| Tue 1 Jun 2010, 17:44 | | DTH - Dynamic Technology Holdings Limited - Proposed Scheme of Arrangement; |
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DTH
DTH
DTH - Dynamic Technology Holdings Limited - Proposed Scheme of Arrangement;
Provision of Financial Assistance; Delisting of DTH from the JSE and
withdrawal of cautionary
DYNAMIC TECHNOLOGY HOLDINGS LIMITED
(Registration Number: 2004/016984/06)
Share Code: DTH ISIN: ZAE000124681
("DTH" or "the Company" or "the Group")
PROPOSED IMPLEMENTATION OF A SCHEME OF ARRANGEMENT IN TERMS OF SECTION 311 OF
THE COMPANIES ACT, NO. 61 OF 1973 ("the Companies Act"), PROVISION OF
FINANCIAL ASSISTANCE IN TERMS OF SECTION 38(2A) AND APPROVAL IN TERMS OF
226(2)(a) OF THE COMPANIES ACT, DELISTING OF DTH FROM THE JSE LIMITED ("the
JSE") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1 Shareholders are hereby advised that the DTH Board of Directors ("the
Board") received a firm intention to make an offer from Xantha Properties
21 (Proprietary) Limited ("Xantha Properties"), registration number
2008/020604/07, a company controlled by certain key members of the
management team of DTH ("the DTH management consortium") on 31 May 2010.
1.2 The offer consideration comprises a total cash consideration of R30 213
058 for 28 774 341 DTH shares ("the offer shares"), equating to a cash
consideration of R1.05 per share ("the scheme consideration") and is
proposed by way of a scheme of arrangement in terms of section 311 of the
Companies Act ("the scheme"). The conditions to which the scheme is
subject are detailed in paragraph 6 below.
1.3 The DTH management consortium, who currently hold 21 182 517 (42.37%) DTH
shares, comprises:
- Mr CJ Wilkins, holding 4 506 021 shares or 9.01%;
- Mr G Fowler, holding 3 467 009 shares or 6.93%;
- Cornastone Technology Investments (Proprietary) Limited
("Cornastone"), holding 10 460 057 shares* or 20.92%;
- Mr J van der Merwe, holding 2 010 854 shares or 4.02%;
- Mr F Luthango, holding 717 076 shares or 1.43%; and
- Mr J Fouche, holding 21 500 shares or 0.04%.
* This comprises Cornastone`s total shareholding, however 5 230 029
(50%) DTH shares held by Cornastone will form part of the offer
shares and will attract the scheme consideration whilst the
remaining 5 230 028 (50%) DTH shares will be held by Cornastone post
the implementation of the scheme.
1.4 Certain shareholders will not form part of the scheme and are considered
"excluded members" for purposes of the scheme, namely:
- The DTH management consortium, holding 15 952 488 DTH shares# or
31.91%; and
- Dynamic Visual Technologies Gauteng (Proprietary) Limited ("DVT
Gauteng"), holding 2 273 170 DTH treasury shares or 4.55%.
# Comprising only 50% of Cornastone`s total holding of 10 460 057
DTH shares as the remaining 50% will be acquired in terms of the
scheme.
2. THE SCHEME
2.1 Xantha Properties has proposed the scheme between DTH and its
shareholders, other than the excluded members ("the scheme members") in
terms of section 311 of the Companies Act, for the purpose of acquiring
the offer shares.
2.2 As consideration for the disposal of their DTH shares, scheme
participants and the DVT employees share trust (holding 3 000 000 shares
or 6%) will become entitled to receive the scheme consideration which
represents a premium of 50% to the 30 day volume weighted average share
price of 70 cents on Monday, 31 May 2010, the day prior to this
announcement.
2.3 Xantha Properties will borrow R20,5 million from DTH to fund the
aggregate consideration with the balance of the funds having being
secured. financial assistance is provided by DTH to Xantha Properties
in terms of section 38(2A) of the Companies Act.
