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Hudaco Industries Limited
Reg no. 1985/00461/06
Share code HDC ISIN code ZAE000003273
ACQUISITION OF TWO SECURITY PRODUCT DISTRIBUTORS IN UK
1 Introduction
Hudaco is pleased to announce that it has successfully concluded
negotiations to acquire 100% of the share capital of two British based
distributors of security products through its wholly-owned Guernsey based
subsidiary Quadrant Investments Limited (Quadrant). It has acquired the
entire issued share capital of Verifier Limited (Verifier) and has an
option to acquire all of the share capital of DSC Security Products
Limited (DSP). Both of these companies are registered in the United
Kingdom (UK). ("the acquisitions").
2 Rationale for the acquisitions
In 2001 Hudaco acquired Elvey Security Technologies Limited (Elsec), the
largest distributor of intruder detection equipment in South Africa. .
The world-wide market for security systems and solutions is growing
rapidly and is one industry where, because of the high domestic crime
rate, South African companies find themselves at the forefront of
technology.
These acquisitions present an opportunity to export Elsec's distribution
and support experience to the UK market by promoting leading edge
electronic security technology on an exclusive basis and providing a
unique standard of training and support to customers.
Additional acquisitions to complement this small foothold in the UK
market have already been identified but they will only be considered once
the current acquisitions are performing to plan. It is anticipated that
Elsec's UK operations will contribute meaningful, hard currency earnings
to the Hudaco Group in the medium term.
3 Nature of business
Verifier is a Midlands based distributor of electronic security equipment
with 3 branches and DSP is the sole distributor of DSC alarm control
products in the UK. DSC of Canada is one of the largest manufacturers of
this equipment in the world and has been represented exclusively by Elsec
in the South African market for the past eleven years.
The businesses will be merged into new premises in Birmingham and will
operate as Elvey Security Technologies (UK). The combined businesses had
a net asset value of GBP230,000 (R3,7million), annual turnover in 2001 of
GBP4.5 million (R54 million) and after tax earnings of GBP268 000
(R3.2million).
4 Salient terms of the acquisitions
* Quadrant's newly formed and UK registered subsidiary, Elvey Security
Technologies Limited (Elsec UK), acquired the entire issued share capital
of Verifier and its two subsidiaries with effect from 1 January 2002 from
the vendors J N Newey and other members of the management team who will
all remain with the group in terms of service agreements.
* Elsec UK has acquired an option to purchase the entire share capital of
DSP with effect from 15 April 2002 from JJB Hill (71%) and CM Webb (29%)
who are entitled to put their shares to Elsec UK should the call option
not be exercised. Elsec UK has a contract to manage the DSP business
from 8 February 2002.
* The purchase consideration for the shares of both Verifier and DSP,
which will be effectively ungeared, comprises a fixed initial payment on
purchase of GBP893,000 and a maximum of a further GBP804,000 payable over
the next 24 months based on the attainment of agreed levels of sales or
profitability for the 2 years ended 30 November 2003. The purchase
consideration which could total GBP1,697,000 (R27,600,000) will be
settled from Quadrant's cash reserves. Costs will be approximately
GBP180 000 (R3,000,000).
5 Financial effects of the acquisitions
The effect of the acquisitions on the net asset value and earnings per
share of Hudaco for the year ended 30 November 2001 is not material.
Johannesburg
25 February 2002
Investment Bank and Sponsor
Nedcor Investment Bank Limited
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