| Wed 24 Oct 2007, 14:50 | | ANT/ATNP/ALT - Altron/Altech - Firm intention by A |
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ATN ALT ATNP
ATN ALT
ANT/ATNP/ALT - Altron/Altech - Firm intention by Altron to make an offer to
acquire the issued ordinary share and withdrawal
of cautionary announcements
ALLIED ELECTRONICS CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06
Share code: ATN ISIN: ZAE000029658
Share code: ATNP ISIN: ZAE000029666
("Altron")
ALLIED TECHNOLOGIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
Share code: ALT ISIN: ZAE000015251
("Altech")
FIRM INTENTION BY ALTRON TO MAKE AN OFFER TO ACQUIRE THE ISSUED ORDINARY SHARE
CAPITAL OF ALTECH THAT ALTRON AND ITS SUBSIDIARIES DO NOT ALREADY OWN AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
1 INTRODUCTION
Shareholders of Altron and Altech are referred to the cautionary announcements
and renewals thereof released by Altron and Altech on the Securities Exchange
News Service ("SENS") of the JSE Limited ("the JSE") on 8 August 2007 and 25
September 2007 respectively. The boards of directors of Altron and Altech are
authorised to announce that Altron has now expressed a firm intention to the
board of directors of Altech to make an offer to acquire the 38.2% of the issued
ordinary share capital of Altech that Altron and its subsidiaries (the "Altron
Group") including Altron One Nominees (Proprietary) Limited (collectively the
"Excluded Members") do not already own (the "Altech Minority Shares") from all
shareholders of Altech other than the Excluded Members ("Altech Minority
Shareholders") in accordance with and as contemplated by the Securities
Regulation Code on Takeovers and Mergers ("the Proposed Altech Acquisition").
The implementation of the Proposed Altech Acquisition is subject to the
fulfillment of the conditions precedent as set out in paragraph 4 below.
2 RATIONALE AND BENEFITS
Pursuant to Altron`s ongoing assessment of the Altron Group structure, its
various investments and operations and in accordance with its stated objective
of unlocking shareholder value, the Altron Group has proposed the following
independent transactions:
* the acquisition of the Altech Minority Shares by way of a scheme of
arrangement and thereafter the delisting of the Altech ordinary shares
("Altech Shares") from the JSE; and
* the acquisition of the Bytes Technology Group Limited ("Bytes") issued
ordinary shares ("Bytes Shares") which the Altron Group does not already
own (the "Bytes Minority Shares") from all of the Bytes shareholders other
than the Altron Group (the "Bytes Minority Shareholders") by way of a
scheme of arrangement and thereafter the delisting of the Bytes Shares from
the JSE (the "Bytes Scheme").
The Altron board of directors believes that the Proposed Altech Acquisition and
the Bytes Scheme will inter alia:
* further simplify the corporate and operating structure of the Altron Group;
* improve the free float and liquidity of the Altron participating preference
shares and the Altron ordinary shares (collectively "Altron Shares") on the
JSE;
* create a single point of entry into the Altron Group whilst simultaneously
increasing Altron`s exposure to its core activities;
* limit the potential strategic conflicts of interest that presently exist
between Altech and Bytes in relation to corporate opportunities whilst
preserving the strong brands and market strength of Altech and Bytes
respectively;
* maximise synergies between Altech and Bytes as the telecoms and information
technology markets undergo increasing convergence enabling the Altron Group
to offer more effective tailored customer solutions;
* improve operational and cost efficiencies and leverage off improved Altron
Group procurement opportunities and standardised internal control systems;
* improve service delivery to customers through a more cohesive approach
whilst maintaining the respective corporate cultures of Altech, Bytes and
Altron;
* improve the enlarged Altron Group`s financial leverage, financial
capability and critical mass; and
* allow Altron greater control over its cash flows and to gear its operations
and allocate its capital more effectively.
The Altech board of directors believes that the Proposed Altech Acquisition
inter alia:
* represents an attractive opportunity for the Altech Minority Shareholders
to become part of a larger more diversified group, with a strong balance
sheet to support value enhancing acquisitions by Altech; and
* provides the Altech Minority Shareholders with a significant premium on
their shareholding in Altech.
3. THE PROPOSED ALTECH ACQUISITION
3.1 Introduction
Altron intends implementing the Proposed Altech Acquisition by way of a scheme
of arrangement in terms of section 311 of the Companies Act, 1973 (Act 61 of
1973), as amended ("the Act"), to be proposed by Altron between Altech and its
shareholders, other than the Excluded Members, in terms of which Altron will
acquire all of the Altech Minority Shares held by the Altech Minority
Shareholders ("the Altech Scheme").
Pursuant to the successful implementation of the Proposed Altech Acquisition, it
is anticipated that the Altech Shares will be delisted from the
"Telecommunications" sector and the "Mobile Telecommunications" sub-sector of
the JSE.
