| Mon 8 Nov 2004, 10:21 | | DISPOSAL OF BCX"S ENTIRE SHAREHOLDING IN |
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BUSINESS CONNEXION GROUP LIMITED - DISPOSAL OF BCX`S ENTIRE SHAREHOLDING IN
MOSAIC SOFTWARE HOLDINGS LIMITED (`MOSAIC`) AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
BUSINESS CONNEXION GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/002506/06)
Share code: BCX ISIN: ZAE000054631
(`BCX` or `the company`)
DISPOSAL OF BCX`S ENTIRE SHAREHOLDING IN MOSAIC SOFTWARE HOLDINGS LIMITED
(`MOSAIC`) AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Investec Bank Limited is authorised to announce that BCX, together with the
other shareholders in Mosaic, has entered into an agreement to dispose of Mosaic
(`the disposal`) to S1 Corporation (`S1`), a company listed on the NASDAQ Stock
Market. S1 is a leading provider of integrated front-office applications for
financial institutions. It is based in Atlanta and currently has a market
capitalisation of approximately US$661 million.
2. Mosaic
2.1 Description and background
Mosaic, a software development and implementation company, is a leader in the
world market for electronic funds transfer (EFT) and financial services
transaction processing. Comparex Holdings Limited (`Comparex`), the previous
holding company of BCX, was instrumental in the establishment of Mosaic in 1994.
The company has offices in the USA, Australia, Europe and South Africa. Mosaic
currently employs 189 staff and is headed by Johann Dreyer, who is based in the
USA.
2.2 Current status and rationale for the disposal
Pursuant to the sale of the European operations of Comparex in November 2002,
the South African Reserve Bank (`SARB`) requested an undertaking from the group
to sell its residual minority shareholding in Mosaic, a company based in the
United Kingdom, as soon as an appropriate opportunity arose.
Following discussions between Mosaic and S1 regarding their complementary
product offerings, S1 approached the Mosaic shareholders to acquire their shares
in Mosaic. Given the limited operational interaction between Mosaic and BCX,
taken together with an attractive price negotiated with S1 and the request from
the SARB, BCX believes that this is an appropriate opportunity to dispose of its
residual minority interest in Mosaic.
Mosaic was carried at a value of approximately R14.7 million in the audited
balance sheet of BCX at 31 May 2004.
3. Terms of the disposal
BCX has disposed of its effective 37.166% shareholding in Mosaic to S1 with
effect from 12 November 2004 for a maximum potential purchase consideration of
US$19.3 million (`the sales proceeds`).
3.1 Conditions precedent
There are a number of conditions precedent to the disposal which are expected
to be fulfilled on or before 12 November 2004.
3.2 The sales proceeds consist of the following payments:
3.2.1 a completion payment of US$10.50 million will be received by BCX three
days after the last condition precedent has been fulfilled;
3.2.2 an escrow payment of US$3.25 million will be placed into an interest
bearing escrow account until 31 December 2005 to cover any potential claims
against the warranties set out in paragraph 4 below; and
3.2.3 a potential earn out payment of a maximum of US$5.57 million, which is
calculated as $4.92 for every dollar of earnings before interest, taxation,
depreciation and amortisation (`EBITDA`) that Mosaic generates during the year
ending 31 May 2005 in excess of US$3.37 million, up to a maximum EBITDA of
US$4.5 million.
4. Warranties
BCX has given normal warranties, representations and undertakings to S1 in
relation to the disposal. BCX`s maximum potential liability in respect of any
claim under the warranties is limited to the sales proceeds received by BCX.
5. Financial effects of the disposal and application of the sales proceeds
The table below sets out the illustrative pro forma financial effects on BCX of
the disposal, assuming it had been implemented for income statement purposes on
1 June 2003, and for balance sheet purposes on 31 May 2004, and based on the
assumptions set out below.
Before After % change
Earnings per share (`EPS`)(cents) 47.5 74.8 57.4
Headline earnings per share (`HEPS`) (cents) 34.2 34.2 -
Net asset value (`NAV`) per share (cents) 397.8 426.3 7.2
Net tangible asset value (`NTAV`)per
share (cents) 354.4 382.9 8.0
Notes:
5.1 The potential earn out payment has been assumed to be nil as the amount
cannot presently be estimated accurately. Consequently the total sales proceeds
are therefore assumed to be US$13.75 million.
5.2 The `Before` column has been extracted without adjustment from BCX`s audited
annual financial statements for the year ended 31 May 2004.
5.3 The `After` column reflects the EPS for the year ended 31 May 2004,
decreased to take account of the loss of earnings arising from the disposal and
increased by the after-tax capital profit made by BCX on the disposal, and
increased by the interest accrued, for the period BCX held Mosaic, at an after-
tax interest rate of 5.6% on the Rand sales proceeds excluding the earn out
payment.
5.4 The `After` column reflects the HEPS for the year ended 31 May 2004,
decreased to take account of the loss of earnings arising from the disposal and
increased by the interest accrued, for the period BCX held Mosaic, at an after-
tax interest rate of 5.6% on the rand sales proceeds excluding the earn out
payment.
5.5 The `After` column reflects the NAV and NTAV per share at 31 May 2004,
adjusted for the after-tax capital profit realised from the disposal.
5.6 The pro forma financial effects of the disposal are calculated based on an
exchange rate of R6.10: 1US$.
6. Renewal of cautionary announcement
BCX shareholders are referred to the cautionary announcement published on SENS
on 11 October 2004, and are advised that negotiations are still in progress
which, if successfully concluded, may have a material effect on the price at
which the company`s shares trade on the JSE Securities Exchange South Africa.
BCX shareholders are accordingly advised to exercise caution when dealing in
their BCX shares until a further announcement is made.
Midrand
8 November 2004
Merchant bank to BCX and transaction sponsor
Investec Corporate Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Lead sponsor
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Attorney
CLIFFE DEKKER
Date: 08/11/2004 09:50:47 AM
Produced by the JSE SENS Department