2.4 Shareholders will be requested to approve the financial assistance to be
provided by DTH to Xantha Properties in terms of section 38(2A)(B) and
226(2)(A) of the Companies Act by way of passing the necessary special
resolution to be proposed at a general meeting of shareholders, notice of
which will be included in a circular to DTH shareholders. The DTH Board
is satisfied that subsequent to providing such financial assistance to
Xantha Properties:-
- DTH will be able to pay its debts as they become due in the ordinary
course of business and will be able to do so for the duration of
this transaction; and
- the consolidated assets of DTH fairly valued will be in excess of
the consolidated liabilities of DTH.
2.5 The Securities Regulation Panel ("SRP") has been provided with written
confirmation, furnished by The Standard Bank of South Africa Limited
that, in the event of all scheme conditions being fulfilled and the
scheme being implemented, sufficient cash resources will be available to
Xantha Properties to discharge the total cash consideration payable in
terms of the scheme.
2.6 The DVT Employees Share Trust provides that if an offer is made to
members in terms of section 311 of the Companies Act, the DTH Board shall
stipulate that all outstanding and unexercised options shall be
exercisable on or before a date determined by the DTH Board so as to
enable holders of the options to participate in the offer to scheme
participants. The DTH Board stipulated that all outstanding and
unexercised options shall be exercisable on or before Wednesday, 2 June
2010. Any options not so exercised by that date shall expire. Whilst the
members of the DVT Employees Share Trust are not scheme participants, the
DVT Employees Share Trust shall receive a distribution of R1.05 per share
pursuant to the implementation of the scheme from the DVT Employees Share
Trust, which net amount to be received by employees is expected to be
approximately R408 146 in total.
2.7 Following the implementation of the scheme and a share swap transaction
whereby the DTH management consortium will swap their DTH ordinary shares
for Xantha Properties shares, Xantha Properties will hold 100% of the
issued shares in DTH.
2.8 DTH shareholders who are precluded from voting on the scheme at a meeting
of scheme members ("scheme meeting") are as follows:-
Name Total number Total shares
of shares held as a %
held of total
shares
Xantha Properties / DTH management 21 182 517 42%
consortium
Ditlaisego Hickson and Company 2 000 000 4%
Remaining voting pool members# 11 142 911 22%
DVT Gauteng (holding the DTH treasury 2 273 170 5%
shares)
The DVT Employees Share Trust 3 000 000 6%
Total 39 598 598 79%
# DTH shareholders, other than the DTH management consortium, who are
parties to a voting pool agreement.
3. IRREVOCABLE UNDERTAKINGS
Scheme members collectively holding 6 554 600 shares in the Company,
representing approximately 63% of the scheme members` shares eligible to
vote, have given irrevocable undertakings to vote in favour of the
implementation of the scheme.
4. NATURE OF BUSINESS
DTH is an empowered software and services business, specialising in the
delivery of tailor-made software solutions using a combination of
frameworks and components, packaged software and custom development,
primarily based on the Microsoft platform. DTH is strategically
committed to Microsoft and is a Microsoft Gold certified partner.
DTH employs over 140 mostly technical staff members and operates from
offices in both Johannesburg and Cape Town. As an owner-managed
business, the current shareholders are directly involved in all aspects
of the business and personally supervise major projects.
DTH`s core offerings are grouped as follows:
- business solutions: solutions for customer relationship management,
business process management, content management and time management;
- custom solutions: project-based, tailor-made software solutions
using frameworks and components;
- professional services, specific software-related consulting and
contracting services; and
- specialist services: complementary or specific software development-
based services such as technology renewal and systems integration.
DTH primarily provides solutions to the corporate and small medium
enterprise markets in South Africa primarily in the financial services,
retail, business services and telecommunications sectors. A key
characteristic of the target market is the need to manage financial and
client information and processes.
