| Thu 12 Aug 2010, 11:39 | | CVN - Convergenet Holdings Limited - Acquisition of additional interest in Sizwe |
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CVN
CVN
CVN - Convergenet Holdings Limited - Acquisition of additional interest in Sizwe
Africa IT Group (Proprietary) Limited ("SIZWE")
CONVERGENET HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/015580/06)
Share code: CVN ISIN: ZAE000102067
("ConvergeNet" or "the Company")
ACQUISITION OF ADDITIONAL INTEREST IN SIZWE AFRICA IT GROUP (PROPRIETARY)
LIMITED ("SIZWE")
Introduction
Shareholders are advised that ConvergeNet has negotiated the conclusion of an
agreement dated 27 July 2010 ("the acquisition agreement") in terms of which
ConvergeNet will acquire an additional 15% in Sizwe held by, Yellow Star
Holdings (Pty) Ltd ("Yellow Star" or "the Vendors"). The Vendors are a related
party to ConvergeNet.
Background to Sizwe Africa IT
Sizwe is the ICT services and solutions provider of choice to a wide variety of
private and public organisations. The company has been awarded several South
African Government term supply contracts. Comprehensive infrastructure services
are provided, which includes project management, hardware maintenance and
Installations, Moves, Adds and Changes (IMAC`s). Sizwe also supplies a number
of value added ICT products and solutions to the local market. Sizwe employs in
excess of 550 people and has a country-wide service and support capability.
Terms of the Acquisition
The acquisition agreement, which was entered into by ConvergeNet and the Vendors
on 27 July 2010, provides for the acquisition by ConvergeNet of an additional
15% shareholding in Sizwe from the vendors ("the acquisition") for an
acquisition price of R18 million ("the consideration"), to be settled in cash.
Following the implementation of the transaction, ConvergeNet will hold a 75%
equity interest in Sizwe.
The acquisition is subject to the normal terms and warranties for a transaction
of the nature contemplated.
Goodwill and other intangibles amounting to R2 647 000 will arise on the
Acquisition.
Pro forma financial effects of the acquisition
The table below summarises the pro forma financial effects of the additional
investment in Sizwe. The financial effects are the responsibility of the
directors and have been prepared for illustrative purposes only, to provide the
possible financial effects on the additional Sizwe investment as if the
investment had taken place from 01 September 2009 for the period of 6 months
until 28 February 2010 for income statement purposes and as at 28 February 2010
for balance sheet purposes.
The pro forma financial effects, because of their nature, may not give a true
reflection of the financial position, the cash flow position, the results of
operations or the changes in equity of ConvergeNet.
Before After % Change
Weighted average shares in issue (`000) 895 611 895 611 179 -
179
Earnings per share ordinary share 1.53 1.66 8.2%
(cents)
Headline earnings per ordinary share 1.53 1.66 8.2%
(cents)
Shares in issue at period end (`000) 915 115 915 115 941 -
941
Net asset value per share (cents) 48.5 48.4 -0.2%
Net tangible asset value per share 18.2 18.0 -1.1%
(cents)
Assumptions:
i) The earnings and headline earnings per ConvergeNet share, as set out in the
"Before" column of the table, are based on the published unaudited interim
financial results of ConvergeNet for the six months ended 28 February 2010
and 895 611 179 weighted average number of ConvergeNet shares in issue.
ii) The earnings and headline earnings per ConvergeNet share, as set out in the
"After" column of the table, are based upon the published unaudited interim
financial results of ConvergeNet for the six months ended 28 February 2010
including the unaudited financial results of Sizwe for the six months ended
28 February 2010 and 895 611 179 weighted average number of ConvergeNet
shares in issue and the assumptions that:
- the additional 15% of the attributable earnings of Sizwe was earned
with effect from 1 September 2009, which information was extracted
from the management accounts of Sizwe, an existing subsidiary of
ConvergeNet. This will have a continuing effect on the Company;
- there were no additional costs incurred relating to the additional
investment in Sizwe or interest adjustments;
- there was no impairment of the goodwill arising from the acquisition;
and
- the purchase price of R18 000 000 was settled on 1 September 2009 in
cash.
iii) The net asset value and tangible net asset value per ConvergeNet share, as
set out in the "Before" column of the table, are based upon the unaudited
balance sheet of ConvergeNet at 28 February 2010 and 915 115 941
ConvergeNet shares in issue.
iv) The net asset value and tangible net asset value per ConvergeNet share, as
set out in the "After" column of the table, are based upon the published
unaudited Balance Sheet of ConvergeNet at 28 February 2010, including the
effects of the additional investment in Sizwe and 915 115 941 ConvergeNet
shares in issue and the assumptions that:
- the additional investment and the acquisition was effective 28
February 2010; and
- the purchase price of R18 000 000 was settled on 28 February 2010.
Rationale
The Group intends delivering turnkey project solutions, ancillary support and
managed services to the Middle Eastern, African and southern African markets.
The acquisition of an additional interest in Sizwe is in line with the Group`s
strategy to acquire appropriate vehicles with which to achieve its vision of
positioning itself as a significant ICT industry player. Sizwe was acquired
for, amongst others, its ICT Infrastructure project and multi- discipline
project management and solutions competence, and forms part of the Group`s
turnkey project business.
Fairness opinion
The acquisition is defined as a small related party transaction in terms of the
JSE Listings Requirements and accordingly a fairness opinion on the transaction
is required. The company has appointed Moore Stephens Corporate Finance
(Proprietary) Limited to act as a professional expert for this opinion, which
opinion will lie for inspection at the company`s registered office from 12
August 2010.
Johannesburg
12 August 2010
Sponsors
Arcay Moela Sponsors
(Proprietary) Limited
Date: 12/08/2010 11:39:01 Produced by the JSE SENS Department.
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