3.2 The Proposed Altech Acquisition consideration
3.2.1 Participating preference share consideration
In the event of the conditions precedent to the Proposed Altech Acquisition
being fulfilled and the Altech Scheme becoming operative, an Altech Minority
Shareholder will receive a scheme consideration of 1.71561 Altron participating
preference shares for every 1 Altech Share held on the record date of the Altech
Scheme credited as fully paid-up (the "Participating Preference Share
Consideration").
3.2.2 Ordinary share consideration alternative
The minimum Altron ordinary shares receivable
As an alternative to the Participating Preference Share Consideration, an Altech
Minority Shareholder may elect to receive a scheme consideration comprising of
so many Altron ordinary shares (the "Minimum Ordinary Shares") as equals 15% of
his aggregate holding of Altech Shares multiplied by 1.60337. The balance of the
scheme consideration due to an Altech Minority Shareholder will be discharged by
way of the issue of so many Altron participating preference shares as equals 85%
of his aggregate holding of Altech Shares multiplied by 1.71561 (the "Ordinary
Share Consideration").
Additional Altron ordinary shares receivable
If the Ordinary Share Consideration is not elected by all Altech Minority
Shareholders and/or all Bytes Minority Shareholders in their respective schemes
of arrangement, there will be excess Altron ordinary shares ("Excess Altron
Ordinary Shares") available to be issued to each Altech Minority Shareholder who
elects the Ordinary Share Consideration ("Ordinary Share Electee"). In that
event, each Ordinary Share Electee will, in addition to the Minimum Ordinary
Shares, receive a percentage of the Excess Altron Ordinary Shares on a pro rata
basis equal to the percentage of Altech Shares held by that Ordinary Share
Electee relative to the aggregate Altech Shares held by all Ordinary Share
Electees, provided that:
* no Ordinary Share Electee will receive a number of Altron ordinary shares
greater than 100% of his aggregate holding of Altech Shares multiplied by
1.60337 (the "Ordinary Share Limit"); and
* if any Ordinary Share Electee receives fewer Altron ordinary shares than
the Ordinary Share Limit, the balance of his scheme consideration will be
discharged by way of the issue of so many Altron participating preference
shares as equals his aggregate holding of Altech Shares (other than those
Altech Shares which were used to calculate the Altron ordinary shares due
to such Ordinary Share Electee) multiplied by 1.71561.
3.2.3 No fractions
No fractions will be issued and any fraction of Altron Shares to which any
Altech Minority Shareholder is entitled to after the conversion of all of the
Altech Shares held by such Altech Minority Shareholder will, if it comprises 0.5
or more of an Altron Share be rounded up, otherwise will be rounded down to the
nearest whole Altron Share.
3.2.4 Deemed election
In the event that an Altech Minority Shareholder does not make a valid election,
that Altech Minority Shareholder will be deemed to have elected the
Participating Preference Share Consideration.
3.3 Irrevocable undertakings
Altron shareholders collectively representing approximately 63% of the voting
rights of the entire issued share capital of Altron have irrevocably undertaken
to vote in favour of the Altron Resolutions as defined in paragraph 4 below.
3.4 Pro forma financial effects of the Proposed Altech Acquisition on Altron
Shareholders
3.4.1 Pro forma financial effects for the 6 month period ended 31 August
2007
The tables below illustrate the unaudited pro forma financial effects of the
transaction based on the published unaudited unreviewed interim results for the
six months ended 31 August 2007 and the audited financial results for the 12
months ended 28 February 2007. The preparation of the unaudited pro forma
financial effects is the responsibility of the directors of Altron. The
unaudited pro forma financial effects have been prepared for illustrative
purposes only to provide information on how the transaction may have impacted on
Altron`s results and financial position and due to the nature thereof may not
give a fair reflection of Altron`s results and financial position.
All Altech and Bytes Minority Shareholders elect the Participating
Preference Share Consideration
Before After the Change After Change After Change
the Bytes 3 the 3 the 3
Schemes Scheme Altech Bytes
onlySquared Scheme and
only4 Altech
Schemes
5
(R) (R) (%) (R) (%) (R) %
Headline 1.71 1.66 6 (2.6) 1.61 6 (5.8) (7.4)
earnings 1.58
per
share
Earnings 1.61 1.56 6 (2.7) 1.47 6 (8.4) (9.9)
per 1.45
share
Net 12.76 12.38 7 (3.0) 12.19 7 (4.5) (6.5)
asset 11.93
value
per
share
9.82 9.75 7 (0.7) 9.84 7 0.1 (0.5)
Net
tangible 9.78
asset
value
per
share
All Altech and Bytes Minority Shareholders elect the Ordinary Share
Consideration
Before After the Change After Change After Change
the Bytes 3 the 3 the 3
Schemes Scheme Altech Bytes
onlySquared Scheme and
only4 Altech
Schemes
5
(R) (R) (%) (R) (%) (R) %
Headline 1.71 1.66 8 (2.5) 1.61 8 (5.6) (7.2)
earnings 1.58
per
share
Earnings 1.61 1.56 8 (2.6) 1.47 8 (8.2) (9.7)
per 1.45
share
Net 12.76 12.40 9 (2.9) 12.21 9 (4.3) (6.3)
asset 11.96
value
per
share
9.82 9.76 9 (0.6) 9.86 9 0.3 (0.2)
Net
tangible 9.80
asset
value
per
share
Notes:
The financial effects are indicative only and have been based on the assumptions
set out below:
1 The "Before the Schemes" column reflects the published Altron unaudited and
unreviewed financial results for the six months ended 31 August 2007.
