| Fri 18 Jun 2010, 13:36 | | SLO - SELCo - Acquisition Of The Entire Issued Share Capital In: Rural |
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SLO
SLO
SLO - SELCo - Acquisition Of The Entire Issued Share Capital In: Rural
Maintenance (Proprietary) Limited ("Rural Maintenance") Netelek (Proprietary)
Limited ("Netelek"); And Netelek Technology Limited ("Netelek Technology")
(The "Transactions")
Southern Electricity Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/006894/06)
JSE code: SLO
ISIN: ZAE000041919
("SELCo" or "the company")
ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL IN:
- RURAL MAINTENANCE (PROPRIETARY) LIMITED ("RURAL MAINTENANCE")
- NETELEK (PROPRIETARY) LIMITED ("NETELEK"); AND
- NETELEK TECHNOLOGY LIMITED ("NETELEK TECHNOLOGY")
(THE "TRANSACTIONS")
1. Introduction
SELCo shareholders are hereby advised that the company has entered into three
separate inter-conditional agreements dated 17 June 2010 to acquire the entire
issued share capital in Rural Maintenance, Netelek and Netelek Technology with
effect from 1 April 2010.
2. Rationale for the Transactions
SELCo distributes electricity procured from the transmission grid to electricity
users located in the southern Namibian towns of Keetmanshoop, Karasburg and
Aranos. SELCo`s ultimate controlling shareholder, Resource Management
Integration Group (Proprietary) Limited ("REMIG"), currently has a number of
promising projects under consideration and development and accordingly deems it
an appropriate time to consolidate its various businesses within the listed
SELCo entity and in the process increase the size and stature of SELCo as a
listed entity. The transactions will consolidate the complementary business of
the broader REMIG group and its associates into a single listed entity. This
will ensure that:
- corporate governance is improved;
- future growth potential is maximised;
- the company`s size and stature with the investment community is suitably
enhanced; and
- staff with specialist technical skills are retained.
It is envisaged that each of the entities acquired will, in due course, enhance
the group`s revenue generating capacity and, as a result, its profitability and
investment return to shareholders.
2.1 About Rural Maintenance
Rural Maintenance is a utility specialist that assists property owners and
municipalities and/or local government structures alike, in the provision of
utility services through the deployment of expertise and capital investment.
Its utility services can also be expanded to include energy management and
alternative renewable supplies.
Rural Maintenance is a market leader in southern Africa in matters pertaining to
metering and verification systems and the private operation of utility
businesses. It is prevalent in its long term energy supply marketplace of
around 10,000 commercial (and domestic) customers in South Africa and Namibia,
providing them with around 40,000,000 kWh`s every month, generating 360,000 data
transactions daily in regard to its metering, verification and transacting
systems, which is probably the biggest remote metering and billing
network/database in Africa.
2.2 About Netelek
Netelek was founded in 1990 to meet the specialised technical needs of an
increasingly sophisticated electricity supply industry. The company combines
first world skills and technology with practical expertise, to create purpose-
fit solutions to the challenges faced in the power management, monitoring and
control environment.
During the past twenty years, Netelek has evolved into a single-source supplier
offering unique, reliable and cost-effective solutions and has established
itself as a significant role player in the South African electricity industry.
Netelek continues to focus on offering complete end-to-end solutions utilising
purpose-built equipment. To this end the company designs, manufactures and
commissions its own range of fully electronic measurement, logging and telemetry
instrumentation ranging from advanced measurement devices to fully integrated
communications equipment.
2.3. About Netelek Technology
Netelek Technology, as technology supplier to SELCo and its subsidiaries, has
developed specialist niche software systems, enabling utilities to reconcile
their stock from generator to end user in an open, transparent and efficient
manner in real time. In addition, Netelek Technology has developed utility
billing systems for billing, revenue collection and credit control. These
solutions are delivered through NetViewTrade Mark and NetBillTrade Mark, two of
its flagship operational products, which provide remote management and
customised billing of services. NetViewTrade Mark is a desktop application that
monitors devices in the field on a scheduled basis to retrieve real-time data.
Through NetViewTrade Mark it is possible to set-up and configure devices,
communicate directly with these devices, configure polling schedules, view event
logs and analyse profile data. NetViewTrade Mark Online provides access to
NetViewTrade Mark from anywhere in the world. NetBillTrade Mark provides
customer account information and allows users access to detailed financial
information.
