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CND
CND
Conduit - Acquisition Of A Stake In Anthony Richards & Associates (Proprietary)
Limited ("ARA") And Renewal Of Cautionary Announcement
Conduit Capital Limited
(formerly IMR Investments Limited)
Incorporated in the Republic of South Africa
(Registration number 1998/017351/06)
Share code: CND ISIN: ZAE000073128
("Conduit" or "the company")
ACQUISITION OF A STAKE IN ANTHONY RICHARDS & ASSOCIATES (PROPRIETARY) LIMITED
("ARA") AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
THE ACQUISITION
Shareholders are advised that Conduit has:
- concluded an agreement with Mindfield Investments (Proprietary) Limited
("Mindfield") to acquire a 40% stake in ARA, which conducts a credit
recovery and call centre services business, with effect from 1 November
2005;
- been granted an option ("the option") to acquire a further 10% stake in ARA
("the option shares") from the minority shareholders of ARA with effect
from 1 November 2005, which option must be exercised by 31 December 2006
and can only be exercised if at the time of exercise of the option at least
30% of the shares in Conduit are owned by black economic empowerment
("BEE") shareholders.
The shares in Mindfield are owned by Wayne Druian (80%) and Jason Druian (20%).
The JSE has confirmed that it is satisfied that the acquisition does not
constitute a related party transaction.
RATIONALE
ARA"s business is profitable, cash generative and well managed. In addition the
business and the acquisition complement certain of Conduit"s existing
investments and fit within its broader strategy. In this regard:
- the stake in ARA broadens Conduit"s interest in the insurance and risk
solutions financial services industry in which it is already invested
through its stake in Black Ginger 92 (Proprietary) Limited - a BEE company
which has a 27.5% interest in Constantia Insurance Company; and
- Conduit is in a position to partner ARA"s credit recovery expertise with
suitable emerging BEE participants in areas in which ARA is not already
involved. This process has already begun and Conduit has assisted ARA in
the formation of certain joint ventures with appropriate BEE parties.
Conduit is confident that it will unlock significant additional growth and
value in ARA to the benefit of Conduit shareholders.
PURCHASE CONSIDERATION
The purchase price payable to Mindfield for the acquisition comprises:
an initial price of R4 984 000; plus
a deferred price equivalent to 5.67 times the amount by which ARA"s profit after
tax for the 24 months ended 28 February 2007 exceeds R4 850 000 (subject to a
maximum deferred price of R6 010 200) and provided that if ARA"s profit after
tax for the 12 months ended 28 February 2007 is less than R2 200 000, the
deferred price will be nil.
Conduit will discharge the:
- initial price by paying R1 464 000 in cash and issuing 5 866 666 Conduit
shares at 60 cents per share;
- deferred price, if any, by paying 29.49% of the deferred price in cash and
issuing Conduit shares at 60 cents per share in respect of the balance.
The purchase price payable to the minority shareholders for the option shares is
equivalent to 25% of the purchase price payable in terms of the acquisition and
will be discharged in the same proportion of shares and cash as is applicable to
the acquisition, save that the cash portion of the initial price will include
interest at the call rate from 1 November 2005 until the date of payment.
CONDITIONS PRECEDENT
The acquisition is subject to the following conditions precedent:
- Conduit advising Mindfield in writing by 28 February 2006 that it is
satisfied with the results of a due diligence investigation of the business
of ARA;
- key employees of ARA concluding a written service and restraint agreement
with ARA on terms and conditions acceptable to Conduit by 28 February 2006.
FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
The financial effects of the transaction will be published in due course.
Shareholders are advised to continue exercising caution when dealing in the
company"s shares until a further announcement is made.
FURTHER DOCUMENTATION
The acquisition and option collectively constitute a category 2 transaction. A
circular containing more detail in relation to the transaction will be sent to
Conduit shareholders in due course.
Melrose Arch
16 January 2006
Corporate advisor and transaction sponsor
Java Capital (Proprietary) Limited
Sponsor
Merchant Sponsors (Proprietary) Limited
Date: 16/01/2006 05:49:56 PM Produced by the JSE SENS Department
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