| Fri 12 Dec 2008, 15:48 | | CVN - ConvergeNet - Update Regarding The Acquisition And Withdrawl Of Cautionary |
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CVN
CVN
CVN - ConvergeNet - Update Regarding The Acquisition And Withdrawl Of Cautionary
Announcement
CONVERGENET HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/015580/06)
Share code: CVN & ISIN: ZAE000102067
("ConvergeNet" or "the Company")
UPDATE REGARDING THE ACQUISITION OF A 74% SHAREHOLDING IN CHRYSTALPINE
INVESTMENTS 9 (PROPRIETARY) LIMITED ("CHRYSTALPINE") AND WITHDRAWL 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, of which Andrews Kit (Proprietary) Limited trading as Contract
Kitting is a wholly owned subsidiary.
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. 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 R184 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 approval in terms of the Competition Act of 1988 is the only remaining
condition precedent.
Pro forma financial effects of the acquisition
Set out in the table below are the pro forma financial effects of the Contract
Kitting acquisition, which have been prepared for illustrative purposes only, to
provide information about how the Contract Kitting acquisition might have
affected the financial information presented. The pro forma financial effects
which are the responsibility of the directors of ConvergeNet, because of their
nature, may not give a true reflection of the financial position, the cash flow
position, the results of operations or the changes in equity of ConvergeNet
Holdings Limited.
Before the After the CK Percentage
CK acquisition change
acquisition
(cents per (cents per (%)
share) share)
Earnings 6.16 (i) 7.71 (i) 25.2%
Headline earnings 6.19 (ii) 7.74 (ii) 25.0%
Net asset value 33.59 46.56 38.6%
(iii) (iii)
Tangible net asset 10.43 (iv) 13.37 (iv) 28.2%
value
Notes:
i. The earnings and headline earnings per ConvergeNet Holdings share, as set
out in the "Before" column of the table, are based on the audited financial
results of ConvergeNet Holdings Limited for the twelve months ended 31
August 2008 and 685,855,777 weighted average number of ConvergeNet Holdings
shares in issue.
ii. The earnings and headline earnings per ConvergeNet Holdings share, as set
out in the "After" column of the table, are based upon the audited
financial results of ConvergeNet Holdings for the twelve months ended 31
August 2008 including the audited financial results of Future Cell, of
which 74% was acquired in April 2008, for the twelve months ended 31 August
2008 and 834,283,505 weighted average number of ConvergeNet Holdings shares
in issue and the assumptions that:
- the Contract Kitting acquisition was effective from 1 September 2007;
- the total maximum purchase price of R160 301 946 was settled on 1
September 2007 through the issue of 148 427 728 new ConvergeNet shares
at 108 cents to Contract Kitting vendors. The maximum purchase price
includes an amount of R16 089 690 which will only become payable on or
after 31 August 2009 subject to certain profit warranties.
- there were no additional costs incurred relating to the Contract
Kitting acquisition; and
- there was no impairment of the goodwill arising from the Contract
Kitting acquisition.
iii. The net asset value and tangible net asset value per ConvergeNet Holdings
share, as set out in the "Before" column of the table, are based upon the
audited Balance Sheet of ConvergeNet Holdings at 31 August 2008 and
733 293 262 ConvergeNet Holdings shares in issue.
iv. The net asset value and tangible net asset value per ConvergeNet Holdings
share, as set out in the "After" column of the table, are based upon the
audited Balance Sheet of ConvergeNet Holdings at 31 August 2008, including
the audited Balance Sheet of Contract Kitting at 31 August 2008 and 881 720
989 ConvergeNet Holdings shares in issue and the assumptions that:
- the Contract Kitting acquisition was effective 1 September 2007;
- the 148 427 728 shares were issued at 108 cents per ConvergeNet
Holding share; and
- the purchase price was settled on 1 September 2007.
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.
Withdrawal of Cautionary Announcement
In terms of the JSE Listings Requirements, the acquisition constitutes a
Category 2 transaction and no circular is therefore required to be posted to
shareholders.
Shareholders are advised that the cautionary announcement is now withdrawn
following the publishing of the pro forma financial effects.
Johannesburg
12 December 2008
Sponsors
Arcay Moela Sponsors (Proprietary) Limited
Date: 12/12/2008 15:48:20 Produced by the JSE SENS Department.
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