2 The "After the Bytes Scheme only" column has been adjusted for the effects
of the transaction on Altron if only the Bytes Minority Shares were
acquired.
3 The percentage change is calculated on unrounded amounts.
4 The "After the Altech Scheme only" column has been adjusted for the effects
of the transaction on Altron if only the Altech Minority Shares were
acquired.
5 The "After the Bytes and Altech Schemes" column has been adjusted for the
effects of the transaction on Altron if both the Bytes and Altech Minority
Shares were acquired.
6 For the purposes of calculating headline earnings per share and basic
earnings per share "after the scheme" for the six months ended 31 August
2007 if all of the Altech and Bytes Minority Shareholders elect the
Participating Preference Share Consideration, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 1 March 2007;
* the Altech Scheme consideration is settled through the issue of 69,817,234
Altron participating preference shares with effect from 1 March 2007 to the
Altech Minority Shareholders;
* the Bytes Scheme consideration is settled through the issue of 32,665,228
Altron participating preference shares with effect from 1 March 2007 to the
Bytes Minority Shareholders;
* the portion of Altech earnings that was previously attributable to the
Altech Minority Shareholders has been earned by Altron for the six months
ended 31 August 2007;
* the portion of Bytes earnings that was previously attributable to the Bytes
Minority Shareholders has been earned by Altron for the six months ended 31
August 2007;
* the proposed treatment of Altech share options and share appreciation
rights occurred with effect from 1 March 2007. The acceleration of the
vesting periods resulted in an additional after tax expense of R5.5 million
in the six months ended 31 August 2007; and
* the proposed treatment of Bytes share options and share appreciation rights
occurred with effect from 1 March 2007. The acceleration of the vesting
periods resulted in an additional after tax expense of R5.7 million in the
six months ended 31 August 2007.
7 For the purposes of calculating the net asset value per share and net
tangible asset value per share "after the scheme" at 31 August 2007 if all
of the Altech and Bytes Minority Shareholders elect the Participating
Preference Share Consideration, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 31 August 2007;
* the number of Altron participating preference shares in issue "after the
scheme" has been increased by 69,817,234 with effect from 31 August 2007,
with regards to the Altech Scheme;
* the number of Altron participating preference shares in issue "after the
scheme" has been increased by 32,665,228 with effect from 31 August 2007,
with regards to the Bytes Scheme;
* the premium of R2,596 million arising on the implementation of the Altech
Scheme has been recognised directly in Altron`s equity in accordance with
Altron`s accounting policy on premiums arising on subsequent purchases from
minority interests in subsidiaries;
* transaction costs of R8 million relating to the Altech Scheme have been
included in the premium arising on the Proposed Altech Acquisition;
* the premium of R1,237 million arising on the implementation of the Bytes
Scheme has been recognised directly in Altron`s equity in accordance with
Altron`s accounting policy on premiums arising on subsequent purchases from
minority interests in subsidiaries;
* transaction costs of R8 million relating to the Bytes Scheme have been
included in the premium arising on the proposed Bytes Scheme;
* Altron`s minority shareholders` interests in relation to Altech "after the
scheme" have been reduced by R701 million with effect from 31 August 2007,
to reflect Altron`s increase in shareholding in Altech following the
implementation of the Altech Scheme (these minority interests represent the
value of the net assets acquired in terms of the Altech Scheme);
* Altron`s minority shareholders` interests in relation to Bytes "after the
scheme" have been reduced by R310 million with effect from 31 August 2007,
to reflect Altron`s increase in shareholding in Bytes following the
implementation of the Bytes Scheme (these minority interests represent the
value of the net assets acquired in terms of the Bytes Scheme);
* Altron`s net asset value "after the scheme" has been reduced by R2.3
million at 31 August 2007 as a result of the acceleration of the vesting
period on the Altech Share appreciation rights;
* Altron`s net asset value "after the scheme" has been reduced by R3.6
million at 31 August 2007 as a result of the acceleration of the vesting
period on the Bytes Share appreciation rights; and
* Altron participating preference shares have been issued with effect from 31
August 2007, to the Altech and Bytes Schemes participants at R47.11 per
Altron participating preference share, being the 30 day Volume Weighted
Average Price ("VWAP") on 7 August 2007 the day prior to the Altron
cautionary announcement.
