| Tue 7 Dec 2004, 15:26 | | ANNOUNCEMENT TO PRIMESERV SHAREHOLDERS |
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Primeserv Group Limited - Announcement To Primeserv Shareholders
PRIMESERV GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1997/013448/06
Share code: PMV ISIN: ZAE000039277
(`Primeserv` or `the Group`)
ANNOUNCEMENT TO PRIMESERV SHAREHOLDERS
1. INTRODUCTION
Shareholders are referred to the cautionary announcements published on 28 July,
8 September, 27 September and 10 November 2004. The directors of Primeserv are
proud to announce the conclusion of two transactions resulting in the
commercialisation of the operations of Bathusi Staffing Services (Pty) Ltd (`the
ABC disposal`) and the introduction of Black Economic Empowerment (`BEE`)
Shareholders into Group operating subsidiaries providing these companies with
empowered status (`the Empowered Transaction`).
2. THE ABC DISPOSAL
Shareholders are advised that Primeserv ABC Recruitment (Proprietary) Limited
(`ABC`), a wholly-owned subsidiary of Primeserv, has entered into an agreement,
subject to the conditions precedent set out below, whereby ABC sells the Secunda
Branch of its operations to Bathusi Staffing Services (Proprietary) Limited
(`BSS`). The transaction is hereinafter referred to as the `ABC disposal`.
2.1 Bathusi Staffing Services
BSS is a black-owned empowerment venture established by Primeserv and Kgorong
Investment Holdings (Proprietary) Limited; the latter is a black-owned company.
The shareholding in BSS will be expanded to include a BEE women`s grouping, as
well as black staff and management.
BSS is headed by KC Makhubele, a former Primeserv executive, and operates as an
outsourced contract staffing, labour and training services provider in
conjunction with Primeserv and its subsidiaries.
Primeserv currently holds 49% of the ordinary shares in BSS but has entered into
an agreement for the disposal of a further 4% of its holding. On conclusion of
all transactions, Primeserv will hold 45% of the issued ordinary shares with the
balance being held by qualifying BEE shareholders.
2.2 The ABC Disposal
2.2.1 Nature of business of the Secunda Branch of ABC
Historically the Secunda ABC branch provided outsourced staffing solutions to
clients in the Secunda area. Upon the award of a major contract (formerly held
by ABC) to Bathusi, an increasingly significant element of the business of the
branch consisted of providing logistical support to BSS. It therefore became
commercially expedient that the businesses of BSS and the Secunda ABC branch
should merge.
2.2.2 Details of the ABC disposal and purchase consideration
ABC will dispose of the business operations of its Secunda Branch, together with
the assets thereof and liabilities related thereto as set out in the sale
agreement, to BSS for a purchase consideration of R6 000 000 (six million Rand)
plus the assumption of certain liabilities. The purchase price may increase
based upon average future profits achieved in the financial years ending 2005,
2006 and 2007. The maximum such increase will result in a purchase price of R10
000 000 (ten million Rand).
2.2.3 Rationale for the disposal
The ABC disposal gives effect to the Group strategy of establishing viable black
owned BEE ventures in which Primeserv has a significant minority interest.
2.2.4 Conditions precedent to the disposal
The ABC disposal is subject to the approval of shareholders at a shareholders`
meeting to be convened and, to the extent necessary, the approval of various
regulatory bodies as well as the Group`s bankers. The business is acquired with
effect from 1 July 2004, but will be accounted for with effect from the date of
transfer of effective control.
2.2.5 Application of sale proceeds
The sale proceeds in respect of the disposals will remain due on loan account to
be repaid from surplus cash generated by the business. The loan due to ABC
carries interest in the first year at a rate equal to the prime lending rate,
and thereafter at the greater of the prime lending rate plus 5% or 18%.
3. THE EMPOWERED TRANSACTION
3.1 Restructure of Capital of the Subsidiaries
In order to realize its objective of having empowered status in Group
operations, the capital structure of Primeserv Employee Solutions (Pty) Ltd
(`PES`), Primeserv ABC Recruitment (Pty) Ltd and Primeserv Corporate Solutions
(Pty) Ltd (`PCS`), hereinafter referred to as `the Companies`, will be altered
such that existing equity loans due to Primeserv will be converted partly into
cumulative, coupon-bearing, redeemable Class A preference shares with a
preferent right to dividends and capital and partly to Class B non-participating
preference shares. The class A preference shares, the capital value of which
represents the current value of the underlying businesses, will be held by
Primeserv.
3.2 The Empowered Transaction and Purchase Consideration
25.8% of the ordinary and class B preference shares of each of the Companies
will be sold to Black Economic Empowerment Entities and donated to the Siyakhula
Trust at nominal value resulting in a 25.01% effective BEE shareholding in these
companies. The total purchase consideration due is an amount of R142.80 (being
the par value of shares sold).
