| Tue 9 Mar 2004, 17:01 | | Acquisition By Black Economic Empowerment |
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Spescom Limited - Acquisition By Black Economic Empowerment (bee) Partner Of
Release Date: 09/03/2004 16:41:38 Code(s): SPS
SPESCOM LIMITED - ACQUISITION BY BLACK ECONOMIC EMPOWERMENT ("BEE") PARTNER OF
25,4% OF THE ISSUED SHARE CAPITAL OF SPESCOM AND A SPECIFIC ISSUE OF SHARES FOR
CASH
Spescom Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/001083/06)
Share code: SPS ISIN: ZAE000017919
("Spescom" or "the Company")
ACQUISITION BY BLACK ECONOMIC EMPOWERMENT ("BEE") PARTNER OF 25,4% OF THE ISSUED
SHARE CAPITAL OF SPESCOM AND A SPECIFIC ISSUE OF SHARES FOR CASH
1. INTRODUCTION
Shareholders are referred to the announcement on Securities Exchange News
Service ("SENS") on 16 October 2003 wherein it was stated that discussions and
negotiations were continuing regarding the introduction of a BEE partner. This
was subsequently confirmed on SENS on 5 November 2003.
Spescom hereby announces that an agreement has been reached in terms of which
Vantage Capital Fund Managers (Pty) Limited ("Vantage Capital") will acquire a
strategic investment in Spescom equal to 25.4% of the issued share capital of
Spescom. The acquisition will be made by way of a specific issue of shares for
cash by Spescom, to Vantage Capital, of 20 000 000 Spescom shares for a purchase
consideration of R20 000 000, equivalent to 100 cents per share ("the specific
issue").
2. RATIONALE FOR THE SPECIFIC ISSUE
Spescom operates within the information and communications technology sector and
has operations in the United States of America, United Kingdom and South Africa.
In South Africa the company"s business is substantially dependent on parastatal
and quasi-governmental organisations including, Telkom South Africa Limited,
Eskom, Transtel (a division of Transnet Limited) and a host of municipalities as
well as major corporates. From investigations undertaken by Spescom during the
past year and considering the pressures, which have been brought to bear upon
Spescom for not conforming to the BEE requirements of the aforementioned
customers, management has determined that Spescom runs the risk of jeopardising
future revenue from these markets and customers.
Spescom remains committed to the concept of BEE. Accordingly and in line with
the BEE requirements of the aforementioned organisations and taking into
consideration proposed new legislation governing BEE in South Africa, Spescom
has identified the critical need and business imperative to introduce a BEE
partner to the company.
It is envisaged that the BEE partner will materially and sustainably transform
Spescom into an entity that has the profile and capacity to successfully deliver
quality services to all segments of the South African business community,
including corporate, government and parastatals thereby facilitating growth in
earnings and ongoing value to shareholders. The BEE partner would also assist in
championing transformation within Spescom, specifically with regard to issues
such as employment equity, affirmative procurement and in attracting and
retaining high quality black professionals. The transaction demonstrates not
only Spescom"s continuing commitment to growing its business in South Africa,
but also its commitment to meaningful transformation at all levels of the
business.
The specific issue will additionally improve liquidity and reduce current debt
levels.
3. BACKGROUND TO VANTAGE CAPITAL
Vantage Capital is a focused black owned fund management company and is a 100%
subsidiary of Vantage Group (Proprietary) Limited ("Vantage Group").
Vantage Group is 51% black owned, with a broad based shareholding, including a
holding by Thusano Trust which has as beneficiaries the Small Enterprise
Foundation (Non Governmental Organisation extending loans to poor rural women)
and Junior Achievement (Non Governmental Organisation involved in enterprise
education) amongst others.
Vantage Capital"s investment philosophy is to support enterprises with strong
management expertise and a sustainable profit history by leveraging of its
financial base, entrepreneurial skills and extensive business and empowerment
networks. Its approach is to work closely with management to identify
opportunities and to leverage off its relationships thereby offering a credible
empowerment model that is underpinned by strong financial resources.
