| Mon 6 Jun 2011, 17:40 | | BCX - Business Connexion Group Limited - Announcement relating to the |
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BCX
BCX
BCX - Business Connexion Group Limited - Announcement relating to the
Acquisition by Business Connexion (Proprietary) Limited of a 50% Plus One Share
Interest in the Issued Share Capital of Dusty Moon Investments 333 (Proprietary)
Limited
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
(ISIN: ZAE000054631)
(Share code: BCX)
("BCX" or "the Company")
ANNOUNCEMENT RELATING TO THE ACQUISITION BY BUSINESS CONNEXION (PROPRIETARY)
LIMITED OF A 50% PLUS ONE SHARE INTEREST IN THE ISSUED SHARE CAPITAL OF DUSTY
MOON INVESTMENTS 333 (PROPRIETARY) LIMITED
1. Introduction
BCX shareholders are hereby advised that Business Connexion (Proprietary)
Limited ("BCX Pty"), a wholly owned subsidiary of BCX, entered into a sale of
shares agreement with the trustees of the Trawaral Trust ("TW Trust" or "the
Seller") on 1 June 2011 ("the Sale of Shares Agreement"), in terms of which,
inter alia, it will purchase 50% plus one share in the issued share capital of
Dusty Moon Investments 333 (Proprietary) Limited ("Sale Shares"), a company
which will hold 100% of the entire issued share capital of Cedar Point Trading
373 (Proprietary) Limited ("Canoa Importers 2") and Newmillen Investments 117
(Proprietary) Limited ("SOS Holdings") (hereinafter referred to as "Canoa Group
Holdings" or collectively as "Canoa Group") on the terms and conditions as set
out below ("the Acquisition").
The purpose of this announcement is to provide BCX shareholders with the salient
terms of the Acquisition.
2. Rationale
In 2010, BCX announced the formation of a Managed Print Services business unit
through a joint venture with the Canoa Group, to enhance its overall managed
services offerings. This Acquisition represents an extended investment into this
important and growing area of information and communications technology ("ICT")
workspace management and managed services.
The Acquisition is aligned to BCX`s vision to create a simplified ICT workspace
for customers. The growth of multipurpose, intelligent print devices and their
related peripherals and management has become a fundamental component of an
enterprise`s overall end-user computing strategy. BCX wishes to further enhance
its position as a leading managed services provider by acquiring exclusive
supply and skills in the market. The Acquisition will enhance BCX`s position in
this growing market.
The Acquisition is expected to have a positive impact on the group`s key target
metrics including, return on equity, earnings per share and operating profit
margins.
3. Details of the Acquisition
3.1. Terms of the Acquisition
In order to facilitate the implementation of the Acquisition, the Seller has
undertaken to restructure the current Canoa Group businesses ("Restructure")
such that on or before the effective date of the Acquisition:
- The Seller holds 100% of the issued share capital of Canoa Group Holdings;
- Canoa Group Holdings holds 100% of the issued share capital of Canoa Importers
2 and SOS Holdings;
- SOS Holdings holds 100% of the issued share capital of OEP Office Equipment
Products (Proprietary) Limited ("OEP"), Smart Office Eastern Cape (Proprietary)
Limited ("Smart Office EC"), Canoa KwaZulu Natal (Proprietary) Limited ("Canoa
KZN"), Automated Office Equipment (Proprietary) Limited ("AOE") and Business
Connexion Managed Print Services (Proprietary) Limited ("BCX MPS");
- OEP continues to hold 100% of the issued share capital of Katlego Solutions
(Proprietary) Limited ("Katlego"); and
- The consumables businesses of Black Ginger 35 (Proprietary) Limited and
Cancape (Proprietary) Limited have been transferred to AOE.
Shareholders are referred to the press announcement to be published in the
Business Day and Beeld on Tuesday, 07 June 2011 for a diagram of the final
structure of the Canoa Group after the Restructure.
