| Mon 25 Feb 2008, 11:49 | | CYB - Cyberhost - Acquisition of 100% of Queensgat |
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CYB
CYB
CYB - Cyberhost - Acquisition of 100% of Queensgate Leisure Holdings
(Proprietary) Limited and withdrawal of cautionary announcement
CYBERHOST LIMITED
(TO BE RENAMED QUEENSGATE HOTELS AND LEISURE LIMITED)
(Incorporated in the Republic of South Africa)
(Registration number 1998/013649/06)
Share code: CYB ISIN Code: ZAE000017471
("Cyberhost" or "the company")
ACQUISITION OF 100% OF QUEENSGATE LEISURE HOLDINGS (PROPRIETARY) LIMITED ("THE
ACQUISITION") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Introduction
Further to the detailed cautionary announcements dated 08 October 2007, 28
November 2007 and 21 January 2008, shareholders are advised that Cyberhost has
negotiated the conclusion of an agreement dated 21 February 2008 in terms of
which Cyberhost will acquire 100% of the issued share capital and shareholders
loans in Queensgate Leisure Holdings (Proprietary) Limited ("Queensgate
Leisure") from Queensgate Holdings (Proprietary) Limited ("QH") and Mvelaphanda
Group Limited ("Mvelaphanda") as further detailed below.
Terms of the Acquisition
The purchase consideration to be paid for Queensgate Leisure is R219 545 921,
which is to be settled by the issue of 731 819 736 new ordinary shares in
Cyberhost at 30 cents per share, which shares will be issued on approval of the
acquisition at the general meeting and fulfilment of the normal terms and
conditions usual for a transaction of the nature contemplated. The shares
issued will rank pari passu in all respects with the shares already issued. The
effective date of the acquisition is 01 September 2007.
The purchase consideration is to be split between the vendors as follows:
- an amount of R139 772 960.40 payable to QH for 50% of Queensgate, to be
settled through the issue of 465 909 868 new Cyberhost shares at 30 cents
per share; and
- an amount of R79 772 960.40 payable to Mvelaphanda for 50% of Queensgate,
to be settled through the issue of 265 909 868 new Cyberhost shares at 30
cents per share.
Mvelaphanda acquired a 50% shareholding in Queensgate Leisure in late 2007 in
return for the injection of R60 000 000 cash through subscription for redeemable
preference shares. The preference share obligation results in the purchase
price differential between QH and Mvelaphanda. In terms of the acquisition
agreement, Mvelaphanda is required to maintain a minimum shareholding of 26% in
Cyberhost and will be required to either subscribe for new shares in Cyberhost
at the market price in 3 years time or alternatively purchase Cyberhost shares
on the open market.
The original acquisition of 50% of Queensgate Leisure by Mvelaphanda from QH is
still subject to Competition Commission approval. In the unlikely event that
this approval is not granted, then the purchase consideration shares due to
Mvelaphanda will be issued to QH and the preference shares will be capitalised
into additional shares in Cyberhost at 30 cents per share.
The transaction is with a related party as QH is already the controlling
shareholder in Cyberhost and accordingly a fairness opinion will be required.
The acquisition will also constitute a reverse listing and will require both JSE
and shareholder approval and, in accordance with the JSE Listings Requirements,
shareholders are cautioned that the continued listing will be subject to the
approval of the JSE. However, shareholders are advised that Queensgate Leisure
has received approval from the AltX Advisory Committee to apply for a listing
and accordingly Cyberhost will make an application for the transfer of its
listing in due course.
The acquisition is subject to the normal terms and warranties usual for a
transaction of the nature contemplated.
The purchase consideration will give rise to intangible assets and goodwill of
approximately R203 million. In accordance with the accounting policies of the
company, goodwill is not amortised, whilst intangible assets are separately
identified and amortised over periods of time related to the particular asset.
Goodwill and intangible assets are tested for impairment at each year end.
Pro forma 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 Cyberhost.
Before After % change
Earnings/(loss) per 0.43 0.79 81%
share
Headline 0.42 0.78 85%
earnings/(loss) per
share (cents)
Weighted average shares 341 647 370 1 073 467 106 214%
in issue
Net asset value per 3.95 19.43 392%
share (cents)
Net tangible asset 0.92 2.94 220%
value per share (cents)
Shares in issue at 500 000 000 1 231 819 736 146%
period end
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 the acquisition of 100%
of Queensgate Leisure as though the acquisition had been in effect from 01
September 2006. The Queensgate Leisure 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. Transaction costs
of R700 000 before notional taxation of 29% have been assumed.
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.
5. No financial effects have been assumed for the preference shares as they
have not yet been issued in terms of the initial agreement with
Mvelaphanda, which is still subject to Competition Commission approval.
Background and Rationale
Queensgate Leisure revenue is derived from four integrated areas in the leisure
industry, namely hotel operations, food and beverage, conferencing and wellness.
Cyberhost previously acquired the IT platform and certain brands from QH, which
are used in the leisure operations and will further glean expansive benefits
from Queensgate Leisure`s established track record, in-depth management
experience and attractive hospitality portfolio, which includes revenues from,
inter alia, Tinga Private Game Reserve (Kruger Park), BMW Pavilion Conferencing
(Cape Town, V&A Waterfront), Radisson Hotel (Cape Town), The Famous Butchers
Grill, etc. In addition, there are significant opportunities in the market for
a freshly positioned hotel brand which offers a holistic approach that
incorporates all the various aspects of hotel management, specifically
integrating hotel management, food and beverage, conferencing and wellness.
During December 2007, Queensgate Leisure also launched its Wellness Brand,
namely ONEWellness, with the opening of its first wellness spa at the Radisson
Hotel in Cape Town.
Queensgate Leisure has entered a critical growth phase, which will see
aggressive growth over the next few years. Queensgate Leisure is an experienced
player in the leisure market with a management team that understands the hotel
investor profile/s, simultaneously boasting a diverse and attractive hospitality
and leisure portfolio. In addition, the company is positioning itself as a real
partner to property landlords, for those assets where pure hotel management
applies.
The acquisition of Queensgate Leisure will result in all QH`s leisure operations
being housed in one subsidiary and, with the recent Mvelaphanda transaction,
will bring an empowered status to Cyberhost going forward.
Circular to shareholders
A circular, which will incorporate full details of the acquisition as well as a
profit forecast, will be posted to Cyberhost`s shareholders within 28 days of
this announcement.
Withdrawal of cautionary announcement
As a result of the above announcement, shareholders are advised that the
cautionary announcement is now withdrawn.
Johannesburg
25 February 2008
Sponsors
Arcay Moela Sponsors
(Proprietary) Limited
Date: 25/02/2008 11:49:01 Produced by the JSE SENS Department.
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