8 For the purposes of calculating headline earnings per share and basic
earnings per share "after the schemes" for the six months ended 31 August
2007 if all of the Altech and Bytes Minority Shareholders elect the
Ordinary Share Consideration, the assumptions were the same as under note
6, except that:
* the Altech Scheme consideration is settled through the issue of 9,788,958
Altron ordinary shares and 59,344,649 Altron participating preference
shares with effect from 1 March 2007 to the Altech Minority Shareholders;
and
* the Bytes Scheme consideration is settled through the issue of 4,579,937
Altron ordinary shares and 27,765,444 Altron participating preference
shares with effect from 1 March 2007 to the Bytes Minority Shareholders.
9 For the purposes of calculating the net asset value per share and net
tangible asset value per share "after the schemes" at 31 August 2007 if
all of the Altech and Bytes Minority Shareholders elect the Ordinary Share
Consideration, the assumptions were the same as under note 7, except that:
* the number of Altron ordinary shares in issue "after the scheme" has been
increased by 9,788,958 and the number of Altron participating preference
shares in issue "after the scheme" has been increased by 59,344,649 with
effect from 31 August 2007, with regards to the Altech Scheme;
* the number of Altron ordinary shares in issue "after the scheme" has been
increased by 4,579,937 and the number of Altron participating preference
shares in issue "after the scheme" has been increased by 27,765,444 with
effect from 31 August 2007, with regards to the Bytes Scheme; and
* Altron ordinary shares have been issued with effect from 31 August 2007, to
the Altech and Bytes Minority Shareholders at R50.40 per Altron ordinary
share, being a 7% premium to the participating preference share 30 day VWAP
on 7 August 2007 the day prior to the Altron cautionary announcement.
3.4.2 Pro forma financial effects for the 12 month period ended 28 February
2007
All Altech and Bytes Minority Shareholders elect the Participating
Preference Share Consideration
Before Afte Chang Afte Chang After Chang
the r e3 r e3 the e3
Scheme the the Bytes
s Byte Alte and
s ch Altech
Sche Sche Scheme
me me s 5
only only
Squa 4
red
(R) (R) (%) (R) (%) (R) %
Headline 2.83 2.80 6(1.2) 2.74 6 (3.1)
earnings per 2.72 (3.9)
share
Earnings per 2.87 2.75 6(4.1) 2.77 6 (3.6) (6.8)
share 2.67
All Altech and Bytes Minority Shareholders elect the Ordinary Share
Consideration
Before Afte Chang Afte Chang After Chang
the r e3 r e3 the e3
Scheme the the Bytes
s Byte Alte and
s ch Altech
Sche Sche Scheme
me me s 5
only only
Squa 4
red
(R) (R) (%) (R) (%) (R) %
Headline 2.83 2.80 7(1.1) 2.75 7 (2.9)
earnings per 2.73 (3.7)
share
Earnings per 2.87 2.76 7(4.0) 2.77 7 (3.4) (6.6)
share 2.68
Notes:
There is no change in the net asset value and net tangible asset value
calculations from those set out above. The financial effects are indicative
only and have been based on the assumptions set out below:
1 The "Before the Schemes" column reflects the published Altron audited
financial results for the year ended 28 February 2007.
2 The "After the Bytes Scheme only" column has been adjusted for the effects
of the transaction on Altron if only the Bytes minority shares were
acquired.
3 The percentage change is calculated on unrounded amounts.
4 The "After the Altech Scheme only" column has been adjusted for the effects
of the transaction on Altron if only the Altech Minority Shares were
acquired.
5 The "After the Bytes and Altech Schemes" column has been adjusted for the
effects of the transaction on Altron if both the Bytes and Altech Minority
Shares were acquired.
6 For the purposes of calculating headline earnings per share and basic
earnings per share "after the schemes" for the year ended 28 February if
all of the Altech and Bytes Minority Shareholders elect the Participating
Preference Share Consideration, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 1 March 2006;
* the Altech Scheme consideration is settled through the issue of 69,817,234
Altron participating preference shares with effect from 1 March 2006 to the
Altech Minority Shareholders;
* the Bytes Scheme consideration is settled through the issue of 32,665,228
Altron participating preference shares with effect from 1 March 2006 to the
Bytes Minority Shareholders;
* the portion of Altech earnings that was previously attributable to the
Altech Minority Shareholders has been earned by Altron for the year ended
28 February 2007;
* the portion of Bytes earnings that was previously attributable to the Bytes
Minority Shareholders has been earned by Altron for the year ended 28
February 2007;
* the proposed treatment of Altech share options and share appreciation
rights occurred with effect from 1 March 2006. The acceleration of the
vesting periods resulted in an additional after tax expense of R6.2 million
in the year to 28 February 2007.
