| Thu 1 Sep 2005, 11:46 | | Arch Equity - Acquisition Of A 30% Interest In Ori |
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Arch Equity - Acquisition Of A 30% Interest In Orion Telecom Investment Holdings
(Pty) Ltd
ARCH EQUITY LIMITED
Incorporated in the Republic of South Africa
Registration number 2004/004019/06
JSE share code: ACH & ISIN: ZAE000061073
(`Arch Equity`)
ACQUISITION OF A 30% INTEREST IN ORION TELECOM INVESTMENT HOLDINGS (PTY) LTD
1. INTRODUCTION
Further to the cautionary announcement published on the Securities Exchange News
Service of the JSE Limited on 11 August 2005, shareholders of Arch Equity are
advised that agreement has been reached to acquire a 30% interest in Orion
Telecom Investment Holdings (Pty) Ltd (`Orion`) from Mogala Investments (Pty)
Ltd (`Mogala`).
2. DETAILS OF ORION
Orion is the holding company of Orion Telecom Corporation (Pty) Ltd, Orion
Cellular (Pty) Ltd, Orion Data Services (Pty) Ltd and Orion Telecom South Africa
(Pty) Ltd. Through its subsidiaries, Orion provides a wide range of services in
the telecoms industry. It is primarily involved in providing least cost routing
services. At 28 February 2005 Orion had a net asset value of R7.6 million and
generated headline earnings of R50.0 million for the financial year then ended.
3. PARTICULARS OF THE ACQUISITION
3.1 Subject matter of the acquisition
Crimson King Properties 152 (Pty) Ltd (`Arch Telecom`), a wholly-owned
subsidiary of Arch Equity, will acquire 30 000 Orion shares, comprising 30%
of Orion`s issued share capital (`the Sale Shares`) from Mogala.
3.2 Acquisition consideration
Arch Telecom shall, subject to the non-fulfilment of the resolutive
conditions referred to in 3.4 below, acquire the Sale Shares from Mogala
for a total consideration of R54 917 045 (`the Purchase Price`).
Arch Telecom will pay R24 000 000 of the Purchase Price in cash on 1
September 2005 and R20 000 000 of the Purchase Price shall be on loan
account due to Mogala. This loan account shall, subject to the non-
fulfilment of the resolutive conditions, be settled by the issue of
redeemable 9% (compounded monthly) preference shares (`the preference
shares`) by Arch Telecom to Mogala. The balance of the Purchase Price of
R10 917 045 (`final payment amount`) will be payable as soon as reasonably
possible after the net after tax profit for the period 1 March 2005 to 28
February 2006 have been determined, subject to Orion achieving a net after
tax profit of R40 000 000 for this period. The final payment amount will be
reduced by R4,50 for every one rand that the net profit after tax is below
the warranted figure of R40 000 000, limited to a maximum reduction of R10
000 000.
3.3 Effective date
The effective date of the transaction is 1 September 2005.
3.4 Conditions
The transaction will dissolve on the non-fulfilment of certain resolutive
conditions on or before 28 February 2005. A further announcement will be
made should the transaction dissolve.
3.5 Other significant terms of the agreement
- Normal warranties for a transaction of this nature have been provided.
- Arch Telecom will appoint two directors to Orion`s board of directors.
- As security for Arch Telecom`s obligations in terms of the preference
shares, Arch Equity has granted Mogala a call option in respect of its
shareholding in Arch Telecom, which may only be exercised if Arch
Telecom remains in breach of certain specified obligations relating to
the preference shares.
4. RATIONALE
Arch Equity, Orion and Mogala believe that Arch Equity could, by means of its
BEE credentials and possible synergies within the telecoms industry, add
significant value to Orion. With its improved BEE credentials through Arch
Equity, Orion is uniquely positioned to take advantage of the current
opportunities in the telecoms industry. Arch Equity`s management expects that
this transaction will yield an above average return on its investment.
5. FINANCIAL EFFECTS
The pro forma financial effects of the transaction are presented for
illustrative purposes only and because of their nature may not give a fair
reflection of Arch Equity`s financial position nor of the effect on future
earnings after the transaction.
Set out below are the unaudited pro forma financial effects of the transaction,
based on the audited consolidated financial results of Arch Equity for the year
ended 28 February 2005.
Audited Pro forma Change
Before the After the (%)
transaction Transaction
(cents) (cents)
Earnings per share 99,9 113,2 13.3
Headline earnings per share 106,0 119,3 12.6
Net asset value per share 173,5 173,5 0.0
Net tangible asset value per 173,5 136,9 (21.1)
share
1. The earnings and headline earnings per share figures in the `Pro forma
After the transaction` column have been calculated:
- on the basis that the transaction was effected on 1 March 2004;
- assuming that Arch Equity would have earned an after tax interest
return of 6% on the cash resources required to implement the
transaction;
- assuming that preference dividends would have been paid on the
R20 million preference shares; and
- assuming that Arch Equity would have equity accounted 30% of
Orion`s earnings for the financial year ending on 28 February
2005.
2. The net asset value and net tangible asset value per share figures in
the `Pro forma After the transaction` column have been calculated on
the basis that the transaction was effected on 28 February 2005.
6. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
As a result of the conclusion of this transaction, shareholders of Arch Equity
are hereby advised that the cautionary announcement of 11 August 2005 is hereby
withdrawn and caution is no longer required to be exercised when dealing in Arch
Equity`s shares.
Stellenbosch
1 September 2005
PSG Capital Limited
Designated Advisor to Arch Equity
Warning: The listing of ordinary shares in the company is on ALTx. Investors
are advised of the risks of investing in a company listed on ALTx. Investors are
advised that the JSE does not guarantee the viability or the success of a
company listed on ALTx. In terms of the Listings Requirements, the company is
obliged to appoint and retain a Designated Adviser, which is required to, inter
alia, attend all board meetings held by the company to ensure that all the
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 arrangements 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 the
prospect of an appropriate offer to minority shareholders.
Date: 01/09/2005 11:00:10 AM
Produced by the JSE SENS Department