3.3 BEE Shareholders
The BEE entities participating in the transaction are:
Kgorong Investment Holdings (Pty) Limited 7.9%
Kgorong is a BEE-investment company with 10 individual shareholders, 9 of whom
are black and collectively hold 90% of the equity in the company. The company
is chaired by Mr. L Maisela and its directors are prominent individuals in the
South African business and investment community.
Lidonga Oil International (Pty) Limited 7.9%
Lidonga is a BEE-investment company chaired by Ms Constance (`Connie`) Nkosi and
includes a broad based women`s grouping shareholder base. Shareholders include
provincial women`s groups in Gauteng, Mpumalanga, North West, Northern Cape,
Western Cape and Eastern Cape as well as Rifihlile Training.
BEE management and staff 8.0%
These shares will be held by Kgorong as nominee until such time as the
appropriate management and staff are identified. Should suitable candidates not
be identified within a prescribed period, the shares will vest in the remaining
BEE shareholders pro rata to their shareholding.
Siyakhula Trust 2.0%
The Siyakhula Trust is a social responsibility trust, registered as a public
benefit organisation and provides training and educational services to
disadvantaged rural communities. The trust has been, in part, supported by
donations made to it by Primeserv over the last five years.
3.4 Nature of the Business of the Companies
ABC and PES carry on business as providers of outsourced staffing solutions to
clients throughout South Africa. PCS carries on business as a provider of
integrated HR solutions and technical training in Gauteng, Richards Bay, Durban
and Cape Town.
3.5 Rationale for the Transaction
The transaction provides empowered status to Group operating companies.
3.6 Conditions Precedent to the Empowered Transaction
The Empowered Transaction is based upon heads of agreement concluded and is
subject to formal agreements being entered into and the production of a fair and
reasonable statement to the JSE Securities Exchange South Africa in relation to
the transaction. The transaction will take effect upon the transaction becoming
unconditional.
4. FINANCIAL EFFECTS OF THE TRANSACTIONS
The table below sets out the financial effects of the ABC disposal and the
Empowered Transaction based on the audited annual financial statements of
Primeserv for the year ended 30 June 2004:
The pro-forma financial effects have been prepared for illustrative purposes
only to provide information on how the ABC disposal and Empowered Transaction
may have impacted on the results and financial position of Primeserv for the
year ended 30 June 2004. Because of their nature, the pro-forma financial
effects may not give a true picture of Primeserv`s financial position after the
proposed ABC disposal and Empowered Transaction. The financial effects are
particularly impacted by virtue of losses incurred in the previous financial
year and the accounting in respect thereof, as losses in the Companies are
consolidated and not attributed to minorities.
Primeserv Group After Before After Before
Limited Empowered vs. ABC vs.
Before Transaction After Disposal After
(cents) (Cents) Change (Cents) Change
Basic earnings per (7.29) (7.29) 0% (4.15) +43.1%
share
Headline earnings (7.31) (7.31) 0% (6.45) +11.8%
per share
Net asset value 31 31 0% 34 +9.7%
per share (`NAV`)
Tangible net asset 23 23 0% 25 +8.7%
value per
share(`TNAV`)
Notes:
1. The `Before` column reflects the position of each Primeserv Group Limited
share for the year ended 30 June 2004 based on the weighted average number of
shares in issue as regards earnings and the number of shares in issue at year
end as regards net asset value.
2. The `After` ABC disposal column assumes that the results of BSS are
accounted for as an associate on the equity basis of accounting applying the
provisions of AC110, that the ABC disposal was implemented on 1 July 2003 and
reflects the after tax earnings of Primeserv which would have been the results
had Primeserv`s interest in ABC Secunda been disposed of as at 1 July 2003, and
the impact on TNAV and NAV reflects the results had the disposal taken place on
30 June 2004.
3. The after Empowered Transaction assumes the results of operations of the
Companies are consolidated in accordance with AC132 and reflects the value of
the minority interest if acquired on 1 July 2003 for the impact on earnings and
30 June 2004 for the impact on TNAV and NAV.
4. Tangible net asset value is calculated net of the carrying values of
goodwill, intangible assets and the deferred tax asset.
5. CIRCULAR TO SHAREHOLDERS
A circular to shareholders containing full details of the ABC disposal will be
included with the annual report circulated to shareholders. A resolution to
approve the ABC disposal will be put to shareholders at the Annual General
Meeting.
6. WITHDRAWAL OF CAUTIONARY
The cautionary announcements published on 28 July, 8 September, 27 September and
10 November 2004 are herewith withdrawn.
7 December 2004
Bryanston
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Corporate Advisor
TWS Consultants
Reporting Accountants
Deloitte & Touche Chartered Accountants SA
Registered Accountants and Auditors
www.primeserv.co.za
Date: 07/12/2004 02:47:05 PM
Produced by the JSE SENS Department
