| Fri 3 May 2002, 0:00 | | Altech - Cautionary Announcement |
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Allied Technologies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1946/020415/06)
JSE Share code: ALT ISIN: ZAE000015251
("Altech")
CAUTIONARY ANNOUNCEMENT
- CREATION OF SIGNIFICANT EMPOWERMENT CONTROLLED IT SERVICES GROUP
1. INTRODUCTION
Standard Corporate and Merchant Bank is authorised to announce that
Altech Data (Proprietary) Limited ("Altech Data"), a wholly-owned subsidiary
of Altech will, subject to certain suspensive conditions, acquire from Labat
Africa Limited ("Labat") its information technology interests ('the Labat IT
operations") in terms of section 228 of the Companies Act, 1973 (Act 61 of
1973).
Simultaneous with or as soon as reasonably possible after the acquisition
of the Labat IT operations, an empowerment consortium consisting of, inter
alia, certain Labat shareholders and members of Labat's senior management
team ("the empowerment consortium") will subscribe for 50,1% of the issued
share capital of Altech Data ("the transaction"). The board and senior
management of Altech Data will be reconstituted to reflect the revised
shareholder base of the company.
Altech strongly believes in the need for black economic empowerment
("BEE") in South Africa and has supported a number of such initiatives to
date. Altech has identified in the empowerment consortium a credible BEE
partner, which has achieved both financial and operational success through
its management and partial ownership of Labat. The acquisition will result
in Altech Data becoming a significant BEE controlled and managed IT services
group.
2. THE LABAT IT OPERATIONS
Subject to the fulfilment of the suspensive conditions outlined in paragraph
8 below, Altech Data will acquire the Labat IT operations, which comprise
of:
* 100% of the issued share capital of South African Micro-Electronic Systems
(Proprietary) Limited ("Sames");
* 51% of the issued share capital of Labat Traffic Solutions (Proprietary)
Limited ("Labat Traffic"); and
* 100% of the issued share capital of Labat Africa Management Consulting
(Proprietary) Limited ("Labat Consulting"),
together with all rights to the Labat Africa name and all claims on loan
account of Labat against the Labat IT operations.
Sames has developed an international niche market in its specialised area
of integrated circuit design and semi-conductor solutions. The majority of
Sames' revenue is derived from the export of these products.
Labat Traffic provides proven technology-driven traffic management
systems to metropolitan councils and provincial traffic departments.
Negotiations are under way with the owners of the remainder of the shares in
Labat Traffic to acquire such shares.
Labat Consulting offers services in areas including finance, operations,
marketing and information technology. Further details of these operations
are set out in the announcement by Labat regarding the transaction which
appears elsewhere in this publication today.
3. THE ALTECH DATA IT OPERATIONS
The Labat IT operations will be merged with the information technology
interests of Altech, all of which are held by Altech Data, and comprise of:
* 100% of Isis Information Systems ("Isis");
* 50,1% of Keops Isis Industrial Information Systems (Proprietary) Limited
("Keops Isis"); and
* 100% of Altech Card Solutions ("ACS").
Isis specialises in systems development and integration, business
management and production systems. Isis focuses on the manufacturing,
banking, advanced business systems, telecommunications, defence, e-commerce
and public sectors.
Keops Isis is a joint venture between Isis and Keops Technologies
(Canada) and develops specialised programs on a contract basis, focusing on
production and process management, production scheduling, process controls
and real-time reporting systems for manufacturing, industrial and mining
concerns.
ACS provides software development, consulting, turnkey project delivery,
help desk support, field support and product repairs in the plastic card and
electronic funds transfer point of sale ("EFTPOS") markets. The business is
divided into three business segments, being:
* banking and retail, focusing on the EFTPOS terminal market;
* card solutions, focusing on the sale and implementation of plastic cards;
and
* card personalisation services and equipment.
The ACS card personalisation businesses specialise in card embossing and
printing, and the supply of cards to the major South African financial
institutions.
4. THE TRANSACTION
Simultaneous with or as soon as reasonably possible after the acquisition of
the Labat IT operations:
* the Labat IT operations will be merged with Altech Data;
* the proceeds received by Labat, net of all costs, will be distributed to
Labat's shareholders; and
* the empowerment consortium will subscribe for 50,1% of the issued share
capital of Altech Data.