3.1.1. Canoa Importers 2
Canoa Importers 2 is a sourcing and direct distribution company for copy, print,
imaging technology and solutions. The exclusive distribution rights with Canon
South Africa (Proprietary) Limited ("Canon SA") for copy and imaging technology
in South Africa currently held by Canoa Importers (Proprietary) Limited ("Canoa
Importers") ("Partner Agreement") will be assigned to Canoa Importers 2 prior to
the effective date of the Acquisition ("Assignment Agreement").
3.1.2. SOS Holdings
SOS Holdings is a company which will, following the Restructure, hold 100% of
the issued share capital of the following companies:
3.1.2.1 OEP (a 100% shareholder of Katlego, a Public sector direct sales print
services company), Smart Office EC, Canoa KZN, and AOE, the multi-brand, break
and fix service companies offering cost effective print solutions, including
document storage and retrieval solutions; and
3.1.2.2 BCX MPS which offers enterprise focused solutions with an emphasis on
providing complete Managed Print Services to large organisations. BCX Pty`s
50.1% shareholding in this entity will be transferred to SOS Holdings as part of
this Acquisition.
3.2. Purchase Consideration
The consideration payable by BCX to the TW Trust in terms of the Sale of Shares
Agreement is R 240 000 000 (two hundred and forty million rand) in cash
("Purchase Consideration"), and will be paid on the closing date, which will be
within 5 (five) business days after the fulfilment or waiver, as the case may
be, of all conditions precedent to the Acquisition.
3.3. Profit Warranty
The Seller has warranted sustainable profit after tax ("PAT") until the period
ending 31 August 2012. To the extent that the actual PAT exceeds the warranted
PAT to 31 August 2012 by more than 5%, then the Seller will earn an additional
consideration ("Increase Amount"). This Increase Amount will be payable in two
instalments.
The first instalment equalling 50% of the Increase Amount will be payable in
November 2012. The second instalment equalling the remaining 50% of the
Increase Amount will only be payable if the sustainable PAT to 31 August 2013 is
equal to or exceeds the inflation adjusted sustainable PAT to 31 August 2012
("2013 Target PAT"). Such payment would be made in November 2013.
If the 2013 Target PAT is not achieved, the second instalment will not be
payable. In the event that the actual sustainable PAT to 31 August 2012 is less
than the warranted PAT by 5% or more, then the Purchase Consideration will be
reduced ("Reduction Amount").
Any potential Increase Amount or Reduction Amount will be capped at a value R60
000 000 (sixty million rand).
4. Pro forma financial effects of the Acquisition on BCX shareholders
The unaudited pro forma financial effects of the Acquisition on BCX shareholders
are set out below and are based on the:
- BCX audited results for the year ended 31 August 2010, adjusted for:
- the results for the year ended 30 September 2010 of the UCS Group Limited
target assets acquired in the acquisition by BCX ("UCS Acquisition") that became
effective on 1 May 2011 and was published in a circular to BCX shareholders
posted on 9 March 2011; and
- the disposal of BCX`s 70% shareholding in Destiny Electronic Commerce
(Proprietary) Limited ("Destiny") as announced on SENS on 24 May 2011, 2 June
2011 and 3 June 2011 ("Destiny Disposal"); and
- unaudited management accounts for the year ended 28 February 2011 for all
Canoa Group companies except Canoa Importers 2 and Smart Office EC whose
unaudited management accounts are for the year ended 30 June 2010. BCX is
satisfied with the quality of these management accounts.
The pro forma financial effects have not been based on the recently published
BCX interim results for the six months ended 28 February 2011 as they did not
account for the UCS Acquisition. It is therefore more meaningful to base the
financial effects on the results for the year ended 31 August 2010 as there
would be continuity of the UCS Acquisition and the Destiny Disposal.
The unaudited pro forma financial effects are the responsibility of the board of
directors of BCX and have been prepared for illustrative purposes only to
provide information about how the Acquisition may have impacted shareholders on
the relevant reporting date and because of their pro forma nature may not give a
fair reflection of BCX`s financial position, changes in equity results of
operations or cash flows after the Acquisition.
