| Thu 15 Mar 2001, 0:00 | | Contlan Restructuring |
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CONTLAN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/006957/06)
("Contlan" or "the Company")
Announcement by Contlan
SAOS
SUID-AFRIKAANSE ONTWIKKELINGSTIGTING
EDUTECH HOLDINGS
Announcement by Contlan regarding:
* The disposal of its Project Services division
* The acquisition of Financial Services of South Africa (Pty) Ltd
* The acquisition of E-ducation Internet Portal (Pty) Ltd
* The acquisition of Edutech Curriculum Services (Pty) Ltd
* A change in control
DEFINITIONS
"Brampton York" Brampton York Software Technologies (Proprietary) Limited
"Contlan" Contlan Holdings Limited
"Creation" Creation Software (Pty) Ltd, holder of 40 million shares in
Contlan, representing a 56,3% interest
"ECS" Edutech Curriculum Services (Pty) Ltd, which is 100%
owned by Edutech
"Edutech" Swanvest 165 (Pty) Ltd, trading as Nova Education and
Technology Holdings, which is owned
50% by SAOS and 50% by WLLP
"Edutech assets" ECS and EIP
"EIP" E-ducation Internet Portal (Pty) Ltd, which is 100%
owned by Edutech
"Finsa" Financial Services of South Africa (Pty) Ltd,
which is 100% owned by SAOS
"Monarch" Monarch Project Services (Pty) Ltd, holder of
9 million shares in Contlan, representing a 12,7% interest
"SAOS" South African Development Foundation
"WLLP" Whistler Lambda Limited Partners
1. INTRODUCTION
Further to the cautionary announcement dated 8 February 2001, Whistler Lambda
Sponsor Services (Pty) Ltd is authorised to announce that Contlan, Brampton
York, SAOS, Edutech, Creation and Monarch have entered into agreements in terms
of which:
* Brampton York will acquire Contlan's Project Services division as a going
concern; and
* Edutech will acquire all of the Contlan shares held by Creation and Monarch,
subject to:
- Contlan acquiring Finsa from SAOS for the issue of new Contlan shares; and
- Contlan acquiring as a going concern the Edutech assets for the issue of new
Contlan shares.
The transactions as contemplated will result in a change in control whereby
SAOS will become the controlling shareholder of Contlan.
2. DISPOSAL OF THE PROJECT SERVICES DIVISION
2.1 Nature of the business
The Project Services division focuses on project management and development
services to the investment industry. This division was founded when Contlan
acquired the Monarch operations during September 1999.
2.2 Rationale for the disposal
The Project Services division has been severely hampered by the lack of working
capital since the acquisition of Monarch. During 2000 Contlan sold its
Infrastructure Services division in an attempt to re-capitalise the Project
Services division, which was communicated to shareholders in a circular dated
31 October 2000. The lack of critical mass, coupled with the intrinsic cost of
maintaining a listing, rendered this action unsuccessful. The board of
directors therefore resolved to sell the division to the operational
management, subject to shareholders approval.
2.3 Purchase consideration
Brampton York, a company established by the management of the Project Services
division to affect the management buy-out, will acquire the Project Services
division as a going concern in exchange for 2,1 million shares that management
holds in Contlan. The shares will be transferred to the share incentive trust
upon the transaction becoming unconditional and the loan to the share incentive
trust will be adjusted accordingly.
2.4 Declaration of interest
Mr. Stuart Mackereth, who is an executive director of Contlan, is a significant
shareholder of Brampton York and has therefore been instrumental in structuring
the management buy-out. Mr. Mackereth has informed the board of a conflict of
interest on his part and has not attended any board meetings where the Brampton
York transaction had to be decided upon. Mr. Mackereth will also withhold any
recommendation to the shareholders of Contlan regarding the Brampton York
transaction.
