| Tue 23 Aug 2011, 17:00 | | AER - Amalgamated Electronic Corporation Ltd - Acquisition of The Secequip and |
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AER
AER
AER - Amalgamated Electronic Corporation Ltd - Acquisition of The Secequip and
the withdrawal of the cautionary announcement of 8 July 2011
AMALGAMATED ELECTRONIC CORPORATION LTD
(Incorporated in the Republic of South Africa)
(Registration number 1997/010036/06)
Share code: AER ISIN: ZAE000070587
("Amecor" or "the Company" or "the Group")
ACQUISITION OF THE SECEQUIP BUSINESS FROM SECEQUIP SUPPLIES (PROPRIETARY)
LIMITED ("SECEQUIP") AND THE WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT OF 8 JULY
2011
1. Introduction
Amecor is pleased to announce that the Company, through its wholly owned
subsidiary Greater Gauteng Alarm Networks (Proprietary) Limited ("GGAN"),
entered into an agreement with Secequip Supplies (Proprietary) Limited
("Secequip"), registration number 1999/025079/07, to purchase, as a going
concern, the Secequip businesses consisting of the fixed assets, stock, the
customers, the intellectual property, the continuing contracts, employees, the
goodwill and the business name and logo (collectively "the business assets"), as
well as the employee liabilities, but excluding the debtors and business
liabilities for R27 million, subject to the fulfilment of the conditions
precedent as outlined in paragraph 6.5 below. Furthermore, Amecor has disposed
of 21% shareholding in GGAN at par to Secequip (collectively "the transaction").
2. Background to Amecor
Amecor is a South African group of companies specialising in the design,
manufacture and distribution of leading brands within the electronic security,
alternative energy, and power optimisation industries. Principal operations
within the Group include:
- FSK Electronics SA (Pty) Limited ("FSK") specialises in the manufacture of
electronic security devices which include remote monitoring and electronically
controlled security applications;
- Sabre Radio Networks (Pty) Limited ("Sabre") offers a network subscription for
data transmission and signalled response;
- Power Development Services (Pty) Limited ("PDS") supplies and installs power
generating equipment including generators and UPS equipment; and
- Amecor PowerStar (Pty) Limited has exclusive distribution rights with respect
to power optimisation units which enable cost savings and power conservation.
3. Background to Secequip
Secequip is an importer and distributor of electronic products, including the
well-known Texecom range of products and related services and solutions to
primarily the security industry and secondarily, the broader electronics
industry. Secequip has an established network of 13 branches across South Africa
together with a central warehouse and a countrywide sales and marketing team.
SEE PRESS FOR MAP
Secequip`s products include:
- Control panels;
- CCTV equipment;
- Video surveillance and multimedia products;
- High definition surveillance equipment;
- Motion detectors;
- Perimeter protection devices;
- External sounders;
- Heat and smoke detectors;
- Power supplies;
- Access control equipment;
- Gate motors;
- Electric fencing; and
- Related support, installation and maintenance solutions.
4. Commentary on the transaction
Keith Vieira, technical director of Amecor commented: "The acquisition of
Secequip into Amecor is a natural fit as its products and electronic solutions
are complementary to Amecor`s. The Amecor team has cooperated with Secequip for
a number of years informally, and this strategic acquisition is valuable and
exciting to us in that it will broaden our business and offer complete turnkey
security solutions to our customers." Dereck Alexander, CEO of Amecor commented:
"We have had Secequip on our radar screen for some time. The completion of this
important transaction will open the door for accelerated organic growth of our
existing businesses and will provide a platform for us to expand our product
range and service offering steadily in the medium term."
Stephen Courtney, Chairman of Amecor commented: "The addition of a national
distribution platform is a fundamental building block in taking Amecor to the
next level as a larger, more broad-based electronic manufacturing and
distribution group."
5. Rationale for the acquisition of Secequip
The rationale for the Secequip transaction is as follows:
5.1 National distribution footprint
Amecor, through its existing subsidiaries, is primarily an inventor, designer
and manufacturer of products within the electronic security, alternative energy
and power optimisation industries. The addition of Secequip`s 13 branches and
central warehouse provide Amecor with a national footprint to distribute
products and services through a dedicated sales and marketing team.
5.2 Integrated convergent product synergies
The range of products distributed and supported by Secequip is complementary to
(and not in competition with) the Amecor product range. In particular FSK`s
remote monitoring electronically controlled security application and Sabre`s
data transmission and signalled response network interface directly with
Secequip`s range of control panels, motion detectors, heat and smoke detectors,
and perimeter protection devices.
5.3 Integrated cost-effective solutions
The broader and synergistic product range available as a result of the Secequip
acquisition enables the marketing and distribution team to offer customers a
more cost-effective, flexible, integrated electronic security solution, i.e.
broadened integrated product range, solution flexibility, more features, better
pricing, and complete turnkey electronic security solution, tailored to each
clients` needs.