4. TERMS OF THE SPECIFIC ISSUE
In terms of the specific issue Spescom will issue 20 000 000 Spescom shares to
Vantage Capital for cash. It is anticipated that this issue will occur as a
result of a new listing of shares on the JSE Securities Exchange South Africa
("JSE"). The main application of the cash raised will be utilised as expansion
capital.
These shares represent approximately 25.4% of the Company"s issued share capital
after the specific issue. The issue price of 100 cents per Spescom share,
represents a discount of approximately 12%, and a premium of approximately 2%
and 11% to the weighted average traded share price of Spescom"s share on the JSE
measured over the 30, 60 and 90 business days respectively prior to the
announcement published by Spescom on 16 October 2003 wherein it was stated that
Spescom was pursuing certain BEE initiatives.
Whilst Spescom appreciates that the issue price offered to Vantage Capital
represents a substantial discount to the current Spescom share price, Spescom
believes that this is not unreasonable having regard to the circumstances which
Spescom currently finds itself under vis-a-vis its major customers and more
particularly having regard to the factors stated in paragraph 2 above.
Accordingly, and from a Spescom perspective, the board views the long-term
benefit, which Vantage Capital is likely to bring to Spescom as significantly
outweighing any dilution that may arise as a result of the Spescom shares being
issued to Vantage Capital at a discount to the current market value. Should
Spescom not conclude a deal with Vantage Capital for reasons solely attributable
to the issue price, Spescom"s businesses in South Africa will be negatively
affected.
5. FINANCIAL EFFECTS OF THE SPECIFIC ISSUE
The table below sets out the pro forma financial effects of the specific issue
on a Spescom shareholder based on the assumptions set out below:
Actual Pro Change
"Before" forma (%)
(Note 1) "After"
(Note
2)
Basic earnings per share (cents) 25,1 20,8 (17,3)
Headline earnings per share (cents) 50,4 39,6 (21,4)
Net asset value per share (cents) 60,4 70,4 16,7
Net tangible asset value per share (32,3) 1,3 104,1
(cents)
Number of shares in issue at 30 58,668 78,668 34,1
September 2003 (`000)
Weighted average number of shares 58,668 78,668 34,1
in issue (`000)
Notes:
1. The "before" financial information has been extracted, without adjustment,
from the audited financial results of Spescom for the year ended 30 September
2003.
2. The basic and headline earnings per share calculations have been based on the
assumption that the specific issue was implemented on 1 October 2002.
3. The net asset value and net tangible asset value per share calculations have
been based on the assumption that the specific issue was implemented on 30
September 2003.
4. In terms of the basic and headline earnings calculations, it has been assumed
that the proceeds of the specific issue amounted to approximately R20 000 000
and was invested on 1 October 2002 in an interest bearing account at an after
tax rate of 8% for the year-ended 30 September 2003
6. CONDITIONS PRECEDENT
The specific issue is, inter alia, subject to the passing of the requisite
resolutions by shareholders in general meeting, approving the specific issue in
accordance with the requirements of the JSE and the Companies Act, 1973 (Act 61
of 1973), as amended.
7. OPINIONS AND RECOMMENDATIONS
The board appointed EY Corporate Finance (Proprietary) Limited, as an
independent professional expert, to advise the Spescom shareholders on the
fairness and reasonableness of the terms and conditions of the specific issue. A
copy of the independent advice from EY Corporate Finance (Proprietary) Limited
will be circulated to shareholders as part of the circular which will be posted
to shareholders in due course.
The directors of Spescom have considered the terms and conditions of the
specific issue and are of the opinion that the specific issue is in the best
interests of all of Spescom"s key stakeholders, including customers, suppliers,
staff, debt funders and shareholders and, accordingly, recommend that the
Spescom shareholders vote in favour of the resolutions required to implement the
specific issue.
Members of the board who beneficially own and/or control Spescom shares intend
to vote in favour of the resolutions to implement the specific issue.
8. GENERAL MEETING
A circular to shareholders setting out details of the specific issue, a notice
of general meeting and form of proxy, will be posted to shareholders in due
course.
Midrand
9 March 2004
