| Thu 26 Sep 2002, 17:44 | | The Acquisition By Btg Of Plato Computer Services |
|
The acquisition by BTG of Plato Computer Services (UK) Limited ("Plato")
BYTES TECHNOLOGY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1911/003874/06)
Share code: BTG ISIN: ZAE000029526
("BTG" or "the company")
The acquisition by BTG of Plato Computer Services (UK) Limited ("Plato")
1. Introduction
Further to the most recent cautionary announcement published on 14 August 2002,
shareholders of BTG are advised that agreement has been reached between BTG and
the shareholders of Plato ("the vendors") whereby BTG will acquire 100% of the
issued share capital of Plato and 100% of the Plato shares to be issued pursuant
to the exercise of existing share options ("the acquisition"), subject to the
fulfilment of the conditions precedent set out in paragraph 5 below ("the
conditions precedent").
2. Terms of the acquisition
The initial purchase consideration for the acquisition is GBP22,5 million
payable to the vendors in cash ("initial consideration").
It has further been agreed that BTG will pay an additional cash consideration
not exceeding GBP5,5 million based on the earnings before interest and tax of
Plato for the 12 months ending 31 December 2002 ("EBIT"), as follows:
- if the EBIT is GBP2,86 million, GBP2,5 million is payable, which amount is
reduced pro rata to the extent that the EBIT is less than GBP2,86 million but
more than GBP2,5 million; plus
- if the EBIT is GBP3,2 million, a further GBP2 million is payable, which
amount is reduced pro rata to the extent that the EBIT is less than GBP3,2
million but more than GBP2,86 million; plus
- if the EBIT is GBP3,4 million, a further sum of GBP1 million is payable,
which amount is reduced pro rata to the extent that the EBIT is less than GBP3,4
million but more than GBP3,2 million.
The acquisition agreement contains terms, conditions and warranties normal for
agreements of such a nature.
3. Nature of the business of Plato
Plato commenced trading in the United Kingdom ("UK") in 1984 as an independent
software and services consulting business. From this base, Plato rapidly
developed expertise in a wide range of computer services, which comprise
applications development, technical and managed services, a centre of excellence
and product-based services. Niche skills specific to the leveraging, re-
engineering and front-end development of legacy systems enable the company to
provide its customers with a competitive edge. Key expertise has been developed
in legacy systems integration, the design and implementation of new media
developments, storage technologies, networks, security, internet technologies
and advanced client server systems.
As a leading UK multi-functional supplier of information technology ("IT")
services to a broad range of blue chip customers, Plato has built a solid
reputation and track record of providing solutions that meet its customers`
defined needs. Plato is widely regarded by its clients to be a flexible and
solutions-focused partner. The main vertical markets served by Plato are the
travel and leisure, financial services and automotive sectors. Customers include
Royal Bank of Scotland / NatWest, TUI (Thomson Travel) and Daimler Chrysler.
Plato also provides consultants, on an interim basis, for technical
architecture, technical appraisal and audit, requirements definition, training
and trouble shooting assignments to its clients.
In 1998, Priam Solutions Limited ("Priam"), an IT recruitment company, was
formed as a 90% subsidiary of Plato. Priam became a 100% subsidiary of Plato in
December 2001. Initially, Priam was founded to cater for the staffing
requirements of Plato and its customer base (both with temporary and permanent
staff), but has since extended its services to external customers, although
approximately 65% of its revenue (and 43% of its gross margin) relates to Plato
itself.
4. Rationale for the acquisition
The BTG group`s ("the group") motivation for the acquisition of Plato centres
around the need to broaden its range of specialised IT activities in the UK and
Africa.
BTG`s existing subsidiary in the UK ("Bytes UK"), is engaged in the provision of
IT solutions for the enterprise, primarily predicated on the licensing of
Microsoft software products. Although profitable and successful, the group has
for some time been concerned by the potential vulnerability associated with
Bytes UK`s extensive dependence on its software licensing business. To this end,
the group has embarked on an objective to diversify its IT activities in the UK,
a strategy which it is believed would best be achieved through the acquisition
of a broad-based IT services business to complement Bytes UK`s existing
offering. Pursuant hereto, the group identified Plato as a suitable operation to
facilitate the attainment of this objective.
Plato provides in-depth and mission critical IT solutions to a relatively select
number of blue chip corporates while Bytes UK on the other hand provides a high
level service to a broad range of customers. This presents substantial
opportunities for each operation to exploit hitherto untapped business
opportunities in the other`s client base, either in isolation or in conjunction
with that other operation.
