| Thu 29 Nov 2007, 15:14 | | HUG - Huge Group Limited - Detailed cautionary ann |
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HUG
HUG
HUG - Huge Group Limited - Detailed cautionary announcement
HUGE GROUP LIMITED
(formerly Vanquish Fund Managers Limited)
(Registration number 2006/023587/06)
Share code: HUG & ISIN: ZAE000102042
("Huge" or "the Company")
DETAILED CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the previous cautionary announcement dated 9
November 2007 and are advised that Huge has entered into a binding Offer to
Purchase Shares Agreement ("the Agreement") with the Bebinchand Seevnarayan
Trust ("the Trust") for the acquisition of 59% of iTalk Cellular (Proprietary)
Limited ("iTalk")("the Transaction").
2. CONSIDERATION
The total consideration for the Transaction is the delivery of 93 000 000
ordinary shares in Huge at an issue price of 550 cents per share.
In order to maintain an orderly market for the ordinary shares of Huge, the
Trust has agreed that it will grant Huge the right to acquire the Huge
ordinary shares to be issued and delivered to the Trust as payment for the
purchase consideration, in the event that the Trust wishes to dispose of such
shares ("the Call Option").
In addition, Huge will grant the Trust the right but not the obligation to
sell its shares in Huge to the Company ("the Put Option"), which Huge ordinary
shares the Company is obliged to acquire.
In order to provide security for the payment of the purchase price of the Huge
ordinary shares forming part of the Call Option and Put Option referred to
above, Huge has obtained debt funding from Investec Private Bank, a division
of Investec Bank Limited, and equity funding from Praesidium Capital
Management (Proprietary) Limited, being an existing shareholder of Huge. The
debt component of the funding amounts to R261.5mn and the equity component
amounts to R80mn. As such the Transaction is fully funded.
3. NATURE OF THE BUSINESS OF ITALK
iTalk is a consumer and SME focused cellular Service Provider holding an MTN
SA (Proprietary) Limited ("MTNSA") service provider license agreement.
In addition, iTalk is a national business operating predominantly from Kwa-
Zulu Natal where it has four outlets, and a 4000 m2 head office located in
Durban. It also has three outlets in Cape Town and three in Gauteng.
iTalk sells both directly through iTalk Direct and through a reseller
distribution channel that includes dealers that operate on a "store within a
store" concept.
4. RATIONALE
In keeping with the future strategy of the company, the directors of Huge have
identified various growth opportunities within the telecommunications market.
iTalk fits perfectly with the vision of Huge to leverage its brand and
increase its points of presence throughout South Africa and augments a strong
corporate-based managed telecommunications business with that of a consumer
related telecommunications business with strong brand credentials. The
annuity revenue base and earnings of Huge is expected to be enlarged by the
transaction with iTalk.
iTalk does not focus on the cellular least cost routing (CLCR) industry and as
such the business of iTalk will complement the existing business of Huge, as
well as assist in diversifying certain business risks of Huge relating to
mobile termination rates.
iTalk will facilitate aggressive growth by Huge in Kwa-Zulu Natal where the
presence of Huge in the corporate market is modest.
The presence of Huge in the Cape Province and Gauteng is significant and this
is expected to assist iTalk in gaining significant market share in these
areas.
5. CONDITIONS PRECEDENT
The Transaction remains subject to a number of suspensive conditions:
* The conclusion of a due diligence by Huge of the business of iTalk;
* The conclusion of a comprehensive sale agreement in respect of the
shares and claims;
* The consent of MTNSA to the change in control of iTalk;
* Final and unconditional approval for the implementation of the
Transaction in terms of the Competition Act, 89 of 1998; and
* All other statutory or regulatory approvals as may be necessary,
including the approval of the JSE.
6. DOCUMENTATION
In terms of the Listings Requirements of the JSE Limited, the Transaction is
regarded as a Category 1 transaction that will require shareholder approval by
way of a circular to be sent to shareholders. Shareholders will be advised on
SENS within due course.
7. FURTHER CAUTIONARY ANNOUNCEMENT
Further announcements will be made on SENS as soon as the financial effects of
the Transaction are finalized and any of the suspensive conditions have been
fulfilled or waived, as the case may be. Accordingly, shareholders are
advised to continue to exercise caution when dealing in their Huge shares.
Woodmead
29 November 2007
Designated advisor
Arcay Moela Sponsors (Pty) Limited
Date: 29/11/2007 15:14:01 Produced by the JSE SENS Department.
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