| Fri 3 Sep 2004, 16:24 | | ABRIDGED PROSPECTUS |
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CASEY - ABRIDGED PROSPECTUS, CHANGE OF NAME OF COMPANY, TRANSFER OF LISTING TO
THE ALTERNATIVE EXCHANGE AND SALIENT DATES
CASEY INVESTMENT HOLDINGS LIMITED (`CASEY`)
(Incorporated in the Republic of South Africa)
Registration number - 1998/016433/06
Share code: CSY ISIN: ZAE 000042537
ABRIDGED PROSPECTUS, CHANGE OF NAME OF COMPANY, TRANSFER OF LISTING TO THE
ALTERNATIVE EXCHANGE (`AltX`) AND SALIENT DATES
Introduction
As previously announced on 30 June 2004, in terms of an agreement signed on 23
April 2004, the Level 4 Group directors acquired 56 234 723 shares, being
control of 75% of Casey from Black Information Technology Empowerment Company
Limited (`Blitec`) as well as Blitec`s loan account claims against Casey, with
effect from 01 March 2004. Blitec has retained a shareholding of approximately
9% in Casey. The listing of Level 4 Group on AltX was approved by the AltX
Advisory Committee, subject to JSE approval, ahead of the acquisition of control
of Casey. During the process of obtaining formal approval from the AltX
Advisory Committee, the Level 4 Group directors acquired a controlling interest
in Casey with an intention to reverse list Level 4 Group into the Casey shell in
order to achieve a spread of shareholders and secure a value-adding black
empowerment company in the form of Blitec. The Level 4 Group business and
contracts will be introduced into Casey without any dilution to minority
shareholders of Casey whereby invoices will be raised from 01 September 2004 in
Casey and the Level 4 Group business will be wound down. At the same time, the
Level 4 Group directors entered into negotiation with DataPro management vendors
and BOE Private Equity Investments (Proprietary) Limited (`BOE Private Equity`)
for the acquisition of 100% of DataPro (Proprietary) Limited (`DataPro`) by
Casey.
As announced on 16 August 2004, in terms of an agreement signed on 13 August
2004, Casey acquired 100% of the preference shares in and claims against
DataPro, a first tier ISP, from BOE Private Equity and 100% of the ordinary
shares in and claims against DataPro, from DataPro management vendors comprising
primarily Douglas Reed (53%) with the balance being widely held by management
and staff. This will result in Casey holding 100% in DataPro.
The purchase price for the acquisition of the ordinary shares and claims from
DataPro management vendors, equating to an effective 13,573% shareholding in
DataPro, is R5 653 650, to be settled through the issue of 66 500 000 new shares
in Casey at 8,5 cents per share. The purchase price for the acquisition of the
preference shares and claims from BOE, equating to an effective 86,427%
shareholding in DataPro, is R36 000 000, to be settled in cash. A bank
guarantee has been issued for the purchase price and the minimum cash
requirement of R36 000 000 has been secured through written undertakings to
subscribe for an issue of up to 87 500 000 new shares in Casey at an issue price
of 55 cents per share, subject to the approval of the acquisition and issue of
shares for cash by the shareholders of Casey in a general meeting.
Prior to, and after, the implementation of the acquisition and issue of shares
for cash, the share capital of the company will be as follows:
Authorised
2 000 000 000 ordinary shares of 0,1 cent each
Issued R`000
Total (Prior to the acquisition)
74 979 627 ordinary shares of 0,1 cent each 75
Share premium 23 498
To be issued to DataPro management vendors at
8,5 cents per share
66 500 000 ordinary shares of 0,1 cent each 67
Share premium 5 586
To be issued for cash at 55 cents per share
87 500 000 ordinary shares of 0,1 cent each 87
Share premium 48 038
Total (After the acquisition and issue of
shares for cash)
228 979 627 ordinary shares of 0,1 cent each 229
Share premium 77 122
The shares are to be placed with black empowerment companies, private
individuals and institutions. The largest shareholder in Casey, after the share
issue, will be Vantage Capital Group, a black economic empowerment company, at
approximately 23% assuming all the shares for cash are placed. There are no
agreements, arrangements or undertakings between any of the parties to these
transactions that will result in shareholders, acting in concert, controlling
35% or more of the voting securities of Casey.
