| Wed 25 Feb 2004, 13:43 | | ACQUISITION OF THE BUSINESS OF UTHO |
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SQUARE ONE SOLUTIONS GROUP LIMITED -
CONCERN AND FORMATION OF A BLACK PARTNERSHIP
WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT
SQUARE ONE SOLUTIONS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/026822/06)
Share code: SQE ISIN: ZAE000023768
("Square One" or "the company" or "the group")
ACQUISITION OF THE BUSINESS OF UTHO TECHNOLOGIES (PTY) LIMITED AS A GOING
CONCERN AND FORMATION OF A BLACK PARTNERSHIP
WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are advised that the company has entered into an agreement
with Utho Technologies (Pty) Limited ("Utho Tech") for the purchase of Utho
Tech"s business ("the business") as a going concern with effect from 1 January
2004 ("the effective date"), subject to the fulfilment of the conditions
precedent set out in paragraph 2 below ("the acquisition").
In a separate but related agreement,GAC Investment Holdings (Pty) Limited,
The James Trust and The Jartay Trust, represented by Garth Alan Coetser and
William Trevor James, executive directors of Square One, have agreed to sell
9 361 901 Square One shares (comprising 32,3% of Square One"s issued share
capital after the issue of the 7 million Square One shares referred to in
paragraph 2 below), valued at R6,5 million, to CCG 182 Investments (Pty)
Limited, a wholly-owned subsidiary of Utho Tech ("the share sale").
2. The acquisition
Utho Tech is a subsidiary of Utho Investment Holding (Pty)
Limited ("Utho"), a holding company with interests in IT and corporate
advisory services. Utho is 100% owned, directly and indirectly, by several
black shareholders. Utho Tech was established in 1997 and is involved in
application systems integration, software development, internet service
provision, network design and installation and IT consulting. Square One will
acquire the business with effect from the effective date for a purchase
consideration of R4,9 million ("the acquisition consideration"). The
acquisition consideration, payable on fulfilment of the conditions precedent,
will be satisfied by the issue of 7 million Square One shares at 70 cents per
share.
The acquisition is subject to the fulfilment of the following conditions
precedent:
* Securities Regulation Panel ("SRP") approval, JSE Securities Exchange South
Africa ("JSE") approval and any other regulatory approvals;
* approval for the acquisition in terms of the Competition Act, 89 of 1998, if
required; and
* approval by the Square One shareholders in general meeting.
Reginald Tafara Muzariri, a non-executive director of Square One, has an
interest in the business and therefore the acquisition is a related party
transaction, as defined by the JSE Listings Requirements. In terms of the
Listings Requirements, the company is required to obtain an opinion from an
independent professional expert as to the fairness and reasonableness of the
acquisition. Square One is in the process of obtaining such opinion, which
will be made available to Square One shareholders in the circular to be
distributed in due course.
3. The share sale
The acquisition and the share sale will result in Utho Tech indirectly
holding 56,4% of Square One"s increased issued share capital. In terms of the
Securities Regulation Code on Take-overs and Mergers, a mandatory offer must
be extended by Utho Tech to all minority shareholders, unless a waiver of this
obligation is obtained from the Square One independent minority shareholders.
A general meeting of Square One minority shareholders will thus be convened
for the purpose of, inter alia, considering and, if deemed fit, approving an
ordinary resolution to waive the requirement for Utho Tech to make a mandatory
offer to the minority shareholders.
4. Rationale for the acquisition and the share sale
Square One has in the last two years been expanding its offering to
incorporate vertical and horizontal
IT solution offerings to its customers. The acquisition is an important step
for Square One in this regard. The acquisition provides Square One with
skilled professionals in, inter alia, the following areas of business: systems
integration, IT business consulting, internet service provision, web and
application development, and network design and implementation.