2.5 Conditions precedent
The disposal of the Project Services division is subject to, inter alia, the
following conditions precedent:
* the approval of all relevant regulatory authorities, including the JSE
Securities Exchange South Africa ("the JSE"), The Securities Regulation Panel
("the SRP") and Competition Commission, to the extent necessary;
* the signing of a share sale agreement between the management and the Share
Incentive Trust; and
* the passing of a special resolution by shareholders of Contlan in general
meeting. Monarch, Creation and the Share Incentive Trust, representing 73% of
Contlan's shareholders, have already given their irrevocable undertakings to
vote in favour of the disposal.
3. ACQUISITION BY SAOS AND WLLP OF A CONTROLLING INTEREST IN CONTLAN
3.1 Introduction
SAOS is an organisation that represents a significant segment of the South
African education market. Over the years SAOS has established a number of
commercial operations, some of them in partnership with WLLP, to the benefit of
the broader education community. The level of its activities has now reached a
point where it is of strategic value to consolidate its commercial interests
into a publicly traded vehicle.
3.2 The transaction
SAOS and WLLP, through their joint investment company, Edutech, have entered
into agreements with Monarch and Creation, the current controlling shareholders
of Contlan, whereby Edutech will acquire all Monarch and Creation's Contlan
shares for a cash consideration of 1,5 cents per share, subject to, inter alia,
the following conditions precedent:
* the Brampton York transaction becoming unconditional;
* the acquisition of Finsa becoming unconditional;
* the acquisition of the Edutech assets becoming unconditional;
* all relevant regulatory authorities, including the JSE and SRP, give their
approval to the extent necessary; and
* the approval of all the acquisitions by the shareholders of Contlan in
general meeting. Creation and Monarch have given their irrevocable undertaking
to vote in favour of all decisions required to affect the acquisitions.
The shareholding structure of Contlan, after the implementation of all the
transactions, will be as follows:
GRAPHIC: SEE PRESS FOR DETAIL
4. ACQUISITION OF FINSA, ECS AND EIP
4.1 Introduction
Contlan has entered into agreements with SAOS and Edutech to acquire all the
shares and shareholder claims of Finsa from SAOS and all the shares and
shareholder claims of ECS and EIP from Edutech. The full purchase consideration
will be settled by the issue of new Contlan shares to SAOS and Edutech as set
out below.
4.2 Nature of the business
4.2.1 Finsa
Finsa is a term lending operation that extends loan finance to the SAOS
constituency. Finsa is primarily involved in the following financing activities
* asset backed finance;
* personal loans; and
* computer centres at schools.
4.2.2 ECS
ECS is a dedicated provider of curriculum services that will focus, in
co-operation with specialised entities, on:
* the provision of telephonic and online advisory and aid services to parents
and students regarding the latest curriculum developments in relation to
Curriculum 2005 within a dedicated call centre;
* the writing and publishing of school textbooks, teacher manuals and school
management manuals. It also entails the provision of specialised consultancy
services in relation to Curriculum 2005; and
* the provision of IT training courses for teachers and school principals.
4.2.3 EIP
EIP is an Internet based procurement platform aimed at the facilitation of both
core and non-core spend of South African schools. The platform is in an
advanced stage of development, with the pilot site going live on 1 May 2001.
4.3 Rationale for the acquisition
The acquisitions allow Contlan to expand its operations into the financial
services and education sectors, which are both considered to be long-term
growth industries with significant profit potential.
4.4 Purchase consideration
The full purchase consideration will be settled by the issue of new Contlan
shares at 18,121 cents per share, on the following basis:
* in respect of Finsa, a total consideration of R25 million, amounting to 137
963 000 new Contlan shares to be issued to SAOS; and
* in respect of the Edutech assets, a total consideration of R2 million,
amounting to 11 037 000 new Contlan shares to be issued to Edutech.
4.5 Suspensive conditions
The acquisitions are in their entirety subject to, inter alia, the following
conditions precedent:
* approval by the shareholders of Contlan in general meeting. Creation and
Monarch have given their irrevocable undertaking to vote in favour of all
decisions required to affect the acquisitions;
* all regulatory relevant authorities, including the JSE and SRP, give their
approval to the extent necessary;
* the JSE allowing the listing to continue following the reverse take-over;
* approval by the SAOS board; and
* approval by Edutech shareholders.