5. RATIONALE FOR THE SCHEME
DTH listed on AltX on 6 November 2007 at a price of R1.00 per share, with
the primary objective of raising capital to fund acquisitions to fulfill
its business strategy by adding the required competencies and solutions
to its existing business. However, due to, inter alia, the low liquidity
of the Company`s shares together with the recent global recession, the
share price has declined to levels of approximately R0.75 per share over
the last 12 months. The economic circumstances in which DTH now operates
are almost unrecognisable from the circumstances prevalent when the
Company listed and transactions of a capital nature have become
challenging for a small IT business listed on AltX. Acquisitions
favourable to DTH shareholders have been significantly impacted by
factors such as the persistently low market value of the Company and the
ongoing negative sentiment associated with small capitalisation companies
in general. This, together with the ongoing listing and associated costs
to the Company, including the decline in the Company`s profits
(shareholders are referred to the trading statement and provisional
audited results for the year ended 28 February 2010 released on SENS on
Thursday, 18 March 2010 and Thursday, 27 May 2010, respectively), has
resulted in Xantha Properties proposing the scheme and, if implemented,
subsequently applying for the delisting of the Company. The DTH Board
believes that the implementation of the scheme is the most efficient
manner to unlock value for DTH shareholders and the Group itself by
providing interested shareholders the opportunity to exit their
investments in DTH. In addition, this will afford management the
opportunity and resources to focus on operational issues within an
unlisted environment without the distraction of regulatory and
shareholder matters.
6. SCHEME CONDITIONS
The scheme is subject to the fulfilment or waiver (where possible), as
the case may be, of the following suspensive conditions:
6.1 the scheme being approved, with or without modification, by a majority
representing not less than three-fourths (75%) of the votes exercisable
by scheme members (who are eligible to vote) present and voting, either
in person or by proxy, at the scheme meeting;
6.2 the special resolution approving the financial assistance to be provided
by DTH to Xantha Properties being duly passed at a general meeting of DTH
shareholders in accordance with section 38(2A)(b) and 226(2)(a) of the
Companies Act, respectively, and the registration of such special
resolution by the Companies Intellectual Property Registration Office
("CIPRO");
6.3 the Court granting an order sanctioning the scheme in terms of section
311 of the Companies Act and CIPRO registering such order; and
6.4 Obtaining all necessary regulatory approvals from the SRP, JSE and the
South African Reserve Bank.
7. OPINIONS AND RECOMMENDATIONS
7.1 Due to members of the DTH Board having conflicting interests regarding
the implementation of the scheme, the DTH Board has established an
independent sub-committee, comprising Rod Fehrsen, an independent non-
executive director of DTH.
7.2 The DTH Board has appointed an independent expert, Mazars Corporate
Finance (Proprietary) Limited, to report to Rod Fehrsen and to advise the
DTH Board on the implementation of the scheme and as to how same affects
the DTH shareholders.
7.3 The substance of the external advice and the views of the DTH Board and
sub-committee will be set out in a circular to be posted to DTH
shareholders in due course.
8. FINANCIAL EFFECTS OF THE SCHEME
The table below sets out the financial effects of the implementation of
the scheme on a scheme member:-
Before After Percentage
the the change
scheme scheme
Market price (cents per
share) 70(1) 105(4) 50%
30 day weighted average share
price (cents per share) 70(1) 105(4) 50%
Basic earnings per share
(cents) 14.4(2) 4.0(3) (72%)
Headline earnings per share
(cents) 12.3(2) 4.0(3) (67%)
Net asset value per share
(cents) 75.1(2) 105(4) 40%
Net tangible asset value per
share (cents) 56.0(2) 105(4) 88%
Notes
1. Based on the ruling market price of DTH on the JSE at the close of
business on the day preceding the announcement.
2. Based on the provisional audited financial results for the year
ended 28 February 2010 as released on SENS on Thursday, 27 May 2010.
