| Tue 25 Aug 2009, 11:59 | | IDE - Ideco - Acquisition of the remaining 70% interest in Kroll Background |
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IDE
IDE
IDE - Ideco - Acquisition of the remaining 70% interest in Kroll Background
Screening (Pty) Limited and Trading Update.
Ideco Group Limited
Incorporated in the Republic of South Africa
(Registration number 2001/023463/06)
Share Code: IDE & ISIN code: ZAE000107579
("Ideco")
ACQUISITION OF THE REMAINING 70% INTEREST IN KROLL BACKGROUND SCREENING (PTY)
LIMITED ("KBS-South Africa" or "the Company") AND TRADING UPDATE.
1. INTRODUCTION
Further to the cautionary announcement that was released on the
Securities Exchange News Service of the JSE Limited ("SENS") on 28 May
2009 and renewed on 2 July 2009 and 12 August 2009, it is announced that
Ideco has reached an agreement, subject to the condition precedent set
out in paragraph 5 below, in terms of which Ideco will acquire the
remaining 70% of the shares in KBS-South Africa not already owned by
Ideco from Kroll Associates (Pty) Limited ("Kroll") (all inclusive "the
Acquisition").
2. DETAILS OF THE ACQUISITION
2.1 SHARE RE-PURCHASE AGREEMENT
The Acquisition is effected by way of a share-repurchase agreement
concluded between KBS-South Africa, Kroll and Ideco in terms of
which KBS-South Africa repurchases 70% of the issued share capital
of the Company from Kroll, leaving Ideco as the only shareholder in
KBS-South Africa.
2.2 THE SHARE RE-PURCHASE CONSIDERATION
The share re-purchase consideration in respect of the Acquisition
amounts to R40,6 million and will be settled in cash ("the
Consideration"). KBS-South Africa will finance the Consideration by
way of a preference share issue to the National Empowerment Fund
Trust ("the NEF").
2.3 THE EFFECTIVE DATE
The effective date of the Acquisition is 1 July 2009 ("the
Effective Date").
2.4 NET ASSET VALUE OF KBS-South Africa
As at the Effective Date, the net asset value of KBS-South Africa
amounted to R25,5 million, inclusive of cash resources of R19,4
million.
3. RATIONALE FOR THE ACQUISITION
KBS-South Africa specialises in intellectual risk management and is a
leading player in the credentials verification industry in South Africa.
Established in 1988, KBS-South Africa was the first, and until recently
the only, dedicated corporate verification agent in South Africa with a
well-established reputation amongst it blue-chip clients. Before the
Acquisition, KBS-South Africa was a division of Kroll USA`s worldwide
background screening division. Kroll is a subsidiary of the New York
Stock Exchange listed company, Marsh & McLennan Companies Inc, with
Ideco holding a minority share of 30% in KBS-South Africa.
Credential verification is increasingly being viewed by organisations as
a crucial mechanism to confirm the integrity of intellectual capital and
manage business risks and KBS-South Africa is the registered trade mark
holder of the National Qualifications Register (NQR), which has
agreements with several South African tertiary education institutions to
verify qualifications accurately and quickly. As such it is ideally
positioned to assist its clients in managing risks. KBS-South Africa`s
verification and background screening capability includes qualification
verification; membership of professional bodies; credit and criminal
records; driver`s licenses and identity verification; reference and
fraud listing checks. The Company`s range of products and services is
complementary to Ideco`s own identity management products and services.
Ideco`s solutions are based on biometrics; in particular fingerprints,
and together Ideco and KBS-South Africa have the ability to enhance the
security of the vetting and identity management solutions for their
combined client bases.
Being a wholly-owned subsidiary of a company with BEE shareholding in
excess of 40%, KBS-South Africa will be much better placed to win
government tenders for credential verification services. KBS-South
Africa was created more than 20 years ago under the brand name M.I.E.
When Kroll acquired KBS-South Africa in the early 2000`s, it was re-
branded to Kroll MIE, which was subsequently changed to KBS-South
Africa. Since it will no longer have any links with Kroll USA, it is
necessary to re-brand the company again, and since the MIE brand is
still remembered in the market, it was decided to re-name KBS-South
Africa to Managed Integrity Evaluation (Pty) Limited, or MIE for short.
4. PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The unaudited pro forma financial effects set out in the table below
have been prepared in accordance with the JSE Limited Listings
Requirements and the Guide on Pro Forma Financial Information issued by
The South African Institute of Chartered Accountants to assist Ideco
shareholders to assess the impact of the Acquisition on the earnings per
share ("EPS"), headline earnings per share ("HEPS"), the net asset value
("NAV") and the tangible NAV ("TNAV") per Ideco ordinary share as at 28
February 2009 and for the six months then ended. The pro forma financial
effects have been prepared for their illustrative purposes only and,
because of their nature, they may not fairly present Ideco`s financial
position at 28 February 2009 and the results of its operations for the
six months then ended. It has been assumed for the purposes of the pro
forma financial effects the Acquisition took place with effect from 1
September 2008 for Income Statement purposes and on 28 February 2009 for
Balance Sheet purposes. The Directors of Ideco is responsible for the
preparation of the financial effects. The "After" column represents the
effects after the Acquisition. The "% Change" column compares the
"After" column to the "Before" column.
Before After % Change
cents cents
per per
share share
Notes (1) (2),
(3),
(4)
EPS
(1,10) 1,46 232,96
HEPS
(1,10) 1,46 232,96
NAV
19,11 21,55 12,74
NTAV
5,57 (7,92) (242,12)
Weighted average shares in
202 222 202
222
issue (`000)
Number of shares in issue
(`000) 202 222 202
222
Notes:
1. Extracted from Ideco`s published unaudited interim financial
statements for six months ended 28 February 2009.
2. The figures for KBS-South Africa were extracted from the Company`s
unaudited management accounts for the six months ended 28 February
2009.
3. Transaction costs of R250 000 relating to the Acquisition were
included in determining the financial effects.
4. A dividend rate of 7,875% has been provided for in determining the
financial effects.
5. CONDITION PRECEDENT
The implementation of the Acquisition is subject to the the registration
of special resolutions by KBS-South Africa to amend its Articles of
Association in order to issue preference shares and to buy back its
issued shares.
6. CLASSIFICATION OF THE ACQUISITION
The Acquisition is classified as a Category 2 transaction in terms of
the JSE Limited Listing Requirements. Accordingly, shareholder
approval is not required.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Ideco shareholders are advised that the cautionary announcements
referred to in the first paragraph of this announcement are hereby
withdrawn and caution is no longer required to be exercised by Ideco
shareholders when dealing in Ideco securities.
8. TRADING UPDATE
In the current circumstances, it is unlikely that the financial results
for the year ending 31 August 2009 will equate to the results achieved
for the year ended 31 August 2008. Once the results for the year ending
31 August 2009 have been established, an announcement in this connection
will be made.
25 August 2009
Bryanston
Designated Advisor: Questco Sponsors (Pty) Limited
Date: 25/08/2009 11:59:02 Produced by the JSE SENS Department.
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