5.4 Purchasing efficiencies and inventory control
The Secequip acquisition will materially increase the number of product lines
and base inventory of the Amecor group, together with a materially increased
customer base. This, in turn, will enable bulk purchasing efficiencies and
inventory and working capital management efficiencies through a consolidated
central warehouse.
6. Details of the transaction
6.1 Subject to the conditions precedent below Amecor will advance a loan of R27
million (twenty seven million Rand) ("the loan") to GGAN and dispose of 21
ordinary shares in GGAN to Secequip at par value. GGAN`s 100 ordinary shares
will be held as follows:
Number of shares %
Amecor 79 79
Secequip 21 21
6.2 The loan is repayable in full within five years of the effective date and
bears interest at the prime overdraft rate plus 2%.
6.3 GGAN will purchase the Secequip business, consisting of the business assets,
the continuing contracts and the employee liabilities, but excluding the debtors
and business liabilities, as a going concern for the sum of R27 million in cash
("the purchase price").
6.4 The purchase price will be funded from Amecor`s resources and no additional
Amecor shares will be issued to fund the acquisition.
6.5 The transaction is subject to the following conditions precedent:
6.5.1 the approval of the board of directors of Amecor;
6.5.2 the parties obtaining such regulatory approvals as are necessary including
the consent of the JSE if applicable;
6.5.3 shareholders` approval in respect of sections 44 and 45 of the Companies
Act authorising the financial assistance between interrelated companies;
6.5.4 the completion of a due diligence investigation of Secequip to the
satisfaction of Amecor; and
6.5.5 the cession of continuing Secequip contracts.
The transaction is subject to certain warranties being provided to Amecor and
GGAN by Secequip and its shareholders. The warranties are those typical of a
transaction of this nature.
7. Pro forma financial effects
The unaudited pro forma financial effects of the transaction, for which the
directors are responsible, are provided for illustrative purposes only to show
the effect of the transaction on earnings per share ("EPS") and headline
earnings per share ("HEPS") as if the transaction had taken effect on 1 April
2010 and on net asset value per share ("NAVPS") and tangible net asset value per
share ("TNAVPS") as if the transaction had taken place on 31 March 2011. Because
of their nature, the unaudited pro forma financial effects may not give a fair
presentation of the Group`s financial position and performance. The unaudited
pro forma financial effects have been compiled from the unaudited reviewed
consolidated financial results of Amecor and the unaudited management accounts
of Secequip for the 12 months ended 31 March 2011 and are presented in a manner
consistent with the format and accounting policies adopted by Amecor and have
been adjusted as described in the notes below:
Change
Notes Before1 After (%)
EPS (cents) 2 28,3 38,5 36
HEPS (cents) 2 28,0 38,2 36
NAVPS (cents) 3 200,5 206,0 3
TNAVPS (cents) 3 109,4 102,6 (6)
Shares in issue at period end (`000) 77 985 77 985
Weighted average number of shares
in issue (`000) 75 553 75 553
Fully diluted weighted average number
of shares in issue (`000) 75 553 75 553
Notes:
1. The "Before" column has been extracted from the reviewed unaudited published
results of Amecor for the 12 months ended 31 March 2011.
2. The financial information relating to Secequip has been extracted from
Secequip`s reviewed unaudited financial statements for the year ended 30
September 2010, pro rated for six months and the further unaudited six months to
31 March 2011 based on management accounts, and 79% applied for the purpose of
the pro forma financial effects, thus excluding Secequip minority interests.
Management are satisfied with accuracy of the management accounts. EPS and HEPS
effects, as reflected in the "After" column, are based on the following
assumptions:
a. the transaction was effective 1 April 2010;
b. the cash paid for the transaction was R27 million;
c. the total after tax profit attributable to the Secequip business is R7,7
million for the 12 months; and
d. all adjustments, except those relating to estimated transaction costs (which
were expensed), are regarded as being of a recurring nature.
3. NAVPS and TNAVPS effects, as reflected in the "After" column, are based on
the following assumptions and information:
a. the transaction was effective 31 March 2011;
b. the purchase price and estimated transaction costs were paid on 31 March 2011
in the manner described to in note 2 above; and
c. net tangible assets acquired are R17,6 million and the excess of the purchase
price over this will comprise goodwill and other intangible assets of R9,4
million subject to a price allocation being performed.
8. Categorisation of the transaction
In terms of the JSE Listings Requirements, the transaction is categorised as a
Category 2 transaction.
9. Withdrawal of the cautionary announcement
Pursuant to the release of the financial effects of the transaction,
shareholders are no longer required to act with caution when dealing in their
securities.
Johannesburg
23 August 2011
Enquiries: Dereck Alexander (CEO) 011 477 2600
Kerry Colley (Financial director) 011 477 2600
Corporate advisor and sponsor
SASFIN CAPITAL
(A division of Sasfin Bank Limited)
Date: 23/08/2011 17:00:01 Produced by the JSE SENS Department.
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