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IDION - Vision Solutions International, Inc. intends to acquire the business of
OS Solutions Ltd and withdrawal of cautionary announcement
IDION Technology Holdings Limited
(Registration Number: 1998/013846/06)
Share Code: IDI ISIN Code: ZAE000022513
(`IDION` or `the Group`)
IDION subsidiary Vision Solutions International, Inc. intends to acquire the
business of OS Solutions Ltd and withdrawal of cautionary announcement
INTRODUCTION
Shareholders are referred to the cautionary announcement dated 2 February 2005
wherein it was announced that the Group had entered into negotiations, which if
successfully concluded may have a material effect on IDION`s share price.
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited is authorised to
announce that IDION`s subsidiary, Vision Solutions International, Incorporated
(`Vision`) signed a definitive agreement on 26 February 2005 with OS Solutions
Ltd (`OSS`), a United Kingdom based company, to acquire selected assets and
assume certain liabilities from OSS and its owners Messrs M Ryan and P Wade and
Mrs S Ryan (`the sellers`).
OSS is an emerging player in the systems management software arena on the IBM
eServer (iSeries) in the small to medium business (`SMB`) sector. OSS is also a
provider of high availability (`HA`) and replication software to the IBM eServer
(iSeries), having approximately 370 customers.
TERMS OF THE ACQUISITION AND PURCHASE CONSIDERATION
Vision will acquire selected assets and assume certain liabilities of OSS for a
purchase consideration not exceeding US$3.5 million in cash plus warrants to
purchase Vision ordinary shares. The effective date for conclusion and the
closing of the transaction will be dependent upon certain conditions precedent,
which are expected to be fulfilled no later than 15 April 2005.
The breakdown of the purchase consideration is as follows:
US$2.5 million in cash at closing subject to 20% of such amount held in escrow
to cover standard representations and warranties on behalf of the sellers;
up to US$1.0 million in additional contingent cash consideration to be paid upon
the achievement of defined revenue targets for a period of 12 months after
closing; and
warrants to purchase 1 312 571 Vision ordinary shares at an exercise price of
US$1.67 per share. The total value placed on these warrants amounts to US$1.5
million, calculated by applying Black-Scholes methodology. The warrants may be
exercised in whole or in part and from time to time and carry a 10 year
expiration.
RATIONALE FOR THE ACQUISITION
While this acquisition is not expected to be significantly accretive to headline
earnings in 2005, it will contribute significantly to the Group`s long-term
strategy of achieving sustainable profit growth and improved shareholder value
by fulfilling the following key objectives:
a strategic acquisition that adds new products, enabling Vision to significantly
extend its solution portfolio and the ability to offer these complete solutions
to the market will result in a significant time-to-market benefit;
permit Vision to enhance its market position in providing HA and system
management solutions to a broader target market including the SMB sector;
strengthen Vision`s European presence and support capabilities;
lower cost offshore development opportunity; and
enhance cross-selling of products.
CONDITIONS PRECEDENT
The acquisition is subject, inter alia, to fulfilment of the following
conditions precedent:
to the extent required by IDION, the obtaining of the approval of the JSE
Securities Exchange South Africa (`JSE`) and the South African Reserve Bank;
completion of the due diligence to the satisfaction of the IDION board of
directors;
the approval of any other regulatory authorities and consents, as required;
execution of employment agreements with key staff; and
assignment of all Intellectual Property rights.
FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the acquisition and
has been provided for illustrative purposes only, to provide information on how
the acquisition may have affected the unaudited financial information of IDION
for the six months ended 30 June 2004:
Per IDION ordinary Before After
share transaction transaction
(United States Cents) (pro forma) %
Change
Earnings (0.73) (i) (1.11) (ii) (53)
Headline Earnings 0.27 (i) 0.03 (ii) (89)
Net Asset Value 11.60 (iii) 12.94 (iv) 12
Tangible Net Asset 6.10 (iii) 1.18 (iv) (81)
Value
Notes:
- IDION`s earnings per share and headline earnings per share for the six
months ended 30 June 2004, based on the weighted average shares in issue of
111.5 million;
- Based on the aggregate of IDION`s earnings and headline earnings, the
additional earnings from OSS and the assumed amortisation cost of the intangible
assets acquired;
- The net asset value per share and tangible net asset value per share of
IDION at 30 June 2004 based on 111.5 million shares (less treasury shares) in
issue;
- The aggregate of the net asset value and tangible net asset value of the
assets acquired ($5.0 million and $0 million respectively) and net asset value
and tangible net asset value of IDION at 30 June 2004; and
- The amortisation period of intangible assets and goodwill is five years and
seven years respectively and it is assumed that all intangible assets to be
recognised according to US GAAP will be recognised according to International
Financial Reporting Standards.
CATEGORISATION OF THE ACQUISITION
The acquisition has been categorised as a category 3 transaction in terms of
section 9.5(a) of the JSE Listings Requirements.
WITHDRAWAL OF CAUTIONARY
As the terms and financial effects in respect of the acquisition have been
announced, shareholders no longer need to exercise caution when dealing in their
IDION shares.
28 February 2005
Sunninghill
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Registered Accountants and Auditors
Deloitte & Touche
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