| Tue 15 Dec 2009, 15:05 | | JSC - Jasco Electronics Holdings Limited - Acquisition by Jasco Trading |
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JSC - Jasco Electronics Holdings Limited - Acquisition by Jasco Trading
(PROPRIETARY) Limited ("JASCO TRADING"), a wholly owned subsidiary of
Jasco, of:A 51% equity interest in and shareholder loan
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1987/003293/06)
Share Code: JSC ISIN: ZAE000003794
("Jasco" or "the Company")
ACQUISITION BY JASCO TRADING (PROPRIETARY) LIMITED ("JASCO TRADING"), A WHOLLY
OWNED SUBSIDIARY OF JASCO, OF:
* A 51% EQUITY INTEREST IN AND SHAREHOLDER LOAN OF LeBLANC CIH LIGHTING
STRUCTURES (PROPRIETARY) LIMITED ("LS") FROM COMMUNITY INVESTMENT
HOLDINGS (PROPRIETARY) LIMITED ("CIH)
1 THE TRANSACTION
1.1 Jasco shareholders are hereby advised that on 8 December 2009,
unconditional agreement was reached between Jasco Trading and Namane
Electrical (Proprietary) Limited ("Namane"), a wholly owned subsidiary
of CIH ("the Seller"), whereby Jasco Trading will acquire a 51% equity
interest in and shareholder loan of LS for a purchase consideration of
R7 million ("the purchase consideration") ("the Acquisition"). The
effective date of the Acquisition is 1 September 2009.
2 background to LS
2.1 LS has been operating from a factory in Nigel for over 20 years and is
involved in the design, manufacture and installation of lighting,
broadcasting and telecommunication steel structures in Sub-Saharan
Africa. LS has a broad range of customers (in excess of 100) with 20%
of customers making up 70% of total sales in 2008.
2.2 The remaining 49% equity interest in LS is owned by LeBlanc
Communications South Africa (Proprietary) Limited ("LC") a subsidiary
of LeBlanc International PTE Limited ("LBI"). LBI also owns 50% of
WebbLeBLANC Communications (Proprietary) Limited ("WLB"), with the
remaining 50% held by Jasco
3 rationale for the TRANSACTION
3.1 Southern Africa is going through a phase of unprecedented
infrastructure development due to ailing infrastructure. This has
resulted in increased spend on infrastructure upgrades such as rail
networks, ports and harbours, roads and pipelines. South African
specific local infrastructure developments include major new power
stations by Eskom and the 2010 Soccer World Cup stadiums.
3.2 In addition, the local and rest of Africa`s communications market
continues to grow, with leading fixed and wireless operators currently
aggressively rolling out infrastructure or announcing plans to expand
their networks. In South Africa, new legislation will allow individual
electronic communication network service providers (I-ECN`s) to
develop and operate their own communications networks.
3.3 In summary, the medium to long term market and economic outlook is
positive for the products and services offered by LS. LS was
therefore identified as a suitable acquisition that will satisfy the
objective of growth in accordance with Jasco`s strategy. Management
strongly believes that the Acquisition will enable Jasco to achieve
the following objectives:
3.3.1 LS qualifies as an acquisition that could contribute to
revenue and earnings growth over the next five years;
3.3.2 LBI offers additional contracts in Africa, such as the
opening of a warehouse in Ghana for Alcatel/Lucent. This
warehouse opens up West Africa for the sale of both
communications and lighting structures as telecommunication
and electrification networks are expanded in that part of
the continent;
3.3.3 various opportunities for inter-divisional supply, such as:
- LS is an approved supplier of lattice towers to Telkom and has
received orders from Telkom that it cannot execute. These orders
can now be executed by WLB;
- Webb Industries, a Jasco Telecommunications division, can assist
in providing kitting that is used in the deployment of the
various lighting structures offered by LS;
- Jasco`s Security division occasionally requires monopoles for
their equipment and LS could supply these monopoles and masts;
and
- Maringo Communications (Proprietary) Limited, a recent Jasco
investment, may be able to use LS` monopole structures in their
network build requirements.
3.4 In addition, the Acquisition was also effected for the following
reasons:
3.4.1 to further enhance Jasco`s relationship with its
international partner, LBI;
3.4.2 to consolidate the management and administrative functions
of WLB and LS into one operational site to extract
efficiencies;
3.4.3 to generate savings in raw material costs such as steel and
galvanising due to increased economies of scale; and
3.4.4 to extract savings in labour costs through sharing of a
common labour pool.