The acquisition and the issue of shares for cash (`the transactions`) will
require the approval of Casey shareholders in a general meeting in terms of the
JSE Listings Requirements. In addition, it is proposed that Casey change its
name to DataPro Group Limited in order to more accurately reflect the nature of
its current and future business activities. The name reservation has been
approved by CIPRO. The memorandum and articles are to be substituted in their
entirety in order for the articles to more accurately reflect the recent changes
in the Act.
General meeting
A general meeting to approve the acquisition of DataPro, the issue of shares for
cash, the change in name of the company and the adoption of new articles of
association is to be held at 10h30 on Monday, 27 September 2004 at Arcay House
II, Number 3 Anerley Road, Parktown, Johannesburg. Irrevocable undertakings to
vote in favour of the transactions of 56 234 723 shares or 75% of the existing
issued share capital of Casey have been secured.
History and nature of business
DataPro is a premier ISP focused on providing permanent Internet connections to
the corporate market in South Africa through the supply of leased lines or ADSL.
The company is currently rated amongst the top five South African first tier
ISPs by BMI (BMI TechKnowledge Group). It has a substantial base of customers,
one of the most advanced networks in the world and provides a basket of quality
communication products and services. DataPro currently services businesses of
all sizes. In Gauteng the customer base consists predominately of mid to large
corporate companies, and in the Cape Town and Durban regions, small to medium
enterprises.
A large portion of DataPro`s business is annuity based income covering a wide
customer base comprising almost 3 000 customers. At 01 August 2004 DataPro`s
contracted monthly annuity revenue was approximately R6 million.
Prior to 1 January 1998, DataPro developed the software for Control Instrument
Limited`s onboard vehicle computers. The software became core to Control
Instruments strategy and as a result they purchased the business, redeployed the
software development team and Douglas Reed was tasked with managing and
developing the remaining business section. It was decided to refocus the
business as an ISP.
On restricted resources, the business grew steadily until April 2001 when the
business became cash positive. In terms of January 2001 market share
information, the market was dominated by three large ISPs. A number of
companies of similar size were positioned below these.
The economic climate combined with DataPro`s lean base enabled management to
affect a buyout with the assistance of BOE Private Equity. Later in 2001
BTGNet, (formerly Uskonet), was acquired and this propelled DataPro to the
fourth largest corporate ISP by market share. With direct links to Intermedia
in Washington DC, DataPro acquired first tier status.
In 2002 there was rapid consolidation and rationalisation in the Internet
industry and DataPro emerged as a leading player with significant market share
and strong financials. Organic sales growth of 118% and a signed
interconnection agreement with an international telecommunications company
marked the highlights of a great year.
To position DataPro to maximise the opportunities presented by convergence of
voice and data, DataPro established a Voice Over Internet Protocol (`VOIP`) VOIP
switch in London in 2003 and launched VOIP services using least-cost routing and
call back protocols. These services provided the basis to build a comprehensive
Voice division offering businesses a complete service.
DataPro also provides IT outsourcing services and supplies, which division will
now be run under the brand name of Level 4 Group and managed by former Level 4
Group directors.
Growth prospects
The ISP business is a subset of the Telecommunication sector. This sector faces
enormous change in South Africa due to deregulation, convergence of
broadcasting, voice and data technologies, technological innovation and
enhancements and the exploding growth of the Internet.
The barriers to entering the permanent ISP market are significant. It is now
extremely difficult to start an ISP from a zero base. Economies of scale limit
small start-up ISPs. ISPs are typically in the bulk-breaking business, which
involves the purchase of bulk bandwidth and the break up and sale to customers.
If a company cannot buy in bulk it cannot attract the volume discounts that
allows it to compete.
Another barrier to entry is the so-called `J-Curve`. A level of infrastructure
is required to successfully operate and this leads to a J-Curve where
infrastructure and operating costs are financed until a point is reached in
turnover that results in the business breaking even. DataPro reached this
breakeven in April 2001 and has been cash generative since then. The costs of
financing J-curves are well documented with various businesses investing
enormous amounts of cash to finance infrastructure and operating costs.
