| Mon 2 Jun 2003, 14:34 | | Paracon - Purchase Of 25% Stake In Paracon By Wdb |
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Paracon - Purchase Of 25% Stake In Paracon By WDB
Paracon Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/008181/06)
Share code: PCN
ISIN: ZAE000029674
("Paracon" or "the company")
Purchase of 25% stake in Paracon by WDB Investment Holdings (Proprietary)
Limited ("WDB") and
General repurchase of shares by Paracon
1. Purchase of 25% stake in Paracon by WDB
1.1 Introduction
Further to the cautionary announcement published on 27 March 2003, shareholders
of Paracon are advised that WDB, funded by the Industrial Development
Corporation of South Africa Limited, has entered into various agreements, which
will collectively result in WDB acquiring 25% of the issued share capital of
Paracon ("the WDB investment").
1.2 Rationale for the WDB investment
WDB is a black economic empowerment company holding several strategic
investments and whose sole shareholder is WDB Trust. WDB Trust is a charitable
entity established to promote the social and economic development of rural South
African women. To date WDB has repatriated in excess of R 25 million to fund
the WDB Trust"s various programmes.
WDB has been involved with Paracon for the past 2 years in a joint venture
operation, WDB Technologies (Proprietary) Limited ("WDB Tech"). This
relationship has proven mutually beneficial for Paracon and WDB and it is
therefore logical to extend and cement WDB"s involvement with Paracon through a
meaningful shareholding at the listed company level.
WDB will assist Paracon in driving the transformation of the Paracon group at
all levels, including board and senior management. WDB"s management, including
Sonja Sebotsa, Tania Slabbert and Tandi Nzimande, will assist the company in
developing black management skills. Sonja Sebotsa will join the Paracon board as
a non-executive director.
WDB is also expected to assist in providing strategic direction to the company,
to help maintain and expand Paracon"s business relationships and to contribute
to the growth and development of Paracon"s business through increased
penetration of existing and new commercial and public sector markets.
1.3 Details of the WDB investment
WDB has entered into the following agreements, each of which is conditional upon
the fulfilment of certain suspensive conditions by 30 June 2003. Should these
conditions not be fulfilled by that date a further announcement will be made:
- purchase of 9 317 967 Paracon shares, amounting to 2.5% of the issued share
capital of Paracon prior to the issue for cash described below, from Dimension
Data SA (Proprietary) Limited at a price of 55 cents per share ("DD purchase");
- purchase of 27 953 901 Paracon shares, amounting to 7.5% of the issued share
capital of Paracon prior to the issue for cash described below, from 3 members
of Paracon management, being Mark Jurgens, Ronald Wasley and Graham Bentley, at
a price of 48 cents per share ("management purchase");
- purchase of 37 624 526 Paracon shares ("treasury shares"), amounting to 10% of
the issued share capital of Paracon prior to the issue for cash described below,
from Paracon SA (Pty) Limited at a price of 48 cents per share ("treasury shares
purchase"), amounting to R 18 059 772. The treasury shares were acquired
through specific repurchases of shares in August 2001 and November 2001 and
through general on-market repurchases over the past 2 years. The carrying value
of the treasury shares is R 21 295 797; and
- subscription for 24 377 702 Paracon shares ("issue for cash"), amounting to
6.5% of the issued share capital of Paracon prior to this issue for cash, at a
price of 48 cents per share, amounting to R 11 701 297. Paracon will issue these
shares in terms of its general authority to issue shares for cash.
Following the simultaneous implementation of the DD purchase, the management
purchase, the treasury shares purchase and the issue for cash, WDB will
beneficially own 99 274 096 Paracon shares, amounting to a 25% shareholding in
the enlarged issued share capital of Paracon.
The total proceeds of R 29 761 069 receivable by Paracon in respect of the
treasury shares purchase and the issue for cash will supplement Paracon"s
existing cash balances and provide a platform for future corporate activity.
1.4 Pro forma financial effects
The table below sets out the pro forma financial effects of the sale of shares
on a Paracon shareholder. The pro forma financial effects have been prepared for
illustrative purposes only, and, because of their nature, they may not give a
true reflection of Paracon"s financial position or results.
Before After Percentage
the sale the sale change
of of
shares shares
Net asset value per 43.0 (1) 43.8 (4) 1.9
share (cents)
Tangible net asset 26.6 (1) 30.0 (4) 12.8
value per share
Headline earnings per 2.1 2.1 (5) 0
share (cents) (2,3)
Earnings per share 1.1 (2) 1.2 (5) 9.0
(cents)
Notes:
1. Based on 335 094 152 shares in issue at 31 March 2003 and the net asset
value of the company on 31 March 2003.
2. Based on a weighted average of 339 065 186 shares in issue for the 6 months
ended 31 March 2003 and headline earnings per share ("HEPS") and earnings per
share ("EPS") for the 6 months ended 31 March 2003.
3. Before amortisation of goodwill and impairment write-offs on investments.
4. Assuming the issue for cash of 24 377 702 shares and the sale of the 37 624
526 treasury shares for total proceeds of R29 761 069 were effected on 31 March
2003. Based on 335 094 152 shares in issue at 31 March 2003 and the net asset
value of the company on 31 March 2003.
5. Assuming the sale of shares was effected on 1 October 2003 and that the
total proceeds of of R29 761 069 were added to Paracon"s existing cash
resources. Based on the weighted average of 339 065 186 shares in issue for the
6 months ended 31 March 2003 and the headline earnings and earnings of the
company for the 6 months ended 31 March 2003. Cash resources are assumed to earn
an after-tax return of 8.75%.
1.5 Purchase of WDB"s shareholding in WDB Tech
As a result of the WDB investment, it no longer makes strategic sense for WDB to
remain invested in WDB Tech. Paracon has agreed to purchase WDB"s 51% interest
in WDB Tech for R 2.9 million, payable in cash, with effect from 1 June 2003.
2. General repurchase of shares by Paracon
2.1 Background
Cumulative repurchases of Paracon shares, in terms of the general authorities
granted to directors, are currently 11 281 235 shares ("general repurchase
shares"), amounting to 2.9% of the shares in issue prior to the granting of the
first of such general authorities ("general repurchase").
The general repurchase shares were purchased between March 2001 and March 2003
at prices varying from 43 cents to 80 cents. The total amount spent on the
general repurchase was R 5 671 322. The general repurchases effected in the 6
months ended 31 March 2003 amounted to 4 671 709 shares at a total cost of R 2
067 269.
The remaining general authority to repurchase shares now available to Paracon is
70 813 368 shares, amounting to 19% of the shares in issue at the time the
latest general authority was granted on 12 February 2003.
In the opinion of the directors, and after considering the effect of the
repurchases already made:
- the company and the group will be able in the ordinary course of business to
pay their debts for a period of 12 months after this announcement;
- the assets of the company and the group will be in excess of the liabilities
of the company and the group for a period of 12 months after this announcement;
- the ordinary capital and reserves of the company are adequate for a period of
12 months after this announcement; and
- the working capital of the company and the group is adequate for a period of
12 months after this announcement.
2.2 Pro forma financial effects
The pro forma financial effects of the general repurchases effected in the 6
months ended 31 March 2003 are not material to Paracon"s results for that
period.
Johannesburg
2 June 2003
Investment bank and sponsor to Attorneys to Paracon
Paracon
Nedbank Corporate Werksmans Inc
