| Thu 11 Jun 2009, 8:54 | | PCN - Paracon Holdings Limited - Acquisition by Paracon of the Resourcing |
|
PCN
PCN
PCN - Paracon Holdings Limited - Acquisition by Paracon of the Resourcing
Business of IC Blue Technologies (Proprietary) Limited
Paracon Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008181/06)
Share code: PCN ISIN: ZAE000029674
("Paracon")
Acquisition by Paracon of the Resourcing Business of IC Blue Technologies
(Proprietary) Limited
1. INTRODUCTION
Shareholders are advised that Paracon, through its wholly-owned
subsidiary, Paracon SA (Proprietary) Limited ("Paracon SA"), has
entered into an agreement with IC Blue Technologies (Proprietary)
Limited ("IC Blue") to acquire its resourcing business as a going
concern for a purchase consideration of R20.7 million ("the
acquisition").
The acquisition is subject to the fulfilment of the conditions
precedent set out in paragraph 2.5 below.
2. THE ACQUISITION
2.1 The nature of the business of IC Blue
IC Blue provides information technology resources and services in
South Africa, in particular, contracting and permanent placements.
Its client base is represented mainly by blue chip and parastatal
clients predominantly in the Gauteng and Cape Town regions.
2.2 The rationale for the acquisition
The acquisition is in line with Paracon`s strategy of acquiring
quality information technology service businesses to which it can
add value. Paracon`s core business is in its Resourcing division and
IC Blue is an excellent fit within this division. In addition, IC
Blue`s client base and geographic spread provides potential for
growth in the Paracon group`s market share both in Cape Town and
Gauteng. Paracon will gain access to a larger client and contractor
base from IC Blue.
Furthermore, it is anticipated that Paracon`s expertise and
competencies in ICT resourcing will add value and extract benefits
in the medium to long-term to the business of IC Blue.
2.3 Purchase consideration
The total purchase consideration of R20.7 million will be settled by
way of a cash consideration of R10.5 million and the balance by way
of an issue of 9 272 728 Paracon ordinary shares to IC Blue at a
price of R1.10 per share. In addition to the purchase consideration,
the business will require Paracon SA to inject an estimated R7.0
million in working capital.
The cash portion of the consideration will be settled from Paracon
SA`s available cash resources.
2.4 Warranties
IC Blue has given Paracon SA warranties which are standard for
transactions of this nature. Warranties on profit projections will
however not be provided as Paracon SA will be integrating the
business into its Resourcing division.
2.5 Conditions precedent and the effective date
The acquisition is subject to various conditions precedent
including, inter alia:
- all necessary consents and approvals required in terms of the
Companies Act, 1973 (Act 61 of 1973), as amended ("Act") are obtained,
including approval of the acquisition by shareholders of IC Blue in
general meeting under section 228 of the Act;
- two directors of IC Blue execute a guarantee in favour of Paracon SA
in terms of which they guarantee the obligations of IC Blue in favour of
Paracon SA, which guarantee is limited to R1 million plus costs; and
- the conclusion of new agreements between Paracon SA and the clients
and contractors of IC Blue.
The effective date of the acquisition is 1 June 2009.
3. FINANCIAL EFFECTS
The table below sets out the unaudited pro forma financial effects of
the acquisition on Paracon`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 Paracon for the six months ended 31 March 2009, had the
acquisition occurred on 1 October 2008 for income statement purposes
and on 31 March 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 results
for the six months ended 31 March 2009 as well as the audited results
of Paracon for the 12 months ended 30 September 2008.
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 Paracon`s financial position, changes in equity, results of
operations or cash flow.
Before1 After2 Change
(cents) (cents) (%)
Earnings per share 8.0 7.7 (3.8)
Headline earnings per share 8.0 7.7 (3.8)
Net asset value per share 61.6 62.9 2.1
Net tangible asset value per 29.1 24.2 (16.8)
share
Weighted average number of 331 524 340 797
shares in issue (000)
Notes:
1. The "Before" column has been extracted from the reported interim
results of Paracon for the six months ended 31 March 2009.
2. The "After" column reflects the financial effects of the acquisition
on Paracon adjusted for the interest foregone on the cash portion of the
purchase price, the working capital requirements of the business and
anticipated cash payments on lease and service contract terminations. The
average working capital outlay is assumed to be R7.0 million and cash
payments on contract terminations is anticipated to amount to R2.8
million. The interest loss has been calculated at an average interest
rate on call funds of 9.0% per annum before tax and applying the South
African corporate tax rate of 28%.
3. The effects on earnings per share and headline earnings per share
are calculated based on the assumption that the acquisition was effected
on 1 October 2008.
4. The effects on net asset value per share and net tangible asset
value per share are calculated based on the assumption that the
acquisition was effected on 31 March 2009.
4. CLASSIFICATION OF THE ACQUISITION
The acquisition is classified as a Category 2 transaction in terms of
the Listings Requirements of the JSE.
Johannesburg
11 June 2009
Sponsor
Merchantec (Proprietary) Limited
Attorneys
Werksmans Incorporating Jan S. De Villiers.
Date: 11/06/2009 08:54:01 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.
