| Mon 11 Feb 2008, 15:32 | | SLO - Southern Electricity Company - Acquisition, Reverse Take-Over And |
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SLO
SLO
SLO - Southern Electricity Company - Acquisition, Reverse Take-Over And
Cautionary Announcement
Southern Electricity Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/006894/06)
Share code: SLO ISIN: ZAE000041919
("SELCo" or "the company")
ACQUISITION, REVERSE TAKE-OVER AND CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement dated 7 January 2008, shareholders are
advised that SELCo has entered into an agreement dated 9 February 2008 to
acquire the entire issued share capital of Rural Maintenance (Pty) Limited
("Rural Maintenance") and Netelek UK Limited ("Netelek UK"), as well as 49% of
the issued share capital of Netelek Holdings (Pty) Limited ("Netelek") from
Resource Management Integration Group (Pty) Limited ("REMIG") ("the
acquisition") for a total consideration of R 320 million ("the acquisition
consideration").
2. Nature of the businesses acquired
Rural Maintenance
Rural Maintenance is a successful local African utility solutions provider,
specialising in the electricity management, metering, billing and revenue
fields. It has successfully operated in Nigeria, Uganda and Mozambique and at
present is focused on expanding its operations in the South African market.
Rural has supported SELCo in Namibia since inception with management services
and logistic support. In South Africa Rural Maintenance inter alia renders
electricity related services pertaining to the metering, monitoring, invoicing
and collection of electricity consumption of tenants in large property
portfolios such as those owned by ApexHi Properties Ltd, Redefine Income Fund
Ltd and Dipula Properties Ltd. These services are based on long term (10-12
year) contracts which provide peace of mind to landlord and service provider
alike. Rural also actively assists landlords to implement energy efficient
strategies and measures and is pursuing environmentally sound programs aimed at
providing renewable electricity to properties in the long term.
Netelek
Netelek`s core business is related to the design and supply of SCADA
(supervisory control and data acquisition), load control, monitoring / metering
systems to medium municipalities throughout South Africa of which Klerksdorp,
Potchefstroom, Empangeni, Robertson and Ceres are all satisfied users of
Netelek`s SCADA systems. Furthermore, Netelek supplies QOS instruments to ESKOM
under the ESKOM National Contract. Netelek also supplies to the commercial
sector and supplied a complete grid metering and monitoring system to various
major Shoprite Checkers stores and complexes. Various major organisations have
entered into agreements with Netelek to provide management and reconciliation
systems. Netelek owns the metering equipment and related software utilised in
rendering electricity related services in terms of the ApexHi, Redefine and
Dipula Agreements.
Netelek UK has recently been established and is focused on the provision and
operation of electricity management systems for the property industry in the
United Kingdom.
3. Rationale for the acquisition
One of the primary objectives of this agreement is to improve corporate
governance by bringing under the SELCo umbrella the related parties with whom
SELCo contracts on a regular basis in the delivery of its services.
SELCo is actively seeking to increase its business outside of the Namibian
marketplace to mitigate the potential risks associated with a single country
revenue source. SELCo`s strategic intent is to grow its revenue streams through
acquiring or organically growing electricity distribution businesses. The
business of Rural Maintenance fall within the company`s core expertise and the
transaction presents an opportunity to secure long-term proven revenue streams.
The proposed acquisition is expected to:
- Increase critical mass,
- Spread political risk,
- Enhance employee security, and
- Increase value for shareholders.
SELCO`s purchase of Netelek UK allows for the expansion of SELCo`s services into
the European market which has been deregulated, resulting in the possible
implementation of a similar model as is currently operated in South Africa.
By acquiring a 49% stake in Netelek, SELCo will ensure access to the technology
utilised in the metering and invoicing of the electricity consumption of tenants
in terms of the ApexHi, Redefine and Dipula Agreements, as well as a
participation in the royalty revenue stream which emanates there from. This also
applies to the technology employed by SELCo in Namibia.
4. Terms of the acquisition
4.1 Acquisition consideration
In terms of the agreement, the acquisition consideration payable amounts to R320
million which is payable after all conditions precedent have been fulfilled.
The acquisition consideration will be settled through an issue of 640 000 000
SELCo shares to REMIG for a consideration of 50 cents per share.
4.2 Conditions precedent
The implementation of the formal agreements will be subject to the fulfilment of
the following conditions precedent:
- the securing of the requisite SELCo shareholder approval for the
Transaction;
- the securing of the approval of the board of directors of REMIG for the
Transaction;
- the securing of the approval of the boards of directors of REMIG, Rural
Maintenance (Pty) Ltd, Rural Maintenance Namibia (Pty) Ltd and RMMS
Consulting (Pty) Ltd for the unbundling of the 92.41% of the issued shares
presently held indirectly by REMIG in RMMS Investments (Pty) Ltd, resulting
in a direct holding by REMIG of the said 92.41% shares;
- the securing of the approval of the boards of directors of REMIG and Rural
Maintenance (Pty) Ltd for the unbundling of the issued shares presently
wholly indirectly held by REMIG in Lange Street 157 (Pty) Ltd, resulting in
a direct holding by REMIG of the said shares;
- that SELCo successfully completes a due diligence on the Target Companies
with specific emphasis on potential liabilities and Rural Maintenance`s
financial statements; and
- the securing of all regulatory approvals including that of the JSE and the
Competition Commission to the extent required.
5. 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.
6. Related Party transaction
REMIG through its subsidiaries is a material shareholder of SELCo, therefore the
acquisition qualifies as a related party transaction in terms of the Listings
Requirements of the JSE Limited ("Listings Requirements"). As required by the
Listing Requirements, SELCo is in the process of appointing an independent
professional expert to provide an opinion as to whether the terms of the
acquisition are fair. The fairness opinion letter will be incorporated in the
circular to be posted to shareholders in due course.
7. Reverse Take-Over
The implementation of the acquisition will result in a reverse take-over of
SELCo according to the Listings Requirements. In accordance with Section 9.24 of
the Listing Requirements, shareholders are hereby made aware of the uncertainty
of whether or not the JSE will allow the listing to continue following the
acquisition.
8. Pro forma financial effects of the acquisition and Cautionary Announcement
The financial effects of the acquisition on the historical results of SELCo are
in the process of being finalised and a further announcement detailing the
financial effects will be published in due course. As a result shareholders are
advised to exercise caution when trading in SELCo shares until a further
announcement has been made.
9. Circular to shareholders
A circular to shareholders setting out full details of the acquisitions as well
as revised listing particulars and incorporating a notice convening a general
meeting will be circulated to shareholders within 28 days following the date of
this announcement.
Johannesburg
11 February 2008
Sponsor and transaction advisor: Bridge Capital Advisors (Pty) Limited
Date: 11/02/2008 15:32:50 Produced by the JSE SENS Department.
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