4 PURCHASE consideration
4.1 The purchase consideration will be settled in cash as follows:
4.1.1 payment of the amount of R4 million in four equal monthly
installments of R1 million each to the Seller, commencing in
December 2009; and
4.1.2 assuming the liability to repay the R3 million vendor loan
granted to CIH when CIH acquired its 51% equity share in LS
from LBI in 2006 ("the vendor loan").
4.2 The acquired shareholder loan amounts to R4 million, and bears
interest at the same rate as the vendor loan.
4.3 The Seller has given warranties which are normal for a transaction of
this nature.
5 Unaudited Pro FORMA financial effects
The unaudited pro forma financial effects on Jasco and its subsidiaries
before and after the Acquisition, as set out in the table below, are the
responsibility of the Company`s directors, and have been prepared for
illustrative purposes only to show how the Transaction may have affected
Jasco`s results for the 16 months ended 30 June 2009.
The unaudited pro forma financial effects, which, due to their nature, may
not fairly reflect Jasco`s financial performance and position after the
Transaction, are based on the assumptions that:
5.1 for the purpose of calculating earnings per ordinary share (basic and
diluted) and headline earnings per ordinary share (basic and diluted),
the Transaction was effected on 1 March 2008; and
5.2 for the purpose of calculating net asset value and net tangible asset
value per ordinary share, the Transaction was effected on 30 June
2009.
It should be noted that board of Jasco has obtained an independent due
diligence and valuation of the business of LS and based on the future
sustainable earnings of LS the Transaction is considered to be earnings
enhancing to Jasco.
Before After the Change Change
Published transaction (cents) (%)
(cents)1 Pro forma
(cents)2,3
Earnings per share 2,5 36.2 35.1 (1.1) (3.04%)
Headline earnings per 36.7 35.6 (1.1) (3%)
share2,5
Diluted earnings per 33.7 32.7 (1) (2.97%)
share2,5
Diluted headline earnings 34.1 33.1 (1) (2.93%)
per share2,5
Net asset value per 225.3 228.1 2.8 1.24%
share3,5
Net tangible asset value 185.5 185.1 (0.4) (0.22%)
per share3,5
Weighted number of shares 103 471 452 103 471 452 - -
in issue4
Actual number of shares in 114 509 435 114 509 435
issue
Notes
1 The "Before Published" financial information has been extracted,
without adjustment, from Jasco`s published audited final results for
the 16 month period as at 30 June 2009.
2. (a) The pro forma "After" adjustment to interest paid represents the
after tax interest charge of 10.5% per annum on the R7 million cash
payment of the purchase consideration. The after tax effect on this
adjustment is R529 000.
(b) This adjustment includes the once-off transaction costs of R450
000, expensed as per the revised IFRS 3 - Business Combinations.
3. The pro forma "After" adjustments include the payment of the purchase
consideration of R7 million, the balance sheet effects of the once-off
transactional costs after tax, the consolidation adjustments required
to consolidate LS and the elimination of Share Capital, Shareholders
Loans and Goodwill.
4. The weighted average number of shares increased from 68 404 120 shares
in February 2008 after the issue of the 27 415 385 shares for the
acquisition of M-TEC on 1 June 2008 and the conversion of the 17 162
969 preference shares on 21 May 2008 in respect of the BEE
transaction.
5. (a) The calculation of basic and diluted earnings per share and
headline earnings per share is based on a weighted number of shares in
issue of 103 471 452.
(b ) The calculation of net asset value per share and net tangible
asset value per share is based on an actual number of shares in issue
of 114 509 435.
6. CATEGORISATION AS A SMALL RELATED PARTY TRANSACTION
The Seller is a material shareholder of Jasco, currently owning 23.9% of
Jasco`s issued share capital, and is therefore a related party to Jasco.
However, the Acquisition is categorised as a small related party
transaction for Jasco in terms of the Listings Requirements of the JSE
Limited ("the Listings Requirements"), as the percentage ratio is less than
5%, and accordingly does not require shareholder approval.
In accordance with the Listings Requirements, the directors of Jasco have
obtained written confirmation from PSG Capital (Proprietary) Limited, the
independent professional expert appointed by the board of Jasco that the
terms of the Acquisition are fair insofar as the shareholders of Jasco are
concerned. This report will be available for inspection at Jasco`s
registered offices, Woodmead Office Park, 8 Saddle Drive, Woodmead, for 28
days from the date of this announcement.
Johannesburg
15 December 2009
Sponsor and Independent Expert: PSG Capital (Proprietary) Limited
Date: 15/12/2009 15:05:01 Produced by the JSE SENS Department.
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