3. Details of the transactions
In order to give effect to the transactions, SELCo has entered into three
separate inter-conditional agreements as follows:
3.1 The REMIG acquisition agreement
In terms of an acquisition agreement entered into between SELCo and REMIG, SELCo
acquired, with effect from 1 April 2010:
- the entire issued share capital in Rural Maintenance; and
- 49% of the issued share capital in Netelek.
The total purchase consideration amounts to R199 100 000 to be settled by the
issue of 288 551 163 new SELCo shares at an issued price of 69 cents per share.
The purchase consideration is split between the assets acquired as follows:
Asset acquired Purchase New SELCo shares to
consideration be issued at 69
(R) cents per share
177 050 000 256 594 641
Entire issued share capital in
Rural Maintenance
49% of the issued share capital in 22 050 000 31 956 522
Netelek
The material beneficial shareholders of REMIG are CF Bosch (39.28%), I Bosch
(39.74%), both of whom are directors of SELCo, and IK Amuah (10.05%).
Immediately following the issue by SELCo of SELCo shares to REMIG in settlement
of the purchase consideration, REMIG will distribute these shares to its
shareholders pro rata to their shareholding in REMIG as a distribution in terms
of section 90 of the Companies Act and an unbundling in terms of section 46 of
the Income Tax Act.
The REMIG acquisition agreement is subject to the suspensive conditions set out
in paragraph 3.4 below.
3.2 The Living Waters Investments (Proprietary) Limited ("Living Waters")
acquisition agreement
In terms of an acquisition agreement entered into between SELCo and Living
Waters, SELCo acquired, with effect from 1 April 2010, 51% of the issued share
capital in Netelek. The purchase consideration amounts to R22 950 000 to be
settled by the issue of 18 043 478 new SELCo shares at an issued price of 69
cents per share and the balance of the purchase consideration amounting to R10
500 000 will be remain outstanding on loan account by SELCo to the vendor. This
loan account will bear interest from 1 September 2010 at the prime bank
overdraft rate plus 2% and will be repaid within 5 years.
Immediately following the issue by SELCo of SELCo shares to Living Waters in
settlement of the purchase consideration, Living Waters will distribute these
shares to its shareholders pro rata to their shareholding in Living Waters as a
distribution in terms of section 90 of the Companies Act and an unbundling in
terms of section 46 of the Income Tax Act.
I Bosch, a director of SELCo, is the sole beneficial shareholder in Living
Waters.
The Living Waters acquisition agreement is subject to the suspensive conditions
set out in paragraph 3.4 below.
3.3 The Netelek Technology acquisition agreement
In terms of the Netelek Technology acquisition agreement, SELCo will acquire,
with effect from 1 April 2010, 100% of the issued share capital and
shareholders` loan accounts in Netelek Technology. The consideration amounts to
R4 500 000 which will be remain owing on loan account by SELCo to the vendors.
This loan account will bear interest from 1 September 2010 at the prime bank
overdraft rate plus 2% and will be repaid within 5 years.
The vendors are Netelek Ireland, of which C F Bosch and I Bosch, directors of
SELCo are the beneficial shareholders, P M Bester a director of SELCo, E A Steyn
the company secretary of SELCo, Estate M Senekal, I K Amuah and I Badenhorst.
The Netelek Technology acquisition agreement is subject to the suspensive
conditions set out below.
3.4 Suspensive conditions
The REMIG acquisition agreement is subject to the fulfilment of the following
suspensive conditions:
- the approval of SELCo shareholders;
- the approval of REMIG shareholders in general meeting;
- the distribution by REMIG of its 81.73% indirect shareholding in SELCo to
its shareholders; and
- the approval of Standard Bank Limited to the transfer of all of the
relevant bank accounts from Rural Maintenance and Netelek to SELCo.
The Living Waters acquisition agreement is subject to the fulfilment of the
following suspensive conditions:
- the approval of SELCo shareholders;
- the approval of Living Waters shareholders in general meeting and
- the unbundling by Netelek Holdings (Proprietary) Limited (a subsidiary of
Living Waters) of its shareholding in Netelek to Living Waters.
The Netelek Technology acquisition agreement is subject to the fulfilment of the
following outstanding suspensive condition:
- the approval of SELCo shareholders; and
- the securing of the consent and co-operation of all the Netelek Technology
shareholders individually.
In addition to the suspensive conditions detailed above, each of the agreements
is conditional upon the other agreements becoming unconditional.
4. Financial effects
Set out below are the pro forma financial effects of the transactions on the
unaudited interim results published by SELCO in respect of the six months ended
31 December 2009. The pro forma financial effects are the responsibility of the
directors of SELCo and have been prepared for illustrative purposes only, to
provide information on how the transactions would have affected the previously
published interim financial results and because of their nature may not fairly
present SELCo`s financial position, changes in equity and results of operations.