Before the After the % Change
Acquisition Acquisition
(1) (2), (3),
(4), (5)
Headline earnings per share 38,7 46,1 19.1
(cents)
Diluted headline earnings per 34,3 40,8 19.0
share (cents)
Basic earnings per share 47,3 54.7 15.6
(cents)
Diluted earnings per share 41,9 48.4 15.5
(cents)
NAV per share (cents) 522,6 512.1 (2.0)
Net tangible asset value per 412,7 370.8 (10.2)
share (cents)
Number of shares in issue 404 912 404 912 -
(`000`s)
Weighted average number of 362 097 362 097 -
shares in issue (000`s)
Diluted weighted average 408 879 408 879 -
number of shares (000`s)
Notes and assumptions:
1) The financial information in the "Before the Acquisition" column has been
based on:
- the pro forma financial effects in the circular to BCX shareholders dated 9
March 2011 relating to the UCS Acquisition; and
- the pro forma financial effects in the SENS announcements to BCX shareholders
dated 2 June 2011 and 3 June 2011 relating to the Destiny Disposal.
2) The net profit after tax and net assets attributable to OEP, Canoa KZN, and
AOE for the year ended 28 February 2011, as included in the pro forma financial
effects amounted to R22.1 million and R80.5 million respectively.
3) The net profit after tax and net assets attributable to Canoa Importers 2 and
Smart Office EC for the year ended 30 June 2010, as included in the pro forma
financial effects amounted to R45.7 million and R4.7 million respectively.
4) The unaudited pro forma statement of comprehensive income of BCX has been
prepared assuming that BCX made the Acquisition with effect from 1 September
2009.
5) The unaudited pro forma statement of financial position of BCX has been
prepared assuming that the Acquisition was effected on 31 August 2010.
5. Conditions precedent
The Acquisition has been approved by the board of directors of BCX and the
Competition Authorities, but remains subject to the fulfilment or waiver (where
applicable) of the following conditions precedent, by no later than 14 June
2011:
5.1. The approval of the trustees of the TW Trust of the entering into of the
Sale of Shares Agreement;
5.2. The approval of the board of directors of Canoa Group Holdings of the
transfer of the Sale Shares from the TW Trust to BCX Pty and the entering into
of the Sale of Shares Agreement;
5.3. The written consent to the Acquisition by Canon SA;
5.4. The adoption of a special resolution by the TW Trust in terms of sections
66(8) and (9) of the Companies Act, No. 71 of 2008, as amended ("Companies
Act"), approving the remuneration of the directors of Canoa Group Holdings;
5.5. The implementation of the Restructure by the TW Trust;
5.6. The conclusion of the Assignment Agreement between Canon SA, Canoa
Importers and Canoa Importers 2 in terms of which Canoa Importers cedes all of
its rights and delegates all of its obligations under the existing Partner
Agreement to Canoa Importers 2 and such agreement becoming unconditional, save
for any condition requiring the Sale of Shares Agreement to become
unconditional;
5.7. The conclusion of the Shareholders Agreement between BCX Pty, the trustees
of the TW Trust and Canoa Group Holdings and it becoming unconditional, save for
any condition requiring the Sale of Shares Agreement to become unconditional;
5.8. The conclusion of employment and restraint agreements and such agreements
becoming unconditional save for any condition requiring the Sale of Shares
Agreement to become unconditional;
5.9. The delivery by the TW Trust of the disclosure schedule containing
information disclosed against warranties given to BCX Pty and the approval of
such disclosure schedule by BCX Pty; and
5.10. The replacement of the Canoa Group Holdings articles of association with
the memorandum of incorporation in line with the Companies Act.
6. Effective date
The Acquisition will be effective on 1 June 2011, provided all conditions
precedent are fulfilled or waived, as the case may be, by 14 June 2011.
7. Classification of the Acquisition
The Acquisition is classified as a category 2 transaction in terms of the JSE
Limited ("JSE`) Listings Requirements.
8. Memorandum of Incorporation
BCX undertakes that the memorandum of incorporation of Canoa Group Holdings will
conform to Schedule 10 of the JSE Listings Requirements, as required.
Midrand
6 June 2011
Transaction Advisor
Imbewu Capital Partners
Merchant Bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Attorneys
Cliffe Dekker Hofmeyr
Date: 06/06/2011 17:40:01 Produced by the JSE SENS Department.
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