| Tue 3 Jun 2008, 10:26 | | SBG - Simeka - Establishment of a joint venture in mobile applications through |
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SBG
SBG
SBG - Simeka - Establishment of a joint venture in mobile applications through
an investment in Adcheck (Pty) Ltd
SIMEKA BUSINESS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: SBG ISIN code: ZAE000074878
("Simeka" or "the company")
ESTABLISHMENT OF A JOINT VENTURE IN MOBILE APPLICATIONS THROUGH AN INVESTMENT IN
ADCHECK (PTY) LTD ("ADCHECK")
INTRODUCTION
Shareholders are advised that Simeka has concluded an agreement in terms of
which it gives effect to its mobile applications strategy by acquiring 50% of
the shares in and claims on loan account against Adcheck (together, the "sale
equity") from the current owners of Adcheck (the "vendors"), namely T B Ahier, A
N Selsick, I A Hoffmann and D Woolnough (the "transaction").
Subject to fulfilment of the condition set out below, the effective date of the
transaction will be 1 April 2008.
BUSINESS OF ADCHECK AND RATIONALE FOR THE TRANSACTION
Adcheck is the leading South African provider of custom developed mobile
applications. The applications are used by customers to automate their field
force processes through "real time" data synchronization utilizing cellphone
and/or other mobile platforms. The applications allow for better in field
tracking, customer relationship management and field management, enabling
Adcheck`s customers to deliver quality service and/or sales through these mobile
devices. Adcheck has more than seven years mobility development experience and
prides itself in delivering true value-add solutions to its clients.
The transaction represents a strategic investment by Simeka intended to launch
the company into the mobility arena, and will further leverage and enhance
Simeka`s technology and outsourced offerings.
THE INVESTMENT PRICE AND RELATED TERMS OF THE TRANSACTION
The Simeka investment in order to acquire the sale equity is initially R5
million which may increase to a maximum amount of no more than R45 million, made
up as follows:
- R5 million invested by Simeka by no later than the end of the month in
which the condition precedent to implementation of the transaction is
fulfilled;
- a further amount payable within 30 days of the approval of the audited
financials of Adcheck for the financial year ended 31 March 2009,
calculated as follows:
- 7 times the audited attributable profits after tax of
Adcheck ("PAT") for that period if the PAT is equal to or less
than R6 million; or
- 7.5 times the audited attributable PAT for that period if the
PAT is greater than R6 million;
- a further cash amount payable within 30 days of the approval of the audited
financials of Adcheck for the financial year ended 31 March 2010 equal to
6.5 times the audited attributable PAT for that period;
- a further cash amount payable within 30 days of the approval of the audited
financials of Adcheck for the financial year ended 31 March 2011 equal to 6
times the audited attributable PAT for that period,
provided that Simeka may elect to settle up to 30% of any of the aforegoing
payments through the delivery of shares ("consideration shares") issued at a 10%
discount to the 30 day VWAP immediately prior to the date of issue of such
shares.
In the event that the Adcheck PAT for either of the financial years ending 31
March 2010 or 31 March 2011 shows a positive growth of less than 20% in that
financial year when compared with the 31 March 2009 PAT, the amount payable for
the sale equity shall be reduced commensurately using the multiple of 6 or 6.5
(as applicable for that year) for every Rand of such shortfall. Alternatively,
at the election of Simeka, the vendors shall be required to reduce their
shareholding in Adcheck pro rata, provided that in the event that Simeka
requests that the vendors reduce their shareholding as indicated, the vendors
shall be entitled to cancel the transaction and refund to Simeka all payments
received in settlement of the purchase price against redelivery of the sale
equity to the vendors. These arrangements will only be given effect to after the
determination of the PAT for the financial year ended 31 March 2011 to allow for
out performance for the financial year ended 31 March 2010 to be carried forward
to the financial year ended 31 March 2011.
RESTRICTIONS ON CONSIDERATION SHARES
In the event that consideration shares are issued to the vendors, typical
restrictions will apply in regard to the vendors ability to dispose of
consideration shares and the vendors shall be obliged to first offer any such
shares to the company should they wish to dispose of any consideration shares.
KEY EXECUTIVES
Adcheck`s key executives are obliged to enter into new service agreements with
minimum terms of 3 years and which contain restraint of trade undertakings and
that are otherwise in line with Simeka`s standard executive service agreements.
CONDITION PRECEDENT TO THE TRANSACTION
Implementation of the transaction is subject to approval of the transaction by
the Competition Commission.
FINANCIAL EFFECTS
Assuming a purchase price of R5 million for the sale equity, the transaction has
no material effect on Simeka`s historical net asset value, net tangible asset
value, earnings or headline per share.
3 June 2008
Designated advisor
Java Capital (Proprietary) Limited
Date: 03/06/2008 10:26:01 Produced by the JSE SENS Department.
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