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CONNECTION GROUP HOLDINGS LIMITED - ACQUISITION OF 16 FOTOFIRST, FOTOSTAA AND
AUDIOLENS SPECIALIST PHOTOGRAPHIC EQUIPMENT
AND DEVELOPING AND PRINTING STORES
CONNECTION GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/005390/06)
JSE Share code: CCT
ISIN: ZAE000042529
("the Connection Group")
ACQUISITION OF 16 FOTOFIRST, FOTOSTAA AND AUDIOLENS SPECIALIST PHOTOGRAPHIC
EQUIPMENT AND DEVELOPING AND PRINTING STORES
Rand Merchant Bank, a division of FirstRand Bank Limited is authorised to
announce that the Connection Group has concluded an agreement with New Teltron
(Proprietary) Limited ("Teltron") to acquire 16 FotoFirst, Fotostaa and
Audiolens photographic equipment and developing and printing stores as going
concerns ("the acquisition").
RATIONALE FOR THE ACQUISITION
Incredible Connection, a division of the Connection Group, is Southern Africa"s
leading retailer of information and communications technology, with high brand
recognition and excellent supplier relationships. Incredible Connection
currently has 32 retail outlets throughout Southern Africa. Internationally, the
consumer electronics, photographic and personal computing markets are converging
rapidly, driven by the significant technological advances being made with
digital photography and its increasing affordability. In line with this all
major hardware and software developers now provide photographic applications as
part of their standard products.
Teltron is considered to be the premier supplier of photographic equipment and
developing and printing services in South Africa. In addition to being agents
for some of the leading brands they are the franchisor of Fotofirst and own
numerous photographic stores under a variety of brands.
The 16 stores being acquired are situated in major urban centres. They give the
Connection Group immediate entry into the retail photographic and film
processing and printing market through a chain of stores operated on a similar
business model, with common customer profiles and complementary store locations.
The acquisition will allow the Connection Group to provide its customers with a
completely integrated IT/digital photographic retail offering with regard to:
* the widest range of branded technology products;
* state-of-the-art developing and printing services;
* after-sales support and service;
* quality, cutting edge merchandise; and
* technical knowledge.
In due course, the stores being acquired will be re-branded to reflect the
Connection Group profile. There are approximately 250 other FotoFirst stores in
South Africa owned by Teltron, other operators or Franchisees. These stores do
not form part of the acquisition and will continue to operate independently.
PURCHASE CONSIDERATION
The purchase consideration is R32 million and is payable in cash on the third
business day after all the conditions precedent have been fulfilled or waived,
or the 29th of February 2004, whichever is the later. The purchase consideration
will be paid from existing cash resources.
SUBJECT OF THE ACQUISITION
The Connection Group will acquire all of the fixed assets and the business of
the 16 stores. A stock count will be performed on 29 February 2004 and the
Connection Group will have the option to acquire certain stock items.
CONDITIONS PRECEDENT
The transaction is subject to the fulfilment of the following conditions
precedent:
* final unconditional approval by the competition authorities, in terms of
the Competition Act, No 89 of 1998;
* the Connection Group obtaining all necessary approvals in terms of the
rules of the JSE Securities Exchange South Africa;
* approval by the board of the Connection Group; and
* the approval by the equity committee of the Standard Bank of South Africa
Limited.
FINANCIAL EFFECTS
The pro forma financial effects of the transaction set out below are based on
the following assumptions:
* the headline earnings, earnings, net asset value and tangible net asset
value per share reflected in the "before" column were extracted from the
Connection Group"s audited results for the fifteen months ended 31 August
2003;
* the net asset value and tangible net asset value per share reflected in the
"after" column assumes that the acquisition was effective on 31 August
2003;
* the headline earnings and earnings per share reflected in the "after"
column assumes that the acquisition was effected on 1 June 2002;
* the reduction in interest received by Connection Group as a result of the
reduction in cash balances to reflect the price of the acquisition,
calculated at a pre-tax interest rate of 10% per annum for the period of 15
months;
* no fair value adjustment was made in the calculation, as the amount of any
such adjustment has not yet been determined; and
* no goodwill write off has been taken into account as the amount of such a
write off is dependent on the fair value adjustment which has not yet been
determined.
For the 15 Before (cents) After (cents) Percentage
months ended 31 change
August 2003
Headline 68.67 78.38 14.14%
earnings per
share
Earnings per 60.95 70.66 15.93%
share
Net asset value 117.00 117.00 0.00%
per share
Net tangible 117.00 83.18 -28.91%
asset value per
share
The total net book value of the fixed assets acquired by the Connection Group is
R18.9 million. The 16 outlets being acquired produced net income before taxation
of R9.9 million for the 15 months ended 31 August 2003.
Johannesburg
27 January 2004
Merchant bank and sponsor to the Connection Group:
Rand Merchant Bank
A division of FirstRand Bank Limited- Corporate Finance
Transactional adviser to the Connection Group:
Solcor Capital
Legal adviser to the Connection Group:
Paul Botha
Legal adviser to Teltron:
Cliffe Dekker
Date: 27/01/2004 03:05:07 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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