5. FINANCIAL EFFECTS
The table below illustrates the effects of the transactions (as per paragraph
3.2 above) on the earnings per share, net asset value and net tangible asset
value per share:
%
Pro forma Pro forma Increase
Before After (Decrease)
Shares in issue 71 000 000 220 000 000 209,9
Earnings/(loss) per share (cents) (1,93) 0,68 n/a
Net asset value per share (cents) 14,15 9,09 (35,8)
Tangible NAV per share (cents) 3,93 9,09 131,3
The financial effects have been calculated based on the following numbers and
assumptions:
"Before" column:
* the interim results of Contlan for the six month period ended 31 August 2000;
and
* the net asset value of Contlan as reported in the interim results.
"After" column:
* earnings per share has been calculated by combining the "before"-column with
the 6 month earnings of Finsa for the period ended 31 August 2000;
* the unaudited tangible NAV of Finsa and the Edutech assets as at 31 August
2000 has been used for all NAV calculations; and
* an average tax rate of 30% has been used.
6. BOARD OF DIRECTORS
6.1 Declaration of interest
Mr. Casper van Wyk, who is currently serving as the non-executive chairman of
Contlan, is a principal in WLLP and is also serving as a director of Edutech
and therefore has a monetary interest in the transactions as contemplated. Mr.
van Wyk disclosed his interest to the Contlan board and to the controlling
shareholders of Contlan when negotiations with SAOS commenced. Mr. van Wyk has
subsequently not attended any board meetings where these transactions were
decided on and has not offered any opinion unless specifically asked to do so.
6.2 Re-constitution of the board of Contlan
SAOS intends to, in the event that all transactions become unconditional,
re-constitute the Contlan board as follows:
Name Current position Designation
Mr. C J Booyens President of SAOS Chairman of the Board
Mr. J C Klopper Executive member of SAOS Chief Executive Officer
Dr E H Davies Executive member of SAOS Executive Director
Mr. C J H van Wyk Principal of WLLP and
non-executive chairman of Contlan Executive Director
Mr. J F Steyn Founding member of SAOS Non-executive Director
Prof M J van Staden Vice president of SAOS Non-executive Director
Mr. L M Maree Principal of WLLP Non-executive Director
Mr. A Lianos Principal of WLLP Non-executive Director
7. CHANGE OF NAME AND TRANSFER OF LISTING TO THE DEVELOPMENT CAPITAL MARKET
It is the intention of SAOS to propose that Contlan's name be changed to Nova
Education and Technology Holdings Limited and to apply to the JSE for the
transfer of Contlan's listing from the Venture Capital sector to the
Development Capital Market sector.
8. OFFER TO MINORITY SHAREHOLDERS
The acquisition of a controlling interest as contemplated in paragraph 3 above
will trigger a mandatory offer to minorities at 1,5 cents per share in terms of
the SRP rules. Edutech has stated its intention to proceed with the offer to
minorities and has undertaken to give adequate security to the SRP for the full
amount of the value of the shares held by minority shareholders before the
offer is made.
9. CIRCULAR TO SHAREHOLDERS
A circular to shareholders convening a special general meeting to vote on the
transactions will be posted within 28 days. The circular will contain the
following information:
* details of the disposal of the Project Services division to Brampton York;
* the acquisition of Finsa from SAOS;
* the acquisition of ECS and EIP from Edutech;
* the offer to minority shareholders; and
* the pre-listing statement of Nova Education and Technology Holdings Limited.
Johannesburg
15 March 2001
Corporate adviser
Whistler * Lambda
Corporate Finance (Pty) Ltd.
Registration number 98/07877/07
Sponsor
Whistler * Lambda Sponsor Services (Pty) Ltd
Registration number 2000/025913/07
Attorneys
Maree - Theunissen Attorneys
