| Mon 30 Jun 2008, 9:57 | | DGC - DigiCore - Acquisition of the remaining interest in Digicore Limited |
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DGC
DGC
DGC - DigiCore - Acquisition of the remaining interest in Digicore Limited
DIGICORE HOLDINGS LIMITED
Registration number:1998/012601/06
Share Code: DGC
ISIN Number: ZAE000016945
("DigiCore")
ACQUISITION OF THE REMAINING INTEREST IN DIGICORE LIMITED
1. INTRODUCTION
1.1 Shareholders are hereby advised that DigiCore has entered into an
agreement, dated 11 March 2008, to purchase the remaining 49.9% economic
interest in DigiCore Limited from the existing vendors of DigiCore Limited
("the acquisition").
1.2 The acquisition referred to in 1.1 above does not constitute a category 1
or 2 transaction in terms of the Listings Requirements of the JSE Limited
("JSE").
This announcement is for information purposes only and no action is
required by DigiCore shareholders with regards to the acquisition.
2. DETAILS OF THE BUSINESS OF DIGICORE LIMITED
DigiCore Limited is a DigiCore subsidiary based in the United Kingdom
("UK") and provides vehicle tracking and fleet management solutions to
customers based in the UK.
3. RATIONALE FOR THE ACQUISITION
DigiCore has adopted a model of investing in companies to promote
DigiCore`s product range over large geographic areas.
The acquisition of the remaining interest in DigiCore Limited represents
DigiCore`s strategic process of identifying key companies to further
DigiCore`s global market penetration and by securing a controlling stake
and eventually a 100% investment in a proven company, DigiCore is able to
ultimately realise the full value of the subsidiary company.
4. RELATED PARTY TRANSACTION
4.1 DigiCore Limited is currently a 50.1% owned subsidiary of DigiCore and the
existing vendors, except for Rosalie Trading Limited, are all directors of
DigiCore Limited. Rosalie Trading Limited is represented by Mr C Dowson, a
director of DigiCore Limited.
In terms of the Listings Requirements of the JSE, the acquisition is
therefore regarded as a small related party transaction and requires
written confirmation from an independent professional expert confirming the
fairness of the terms of the acquisition to DigiCore shareholders.
4.2 Accordingly DigiCore has appointed PSG Capital (Pty) Limited ("PSG
Capital") as the independent professional expert in accordance with
paragraph 10.7(b) of the JSE Listings Requirements.
PSG Capital has provided the JSE with written confirmation that the terms
of the acquisition are fair to DigiCore shareholders. The fairness opinion
will lie open for inspection at the registered office of DigiCore for a
period of 28 days from the date of publication of this announcement.
5. PARTICULARS OF THE ACQUISITION
5.1 Subject matter of the acquisition
The subject matter of the acquisition is 49.9% of the issued share capital
of DigiCore Limited.
5.2 The vendors
The vendors are Messrs T O` Connor (16,71% shareholding), M Woodhouse
(10,23% shareholding), M Naldrett (10,23% shareholding), J Wybrew (2,5%
shareholding) and Rosalie Trading Limited (10,23% shareholding)
(represented by Mr C Dowson).
5.3 The effective date
The effective date of the acquisition is the commencement of business on 1
July 2007.
5.4 Purchase consideration
5.4.1 The purchase consideration is GBP2 940 935 that is settled through the
payment of GBP300 000 in cash and through the issue of up to a maximum
of 4 810 156 DigiCore shares. The total rand value of the transaction
amounts to approximately R 42 585 061 (calculated using an exchange
rate of R14.48/GBP at the time the transaction was negotiated).
5.4.2 In terms of the agreement, DigiCore Limited is required to make a
minimum net profit after tax ("NPAT")of GBP 718 317 in each of the
financial years ending 30 June 2008 and 2009, equating to an aggregate
GBP 1 436 634 over the 2 financial years.
