| Thu 20 Dec 2001, 0:00 | | Mb Technologies Limited - General Issue Of Shares |
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MB Technologies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/008964/06)
Share code MBT ISIN ZAE000015996
("MB Technologies" or "the company")
GENERAL ISSUE OF SHARES FOR CASH
1. Introduction
Shareholders are advised that MB Technologies has successfully completed a
fully subscribed issue of shares for cash, thereby strengthening its
permanent capital base by R30,0 million. In total 30 000 000 new MB
Technologies ordinary shares of 1 cent par value each ("new MB Technologies
shares") are to be issued at an issue price of 100 cents per share ("the
issue"). All the new MB Technologies shares have been placed with South
African institutional shareholders in terms of the general authority granted
to the company by its shareholders on 6 December 2001.
The issue represents 7,3% of the issued share capital of MB Technologies
prior to the issue and will increase MB Technologies' issued share capital
from 408 621 664 shares to 438 621 664 shares. The issue price represents a
discount of 5,4% to the weighted average traded price of MB Technologies
shares on the JSE Securities Exchange South Africa ("JSE") for the 30-day
period prior to the date on which the terms of the issue were agreed, being
20 December 2001. The new MB Technologies shares will rank pari passu with
the existing issued shares of MB Technologies. Application has been made to
the JSE for the listing of the new MB Technologies shares from 24 December
2001.
2. Rationale for the issue
Tarsus Technologies (Proprietary) Limited ("Tarsus"), a subsidiary of MB
Technologies and a leading value add distributor of IT infrastructure, has
recently experienced a large increase in revenue and profitability as a
result of the demise of its largest competitor, Siltek Limited. The
directors of MB Technologies are satisfied that:
- the large increase in trading activity will substantially increase Tarsus'
sustainable net profitability and that of MB Technologies;
- this opportunity will further strengthen Tarsus' market position and will
allow Tarsus, in partnership with leading brand vendors, to significantly
improve various aspects of the business model;
- given Tarsus' already tight control over its insured debtors book, its
historical inventory turnover of in excess of 12 times per annum and the
strictly enforced conservative inventory management policy, the increased
trading activity will pose no risk to the business of Tarsus or that of MB
Technologies; and
- will assist MB Technologies to continue to deliver above average earnings
growth for the foreseeable future.
The directors of MB Technologies have determined that, given the
sustainability of the increased profitability, this large increase in
business should be funded by an increase in permanent capital through the
issue of new shares so as to maintain the group's interest bearing debt at
acceptable levels.
The purpose of the issue of shares for cash is primarily to provide MB
Technologies with the funding required by Tarsus to meet initial net working
capital requirements so as to exploit the opportunity created by current
market conditions. In addition, the issue of shares for cash will increase
the liquidity of MB Technologies' shares on the JSE and broaden its
shareholding base through the introduction of further institutional
shareholders.
Despite MB Technologies' strong growth outlook and historical track record,
pricing of the issue has been adversely affected by market sentiment toward
technology shares and has accordingly been determined at 100 cents per new
ordinary share. In line with institutional requests, the founder
shareholders of MB Technologies, L C Baxter and M J McGrath, have each
disposed of 5 000 000 shares to institutional shareholders at the same price
in order to improve the free float and tradeability of the shares. These
disposals by the aforementioned directors represent less than 5% of their
respective holdings prior to the transaction.
MB Technologies is currently experiencing its best trading months in its
history, as a result of strong performances from PC POS International as
well as its local subsidiaries including Tarsus. Investors should note that
the board has taken a conservative route by issuing shares to institutional
investors at a price of 100 cents per ordinary share, rather than increasing
the company's interest bearing debt.
3. Financial effects of the issue
Set out below are the financial effects of the issue of 30 000 000 new
ordinary shares at an issue price of 100 cents per share on headline
earnings per MB Technologies share for the year ended 31 August 2001 and net
asset value per MB Technologies share at 31 August 2001, prepared on the
following basis:
- the calculations below are based on the audited results of MB Technologies
for the financial year ended 31 August 2001;
- the effect of the issue on headline earnings per share has been calculated
on the assumption that the new MB Technologies shares were issued on 1
September 2000 (being the first day of MB Technologies' last annual
reporting period). It has been further assumed that the net proceeds of the
issue were applied to settle debt funding at an after-tax rate of 9,75% per
annum for the financial year to 31 August 2001; and
- the effect of the issue on net asset value per share has been calculated
on the assumption that the new MB Technologies shares were issued on 31
August 2001.
Audited -
12 months ended Pro forma
31 August 2001 After the issue Percentage
(cents) (cents) Change
Normal earnings per share 12,6 12,4 (1,6)
Headline earnings per share 16,3 15,9 (2,5)
Fully diluted headline
earnings
per share 16,1 15,7 (2,5)
Net asset value per share 72,1 73,9 2,5
Johannesburg
20 December 2001
Corporate adviser
Wipcapital (Proprietary) Limited
(Registration number 1997/021195/07)
Sponsor
Smith Borkum Hare
Merrill Lynch South Africa (Pty) Ltd.
Registered Sponsor and
Member of the JSE Securities Exchange South Africa
Registration number 1995/001805/07
