| Thu 13 Jun 2002, 0:00 | | DECTRONIC LIMITED: PROPOSED TRANSACTION |
|
DECTRONIC LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
(JSE share code: DTR ISIN: ZAE000016754)
("Dectronic" or "the company")
ANNOUNCEMENT REGARDING A PROPOSED TRANSACTION ENCOMPASSING:
A SPECIFIC ISSUE OF SHARES FOR CASH ("the specific issue")
TO AVSA MANAGEMENT LIMITED ("AVSAM");
A CHANGE OF NAME TO AVASA HOLDINGS LIMITED ("AVASA");
THE INTRODUCTION OF THE NEW BUSINESS OPERATIONS OF AVASA;
A CHANGE OF CONTROL AND WAIVER OF MANDATORY OFFER;
CREATION OF A SHARE OPTION SCHEME IN AVASA; and
THE RECONSTITUTION OF THE BOARD OF DIRECTORS.
1. Introduction
Further to the cautionary announcement published on 27 May 2002, Radagast
Capital (Proprietary) Limited is authorised to announce that Dectronic has
entered into an agreement in terms of which it will issue 275 million
ordinary shares to AVSAM at 1 cent per share for an amount of R2,75 million.
The agreement is subject, inter alia, to the conditions set out in
paragraph 5 below. In addition, the shareholders of Dectronic are advised
that the continued listing of the company is in the discretion of the JSE
Securities Exchange South Africa ("the JSE") and contingent upon the JSE`s
assessment of the suitability for listing of the company after the proposed
transaction.
2. New nature of business of Dectronic
It is intended that Dectronic will change its name to AVASA and Brian
Myerson and Julian Treger will join the board of directors. Messrs Myerson
and Treger are well-known proponents of activist investing through their
work advising the Active Value funds and the new board intends to utilise
AVASA to make one or a series of substantial acquisitions of undervalued
businesses (private or public) in South Africa.
The board believes that the current prevalence of undervalued companies
in South Africa which have under-performing or recalcitrant management,
coupled with an active acquisition and buyout market, provides an excellent
opportunity for significant value to be realised, by using AVASA as a
catalyst for change.
Karl Gribnitz and Jan Nel will remain on the board and AVASA intends to
engage the services of an operating officer and an investment professional,
who will be dedicated to the task of seeking out and executing suitable
transactions together with the company`s advisers. It is expected that any
acquisition would be accompanied by AVASA hiring in appropriately
experienced management to realise the value in the target business /es
acquired.
3. Background and rationale
Dectronic listed in the Venture Capital Market of the JSE in 1998 with
its primary business activity being that of investing in small and medium
enterprises in the broad information technology sector. Due to a combination
of disappointing market penetration by most of its operating companies and
rapidly rising overhead costs, the company ran into severe financial
difficulties.
In August 2001, Gandalf Trust acquired 34 214 406 ordinary shares in the
company, representing 43,85% of the issued share capital, and took effective
control. Gandalf Trust subsequently proposed an offer of compromise to the
creditors of Dectronic in terms of section 311 of the Companies Act, 1973
(Act 61 of 1973), as amended. The offer was accepted by the creditors of the
company and sanctioned by the High Court of South Africa (Transvaal
Provincial Division) during October 2001. Acceptance of the offer resulted
in all creditors` claims being settled and solvency being restored to the
company.
Karl Gribnitz and Jan Nel, both directors of the company and
representatives of Gandalf Trust, which specialises in corporate
restructuring, have negotiated the transaction with AVSAM and are confident
that the transaction will restore the fortunes of the company.
4. Financial effects of the specific issue
Dectronic will essentially incorporate the formal start-up operations of
AVASA in South Africa after the specific issue.
To illustrate the estimated financial effects of the specific issue on
the company, the table below summarises:
* the most recent audited financial statements of Dectronic (for the 12
months ended 31 August 2001), which reflect the company`s financial position
prior to restructuring;
* the latest unaudited interim financial statements of Dectronic (for the
six months ended 28 February 2002), which reflect the company`s financial
position after the restructuring but prior to the specific issue; and
* the pro forma financial position of the company for the six-month
period to 28 February 2002 as if the specific issue had been effective on 1
September 2001. The pro forma figures are given for illustrative purposes
only and may not accurately reflect the financial position of the company
should shareholders approve the proposed transaction.