Square One has for some time been attempting to find an appropriate black
partner that can assist in appropriately positioning the company to take
advantage of the significant business opportunities that are afforded to
empowered companies in, inter alia, the national and provincial government and
municipal markets. The acquisition and the share sale will enable Square One
to more aggressively pursue opportunities in these markets.
The expanded group adds additional value to customers, and across all the
operations the business is entirely complementary to Square One. In addition,
the acquisition gives rise to a strategic partnership which is in line with
the group"s long-term strategy. The acquisition provides access to highly
skilled black IT professionals which will enable Square One to move rapidly
towards meeting its employment equity requirements, particularly within the
senior management team.
The expanded group will specialise in the provision of niche and vertical
technology solutions. The primary solution offerings will be focused around
the provision of niche vertical offerings encompassing authentication
offerings, social services, coding and marking solutions, application and
systems integration services, as well as telecommunications and service
provider solutions. The business-enabling solutions are supported by the
group"s ability to provide horizontal infrastructure solutions spanning power
solutions, network solutions, processing and storage solutions, infrastructure
integration, security and biometric authentication and verification solutions.
5. Financial effects of the acquisition
Set out in the table below are the pro forma financial effects of the
acquisition based on Square One"s interim results for the six months ended
30 June 2003. The pro forma financial effects have been prepared for
illustrative purposes only to provide information of how the acquisition may
have impacted on the results and financial position of Square One. Because of
their nature, the pro forma financial effects may not give a fair reflection
of Square One"s financial position after the acquisition or the effect on
future earnings.
Before the After the Percentage
acquisition acquisition change
Notes (cents)1 (cents) (%)
Earnings per share 2 6,3 5,5 (12,7)
Headline earnings per share 2 6,3 5,5 (12,7)
Net asset value per share 3 28,8 24,5 (14,9)
Net tangible asset value
per share 3 28,3 24,1 (14,8)
Notes:
1. Extracted from the reviewed interim results of Square One for the six
months ended 30 June 2003.
2. Earnings and headline earnings per share are based on the following
assumptions:
* the acquisition was effective 1 January 2003;
* the business" results for the six months ended 30 June 2003 have been used
in the calculations; and
* the weighted average number of shares in issue during the six-month period
was 22 000 000 and 29 000 000 before and after the acquisition, respectively.
3. Net asset and net tangible asset value per share are based on the following
assumptions:
* the acquisition was effective 30 June 2003;
* the net assets of the business at 30 June 2003 of R770 000 have been used
for this purpose; and
* the number of shares in issue at 30 June 2003 was 22 000 000 and 29 000 000
before and after the acquisition, respectively.
6. Changes to the SQUARE ONE board of Directors
As a result of the acquisition and the share sale, the following persons
have been appointed to the board of directors, with immediate effect:
Mr Raisaka Masebelanga Non-executive director
Ms Basetsana Thokoane Non-executive director
Mr Bruce Antonio Croza Executive director
Mr Craig Luton Alexander Executive director
Mr Anton Meyer Executive director
Mr Reginald Tafara Muzariri, currently a non-executive director, has been
appointed as an executive director, and Mr Brian van Rooyen, a non-executive
director, has resigned from the board, both with immediate effect.
7. Withdrawal of joint cautionary announcement
Shareholders are referred to the joint cautionary announcement dated 19
January 2004. Discussions with Labat Africa Limited have terminated and
therefore shareholders no longer have to exercise caution when dealing in the
company"s shares.
8. Documentation
A circular, which is subject to the approvals of the JSE and SRP, will be
sent to shareholders in due course. The circular will contain details of the
acquisition, the share sale, the independent professional expert"s opinion
letter, and will incorporate a notice of general meeting of Square One
shareholders.
Johannesburg
24 February 2004
Corporate advisor and sponsor to Square One
BRIDGE CAPITAL
Reporting accountants and auditors
Russell Bedford
(Southern Africa) (JHB) Inc.
Corporate advisor to Utho Tech
Utho Capital (Pty) Ltd
Date: 25/02/2004 12:54:41 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
