| Mon 4 May 2009, 15:49 | | CVN - Convergenet - Acquisition of additional interest in Sizwe Africa It Group |
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CVN
CVN
CVN - Convergenet - Acquisition of additional interest in Sizwe Africa It Group
(Proprietary) Limited
CONVERGENET HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/015580/06)
Share code: CVN ISIN: ZAE000102067
("ConvergeNet" or "the Company")
ACQUISITION OF ADDITIONAL INTEREST IN SIZWE AFRICA IT GROUP (PROPRIETARY)
LIMITED ("SIZWE AFRICA IT")
Introduction
Shareholders are advised that ConvergeNet has negotiated the conclusion of an
agreement dated 29 April 2009 ("the acquisition agreement") in terms of which
ConvergeNet will acquire an additional 3.8% in Sizwe Africa IT held by, Yellow
Star Holdings (Pty) Ltd ("Yellow Star" or "the Vendors"). The Vendors are a
related party to ConvergeNet.
Background to Sizwe Africa IT
Sizwe Africa IT is the ICT services and solutions provider of choice to a wide
variety of private and public organisations. The company has been awarded
several South African Government term supply contracts. Comprehensive
infrastructure services are provided, which includes project management,
hardware maintenance and Installations, Moves, Adds and Changes (IMAC`s). Sizwe
also supplies a number of value added ICT products and solutions to the local
market. Sizwe employs in excess of 550 people and has a country-wide service
and support capability.
Terms of the Acquisition
The acquisition agreement, which was entered into by ConvergeNet and the Vendors
on 29 April 2009, provides for the acquisition by ConvergeNet of an additional
3.8% shareholding in Sizwe Africa IT from the vendors ("the acquisition") for an
acquisition price of R15 million ("the consideration"), to be settled in cash.
Following the implementation of the transaction, ConvergeNet will hold a 60%
equity interest in Sizwe Africa IT.
The acquisition is subject to the normal terms and warranties for a transaction
of the nature contemplated.
Goodwill and other intangibles amounting to R10 404 318 will arise on the
Acquisition.
Pro forma financial effects of the acquisition
The table below summarises the pro forma financial effects of the additional
investment in Sizwe Africa IT Group. The financial effects are the
responsibility of the directors and have been prepared for illustrative purposes
only, to provide the possible financial effects on the additional Sizwe
investment as if the investment had taken place from 01 September 2008 for the
period of 6 months until 28 February 2009. The pro forma financial effects,
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.
Before After % Change
Weighted average shares in 815 218 815 218 619 -
issue (`000) 619
Earnings per share 2.84 2.95 3.9%
ordinary share (cents)
Headline earnings per 2.71 2.82 4.1%
ordinary share (cents)
Shares in issue at period 865 631 865 631 298 -
end (`000) 298
Net asset value per share 47.9 48.0 0.2%
(cents)
Net tangible asset value 15.0 13.8 -8.7%
per share (cents)
Assumptions:
i) The earnings and headline earnings per ConvergeNet share, as set out in the
"Before" column of the table, are based on the unaudited interim financial
results of ConvergeNet for the six months ended 28 February 2009 and 815
218 619 weighted average number of ConvergeNet shares in issue.
ii) The earnings and headline earnings per ConvergeNet share, as set out in the
"After" column of the table, are based upon the unaudited interim financial
results of ConvergeNet for the six months ended 28 February 2009 including
the unaudited financial results of Sizwe Africa IT Group for the six months
ended 28 February 2009 and 815 218 619 weighted average number of
ConvergeNet shares in issue and the assumptions that:
- the additional Investment in Sizwe Africa IT Group was effective from 1
September 2008;
- the Purchase Price of R15 000 000 was settled on 1 September 2008 in cash;
- there were no additional costs incurred relating to the additional
investment in Sizwe Africa IT Group; and
- there was no impairment of the goodwill arising from the acquisition
iii) The net asset value and tangible net asset value per ConvergeNet share, as
set out in the "Before" column of the table, are based upon the unaudited
Balance Sheet of ConvergeNet at 28 February 2009 and 865 631 298
ConvergeNet shares in issue.
iv) The net asset value and tangible net asset value per ConvergeNet share, as
set out in the "After" column of the table, are based upon the unaudited
Balance Sheet of ConvergeNet at 28 February 2009, including the effects of
the additional investment in Sizwe Africa IT Group and 865 631 298
ConvergeNet shares in issue and the assumptions that:
- the additional investment and the acquisition was effective 28 February
2009; and
- the purchase price was settled on 28 February 2009.
Rationale
The Group intends delivering turnkey project solutions, ancillary support and
managed services to the Middle Eastern, African and southern African markets.
The acquisition of an additional interest in Sizwe Africa IT is in line with the
Group`s strategy to acquire appropriate vehicles with which to achieve its
vision of positioning itself as a significant ICT industry player. Sizwe Africa
IT was acquired for, amongst others, its ICT Infrastructure project and multi-
discipline project management and solutions competence, and forms part of the
Group`s turnkey project business.
Fairness opinion
The acquisition is defined as a small related party transaction in terms of the
JSE Listings Requirements and accordingly a fairness opinion on the transaction
is required. The company has appointed Moore Stephens Corporate Finance
(Proprietary) Limited to act as a professional expert for this opinion, which
opinion will lie for inspection at the company`s registered office from 4 May
2009.
Johannesburg
4 May 2009
Sponsors
Arcay Moela Sponsors
(Proprietary) Limited
Date: 04/05/2009 15:49:43 Produced by the JSE SENS Department.
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