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PARACON - THE ACQUISITION BY PARACON OF THE IT CONTRACTING AND SERVICES BUSINESS
OF TIME QUANTUM CONSULTING (PROPRIETARY) LIMITED AND AN OPTION TO
ACQUIRE THE IT CONTRACTING AND SERVICES BUSINESS OF TEE QUE TRADING
SERVICES (PROPRIETARY) LIMITED
Paracon Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/008181/06)
JSE Share code: PCN
ISIN: ZAE000029674
(`Paracon`)
THE ACQUISITION BY PARACON OF THE IT CONTRACTING AND SERVICES BUSINESS OF TIME
QUANTUM CONSULTING (PROPRIETARY) LIMITED (`Time Quantum`) AND AN OPTION TO
ACQUIRE THE IT CONTRACTING AND SERVICES BUSINESS OF TEE QUE TRADING SERVICES
(PROPRIETARY) LIMITED (`Tee Que`)
1. Introduction
Further to the cautionary announcements dated 7 April 2004 and 14 May 2004,
shareholders are advised that Paracon has entered into agreements with -
* Time Quantum to acquire its IT contracting and services business as a
going concern for a purchase consideration of R11 100 000 (`the Cape
Town acquisition`) with effect from 1 June 2004; and
* Tee Que granting Paracon an exclusive option (`the option`),
exercisable on or before 30 November 2004, to purchase Tee Que`s IT
contracting and services business (`the Gauteng acquisition`) as a
going concern with effect from 1 November 2004. If the option is
exercised, the purchase consideration for the Gauteng acquisition will
be R34 500 000.
(The Cape Town acquisition and the Gauteng acquisition are collectively
referred to herein as the `TQ acquisitions`).
The TQ acquisitions are subject to the fulfilment of various conditions
precedent including those referred to below.
2. Nature of businesses of Time Quantum and Tee Que
Tee Que provides information technology resources and services in Gauteng
and surrounding areas. Time Quantum provides information technology
resources and services in Cape Town and surrounding areas. Their client
bases are represented by blue chip and parastatal clients.
3. Settlement of consideration
The considerations for the TQ acquisitions will be funded from Paracon`s
available cash resources.
4. Warranties
Tee Que and Time Quantum have given Paracon warranties which are standard
for transactions of this nature.
5. Conditions precedent
The TQ acquisitions are subject to various conditions precedent including,
inter alia -
* approval of the competition authorities and any other regulatory
approvals which may be required; and
* required consents for the assignment of material agreements to
Paracon.
Senior management of Time Quantum and Tee Que (should the option be
exercised) will enter into service, confidentiality and restraint
agreements with Paracon.
6. The rationale for the TQ acquisitions and the option
The TQ acquisitions are in line with Paracon`s strategy of acquiring
quality information technology service businesses to which it can add
value. Paracon believes that Time Quantum and Tee Que`s extended client
base and geographic spread provide potential for significant growth in the
Paracon group`s market share both in Cape Town and Gauteng. Time Quantum
and Tee Que offer services which are highly complementary with those
currently offered by the Paracon group leading to considerable benefits.
The option for the Gauteng acquisition has been entered into because
certain criteria need to be satisfied prior to Paracon electing to exercise
the option. In the event that the criteria are satisfied, it is Paracon`s
intention to exercise the option by no later than 30 November 2004.
7. Financial effects
Each of the pro forma financial effects of the Cape Town acquisition only
(if the option is not exercised) and the pro forma financial effects of the
TQ acquisitions on Paracon`s earnings, headline earnings, net asset value
(`NAV`) and tangible NAV per share are set out below. The pro forma
financial information has been prepared for illustrative purposes only and
because of its nature may not give a true picture of Paracon`s financial
position and results of operations.
Per Paracon Before the After the Percentag After the TQ Percentage
ordinary TQ Cape Town e change acquisitions change
share acquisitions acquisition % (Cape Town %
(cents) (1) only (2) and Gauteng)
(2)
Earnings for
6 months 1.54 1.51(3) (2) 1.46(3) (5)
ended 31
March 2004
Headline
earnings for
6 months 2.7 2.8(3) 4 3.2(3) 19
ended 31
March 2004
NAV at 31 43.3 43.3 - 43.3 -
March 2004
Tangible NAV
at 31 March 30.1 27.2 (10) 18.3 (39)
2004
Number of shares - 383.1 million
Weighted average number of shares - 389.1 million
Notes
1. Based on the interim results of Paracon for the six months ended 31
March 2004.
2. Based on the assumption that the TQ acquisitions were effected on 1
October 2003 for income statement purposes and 31 March 2004 for
balance sheet purposes.
3. Earnings and headline earnings have been adjusted to include the pro
forma incremental consolidated income attributable to Paracon pursuant
to the TQ acquisitions. Further to this, adjustments have been made
to take into account the pre-tax interest foregone on both the cash
considerations of the TQ acquisitions and the working capital
requirements of the businesses, at the average rate of 9.4% during the
period under review. Adjustments have also been made to take into
account the amortisation of the goodwill arsing from the TQ
acquisitions.
4. The accounting policies employed by Paracon for the six months ended
31 March 2004 have been consistently applied in these calculations.
8. Withdrawal of cautionary
Shareholders are advised that caution is no longer required to be exercised
when dealing in their Paracon shares.
Johannesburg
28 June 2004
Sponsor
Nedbank Capital
Attorneys
Werksmans Inc.
Date: 28/06/2004 09:30:06 AM
Produced by the JSE SENS Department
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