| Wed 19 Nov 2003, 8:45 | | Prism Holdings Limited - Introduction Of A Black E |
|
Prism Holdings Limited - Introduction Of A Black Economic Empowerment Partner To
Prism Transwitch Services (Proprietary) Limited ("TSS"), Trading Statement And
Cautionary Announcement
PRISM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/018949/06)
Share code: PIM ISIN: ZAE000022257
("Prism")
INTRODUCTION OF A BLACK ECONOMIC EMPOWERMENT PARTNER TO PRISM TRANSWITCH
SERVICES (PROPRIETARY) LIMITED ("TSS"), TRADING STATEMENT AND CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Standard Corporate and Merchant Bank is authorised to announce that Prism has
entered into an agreement with a wholly-owned subsidiary of Gijima Technologies
(Proprietary) Limited ("Gijima") ("the sale agreement") in terms of which Prism
will, with effect from 1 December 2003 ("the effective date"), sell 25,1% of the
issued share capital and proportionate claims in TSS to Gijima for a cash
purchase consideration of up to R15 348 250 ("the transaction"). The sale
agreement is subject to the suspensive conditions set out in paragraph 5 below
("the conditions precedent").
2. BACKGROUND ON TSS
TSS is a wholly-owned subsidiary of Prism, which specialises in electronic
funds transfer and bill payment processing services and switches over 150
million transactions per annum on behalf of major retailers and financial
institutions.
3. RATIONALE
Prism has for some time intended to introduce a value-adding empowerment
partner into the equity of TSS and identified Gijima as its preferred partner in
this respect.
Gijima is a wholly black-owned technology company focusing on the information
technology, telecommunications and smart card technology sectors founded by
Robert Gumede (Executive Chairman) and Nhlanhla Mhlongo (Chief Operating
Officer). Gijima is involved in a number of joint ventures with local and
international companies and is focused on pursuing business in the rest of
Africa.
Gijima has won several awards for its role in technology, including:
* the 2000 Top 10 Achievers Award from BMI - TechKnowledge ("BMI-T") and the
Department of Communication;
* the Most Admired Black ICT Company in the 2001 Forge Ahead BMI-T Black ICT
Achievers Award; and
* the 2002 Top 12 Black Empowerment Companies - Impumelelo Top 300.
Gijima"s focus upon the secure payments market space and its status as a wholly
black-owned company made Gijima the preferred choice as a partner with whom
Prism can grow the business of TSS. Subsequent to the transaction, TSS will be a
"black empowered company" as defined by the Black Economic Empowerment
Commission and will be well positioned for the transformation of its business
and to facilitate future growth in new areas.
The proceeds of the sale will be applied to Prism"s general corporate
purposes.
4. SALIENT TERMS AND CONDITIONS OF THE TRANSACTION
The salient terms and conditions of the sale agreement are as follows:
4.1 The purchase price shall be payable in three tranches. The first tranche of
R12 278 600 (together with post effective date accrued interest thereon) is to
be paid in cash within three business days of fulfilment of the conditions
precedent. A further two tranches, each of a maximum of R1 534 825 in cash plus
an amount determined thereon at 75% of the prime rate from the effective date to
the date of payment, are to be paid on each of the days following the
determination of the audited results of TSS for the 12 months ending 30 June
2004 and 30 June 2005 respectively, subject to certain conditions and
adjustments. The future payments in respect of the purchase price will be
reduced to the extent that TSS fails to achieve audited earnings after tax of R9
824 000 for each of the 12 month periods ending 30 June 2004 and 30 June 2005.
4.2 Prism has provided to Gijima warranties normal for a transaction of this
nature.
A shareholders" agreement has been concluded between Prism, Gijima and TSS,
in terms of which, inter alia, Gijima:
* shall be entitled to appoint two directors to the board of TSS, one of which
shall, at Gijima"s election, be an executive director; and
* has undertaken not to dispose of its shares in TSS for a period of three years
from the effective date, unless to a majority black-owned empowerment company
formally approved by Prism.
5. CONDITIONS PRECEDENT
The sale agreement is subject to the following conditions precedent, inter
alia:
5.1 the granting of any consents required under the Competition Act 89 of 1998;
5.2 the unconditional written release of any encumbrances that may exist over
the shares that are the subject of the transaction; and
5.3 Gijima finalising the conditions of the funding for the transaction, on
terms acceptable to Prism.
6. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
The pro forma financial information has been prepared for illustrative
purposes only and, due to its nature, may not accurately reflect the financial
position of Prism subsequent to the implementation of the transaction.
The pro forma financial effects of the transaction on the earnings, headline
earnings, net asset value and tangible net asset value per Prism share are set
out in the table below.
Before After
per Prism share per Prism share Change
(cents) (cents) (%)
Earnings 5,9 9,3 57,6
Headline earnings 7,3 7,0 (4,1)
Net asset value 17,4 19,9 14,4
Tangible net asset value 11,3 13,8 22,1
Notes:
1. The earnings and headline earnings per Prism share, as set out in the
"Before" column of the table, were extracted from Prism"s audited results for
the year ended 30 June 2003.
2. The earnings and headline earnings per Prism share for the year ended 30 June
2003, as set out in the "After" column of the table, are based on the
assumptions that:
* Prism"s weighted average number of shares in issue for the 12 month period was
397.032 million; and
* the maximum total consideration received in respect of the transaction was
received on 1 July 2002 and invested at an interest rate of 8% per annum, which
has been subject to tax at the statutory rate of 30%.
3. The net asset value and tangible net asset value per Prism share, as set out
in the "Before" column of the table, were extracted from Prism"s audited balance
sheet as at 30 June 2003.
4. The net asset value and tangible net asset value per Prism share, as set out
in the "After" column of the table, are based upon the assumption that the
maximum total consideration received in respect of the transaction was received
on 30 June 2003.
7. TRADING STATEMENT AND CAUTIONARY ANNOUNCEMENT
Shareholders are advised that, as a result of the continued appreciation of
the rand against the United States dollar, coupled with the increased number of
shares in issue post the rights issue concluded in February 2003, the headline
earnings per share of Prism for the half-year to 31 December 2003 are expected
to be substantially below those reported for the half-year to 31 December 2002.
In terms of the definitions used in the Listings Requirements of the JSE
Securities Exchange South Africa, "substantially" should be interpreted as
meaning a decrease equal to or greater than 30%.
The forecast earnings information has not been reviewed or reported on by
Prism"s auditors. Accordingly, shareholders are advised to exercise caution in
trading in Prism shares until the release of Prism"s interim results, which are
expected to be published towards the end of
January 2004.
Fourways
19 November 2003
Merchant bank and sponsor
SCMB
Standard Corporate and Merchant Bank
(A division of The Standard Bank of South Africa Limited)
(Registration number 1962/000738/06)
Corporate legal advisor
JAVACAPITAL