It is anticipated that the combined UK operations could generate around 40% of
the group`s total revenue during the February 2004 financial year, a significant
increase over the 28% generated during the year ended February 2002.
5. Conditions precedent
The acquisition is subject to the fulfilment of the following conditions
precedent:
- the approval of the acquisition by BTG shareholders in general meeting;
- all holders of options in shares of Plato executing irrevocable
undertakings to exercise their share options and to sell their resulting shares
to BTG as part of the acquisition; and
- the approval of the acquisition by the necessary regulatory authorities,
including the Exchange Control Department of the South African Reserve Bank and
the JSE Securities Exchange South Africa.
6. Financial effects
The table below sets out the illustrative financial effects of the acquisition
based on audited historical information ("after the acquisition" column) and
based on unaudited adjusted historical information ("after the acquisition
(unaudited pro forma)" column) assuming that the transaction had been concluded
for income statement purposes on 1 March 2001 and for balance sheet purposes, on
28 February 2002.
Before After Percentage After the Percen-
the the change acquisition tage
acqui- acqui- (unaudited change
sition1 sition2, pro
3 forma)2,3
Basic earnings per 28,64 (27,56)4 (196) (18,20)6 (164)
share (cents)
Headline earnings 63,39 55,894 (12) 60,306 (5)
per share (cents)
Adjusted headline
earnings per share *40,33 *32,824 (19) *37,236 (8)
(cents)
Net asset value 329,59 329,595 0 329,595 0
per share (cents)
Net tangible asset
value per share 180,51 (37,39)5 (121) (37,39)5 (121)
(cents)
Weighted average
number of shares 150 733 150 733 0 150 733 0
in issue (000)
Number of shares 151 336 151 336 0 151 336 0
in issue (000)
* excludes the deferred tax asset raised at year end
Notes:
1. The "before" financial information has been extracted, without adjustment,
from the annual financial statements of BTG for the year ended 28 February 2002.
2. The basic, headline and adjusted headline earnings per share calculations
have been based on the assumption that the proposed transaction was implemented
on 1 March 2001 and that it was effective for the financial year that ended
28 February 2002.
3. The net asset value and net tangible asset value per share calculations
have been based on the assumption that the proposed transaction was implemented
on 28 February 2002.
4. Basic, headline and adjusted headline earnings per share have been adjusted
to include the results of the Plato group for the year ended 31 December 2001
(translated at the average exchange rate of GBP12,8:R1 for the period 1 January
2001 to 31 December 2001), EBIT of GBP1,514 million, the amortisation of
goodwill (over 5 years) arising on the acquisition, the interest and dividends
paid on borrowings of R240,0 million and preference shares of R108,0 million and
a decrease in interest earned on BTG`s cash and cash equivalents of R28,0
million to fund the Plato acquisition (calculated at an average after-taxation
interest rate of 7,7%). Headline and adjusted headline earnings per share
excludes the amortisation of goodwill arising on the acquisition.
5. Net asset value and net tangible asset value per share have been adjusted
to include the assets and liabilities of Plato at 31 December 2001 (translated
at an exchange rate of GBP16:R1 on 28 February 2002), the goodwill arising on
the acquisition of R313,8 million, capitalisation of transaction costs of R16,0
million and payment of the initial consideration and transaction costs of R376,0
million funded by long-term liabilities of R240,0 million, preference shares of
R108,0 million and cash of R28,0 million. Net tangible asset value per share
excludes the goodwill arising on the acquisition.
6. Basic, headline and adjusted headline earnings per share have been adjusted
as set out in note 4 above, except that an adjusted EBIT of GBP2,5 million has
been used, based on the BTG directors` assessment of the recurring and
sustainable EBIT of the Plato group, for the year ended 31 December 2001. The
adjustments made to determine recurring and sustainable EBIT relate mainly to
payments made to senior executives who are no longer part of executive
management and will not be replaced.
7. Documentation
A circular containing full details of the acquisition and a notice of general
meeting will be posted to the shareholders of BTG within 28 days of the
publication of this announcement.
Johannesburg
26 September 2002
Investment bank, International legal United Kingdom
South African advisor investment bank and
advisor and joint advisor
sponsor
Nedcor Investment Maitland & Co Standard Bank
Bank London Limited
Attorneys Joint sponsor Independent
reporting
accountants
Werksmans ENF Sponsors KPMG Incorporated
Incorporated (Proprietary)
Limited
Date: 26/09/2002 05:23:54 PM Produced by the JSE SENS Department