Audited Interim Pro forma
Final: Unaudited Six months to
Percentage
31 Aug 2001 28 Feb 2002 28 Feb 2002 change
(before (before the (after the increase/
restructuring) specific issue) specific issue)
(decrease)
Notes: 1 2 3
Earnings per
ordinary share
(cents) (6,17) 3,48 0,56 (84)
Headline earnings
per ordinary share
(cents) (2,74) (0,06) (0,22) 268
Tangible
net asset value
per ordinary share
(cents) (3,44) 0,41 0,84 925
Net asset value
per ordinary share
(cents) (3,44) 0,41 0,84 925
Weighted average number
and number of ordinary
shares in issue (`000) 78 020 78 020 355 000 355
Notes:
1. The difference between attributable and headline earnings per share
reflects the writing-off of loan accounts and the loss on the sale of
shares.
2. The difference between attributable and headline earnings per share
reflects the gain on the offer of compromise settlement.
3. Pro forma earnings figures take into account interest received on the
amount raised by the specific issue at a 12% rate of interest and the
projected expenses associated with establishing AVASA`s business operations.
Because of Dectronic`s assessed loss, no provision has been made for
taxation. Projected net asset value figures have been adjusted by the
amounts of cash received and interest earned.
5. Suspensive conditions
The proposed transaction is subject to the suspensive conditions
summarised below, which are indivisible, and should any of the resolutions
proposed at the general meeting not be approved, the proposed transaction
will not be implemented:
5.1 approval of the proposed transaction and the documentation relating
thereto by the JSE (including the continued listing of the company and the
shares to be issued in terms of the proposed transaction), the Securities
Regulation Panel ("the SRP") and any other regulatory authorities;
5.2 approval by the shareholders of Dectronic of, inter alia:
5.2.1 the specific issue, which approval will include an increase
in the authorised and issued share capital of Dectronic, the change of name
of Dectronic to AVASA Holdings Limited and the reconstitution of the board
of directors of the company to include Messrs Myerson and Treger;
5.2.2 the creation of a share option scheme in favour of AVSAM,
further details regarding which are set out in paragraph 6 below;
5.2.3 the dissolution of the Dectronic Share Incentive Trust and
the cancellation of the R7 400 000 million shares held by it; and
5.2.4 a further specific issue of shares for cash which will
provide for redemption of the loan account of Gandalf Trust arising out of
the offer of compromise. This issue will comprise 9 380 000 shares in the
company at 2,6 cents per share, totalling R241 285, being the loan account
of Gandalf Trust at 28 February 2002.
6. Subject to the approval of shareholders and the JSE, a share option
scheme will be entered into between Dectronic and AVSAM in terms of which
AVSAM will, in order to avoid dilution of its shareholding in Dectronic, be
granted an option to purchase up to the equivalent of 25% of any new shares
issued by Dectronic.
7. Approval and implementation of the proposed transaction will result in a
change of control of Dectronic, which would in the normal course give rise
to a mandatory offer to the minority shareholders of the company at a price
of 1 cent per share in terms of the rules of the SRP. Application will be
made to the SRP for dispensation in this regard and a resolution requesting
the independent minority shareholders to waive their rights in terms of Rule
8.7 to a mandatory offer will be included in the resolutions to be proposed
at the general meeting of the company referred to below.
8. Opinion and recommendation
The directors of Dectronic are unanimously of the opinion that the terms
of the proposed transaction are fair and reasonable to the shareholders of
the company and recommend that the shareholders vote in favour of the
special and ordinary resolutions required for implementation thereof.
Those directors of Dectronic who have beneficial interests in the share
capital of the company intend to vote in favour of the resolutions required
to implement the proposed transaction.
9. Circular to shareholders
A circular to the shareholders of Dectronic containing full details of
the proposed transaction, including revised listing particulars and notice
of a general meeting of the shareholders of the company will be posted to
shareholders in due course, subject to approval by the JSE of the continued
listing of the company.
Pretoria
13 June 2002
Corporate advisers
Radagast
LFS
Lanark Financial Services (Proprietary) Limited
(Registration number 1999/021799/07)
Sponsor
LPC Manhattan Sponsors (Pty) Ltd
(Registration number 1999/024792/07)
Auditors
Compendium (Pretoria) Incorporated
(Registration number 1999/024792/07)
Attorneys to AVSAM
S&W
Date: 13/06/2002 01:00:00 PM Produced by the SENS Department
