| Mon 1 Jun 2009, 9:54 | | ADI - AdaptIT - Acquisition By Adaptit Of 51% Of ITS Holdings |
|
ADI
ADI
ADI - AdaptIT - Acquisition By Adaptit Of 51% Of ITS Holdings
(Proprietary) Limited
ADAPTIT HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/017276/06)
Share code: ADI & ISIN: ZAE000113163
("AdaptIT" or "the company")
ACQUISITION BY ADAPTIT OF 51% OF ITS HOLDINGS (PROPRIETARY) LIMITED
1. INTRODUCTION AND BACKGROUND TO ADAPTIT
Shareholders are advised that AdaptIT has entered into agreement to acquire
51% of the issued share capital in, and 51% of the loan accounts, including
claims, against ITS Holdings (Proprietary) Limited ("ITS") from The Rooibos
Trust ("Rooibos") and from EDITS Holdings (Proprietary) Limited ("EDITS")
("the vendors") as linked transactions, for a total consideration of R16
million ("the acquisition").
AdaptIT provides IT services and solutions including consulting and
application design and delivery and support, predominantly to the public
sector and the sugar producing industry in Southern Africa.
2. THE ACQUISITION
2.1 Nature of the ITS business
Established in 1986 in South Africa, ITS is a company with investments
in various local and international providers of information and
communication technology products and services. ITS has 22 years`
experience in the IT industry and a proven track record in the
tertiary and higher education market with a client base in excess of
40 Universities, Polytechnics and Colleges worldwide. ITS focuses on
the provision of administrative software and support services to
tertiary and higher education institutions in 12 countries.
Approximately 50% of revenue generated by ITS is recurring in nature.
Recurring revenue from product sales is comprised solely of software
licence renewals while recurring revenue from support services is
comprised solely of renewal of support contracts.
ITS operates from its head office in Pretoria and also has offices in
Cape Town, Durban, Ireland and New Zealand.
2.2 Rationale
The acquisition will provide AdaptIT with a significantly diversified
client portfolio, predominantly in the public sector and ensure that
the company`s risk is adequately managed. The acquisition will assist
in increasing the company`s annuity revenue earned from the licensing
and support of ITS software programs. AdaptIT and ITS` product and
service offerings are mutually complementary and can be "cross sold"
into their respective markets. There are also strong technology
synergies between the two groups, predominantly in the world class
Oracle technologies as well as in domain expertise relating to
financial and enterprise resource planning systems. Furthermore, the
acquisition will strengthen AdaptIT`s presence in the Gauteng market
through a significant increase in the skills base available to AdaptIT
in the region.
In addition, the acquisition will result in a significant improvement
of the BBBEE credentials of ITS, facilitate sustainability and
position it for future growth in the South African market.
2.3 Acquisition consideration
The aggregate acquisition consideration payable to the vendors is R16
million, which will be settled as follows:
- R15 million payable in cash to Rooibos; and
- R1 million payable in cash to EDITS.
AdaptIT will fund the acquisition consideration from available cash
resources. An amount of R14 556 076 was available to the company as at
28 February 2009. The balance of R1 443 924 will be generated from
general business activity occurring between 1 March 2009 and the
effective date of the acquisition.
2.4 Conditions precedent and effective date
The acquisition is conditional upon fulfilment of the following
conditions precedent on or before 30 June 2009 or such later date as
AdaptIT, Rooibos and EDITS may agree to in writing:
- the provision to AdaptIT of a certified copy of the minutes of
the meeting of the remaining shareholders of ITS, approving the
conclusion of a shareholders` agreement with AdaptIT;
- the obtaining of all necessary approvals, including, approval of
the acquisition by a majority of AdaptIT`s shareholders present
and voting at the general meeting;
- AdaptIT obtaining a certified copy of an ITS board resolution in
terms of which:
- the transfer of the shares to AdaptIT is approved;
- the resignations of Messrs Alan Mundell and Rudi Stumpf as
directors of ITS are approved by the board of directors of
ITS; and
- the nominees of AdaptIT as directors are accepted;
- the conclusion by AdaptIT of an agreement with a third party
funder for a working capital loan facility of R8 million;
- the receipt by AdaptIT of a written notice from the shareholders
of EDITS and the beneficiaries of Rooibos waiving their pre-
emptive rights to acquire the EDITS shares and claims and the
Rooibos shares and claims respectively; and
- the execution by EDITS shareholders of certain amendments to the
shareholders` agreement between the shareholders of EDITS.
