| Wed 16 Jan 2008, 16:21 | | CVN - Convergenet Holdings - Acquisition And Withdrawal Of Cautionary |
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CVN
CVN
CVN - Convergenet Holdings - Acquisition And Withdrawal Of Cautionary
Announcement
CONVERGENET HOLDINGS LIMITED
(formerly Vestor Investments Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1998/015580/06)
Share code: CVN ISIN: ZAE000102067
("ConvergeNet" or "the Company")
ACQUISITION OF FUTURE CELL (PROPRIETARY) LIMITED ("Future Cell") AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
ACQUISITION OF FUTURE CELL
Introduction
Further to the cautionary announcement on 7 December 2007, shareholders
are advised that ConvergeNet has negotiated the conclusion of an
agreement dated 7 December 2007 in terms of which ConvergeNet will
acquire, from Peter Johnson, Mike Morris and Paul Potter (the
"Vendors"), 74% of the issued share capital in and claims against,
Future Cell ("the Acquisition").
Background to Future Cell
Future Cell is a focused mobile telecommunications company with a good
market share in the pre-paid distribution business. The company is
characterized by good systems, processes and skills in this market.
Future Cell employs 23 people and currently distributes its pre paid
products in a number of provinces country-wide.
Rationale
The acquisition of Future Cell by ConvergeNet is in line with the
Group`s strategy to acquire appropriate vehicles through which to
achieve its vision of positioning ConvergeNet as a significant ICT
industry player.
The group will also benefit from the annuity profile of Future Cell`s
income. ConvergeNet regards the Future Cell`s pre-paid distribution
technologies and skills as strategic in emerging markets.
The Future Cell management team will continue to manage the company.
The acquisition of Future Cell will enhance ConvergeNet`s earnings and
will provide good opportunities for organic growth.
Terms of the Acquisition
The effective date of the acquisition is 01 January 2008. The purchase
consideration price payable to the Vendors for the Future Cell Equity
and Claims, is R68 376 000 and is to be discharged by ConvergeNet
through the issue of 31 048 276 new ConvergeNet shares at 87 cents per
share to the Vendors and a cash payment of R41 364 000 to the vendors.
Cash will be raised through a vendor placing of 47 544 827 new
ConvergeNet shares at 87 cents per share.
The acquisition is subject to the following conditions:
- the approval of the acquisition by the Competition Commission in
terms of the Competition Act 1998 (Act No. 89 of 1998);
- the approval of Regulatory Authorities in terms of the JSE Listings
Requirements for the conclusion and implementation of the acquisition;
- the conclusion of a due diligence investigation to the satisfaction
of ConvergeNet; and
- the signing of a shareholders` agreement between the parties before
15 February 2008.
The acquisition is subject to the normal terms and warranties usual for
a transaction of the nature contemplated.
Subject to the implementation of the acquisition, Future Cell`s Articles
of Association will be amended to conform to the Articles of Association
of a listed Company in terms of the JSE Listings Requirements.
Pro forma financial effects
Set out in the table below are the pro forma financial effects of the
Future Cell acquisition, which have been prepared for illustrative
purposes only, to provide information about how the Future Cell
acquisition might have affected the financial information, presented.
The pro forma financial effects, because of its nature, may not give a
true reflection of the financial position, the cash flow position, the
results of operations or the changes in equity of ConvergeNet.
Before the Future After the Future Percentage
Cell Cell change
acquisition acquisition
(cents per share) (cents per share) (%)
Earnings 2.37 (i) 2.66 (i) 12.1%
Headline earnings 2.46 (ii) 2.73 (ii) 10.8%
Net asset value 19.64 (iii) 27.49 (iii) 40.0%
Tangible net asset
value 4.39 (iv) 4.38 (iv) -0.2%
Notes:
(i) The earnings and headline earnings per ConvergeNet share, as set
out in the "Before" column of the table, are based on the audited
financial results of ConvergeNet for the twelve months ended 31 August
2007 and 259, 469, 863 weighted average number of ConvergeNet shares in
issue.
(ii) The earnings and headline earnings per ConvergeNet share, as set
out in the "After" column of the tab le, are based upon the audited
financial results of ConvergeNet for the twelve months ended
31 August 2007 including the audited financial results of Future Cell
for the twelve months ended 30 June 2007 form which the unaudited
results of Future Cell for the two months ended 31 August 2006 as per
management accounts were deducted and the unaudited results of Future
Cell for the two months ended 31 August 2007 as per management accounts
were added, and 338,062,966 weighted average number of ConvergeNet
shares in issue and the assumptions that:
- The Future Cell acquisition was effective from 1 September 2006;
- The Purchase Price of R68 376 000 was settled on 1 September 2006
through the issue of 78 593 103 new ConvergeNet shares at 87 cents;
- There were no additional costs incurred relating to the Future Cell
acquisition; and
- There were no impairment of the goodwill arising from the Future
Cell acquisition.
iii) The net asset value and tangible net asset value per ConvergeNet
share, as set out in the "Before" column of the table, are based upon
the audited Balance Sheet of ConvergeNet at 31 August 2007 and 595 812
786 ConvergeNet shares in issue.
iv) The net asset value and tangible net asset value per ConvergeNet
share, as set out in the "After" column of the table, are based upon the
audited Balance Sheet of ConvergeNet at 31 August 2007, including the
unaudited Balance Sheet of Future Cell at 31 August 2007 as per
management accounts, and 674 405 889 ConvergeNet shares in issue and the
assumptions that:
- The Future Cell acquisition was effective 31 August 2007;
- The 78 593 103 shares were issued at 87 cents per ConvergeNet
share; and
The Purchase Price was settled on 31 August 2007.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement is now withdrawn following the publishing of
financial information and pro forma financial effects.
Johannesburg
16 January 2008
Sponsors
Arcay Moela Sponsors (Proprietary) Limited
Date: 16/01/2008 16:21:04 Produced by the JSE SENS Department.
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