* the proposed treatment of Bytes share options and share appreciation rights
occurred with effect from 1 March 2006. The acceleration of the vesting
periods resulted in an additional after tax expense of R6.4 million in the
year to 28 February 2007.
7 For the purposes of calculating headline earnings per share and basic
earnings per share "after the schemes" for the year ended 28 February 2007
if all of the Altech and Bytes Minority Shareholders elect the Ordinary
Share Consideration, the assumptions were the same as under note 6, except
that:
* the Altech Scheme consideration is settled through the issue of 9,788,958
Altron ordinary shares and 59,344,649 Altron participating preference
shares with effect from 1 March 2007 to the Altech Minority Shareholders;
and
* the Bytes Scheme consideration is settled through the issue of 4,579,937
Altron ordinary shares and 27,765,444 Altron participating preference
shares with effect from 1 March 2007 to the Bytes Minority Shareholders.
3.5 Pro forma financial effects of the Proposed Altech Acquisition on the
Altech shareholders
3.5.1 Pro forma financial effects for the 6 month period ended 31 August
2007
The tables below illustrate the unaudited pro forma financial effects of the
transaction based on the published unaudited unreviewed interim results for the
six months ended 31 August 2007 and the audited financial results for the 12
months ended 28 February 2007. The preparation of the unaudited pro forma
financial effects is the responsibility of the directors of Altech. The
unaudited pro forma financial effects have been prepared for illustrative
purposes only to provide information on how the transaction may have impacted on
Altron`s results and financial position and due to the nature thereof may not
give a fair reflection of Altech`s results and financial position.
An Altech Minority Shareholder receives the Participating
Preference Share Consideration
Financial Before After the Change After Change
information the Altech 3 the 3
Scheme Scheme Altech
onlySquared and
Bytes
Schemes
4
(R) (R) (%) (R) %
Headline 2.20 2.76 5 25.3 23.1
earnings per 2.71
share
Earnings per 1.72 2.52 5 46.7 44.3
share 2.48
Net asset 17.34 20.91 6 20.6 18.0
value per 20.47
share
Net tangible 14.43 16.88 6 17.0 16.2
asset value 16.77
per share
An Altech Minority Shareholder receives the Ordinary Share
Limit
Financial Before After the Change After Change
information the Altech 3 the 3
Scheme Scheme Altech
onlySquared and
Bytes
Schemes
4
(R) (R) (%) (R) %
Headline 2.20 2.58 7 17.3 15.3
earnings per 2.54
share
Earnings per 1.72 2.36 7 37.4 35.2
share 2.33
Net asset 17.34 19.58 8 12.9 10.6
value per 19.18
share
Net tangible 14.43 15.80 8 9.5 8.9
asset value 15.72
per share
Notes:
The financial effects are indicative only and have been based on the assumptions
set out below:
1 The "Before the Scheme" column reflects the published Altech unaudited and
unreviewed interim financial results for the six months ended 31 August
2007.
2 The "After the Altech Scheme only" column reflects the Altron published
unaudited and unreviewed interim financial results for the six months ended
31 August 2007 and has been adjusted for the effects of the transaction on
Altech Minority Shareholders if only the Altech Minority Shares were
acquired.
3 The percentage change is calculated on unrounded amounts.
4 The "After the Altech and Bytes Schemes" column reflects the Altron
published unaudited and unreviewed interim financial results for the six
months ended 31 August 2007 and has been adjusted for the effects of the
transaction on Altech Minority Shareholders if both the Altech and Bytes
Minority Shares were acquired.
5 For the purposes of calculating headline earnings per share and basic
earnings per share "after the scheme" for the six months ended 31 August
2007 if the applicable scheme is settled entirely with Altron participating
preference shares, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 1 March 2007;
* the Altech Scheme consideration is settled through the issue of 69,817,234
Altron participating preference shares with effect from 1 March 2007 to the
Altech Minority Shareholders;
* the Bytes Scheme consideration is settled through the issue of 32,665,228
Altron participating preference shares with effect from 1 March 2007 to the
Bytes Minority Shareholders;
* the portion of Altech earnings that was previously attributable to the
Altech Minority Shareholders has been earned by Altron for the six months
ended 31 August 2007;
* the portion of Bytes earnings that was previously attributable to the Bytes
Minority Shareholders has been earned by Altron for the six months ended 31
August 2007;
* the proposed treatment of Altech share options and share appreciation
rights occurred with effect from 1 March 2007. The acceleration of the
vesting periods resulted in an additional after tax expense of R5.5 million
in the six months to 31 August 2007; and
* the proposed treatment of Bytes share options and share appreciation rights
occurred with effect from 1 March 2007. The acceleration of the vesting
periods resulted in an additional after tax expense of R5.7 million in the
six months to 31 August 2007.