Before After the Change
transactions
Cents Cents %
Earnings per share 1.96 0.99 (49)
Headline earnings per share 1.96 0.99 (49)
Diluted earnings per share 1.96 0.99 (49)
Diluted headline earnings per share 1.96 0.99 (49)
Net asset value per share 42.52 64.44 52
Net tangible asset value per share 28.79 9.6 (67)
Weight average number of shares in 54 948 173 361 542 814 558
issue
Notes:
1. The "Before" column presents SELCo`s reviewed interim results for the
6 month period ended 31 December 2009 prior to the transactions.
2. The "After the transactions" column indicates the pro-forma results
for SELCo for the 6 month period ended 31 December 2009 after the
complete acquisition of Rural Maintenance, Netelek and Netelek
Technology.
3. For the purpose of calculating earnings per share (basic and diluted)
and headline earnings per share (basic and diluted), the transactions
took place on 1 July 2009.
4. For the purpose of calculating net asset value and net tangible asset
value per share, the transactions took place on 31 December 2009.
5. The entities being acquired by SELCo had the following net asset
values as at 31 December 2009:
a) Rural Maintenance R21,835,900
b) Netelek R15,567,483
c) Netelek Technology R301,307(Euro28,338)
6. The entities being acquired by SELCo had the following profits after
tax for the 6 months ended 31 December 2009:
a) Rural Maintenance R4,164,369
b) Netelek R1,243,076
c) Netelek Technology R7,390 (Euro667)
7. Restructuring costs of R1,943,000 will be incurred in respect of the
transactions. These costs relate to legal fees, reporting accountants
fees, JSE fees, fairness opinion costs, exchange control and printing,
publications and advertising.
8. Interest earned has been adjusted as a result of the reduction in cash
balances due to restructuring costs.
9. The full purchase price of R177,050,000 for Rural Maintenance will be
settled in shares.
10. Of the purchase price of R45,000,000 for 100% of the shares in
Netelek, R34,500,000 will be settled in shares and R10,500,000 will be
settled via a loan account. Interest will be charged at a rate of
12.5% being the prime overdraft rate plus 2.5%.
11. The purchase price of R4,500,000 for Netelek Technology Ltd will be
settled in its entirety via a loan account. Interest will be charged
at a rate of 12% being the prime overdraft rate plus 2%.
5. Fairness opinions
Due to the fact that each of the transactions is considered a related party
transaction in terms of paragraph 10.4(f) of the JSE Limited Listings
Requirements, the board of directors has appointed Java Capital (Proprietary)
Limited ("Java Capital") as independent professional expert to advise on the
fairness of the transactions.
6. Change of name
It is proposed that as a result of the transactions the company change its name
from Southern Electricity Company Limited to Southern Electricity Company
Holdings Limited. It is envisaged that the new name will better reflect the
function of the entity as a holding company following the transactions as well
as the increased size and scope of its product and service offering. A special
resolution to this effect will be proposed at a general meeting as detailed
below.
7. Reverse takeover
The implementation of the transactions will result in a reverse takeover of
SELCo in terms of the JSE Limited Listings Requirements which stipulate that
SELCo can only retain its listing following the reverse take-over if the JSE is
satisfied that SELCo continues to satisfy the criteria for maintaining its
listing. The directors of SELCo are confident that the company will meet this
requirement post the implementation of the transactions.
8. Circular to shareholders and general meeting
The transactions are classified as both category 1 and related party
transactions in terms of the Listings Requirements of the JSE Limited and
furthermore constitute a reverse listing. Each of the acquisition agreements is
subject to the approval of shareholders (excluding those shareholders who are
considered related parties). SELCo will, in due course, send a circular to
shareholders including a notice convening a general meeting of shareholders. At
the general meeting to be convened, the resolutions required to give effect to
the transactions, the change of name of the company and further ancillary
matters will be tabled.
9. Withdrawal of cautionary announcement
Shareholders are referred to the renewal of cautionary announcement published on
SENS on 12 May 2010 and are advised that caution need no longer be exercised
when dealing in the company`s securities.
Pretoria
18 June 2010
Sponsor:
Grindrod Bank Limited
Independent professional expert:
Java Capital (Proprietary) Limited
Auditors and reporting accountants:
Mazars
Legal advisors:
Adams & Adams
Date: 18/06/2010 13:36:01 Produced by the JSE SENS Department.
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