum amount of R18.55 million ("the acquisition").
2. CallForce Direct
CallForce Direct is a staffing company focusing on permanent and temporary
staff recruitment, placement and management for call centres. It has been
in operation for over eight years and is considered to be the largest
competitor to the three other primary staffing companies operating within
the call centre industry.
CallForce Direct provides typical recruitment and selection services to
many large financial institutions and telecoms companies. They currently
have 1,300 staff under management and operate from Johannesburg and Durban.
3. Rationale for the acquisition
As local clients increase their call centre capacity they are likely to
follow international trends and outsource between 40% and 60% of that
requirement, retaining the balance in-house. It is in supplying that in-
house component that Dialogue is interested in acquiring a stake in
CallForce Direct.
For international clients wanting to offshore work to South Africa, some of
this capacity will be fully outsourced and some will be within "captives`"
or local in-house operations - often for regulatory purposes. There is a
further opportunity for the Group to provide staff into these international
in-house operations based in South Africa and deepen its relationship with
its international clients.
The provision of staff to in-house operations not yet ready to outsource
fully is an excellent way of establishing relationships with potential
Group clients. The acquisition, as part of a defined Group strategy,
further expands the range of outsourced services that the Dialogue can
provide to its local and international clients.
4. Details of the acquisition
4.1 Acquisition consideration
The aggregate acquisition consideration is R18.55 million payable upon the
fulfilment of the conditions precedent set out under 4.2 below. Of the
aggregate acquisition consideration, an amount of R1 million is payable
through the issue of new Dialogue shares and the balance is payable in
cash. The acquisition consideration will be funded out of Dialogue`s
existing cash resources.
The acquisition represents a Category 3 transaction in terms of the JSE
Listings Requirements.
4.2 Conditions precedent
The acquisition is subject to, inter alia, the fulfilment of the following
conditions precedent:
- Completion of a comprehensive due diligence review of CallForce Direct
to Dialogue`s satisfaction;
- Approval of the final terms of the acquisition by the Dialogue board
of directors;
- Conclusion of comprehensive transaction and shareholders agreements;
- All statutory and regulatory approvals including but not limited to
the JSE and the Competition Commission, if required;
- Conclusion of appropriate service and restraint agreements with the
senior management members of CallForce Direct.
4.3 Effective date
The effective date of the acquisition will be the first day of the month
following the month in which the last remaining condition precedent is
fulfilled.
4.4 Options
Following implementation of the acquisition, the remaining 49% of CallForce
Direct will be held by its managing director ("the minority shareholder").
Appropriate option arrangements have been agreed which will facilitate
Dialogue possibly acquiring a further 29.4% of CallForce Direct in due
course. In this regard, the minority shareholder is entitled to put 29.4%
of her 49% shareholding in CallForce Direct to Dialogue for a 2-month
period post the release of the final audited financial statements for each
of the 2007 and 2008 CallForce Direct financial year-ends. The strike price
of the option will be based on a historic price earnings ratio of 7.5 and
the payment will be settled in cash, unless agreed otherwise by both
parties, within 30 working days of the option being exercised.
Similarly, the minority shareholder has an option to acquire Dialogue`s 51%
interest, exercisable in each of March 2010 and 2012, based on price
earnings multiple of 6.5 applied to the most recent year`s audited profits
and payable in cash.
4.5 Articles of association
Pursuant to the acquisition, CallForce Direct will become a subsidiary of
Dialogue. In accordance with paragraph 9.16 of the JSE Listings
Requirements, the articles of association of CallForce Direct will be
amended to conform to Schedule 10 of the JSE Listings Requirements.
5. Pro forma financial effects of the acquisition
Set out in the table below are the unaudited pro forma financial effects of
the acquisition on Dialogue`s audited results for the six months ended 30
June 2007. The unaudited pro forma financial effects are presented for
illustrative purposes only, to provide information on the impact of the
acquisition. The unaudited pro forma financial effects are the
responsibility of Dialogue`s directors. Due to the nature of the unaudited
pro forma financial effects, they may not give a fair presentation of
Dialogue`s financial position and the results of its operations after the
acquisition.
Before the After the Percentage
acquisition acquisition change
(1) (%)
Earnings per share 2.8 3.1(2) +11.1
(cents)
Headline earnings per 2.8 3.1(2) +11.1
share (cents)
Net asset value per 25.1 25.5(3) +1.9
share (cents)
Net tangible asset 25.1 18.0(3) (28.2)
value per share (cents)
Notes:
1. Extracted from the published unaudited interim results of Dialogue for the
six months ended 30 June 2007.
2. Earnings and headline earnings per share in the "After the acquisition"
column have been based on the following assumptions:
- The acquisition was effective 1 January 2007;
- Dialogue holds 51% of the issued share capital of CallForce Direct, hence -
49% minorities have been taken into account;
- CallForce Direct`s results used in the preparation of the pro forma
financial effects were extracted from their unaudited management accounts
for the six months ended 30 June 2007.
- The weighted average number of Dialogue shares in issue is 210 000 000
before and 210 500 000 after the acquisition;
- Interest foregone on the cash utilised by Dialogue to fund the acquisition
at a pre-tax rate of 8% per annum was taken into account.
3 Net asset value and net tangible asset value per share in the "After the
acquisition" column have been based on the following assumptions:
- The acquisition was effective 30 June 2007;
- The balance sheet of CallForce Direct used in the preparation of the pro
forma financial effects was extracted from their unaudited management
accounts as at 30 June 2007;
C The total number of Dialogue shares in issue is 210 000 000 before and 210
500 000 after the acquisition.
6. Reminder of cautionary announcement
Shareholders are reminded of the cautionary announcement released on SENS
on Friday, 27 July 2007 wherein it was announced that Dialogue is involved
in discussions which if successfully concluded could have an impact on the
price at which Dialogue shares trade. These discussions are ongoing.
Accordingly, shareholders are advised to continue to exercise caution when
dealing in their Dialogue shares until a further announcement is made.
Johannesburg
30 August 2007
Corporate Advisor and Designated Advisor: Bridge Capital Advisors (Pty) Limited
Date: 30/08/2007 16:12:01 Produced by the JSE SENS Department.
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