6 For the purposes of calculating the net asset value per share and net
tangible asset value per share "after the scheme" at 31 August 2007 if the
applicable schemes are settled entirely with Altron participating
preference shares, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 31 August 2007;
* the number of Altron participating preference shares in issue "after the
scheme" has been increased by 69,817,234 with effect from 31 August 2007,
with regards to the Altech Scheme;
* the number of Altron participating preference shares in issue "after the
scheme" has been increased by 32,665,228 with effect from 31 August 2007,
with regards to the Bytes Scheme;
* the premium of R2,596 million arising on the implementation of the Altech
Scheme has been recognised directly in Altron`s equity in accordance with
Altron`s accounting policy on premiums arising on subsequent purchases from
minority interests in subsidiaries;
* transaction costs of R8 million relating to the Altech Scheme have been
included in the premium arising on the Proposed Altech Acquisition;
* the premium of R1,237 million arising on the implementation of the Bytes
Scheme has been recognised directly in Altron`s equity in accordance with
Altron`s accounting policy on premiums arising on subsequent purchases from
minority interests in subsidiaries;
* transaction costs of R8 million relating to the Bytes Scheme have been
included in the premium arising on the proposed Bytes Sheme;
* Altron`s minority shareholders` interests in relation to Altech "after the
Altech Scheme" has been reduced by R701 million with effect from 31 August
2007, to reflect Altron`s increase in shareholding in Altech following the
implementation of the Altech Scheme (these minority interests represent the
value of the net assets acquired in terms of the Altech Scheme);
* Altron`s minority shareholders` interests in relation to Bytes "after the
Bytes Scheme" has been reduced by R310 million with effect from 31 August
2007, to reflect Altron`s increase in shareholding in Bytes following the
implementation of the Bytes Scheme (these minority interests represent the
value of the net assets acquired in terms of the Bytes Scheme);
* Altron`s net asset value "after the Altech Scheme" has been reduced by R2.3
million at 31 August 2007 as a result of the acceleration of the vesting
period on the Altech share appreciation rights;
* Altron`s net asset value "after the Bytes Scheme" has been reduced by R3.6
million at 31 August 2007 as a result of the acceleration of the vesting
period on the Bytes share appreciation rights; and
* Altron participating preference shares have been issued with effect from 31
August 2007, to the Altech and Bytes Minority Shareholders at R47.11 per
Altron participating preference share being the 30 day VWAP on 7 August
2007, the day prior to the Altron cautionary announcement.
7 For the purposes of calculating headline earnings per share and basic
earnings per share "after the scheme" for the six months ended 31 August
2007 if the schemes are settled 15% with Altron ordinary shares and 85%
with Altron participating preference shares, the assumptions were the same
as under note 5, except that:
* the Altech Scheme consideration is settled through the issue of a maximum
of 9,788,958 Altron ordinary shares and 59,344,649 Altron participating
preference shares being issued with effect from 1 March 2007 to the Altech
Minority Shareholders;
* the Bytes Scheme consideration is settled through the issue of a maximum of
4,579,937 Altron ordinary shares and 27,765,444 Altron participating
preference shares being issued with effect from 1 March 2007 to the Bytes
Minority Shareholders; and
* the financial effects shown are for an Altech Minority Shareholder that
receives the Ordinary Share Limit.
8 For the purposes of calculating the net asset value per share and net
tangible asset value per share "after the scheme" at 31 August 2007 if the
schemes are settled 15% with Altron ordinary shares and 85% with Altron
participating preference shares, the assumptions were the same as under
note 6, except that:
* the number of Altron ordinary shares in issue "after the Altech Scheme" has
been increased by 9,788,958 and the number of Altron participating
preference shares in issue "after the Altech Scheme" has been increased by
59,344,649 with effect from 31 August 2007, with regards to the Altech
Shares;
* the number of Altron ordinary shares in issue "after the Bytes Scheme" has
been increased by 4,579,937 and the number of Altron participating
preference shares in issue "after the Bytes Scheme" has been increased by
27,765,444 with effect from 31 August 2007, with regards to the Bytes
Scheme;
* the financial effects shown are for an Altech Minority Shareholder that
receives the Ordinary Share Limit; and
* Altron ordinary shares have been issued with effect from 31 August 2007, to
the Altech and Bytes Minority Shareholders at R50.40 per Altron ordinary
share being a 7% premium to the Altron participating preference share 30
day VWAP on 7 August 2007, the day prior to the Altron cautionary
announcement.