Finally, the last barrier to entry is the nature of an ISP sale - which is a
technical sale with a long sales cycle and generally requires a trained and
experienced sales force, which comes with an expensive price tag. From the
moment a customer is seen to the time a sale occurs, averages ten months. New
entrants are therefore required to finance at least ten months in operating
costs before the first sale and will further require a level of sales in the
future that will cover operating costs and infrastructure - that is, the J-
curve.
The Internet is a significant area of growth as a business network in South
Africa. Like all networks they are subject to exponential growth factors.
Generally network usage grows slowly until critical mass is achieved, then the
growth increases in leaps and bounds. A good example of this is the fax
machine. A fax network of two people had very little value, a business with a
100 customers who had a fax machine had more value and once enough users were
added to achieve critical mass the faxing network grew significantly. Today,
the majority of businesses in the world regard having a fax machine as a
necessity to do business. This factor, known as Metcalf`s Law, quantifies a
networks value as the sum of the users squared. The majority of businesses -
regardless of size - have to utilise telephone, postal, fax and email networks.
This was not always the case and soon a permanent connection to the Internet
will become a requirement to do business in South Africa. In South Africa, the
Internet is still in its infancy - critical mass has just recently been
achieved. Towards the end of 2002 an estimated 8,000 businesses were
permanently connected. With the launch of ADSL the costs of being connected
were lowered and there are now an estimated 25,000 South African based
businesses permanently connected to the Internet - this represents roughly 21%
of the market with growth of 17,000 users achieved in only two years.
It is estimated that the total size of the private sector component of the South
African permanent connection Internet market is 80,000 to 100,000, comprising
businesses that will ultimately need a permanent Internet connection. In
support of this estimate, there are an estimated 350,000 businesses in South
Africa, listed with the various directories. Approximately 120,000 of these
businesses are insured by the various credit bureaus and credit insurance
companies.
The South African Public Sector is potentially double the Private Sector.
Individual public enterprises number in the thousands especially when schools,
hospitals, clinics, police stations, municipalities, parastatals and
institutions such as Custom & Excise are taken into account.
The permanent Internet connection market has a number of factors influencing
growth. There is growth in the number of users and current users are also using
more bandwidth. The increase in use of Internet is expected to follow the same
growth pattern demonstrated in the cellular market.
DataPro is uniquely positioned. It is the only independent company in the top
six, has already achieved critical mass with a foundation necessary to exploit
opportunities, and is a business in the expansion phase of its life cycle. It
achieved breakeven levels of cash generated from operations, and earnings in
late 2000. In addition, with Blitec, Blitec minorities and Vantage Capital
Group as shareholders, DataPro Group is a broad based, black empowered ISP, with
over 400 black IT professionals as direct shareholders.
DataPro`s independence enables it to be decisive, to focus on core activities
and to be flexible. The critical mass ensures that it is competitive,
profitable and able to generate the cash required to fund growth and debt
repayments. The foundation includes the infrastructure, customer base and the
entrepreneurial team with the necessary skills required to move fast with
innovative products and services. DataPro has a cost advantage relative to its
competitors, which has been achieved with innovative technologies like bandwidth
accelerators.
DataPro has historically seen 35% of its growth from existing customers
increasing their usage by upgrading their bandwidth requirement and 15% achieved
by selling new products and services to the existing base. The other 50% of its
growth is achieved by selling products and services to new customers.
DataPro`s growth startegy focuses on three principal drivers, its current lease
line business that contributes 80% of turnover and profit and two new divisions,
namely ADSL and Voice. All are expected to contribute equally to the overall
contribution to turnover and profit in the future.
Although DataPro is not a consumer dial up ISP, an acquisition of a dial-up
consumer business can be highly contributory to profit since the pattern of
bandwidth usage at DataPro is concentrated during the day. The acquisition of a
consumer dial up customer base would increase overall capacity utilisation with
an enhanced contribution to the bottom line as the consumer dial up market has
its usage concentrated after normal business hours.
Another major factor ensuring the success of DataPro is the fact that the
company is a lean organisation when compared to its competitors. It is a low
cost operator rather than a cheap operator. Normal manufacturing principles
have been applied to a high tech business. This has resulted in cost
reductions, shorter implementation lead times, faster time to market for new
products, continuous quality improvement and customer satisfaction. These
principles have been extended right down to DataPro being the only ISP in South
Africa to have an ISO 9001:2000 certification and is one of the few ISPs in the
world with this certification. These are DataPro`s key differentiators.