The effective date of the acquisition is 30 June 2009.
2.5 Vendors
Rooibos and EDITS currently own 49% and a 51% of the issued share
capital of ITS, respectively.
AdaptIT will acquire 51% of the issued share capital of ITS from the
vendors in the following proportions:
- 49% of the shares in ITS and 49% of the loan accounts or claims
against ITS from Rooibos; and
- 2% of the shares in ITS and 2% of the loan accounts or claims
against ITS from EDITS.
2.6 Working Capital Funding
AdaptIT, through its subsidiary InfoWave (Proprietary) Limited, having
entered into a working capital loan facility agreement of R5 million,
will enter into an additional working capital loan facility of R8
million, to ensure adequate working capital going forward.
3. PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The table below sets out the unaudited pro forma financial effects of the
acquisition on AdaptIT`s earnings per share, headline earnings per share,
net asset value per share and tangible net asset value per share.
The unaudited pro forma financial effects have been prepared to illustrate
the impact of the acquisition on the reported financial information of
AdaptIT for the year ended 28 February 2009, had the proposed acquisition
occurred on 1 March 2008 for income statement purposes and on 28 February
2009 for balance sheet purposes.
The unaudited pro forma financial effects have been prepared using
accounting policies that comply with International Financial Reporting
Standards and that are consistent with those applied in the audited results
of AdaptIT for the year ended 28 February 2009.
The unaudited pro forma financial effects which are the responsibility of
the directors are provided for illustrative purposes only and, because of
their pro forma nature may not fairly present AdaptIT`s financial position,
changes in equity, results of operations or cash flow.
Before the After the % change
proposed proposed
acquisition acquisition
Earnings per share (cents) 9.44 9.47 0.32
Headline earnings per share 9.46 9.49 0.32
(cents)
Net asset value per share 34.25 43.4 26.72
(cents)
Tangible net asset value 22.17 (1.09) (104.92)
per share (cents)
Weighted average number of 96 203 96 203 -
shares in issue (000`s)
Fully diluted weighted 96 203 96 203 -
average number of shares in
issue (000`s)
Notes:
1. The amounts in the "Before the proposed acquisition" column have been
extracted from the year-end results of AdaptIT for the year ended 28
February 2009.
2. The amounts in the "After the proposed acquisition" column reflect the
financial effects of the acquisition on AdaptIT.
3. The effects on basic earnings per share and headline earnings per
share are calculated based on the assumption that the acquisition was
effected on 1 March 2008.
4. The effects on net asset value per share and tangible net asset value
per share are calculated based on the assumption that the acquisition
was effected on 28 February 2009.
4. CLASSIFICATION OF THE ACQUISITION AND FURTHER DOCUMENTATION
The acquisition is classified as a category 1 transaction in terms of the
JSE Listings Requirements. Accordingly, a circular containing full details
of the acquisition and a notice to convene a general meeting of AdaptIT
shareholders will be sent to AdaptIT shareholders on or about 10 June 2009.
The general meeting will provide shareholders with the opportunity to
consider and, if deemed fit, to pass, with or without modification, the
resolutions necessary to approve and implement the acquisition.
5. OTHER MATTERS
As a result of the acquisition, ITS will become a subsidiary of AdaptIT and
consequently, the articles of association of ITS will be amended to comply
with the JSE Listings Requirements.
Durban
1 June 2009
Sponsor and Corporate Adviser
Merchantec (Proprietary) Limited
Reporting accountants
Ernst & Young Inc.
Legal Advisers to AdaptIT
Shepstone & Wylie Attorneys
Legal Advisers to ITS and EDITS
Read Hope Phillips Attorneys
Independent Transaction Arrangers
Ararat Corporate Advisory Services (Proprietary) Limited
Date: 01/06/2009 09:54:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