3.5.2 Pro forma financial effects for the 12 month period ended 28
February 2007
An Altech Minority Shareholder receives the Participating
Preference Share Consideration
Financial Before After the Change After Change
information the Altech 3 the 3
Scheme Scheme Altech
onlySquared and
Bytes
Schemes
4
(R) (R) (%) (R) %
Headline 4.14 4.71 5 13.7 12.7
earnings per 4.66
share
Earnings per 4.10 4.74 5 15.7 11.9
share 4.59
An Altech Minority Shareholder receives the Ordinary Share
Limit
Financial Before After the Change After Change
information the Altech 3 the 3
Scheme Scheme Altech
onlySquared and
Bytes
Schemes
4
(R) (R) (%) (R) %
Headline 4.14 4.41 6 6.4 5.6
earnings per 4.37
share
Earnings per 4.10 4.44 6 8.4 4.9
share 4.30
Notes:
There is no change in the net asset value and net tangible asset value
calculations from those set out above. The financial effects are indicative only
and have been based on the assumptions set out below:
1 The "Before the Scheme" column reflects the published Altech audited
financial results for the year ended 28 February 2007.
2 The "After the Altech Scheme only" column reflects the published Altron
audited financial results for the year ended 28 February 2007 and has been
adjusted for the effects of the transaction on Altron if only the Altech
Minority Shares were acquired.
3 The percentage change is calculated on unrounded amounts.
4 The "After the Altech and Bytes Schemes" column reflects the Altron audited
financial results for the year ended 28 February 2007 and has been adjusted
for the effects of the transaction on Altron if both the Altech and Bytes
Minority Shares were acquired.
5 For the purposes of calculating headline earnings per share and basic
earnings per share "after the scheme" for the year ended 28 February 2007
if the scheme is settled entirely with Altron participating preference
shares, it was assumed that:
* the Altech and Bytes Schemes became operational and were implemented in
full with effect from 1 March 2006;
* the Altech Scheme consideration is settled through the issue of 69,817,234
Altron participating preference shares with effect from 1 March 2006 to the
Altech Minority Shareholders;
* the Bytes Scheme consideration is settled through the issue of 32,665,228
Altron participating preference shares with effect from 1 March 2006 to the
Bytes Minority Shareholders;
* the portion of Altech earnings that was previously attributable to the
Altech Minority Shareholders has been earned by Altron for the year ended
28 February 2007;
* the portion of Bytes earnings that was previously attributable to the Bytes
Minority Shareholders has been earned by Altron for the year ended 28
February 2007;
* the proposed treatment of Altech share options and share appreciation
rights occurred with effect from 1 March 2006. The acceleration of the
vesting periods resulted in an additional after tax expense of R6.2 million
in the year to 28 February 2007; and
* the proposed treatment of Bytes share options and share appreciation rights
occurred with effect from 1 March 2006. The acceleration of the vesting
periods resulted in an additional after tax expense of R6.4 million in the
year to 28 February 2007.
6 For the purposes of calculating headline earnings per share and basic
earnings per share "after the scheme" for the year ended 28 February 2007
if the applicable scheme is settled 15% with Altron ordinary shares and 85%
with Altron participating preference shares, the assumptions were the same
as under note 5, except that:
* the Altech Scheme consideration is settled through the issue of a maximum
of 9,788,958 Altron ordinary shares and 59,344,649 Altron participating
preference shares with effect from 1 March 2006 to the Altech Minority
Shareholders;
* the Bytes Scheme consideration is settled through the issue of a maximum of
4,579,937 Altron ordinary shares and 27,765,444 Altron participating
preference shares with effect from 1 March 2006 to the Bytes Minority
Shareholders; and
* the financial effects shown are for an Altech Minority Shareholder that
receives the Ordinary Share Limit.
3.5.3 Market information with respect to the Altech Scheme
An Altech An Altech
Minority Minority
Shareholder Shareholder
receives the receives the
Participating Ordinary Share
Preference Limit
Share
Consideration
Market After Premium After Premium
information Before the the
the Altech Altech
Scheme Scheme Scheme
1 2
(R) (R) % (R) %
Market value 62.49 77.80 24.5 72.71 16.4
per Share pre-
cautionary
30 day VWAP pre- 62.65 80.82 29.0 75.53 20.6
cautionary
60 day VWAP pre- 64.97 81.59 25.6 76.26 17.4
cautionary
Notes:
The financial effects are indicative only and have been based on the assumptions
set out below:
1 On the assumption that an Altech Minority Shareholder receives the
Participating Preference Share Consideration, the market value in the
"After the Altech Scheme" column is calculated by multiplying the switch
ratio of 1.71561 by the Altron participating preference share price at that
time.
2 On the assumption that an Altech Minority Shareholder receives the Ordinary
Share Limit, the market value in the "After the Altech Scheme" column is
calculated by multiplying of the switch ratio of 1.60337 by the Altron
participating preference share price at that time. This switch ratio
results from the ordinary shares being issued at a 7% premium to the Altron
participating preference share 30 day VWAP on 7 August 2007.
3 The Altron participating preference shares rank pari passu to the Altron
ordinary shares in terms of both earnings and dividends as well as on
residual assets on a winding-up and have no vote except in certain
restricted and defined circumstances where they are entitled to one two
hundredth of a vote.