The subscription for 50,1% of the issued share capital of Altech Data
will be funded by the distributed acquisition proceeds received by the
empowerment consortium and the balance of R39,3 million will be funded by
Altech via a special purpose vehicle which has been established for the
purposes of the transaction.
The board and senior management of Altech Data as enlarged, will be
reconstituted as follows:
* the board will have an equal number of representatives from Altech and
the empowerment consortium;
* the chief executive officer of Altech Data will be appointed by the
empowerment consortium, the first of whom will be Mr Brian van Rooyen, who
is currently the chief executive officer of Labat; and
* the chairman, who will hold the casting vote, and financial director of
Altech Data will be appointed by Altech.
Following the implementation of the transaction, the structure of Altech
Data, as enlarged, will be as set out below.
Altech and the empowerment consortium will own 49,9% and 50,1%,
respectively, of Altech Data, which will comprise of:
- 50,25% of Keops Isis;
- 100% of Isis;
- 100% of Altech Card Solutions;
- 100% of Sames;
- 51% of Labat Traffic; and
- 100% of Labat Consulting.
In accordance with South African Generally Accepted Accounting Practices,
Altech will continue to consolidate the financial results of Altech Data.
5. RATIONALE FOR THE TRANSACTION
The acquisition creates a significant BEE controlled IT service and
solutions group in which Altech is a 49,9% shareholder with board control.
South African IT companies are required to demonstrate meaningful BEE
ownership and management. Altech has identified the empowerment consortium
as a credible empowerment partner due to its proven financial and
operational successes. On completion of the transaction, Altech Data will be
qualified to participate in transactions requiring the demonstration of BEE
credentials.
The operations of Altech comprise three separately identifiable operating
divisions:
* Telecommunications;
* Multi-Media and Electronics; and
* Information Technology.
The Information Technology Division of Altech accounted for 6,3% of
Altech's revenue for the year ended 28 February 2002 and 7,4% of Altech's
operating income for the same period. The transaction will significantly
enhance Altech's revenue and operating income from IT activities.
Furthermore, the acquisition brings to Altech IT-assets that are unique
in South Africa and that are primarily utilised in international markets,
thereby furthering Altech's strategy of transforming Altech from a company
that is licensed to use foreign intellectual property rights locally to a
company that is able to export and/or license locally developed intellectual
property rights internationally.
6. PURCHASE CONSIDERATION
Subject to a successful due diligence, the gross purchase consideration
for the acquisition is R180 million, which will be settled by Altech in
cash. This purchase consideration may be adjusted upon the completion of the
due diligence process.
As stated in paragraph 4 above, the empowerment consortium will then
subscribe for 50,1% of the issued share capital of Altech Data. After the
receipt of these subscription proceeds and allowing for the special purpose
vehicle funding to be provided by Altech, the net cash outlay by Altech as a
result of the overall transaction will amount to R84 million.
ABSA Bank Limited has confirmed to the Securities Regulation Panel that
sufficient financial resources are available to Altech to ensure that it is
able to honour its financial commitments in terms of the transaction.
7. FINANCIAL EFFECTS
The transaction is expected to have a positive impact on the headline
earnings and earnings per Altech share. The pro-forma financial effects of
the transaction on the headline earnings, earnings and net asset value per
Altech share will be published following the audit of Labat's results for
the year ended 28 February 2002 and the final determination of the purchase
consideration.
8. SUSPENSIVE CONDITIONS
The transaction is subject to various suspensive conditions as are normal
in a transaction of this nature including, inter alia:
* Altech Data being satisfied with the outcome of a due diligence on the
Labat subsidiaries;
* Labat and the empowerment consortium being satisfied with the outcome of a
due diligence on Altech Data;
* requisite approvals, where required, from the respective boards and
shareholders of Labat and/or Altech; and
* requisite approvals from regulatory authorities and any such other parties
as may be necessary.
9. CAUTIONARY AND FURTHER ANNOUNCEMENT
An announcement informing shareholders of the fulfilment of all
suspensive conditions, the final purchase consideration and the financial
effects of the transaction will be published in due course. Shareholders are
advised to exercise caution when dealing in Altech shares until such time as
a further announcement is made.
Johannesburg
3 May 2002
Merchant bank & Transaction Sponsor
Standard Corporate and Merchant Bank
A division of The Standard Bank
of South Africa Limited
(Reg No 1962/000738/06)
Attorneys
Jowell Glyn & Marais
Inc Attorneys
(Reg No:1990/000849/21)
