| Mon 25 Feb 2008, 12:24 | | CVN - Convergenet - Acquisition of additional interest in structured |
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CVN
CVN
CVN - Convergenet - Acquisition of additional interest in structured
Connectivity Solutions (Proprietary) Limited ("SCS")
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 ADDITIONAL INTEREST IN STRUCTURED CONNECTIVITY SOLUTIONS
(PROPRIETARY) LIMITED ("SCS")
Introduction
On 26 April 2007, shareholders were advised of the acquisition of 51% of the
issued share capital in and claims against SCS, which acquisition was approved
by shareholders in general meeting. Shareholders are now advised that
ConvergeNet has negotiated the conclusion of an agreement dated 25 January 2008
in terms of which ConvergeNet will acquire, from David Braine (the "Vendor"), an
additional 19% of the issued share capital in and claims against, SCS ("the
Acquisition"). The Vendor is a related party to ConvergeNet.
Background to SCS
SCS was established in January 2002 as a full solutions information technology
Company dedicated to the consultancy, design and turnkey project management of
business IT solutions. These solutions include all ICT Infrastructure projects,
including multi service network solutions, facilities for ICT environments,
environmental control and monitoring solutions for ICT facilities and support
and maintenance thereof.
Many of South Africa`s leading companies, state and para-state organisations are
amongst SCS customers. SCS is comprised of experienced industry specialists
with core competency in account management, design consultancy and turnkey
project management.
Terms of the Acquisition
The effective date of the Acquisition is 01 September 2008. The purchase
consideration price payable to the Vendor for the SCS Equity and Claims is R13
239 687, and is to be discharged by ConvergeNet through the issue of 15 818 024
new ConvergeNet shares at 84 cents per share to the Vendor.
The Acquisition is subject to the following conditions precedent;
* the approval of the Acquisition, if required, by various Regulatory
Authorities and in terms of the JSE Listing Requirements for the conclusion
and implementation of the Acquisition by no later than 15 February 2008;
and
The Acquisition is subject to the normal terms and warranties usual for a
transaction of the nature contemplated. Goodwill and other intangibles
amounting to R11 266 888 will arise on the Acquisition.
Pro form financial effects of the acquisition
The table below summarises the financial effects of the acquisition on the
audited financial statements for the year ended 31 August 2007. The financial
effects are the responsibility of the directors and have been prepared for
illustrative purposes only, to show the possible financial effect if the
acquisition had been effective on 01 September 2006 for income statement
purposes and as at 31 August 2007 for balance sheet purposes. The pro forma
financial effects, because of their nature, may not give a true reflection of
the financial position, the statement of changes in equity, the results of
operations or cash flows of ConvergeNet.
Before After % Change
Weighted average shares in 259 470 275 288 6.1%
issue (`000)
Earnings per share 2.37 3.12 31.8%
ordinary share (cents)
Headline earnings per 2.46 3.21 30.4%
ordinary share (cents)
Shares in issue at period 595 813 611 631 2.7%
end (`000)
Net asset value per share 19.64 21.29 8.4%
(cents)
Net tangible asset value 4.39 4.60 4.8%
per share (cents)
Assumptions:
1. The "Before" column is extracted from the company`s published audited
results for the year ended 31 August 2007.
2. The "After" column shows the pro forma effects of an increased shareholding
by 19%, up to 70%, of SCS as though the acquisition of the additional 19%
shareholding had been in effect from 01 September 2006. The SCS results
have been based on the 6 months to 31 August 2007, which have been
annualised, as this is considered to be more representative of the business
going forward.
3. No amortisation of intangibles or impairment of goodwill has been assumed.
4. The shares issued for the consideration are assumed to have been issued as
at 01 September 2006.
Rationale
The Group intends delivering turnkey project solutions, ancillary support and
managed services to the Middle Eastern, African and southern African markets.
The acquisition of an additional interest in SCS is in line with the Group`s
strategy to acquire appropriate vehicles with which to achieve its vision of
positioning itself as a significant ICT industry player. SCS was acquired for,
amongst others, its ICT Infrastructure project and multi discipline project
management and solutions competence, and forms part of the Group`s turnkey
project business.
Fairness opinion
The acquisition is defined as a small related party transaction in terms of the
JSE Listings Requirements and accordingly a fairness opinion on the transaction
is required. The company has appointed Arcay Moela Sponsors (Proprietary)
Limited to act as a professional expert for this opinion, which opinion will lie
for inspection at the company`s registered office from 25 February 2008.
Johannesburg
25 February 2008
Sponsors
Arcay Moela Sponsors
(Proprietary) Limited
Date: 25/02/2008 12:24:01 Produced by the JSE SENS Department.
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