| Fri 7 Nov 2003, 9:28 | | COMPAREX HOLDINGS LIMITED - COMPANY ANNOUNCEMENT |
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COMPAREX HOLDINGS LIMITED - COMPANY ANNOUNCEMENT
COMPAREX HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1994/002506/06)
Share code: CPX
ISIN: ZAE000016812
("Comparex")
Business Connexion Investments
(Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/016929/07)
("BCI")
MERGER OF COMPAREX AFRICA (PROPRIETARY) LIMITED AND BUSINESS CONNEXION
SOLUTIONS HOLDINGS (PROPRIETARY) LIMITED AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published by Comparex and BCI on the
Securities Exchange News Service ("SENS") of the JSE Securities Exchange
South Africa ("JSE") on 21 October 2003, Investec Bank Limited is
authorised to announce that Comparex, the ultimate holding company of
Comparex Africa (Proprietary) Limited ("Comparex Africa") via its wholly-
owned subsidiary Comparex Africa Group (Proprietary) Limited ("CAG"), has
reached agreement with BCI, the holding company of Business Connexion
Solutions Holdings (Proprietary) Limited ("Business Connexion"), regarding
the proposed merger of Comparex Africa and Business Connexion ("the
proposed merger") subject to the fulfilment of the conditions precedent set
out in paragraph 5 below.
Pursuant to the proposed merger, BCI, a black owned and controlled company,
will be issued 11,82% of the issued share capital of Comparex Africa after
the proposed merger. In addition, BCI will subsequently acquire an
additional 13,19% of the issued share capital of Comparex Africa from CAG
for a purchase consideration of R117 million, utilising funding provided by
CAG (collectively, "the proposed transaction"). Accordingly, the proposed
transaction will result in BCI holding 25,01% of the issued share capital
of the merged business of Comparex Africa and Business Connexion ("the
merged business").
2. RATIONALE FOR THE PROPOSED TRANSACTION
The management and shareholders of Comparex Africa have been considering
alternative approaches to introduce Black Economic Empowerment ("BEE") into
the ownership and control structures of Comparex Africa to complement
existing initiatives to introduce BEE at other levels of the business of
Comparex Africa, including, inter alia, employment equity and affirmative
procurement.
In addition, Comparex Africa has for some time been evaluating options to
expand its product and service offering to include a comprehensive
Microsoft capability. The proposed merger not only presents a unique
opportunity for Comparex Africa to achieve both of the objectives outlined
above but also positions the merged business for significant growth in
future in both the local market and on the rest of the African continent.
From a Business Connexion perspective, the proposed merger provides
Business Connexion with enhanced capacity to pursue the significant growth
opportunities open to it. In addition, the limited overlap of customers
between Comparex Africa and Business Connexion provides substantial
opportunities for the two businesses to cross-sell products and services to
each other"s respective customer bases and therefore provide a more
comprehensive end to end solution for their respective clients.
On the basis of the above, the proposed merger will be highly beneficial to
the businesses of both Comparex Africa and Business Connexion and will
create one of the largest and most cash generative black-empowered
Information and Communication Technology businesses in South Africa with a
strong corporate and Government client base and market leadership in
Outsourcing, Professional Services, Technology Infrastructure, Business
Applications and Microsoft solutions.
3. IMPLEMENTATION OF THE PROPOSED TRANSACTION
Comparex Africa and Business Connexion have completed mutual due diligence
investigations into one another"s businesses, that incorporated financial,
legal and operational matters as well as issues such as the future
integration, ongoing transformation and management of the merged business.
3.1 Management Of The Merged Business
Peter Watt, the current Chief Executive Officer ("CEO") of Comparex,
will be CEO of the merged business while Benjamin Mophatlane, the
current CEO of Business Connexion, will be deputy CEO. Key executives
of Business Connexion will be appointed to the board of Comparex
Africa and will assume executive positions in the merged business
alongside current Comparex executives.
3.2 Branding Of The Merged Business
It is intended that, once the proposed transaction has been
implemented, Comparex Africa will consider changing its trading name
and branding to reflect the new profile and positioning of the merged
business. Further details in this regard will be announced in due
course.
3.3 Summary Of The Proposed Transaction Structure
Set out below is a simplified illustration of the Comparex group
structure prior to the proposed transaction:
* Comparex Africa is to be restructured to ensure that it holds all
of the core operating businesses of Comparex. All other
investments, as well as Comparex"s surplus cash holdings, are
accordingly excluded from the proposed transaction. Set out below
is a simplified illustration of the Comparex group structure
subsequent to the proposed transaction:
4. FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION ON COMPAREX
Based on the assumptions set out below, the financial effects of the
proposed transaction on Comparex based on the audited results for the year
ended 31 May 2003 would have been as follows:
Audited Pro forma
Before the After the
proposed proposed
transaction transaction Change
(cents) (cents) (%)
Headline earnings per share
- Statutory 62,3 61,4 (1,4)
- Continuing businesses 107,6 106,8 (0,7)
Earnings per share
- Statutory 26,9 23,7 (11,9)
- Continuing businesses 99,1 96,0 (3,1)
Net asset value per share 851,6 852,6 0,1
The Pro forma After column assumes that:
4.1 earnings per share and headline earnings per share are calculated
using historically published information for Comparex for the year
ended 31 May 2003 as if the proposed transaction had taken place with
effect from 1 June 2002;
4.2 net asset value is calculated as if the proposed transaction had
occurred on 31 May 2003;
4.3 the audited net income of Business Connexion for the year ended
28 February 2003 was earned by Comparex Africa during the year
commencing 1 June 2002; and
4.4 the goodwill created as a result of the proposed merger will be
amortised over seven years.
5. CONDITIONS PRECEDENT
The implementation of the proposed transaction is conditional upon, inter
alia, the requisite approvals of the competition authorities.
6. FUTURE PROPOSED RESTRUCTURE
Subsequent to the implementation of the proposed transaction it is the
intention of Comparex to make an application for the listing of CAG on the
JSE, pursuant to which Comparex will unbundle its shareholding in CAG to
Comparex shareholders. Comparex will then be restructured and will make a
distribution of surplus cash to shareholders after providing for and taking
into account working capital requirements and any actual and contingent
liabilities. An announcement in this regard will be made in due course.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Comparex shareholders are referred to the cautionary announcement published
on SENS on 21 October 2003 and are advised that, as a result of this
announcement, such cautionary announcement is now withdrawn.