Directors` information
The directors of the company after the transactions will be as follows:
Name Age Business Occupation Other key
Address directorships
Yvonne Thato 39 Block B1 Businesswoman Blitec
Moerane* Green Oaks SAP Public
Office Park Services (Pty) Ltd
Vorna Valley
Midrand
Douglas 45 DataPro Businessman DataPro
Graham Reed Building
Rutherford
Estate
1 Scott Street
Waverley
James Charles 33 Suites 5 & 6 Finance Level 4 Group
Herbst Lower Ground Level 4 IT
Floor Services Limited
Stellenryk Herbst Investments
Building (Pty) Ltd
Constantia
Square
526 16th Road
Midrand
Gary Paul 27 DataPro Operations DataPro
Sweidan Building
Rutherford
Estate
1 Scott Street
Waverley
Karl Chelius 34 Suites 5 & 6 Sales and Level 4 Group
Lower Ground marketing Level 4 IT
Floor Services Limited
Stellenryk IT-Net Solutions
Building (Pty) Ltd
Constantia
Square
526 16th Road
Midrand
Michelle 38 Arcay House Accountant Arcay Corporate
Julie Number 3 Services
Krastanov* Anerley Road
Parktown
* Non-executive
Salient Dates
2004
Last day to lodge forms of proxy for the Thursday, 23
general meeting by 10h30 on September
General meeting of shareholders to be held at
10h30 and results of general meeting published Monday, 27
on SENS on September
Results of general meeting published in the Tuesday, 28
press on September
Offer opens at 09h00 Tuesday, 28
September
Offer closes at 12h00 (see note below) Friday, 08
October
Last day to trade Friday, 15
October
Change of name effective from commencement of Monday, 18
trading on October
Transfer of sector and list and trade new
shares in the new name of DataPro Group Monday, 18
Limited on October
Listing of new securities at commencement of Monday, 18
business on October
Refund cheques posted to shareholders who
applied for certificates (dematerialised
shareholders will not get refunds as payment Tuesday, 19
is only made on delivery versus payment October
method)
Record date Friday, 22
October
New share certificates posted to certificated
shareholders and, in respect of dematerialised Monday, 25
shareholders, CSDP and broker safe custody October
accounts updated
Share certificates in the name of Casey may not be dematerialised or
rematerialised after Friday, 15 October 2004.
Transfer to AltX
The directors are pleased to announce that the JSE Securities Exchange South
Africa has formally approved the transfer of the company`s listing to AltX,
subject to the approval of the acquisition of DataPro (Proprietary) Limited on
27 September 2004. The company`s securities will commence trading on AltX from
commencement of business on 18 October 2004 in the new name of the company
DataPro Group Limited under the share code DTP and the new ISIN will be
ZAE000058061.
In accordance with the JSE Listings Requirements the following wording is
included in this announcement:
`In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on the AltX. Shareholders are advised
that the JSE does not guarantee the viability or the success of a company
listing on AltX. In terms of JSE Listings Requirements a Designated Adviser has
to be retained by the company. The Designated Adviser is required to, inter
alia, attend all board meetings held by the company to ensure that all JSE
Listings Requirements and applicable regulations are complied with, approve the
financial director of the company and guide the company in a competent,
professional and impartial manner. If the company fails to retain a Designated
Adviser it must make arrangement to appoint a new Designated Adviser within 10
business days, failing which the company faces suspension of trading of its
securities. If a Designated Adviser is not appointed within 30 days of its
suspension the company faces the termination of its listing without an offer to
minorities.`
Shareholders are advised that in order to be admitted to AltX, inter alia, the
company has to first present to, and be approved for listing by, the AltX
Advisory Committee. Casey believes that the company, and its shareholders, will
be better suited for AltX, based on the benefits that AltX presents.
Copies of this document
Copies of this document will be available for inspection at the registered
office of the company at Number 3 Anerley Road, Parktown, Johannesburg during
normal business hours from Wednesday, 01 September 2004 up to and including
Tuesday, 28 September 2004.
Johannesburg
03 September 2004
Sponsor Independent reporting accountants
Arcay Corporate Services Grant Thornton
Attorneys Auditor
Webber Wentzel Bowens SAB&T Incorporated