3. Based on the assumption that a scheme participant would have
received a pre-tax interest rate of 6.4% for the twelve months to
February 2010 if a scheme participant invested its scheme
consideration of R1.05 per share in a fixed deposit account with The
Standard Bank of South Africa Limited. A tax rate of 40% was assumed
to calculate the after tax effect on an individual.
4. Based on the scheme consideration of R1.05. Capital Gains Tax
consequences have been ignored.
9. DELISTING OF DTH FROM THE JSE
Pursuant to the implementation of the scheme, it is intended that the
business of DTH will continue to operate in its current format but will
be delisted, rationalised and restructured with a view to improving tax
structures, simplifying underlying legal entity structures and operating
more efficiently.
10. SPECIAL ARRANGEMENTS
Except for the terms and conditions applicable to the voting pool
agreement, the scheme and Xantha Properties` related funding
arrangements, there are no special arrangements, undertakings or
agreements between Xantha Properties and DTH, or persons acting in
concert with these parties in relation to the scheme shares.
11. SALIENT DATES AND TIMES
2010
Notice of scheme meeting, general meeting and Order of Thursday, 1 July
Court convening the scheme meeting submitted in the
press on
Circular posted to DTH shareholders on Thursday, 1 July
Last day to trade to be recorded in the register to Tuesday, 13 July
vote at the scheme meeting, on
Scheme voting record date, on Tuesday, 20 July
Last day to lodge forms of proxy for the scheme Wednesday, 21 July
meeting by 10h00, on
Last day to lodge forms of proxy for the general Wednesday, 21 July
meeting by 10h30, on
Scheme meeting to be held at 10h00, on Friday, 23 July
General meeting to be held at 10h30 (or 10 minutes Friday, 23 July
after the conclusion or adjournment of the scheme
meeting, whichever is later)
Results of the scheme meeting and the general meeting Friday, 23 July
released on SENS, on
Results of the scheme meeting and the general meeting Monday, 26 July
published in the press, on
Court hearing to sanction the scheme, on Tuesday, 3 August
If the scheme is sanctioned and implemented:
Announcement regarding the sanctioning of the scheme Wednesday, 4 August
released on SENS, on
Announcement regarding the sanctioning of the scheme Thursday, 5 August
published in the press, on
Order of Court sanctioning the scheme registered by Thursday, 12 August
CIPRO, on
Last day to trade to become a scheme participant, on Friday, 20 August
Shares suspended as from commencement of trade on Monday, 23 August
Scheme consideration record date on which scheme Friday, 27 August
participants must be recorded in the register to
receive the scheme consideration, on
Operative date of the scheme from commencement of Monday, 30 August
trade, on
Date on which the scheme consideration will be made Monday, 30 August
available to the scheme participants, on
Listing terminates at commencement of trade on Tuesday, 31 August
The above dates and times are provisional and any applicable adjournments
or postponements will be announced on SENS.
Share certificates may not be dematerialised or rematerialised after
Friday, 20 August 2010.
12. FURTHER DOCUMENTATION
Further details of the scheme and related shareholder approvals will be
included in a circular to DTH shareholders which will, subject to the
approval of the JSE and the SRP, be posted to DTH shareholders in due
course.
13. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Following the release of this announcement, the cautionary announcement
referred to above is withdrawn and caution is no longer required to be
exercised by DTH shareholders when dealing in the Company`s shares.
For and on behalf of the Board
H Ratshefola C Wilkins G Fowler
Chairman Chief Executive Officer Chief Financial Officer
Johannesburg
1 June 2010
Company secretary and registered office:
D M Hughes
Ground Floor, Victoria Gate South, Hyde Lane, Hyde Park, Sandton, 2199.
Corporate Advisor:
Richmond Capital (Proprietary) Limited
Designated Advisor:
Grindrod Bank Limited
Attorneys:
Webber Wentzel Attorneys
Independent Expert:
Mazars Corporate Finance (Proprietary) Limited
Date: 01/06/2010 17:44:01 Produced by the JSE SENS Department.
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