| Wed 22 Oct 2008, 13:23 | | CVN - Convergenet Holdings Limited - Acquisition and renewal of cautionary |
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CVN
CVN
CVN - Convergenet Holdings Limited - Acquisition and renewal 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 74% SHAREHOLDING IN OF CHRYSTALPINE INVESTMENTS 9 (PROPRIETARY)
LIMITED ("CHRYSTALPINE") OF WHICH ANDREWS KIT (PROPRIETARY) LIMITED TRADING AS
CONTRACT KITTING IS A WHOLLY OWNED SUBSIDIARY ("CONTRACT KITTING") AND RENEWAL
OF CAUTIONARY ANNOUNCEMENT
Introduction
Shareholders are advised that ConvergeNet has negotiated the conclusion of an
agreement dated 20 October 2008 in terms of which ConvergeNet will acquire 74%
of Chrystalpine, from Noel William Andrews ("NA") and John Eric Andrews ("JA")
cumulatively known as the "Sellers". Contract Kitting is held 100% by
Chrystalpine.
Background to Contract Kitting
Contract Kitting operates as a supplier of Infrastructure Technology products
and services and all related activities, born out of the idea and need for on-
site telecommunication installation solutions. Solutions are provided through
interaction with network providers in ascertaining installation or upgrade needs
and providing the required equipment in kit form. The various kits are supplied
to customer specifications to assist in speedy and accurate installations and
Contract Kitting provide a single contact point in the supply chain. Contract
Kitting has also developed proprietary patented technology in the area of Base
Station Power Management solutions and Emergency Cooling, that is key to its
telecommunications solutions. Niche products include Cabling Assemblies, Telco
Wiring Harnesses, Standby Batteries, Battery Cell Voltage Equalisers and
Switchmode Rectifiers.
Many of Contract Kittings` products are specified by the major
Telecommunications Operators as part of the network infrastructure. These
listings form part of the company`s future income as the products are mandatory
in terms of any new builds or refurbishing activity. These products and
solutions are particularly relevant for the African and Emerging market.
Contract Kitting was formed in 2001, has achieved substantial market penetration
and has achieved recognition as a preferred kitting supplier to many companies
involved in building network infrastructures within the telecommunication
sector. Turnover has grown to approximately R 184 000 000 for the year ended 31
August 2008, with good profit margins. Contract Kitting has little or no
gearing, has a sound balance sheet and generates positive cash flows, which are
able to fund its continued high growth.
Terms of the Acquisition
The purchase consideration price payable to the Sellers for the Chrystalpine
Sale Shares and Sellers Claims are R142 925 080, and are to be discharged by
ConvergeNet through the issue of 135 115 815 new ConvergeNet shares at 108 cents
per share as vendor consideration shares. ConvergeNet have sourced an
appropriate BEE partner to acquire these shares.
The Acquisition is subject to the following conditions precedent;
1.within a period of 7 business days of signature date:
a. a resolution from the board of directors of Chrystalpine approving the
transaction;
b. a resolution from the board of direct of ConvergeNet approving the
transaction;
c. signed service agreements from NA and JA;
d. the BEE agreement to be executed by the parties thereto.
2.that a due diligence be performed and that ConvergeNet is satisfied with the
results thereof.
3.within a period of 70 business days after signature date, insofar as it is
necessary:
a. approval by the JSE;
b. approval in terms of the Competition Act of 1988;
The Sellers have estimated R26 000 000 profit after tax for the financial year
ended 31 August 2008. The agreement provides for the calculation of an adjusted
purchase price. A proportional adjustment will be made to the purchase price if
the actual profit after tax is below this, and a dividend will be declared to
the sellers for the difference if the actual profit after tax is higher. If
higher, the remainder of the possible payout will be based on the 31 August 2009
profit after tax figures, only if an increase of 20% is achieved on the 31
August 2008 figures. If not, the remainder of the adjusted purchase price will
be paid out proportionately.
Pro form financial effects of the acquisition
The pro forma financial effects of the acquisition will be announced at a later
stage. Please see the renewal of cautionary announcement paragraph below.
Rationale
The acquisition of Contract Kitting will fast track ConvergeNet`s ambitions and
strategy in the Telecommunications market segment and will diversify the group`s
income and assist in growing the groups` annuity income. ConvergeNet would,
through the acquisition of Contract Kitting, be in a position to materially
broaden the range of services it is able to offer to its customers. Contract
Kitting would also serve as a platform to take advantage of the synergies
between Contract Kitting and ConvergeNet as well as the opportunities for cross
selling into the respective customer bases.
Renewal of Cautionary Announcement
Shareholders are advised to continue to exercise caution when dealing in the
company`s securities until the pro forma financial effects of the acquisition
has been made.
Johannesburg
22 October 2008
Sponsors
Arcay Moela Sponsors
(Proprietary) Limited
Date: 22/10/2008 13:23:11 Produced by the JSE SENS Department.
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