Historically the Altron ordinary shares have traded at an approximate 7%
premium to the Altron participating preference shares.
4 In addition it was assumed that there will be no changes to the Altron
participating preference share price as a result of the Altech Scheme.
4. CONDITIONS PRECEDENT
The Proposed Altech Acquisition is subject to the fulfillment of the following
conditions precedent:
* the Altech Scheme being approved at the scheme meeting by a majority
representing not less than three-fourths of the votes exercisable by the
Altech Minority Shareholders present and voting, either in person or by
proxy, or by representative, at the scheme meeting;
* the Altech Scheme being sanctioned by the High Court of South Africa
(Witwatersrand Local Division) ("the Court");
* a certified copy of the order of Court sanctioning the Altech Scheme being
lodged with, and registered by the Companies and Intellectual Property
Registration Office of South Africa;
* the listing of the Altron Shares to be issued in terms of Proposed Altech
Acquisition being approved by the JSE; and
* the Altron ordinary resolutions approving the issue of Altron Shares to
satisfy the consideration due to Altech Minority Shareholders as well as to
the Altech share incentive schemes to enable them to participate in the
Altech Scheme as required in terms of the Act, being duly passed at the
Altron general meeting in accordance with the Act (the "Altron
Resolutions").
5. ALTECH`S INDEPENDENT ADVISOR`S OPINION
The Altech Board of Directors ("the Board"), in complying with its
responsibilities in terms of the Securities Regulation Code on Takeovers and
Mergers, has appointed Nedbank Capital, a division of Nedbank Limited ("Nedbank
Capital") to act as independent advisors to the Board. Nedbank Capital has been
asked by the Board to provide an opinion as to whether the terms and conditions
of the Proposed Altech Acquisition are fair and reasonable to the Altech
Minority Shareholders. The Board formed an independent sub-committee ("the
Committee") consisting of Dr HK Davies, CG Venter, Dr JEW Carstens, PMO Curle,
ML Leoka, R Naidoo and Dr EN Banda to consider Nedbank Capital`s opinion and
advised the Board regarding whether or not the Board should recommend the
Proposed Altech Acquisition to the Altech Minority Shareholders. The Committee
considered the terms and conditions of the Altech Scheme and the opinion of
Nedbank Capital. The Committee is of the opinion that the Altech Scheme is fair
and reasonable to Altech Minority Shareholders and has voted in favour thereof.
Messrs Venter and Curle who are directors of Altron and Altech recused
themselves from voting on the matter. Full details of the terms and conditions
of the Proposed Altech Acquisition, and the Board`s recommendations to Altech
Minority Shareholders are set out in the circular and the Altech Scheme document
addressed to Altech shareholders, to be dated on or about 7 November 2007.
The Nedbank Capital opinion is based on the current economic, market, regulatory
and other conditions and the information made available to Nedbank Capital by
the management of Altech, Altron and Bytes up to 22 October 2007. Accordingly,
subsequent developments may affect this opinion, which Nedbank Capital is not
under obligation to update, revise or re-affirm.
Based upon Nedbank Capital`s analysis, subject to the foregoing and after taking
into account all financial and non-financial considerations, Nedbank Capital is
of the opinion that the terms and conditions in respect of the Proposed Altech
Acquisition are fair and reasonable to Altech shareholders as at 22 October
2007.
6. DOCUMENTATION AND SALIENT DATES
A circular, containing full details of the Altron Resolutions, will be posted to
Altron shareholders within approximately 28 days.
A circular, containing full details of the Altech Scheme, will be posted to
Altech shareholders within approximately 30 days.
A further announcement setting out salient dates of the Proposed Altech
Acquisition will be made in due course.
7. WITHDRAWAL OF ALTRON AND ALTECH CAUTIONARY ANNOUNCEMENTS
Altron and Altech shareholders are advised that the cautionary announcements
referred to in paragraph 1 above are hereby withdrawn
Sandton
24 October 2007
Investment Bank to the transaction
Investec Bank Limited
(Registration number 1969/004763/06)
Sponsor to Altron and Altech
Investec Bank Limited
(Registration number 1969/004763/06)
Legal advisor to Altron and attorneys to the Schemes
Edward Nathan & Sonnenbergs Inc.
(Registration number 2006/018200/21)
Legal advisor to Altech
HR Levin Attorneys, Notaries & Conveyancers
(Practice number M2841)
Independent advisor to Altech
Nedbank Capital, a division of Nedbank Limited
(Registration number 1969/010630/06)
Reporting accountants to Altron
KPMG Inc.
(Registration number 1999/21543/21)
Reporting accountants to Altech
PKF (Jhb) Inc.
(Registration number 1994/001166/21)
Date: 24/10/2007 14:50:38 Produced by the JSE SENS Department.
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