5.4.3 For every GBP1 that the NPAT over the two financial years ending 30
June 2008 and 2009 is less than GBP 718 317 per year, the number of
shares to be issued to the vendors will be reduced by 3.64 DigiCore
shares. The consideration shares will be issued by 31 July 2008 and 31
July 2009 in respect of the 2008 and 2009 entitlement years
respectively.
5.4.4 Should DigiCore Limited make in excess of GBP 718 317 NPAT in the 2008
financial year, the excess NPAT achieved shall then reduce the 2009
target on a pound-for-pound basis.
5.4.5 Should DigiCore Limited, however, not achieve the 2008 target the
shortfall will be added to the 2009 target. The number of
consideration shares due for the 2008 period shall then be reduced as
set out in 5.4.3 above. Should DigiCore Limited make in excess of the
adjusted NPAT in the 2009 financial year, any shortfall not issued in
the 2008 entitlement period will then be issued in the 2009
entitlement period. Should DigiCore Limited not achieve the increased
2009 target, the 2009 entitlement shall be reduced by 3.64
consideration shares as set out in 5.4.3 above.
5.4.6 To the extent that the aggregate profit after tax for the two
financial years ending 30 June 2008 and 2009 is greater than GBP1 436
634 in total, then the vendors will receive an incremental
consideration amounting to one half of the amount in excess of GBP1
436 634.
5.5 Suspensive conditions
The acquisition is subject to certain regulatory approvals, to the extent
required. Approval of transaction by the South African Reserve Bank has
been duly received.
6. FINANCIAL EFFECTS OF THE ACQUISITION
The pro forma financial effects of the acquisition are presented for
illustrative purposes only and because of their nature may not give a fair
reflection of DigiCore`s financial position nor of the effect on future
earnings after the acquisition. Set out below are the unaudited pro forma
financial effects of the acquisition, based on the unaudited interim
results for the six month period ended 31 December 2007. The directors of
DigiCore are responsible for the preparation of the unaudited pro forma
financial information.
Unaudited Pro forma Change(%)
before after
Acquisition Acquisition
(cents) (cents)
Basic earnings 23.5 24.9 5.9
per share
Basic headline 23.3 24.7 6.0
earnings per
share
Net asset 155.0 169.0 9.1
value per
share
Net tangible 104.1 102.5 (1.5)
asset value
per share
Notes and assumptions:
1 The basic earnings per share and basic headline earnings per share
figures in the "Pro Forma after the Acquisition" column have been
calculated on the basis that the acquisition was effected on 1 July
2007.
2. The net asset value per share and net tangible asset value per share
figures in the "Pro Forma after the Acquisition" column have been
calculated on the basis that the acquisition was effected on 31
December 2007.
3. It has been assumed that the total purchase consideration of R42,59
million has been settled by a cash payment of R4,34 million and by the
issue of 4,81 million shares at an issue price of R7.95 (amounting to
R38,24 million)
4. It has been assumed that the maximum number of consideration shares
i.e. 4 810 156 DigiCore shares have been issued on 1 July 2007 in
respect of the basic earnings per share and headline earnings per
share pro forma financial effects and issued on 31 December 2007 in
respect of the net asset value per share and net tangible asset per
share value pro forma financial effects.
5. Interest on the cash consideration paid has been calculated at 9% per
annum for the purposes of the basic earnings per share and basic
headline earnings per share pro forma financial effects.
6. The taxation rate applicable is assumed to be 28%.
7. The basic earnings per share and basic headline earnings per share
figures are calculated based on weighted average number of shares in
issue of 205,849 million shares.
8. The net asset value per share and net tangible asset value per share
have been calculated based on 218,675 million shares in issue
9. It has been assumed that the incremental consideration referred to in
5.4.6 has not been earned.
Pretoria
30 June 2008
Sponsor
PSG Capital (Pty) Limited
Date: 30/06/2008 09:57:01 Produced by the JSE SENS Department.
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