| Thu 9 Feb 2006, 16:11 | | Sekunjalo - Acquisition |
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SKJ
SKJ
Sekunjalo - Acquisition, Disposal and the Renewal of Cautionary Announcement
Sekunjalo Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/006093/06)
Share code: SKJ & ISIN: ZAE000017893
("Sekunjalo" or "the company")
ANNOUNCEMENT REGARDING THE ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL OF
FIOS (PROPRIETARY) LIMITED ("FIOS"), THE DISPOSAL OF CERTAIN PREMIER FISHING SA
(PROPRIETARY) LIMITED ("PREMIER FISHING") CONSUMER BRANDS, AND THE RENEWAL OF
CAUTIONARY ANNOUNCEMENT
ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL OF FIOS
Introduction
Sekunjalo, through its wholly owned subsidiary Sekunjalo Informatics and
Telecommunications Africa (Proprietary) Limited ("Sekunjalo Informatics") has
entered into an agreement, dated 31 January 2006 ("the agreement"), with Messrs
J van Jaarsveld, B McCreedy, R Gydien and K Simon ("the vendors") to acquire
100% of the issued share capital of FIOS ("the FIOS acquisition").
The FIOS acquisition will be effected in three tranches. 51% of FIOS" issued
share capital will be acquired with effect from 1 September 2005 ("the first
tranche"), while 25% of FIOS" issued share capital will be acquired with effect
from 1 September 2006 ("the second tranche") and 24% of FIOS" issued share
capital will be acquired with effect from 1 September 2007 ("the third
tranche").
Nature of business of FIOS
FIOS concentrates on the deployment and support of Financial Performance
Management ("FPM") systems in both the public and private sectors. FIOS is a
value added reseller of the Cognos Office system of finance solutions focussing
on an integrated state-of-the-art solution for planning, budgeting, forecasting,
modelling, consolidating and financial reporting.
Rationale for the FIOS acquisition
Sekunjalo, via its wholly owned subsidiary Sekunjalo Informatics, is in the
process of establishing an informatics division providing products and services
to niche markets, therefore remaining at the cutting edge of the informatics
sector.
Sekunjalo positions itself in niche areas where it has the ability to be a
market leader in its chosen sectors.
Via the acquisition of Synergy Computing and now FIOS, Sekunjalo has become the
clear leader and distributor in Africa, of the products and services of the
NASDAQ-listed, and global leader in the business intelligence field, Cognos.
Consideration for the FIOS acquisition
The first tranche consideration is R5.3 million ("the first tranche
consideration") and is to be settled on or about 8 February 2006. Sekunjalo will
place shares ("the placing shares") on behalf of the vendors at a discount of up
to 10% to the 30-traded day volume weighted average price ("VWAP") of Sekunjalo
immediately preceding the date of the agreement. The placing shares will be
issued as soon as practicable.
The second tranche consideration is to be determined by applying a multiple of 5
to FIOS" earnings before interest, tax, depreciation and amortisation ("EBITDA")
for the period 1 September 2005 to 31 August 2006, and then 25% thereof will be
the second tranche consideration. The second tranche consideration will however
not exceed R8 million and will be settled in cash or through the issue of
Sekunjalo shares, at the election of Sekunjalo Informatics.
The third tranche consideration is to be determined by applying a multiple of 5
to FIOS" EBITDA for the period 1 September 2006 to 31 August 2007, and then 24%
thereof will be the third tranche consideration. The third tranche consideration
will not exceed an amount which when added to the first and second tranche
considerations would exceed R17.3 million and will be settled in cash or through
the issue of Sekunjalo shares, at the election of Sekunjalo Informatics.
The first, second and third tranche considerations will collectively not exceed
R17.3 million. In the event that Sekunjalo Informatics elects that the second
tranche and/or third tranche considerations be settled in shares, the number of
consideration shares to be issued, will not exceed 20% of the shares in issue in
Sekunjalo as at 31 January 2006. The number of consideration shares to be issued
will be based on Sekunjalo"s VWAP preceding the effective date of the sale of
the second tranche and the sale of the third tranche respectively. If the number
of Sekunjalo shares is limited to a number less than 20% of the shares in issue
in Sekunjalo at 31 Janaury 2006, then the balance of the second tranche
consideration and/or third tranche consideration shall be settled in cash.
Financial effects of the FIOS acquisition
The unaudited pro forma financial effects of the FIOS acquisition (being the
first, second and third tranches) on Sekunjalo"s earnings, headline earnings,
net asset value ("NAV") and tangible NAV per ordinary share are set out below.
The unaudited pro forma financial information has been prepared for illustrative
purposes only and because of its of nature may not give a true picture of
Sekunjalo"s financial position and results of operations. The preparation of the
pro forma financial effects is the responsibility of Sekunjalo"s directors.
Per Sekunjalo Before the After the Percentage After the Percentage
ordinary share FIOS FIOS change FIOS change
(cents) acquisition acquisition % acquisition %
(1) (the second (the second
and third and third
tranches tranches
are settled are settled
in cash) in shares)
(2)(3) (3)(4)
Earnings 14.69 15.14 3.06 14.21 (3.26)
Headline 4.76 5.49 15.33 5.16 8.40
earnings
NAV for the 57.50 57.83(5) 0.57 58.51(5) 1.75
group
(consolidated)
Tangible NAV 37.11 32.74(5) (11.77) 34.81(5) (6.19)
for the group
(consolidated)
NAV for the 291.00 285.37 (1.93) 273.40 (6.04)
company
Sekunjalo
Investments
Limited
Shares in 283 840 291 412 308 554
issue at 31
August 2005
("000)
Weighted 255 120 262 692 279 834
shares in
issue used for
calculating
earnings and
headline
earnings per
share ("000)
Notes:
Based on Sekunjalo"s audited earnings, headline earnings, NAV and tangible
NAV per ordinary share for the year ended 31 August 2005.
Based on the assumption that the FIOS acquisition was effected on 1
September 2004 for income statement purposes and 31 August 2005 for balance
sheet purposes and that the maximum considerations of R8 million for the
second tranche acquisition and R4 million for the third tranche acquisition
have been settled in cash.
On the assumption that all the tranches of the FIOS acquisition have taken
place, taking into account Sekunjalo"s 100% share of the income
attributable to FIOS based on FIOS" unaudited management accounts for the
year ended 28 February 2005.
Based on the assumption that the FIOS acquisition was effected on 1
September 2004 for income statement purposes and 31 August 2005 for balance
sheet purposes and that the maximum considerations of R8 million for the
second tranche acquisition and R4 million for the third tranche acquisition
have been settled in shares (using an assumed VWAP of 70 cents per
Sekunjalo share to determine the number of consideration shares).
After taking into account the goodwill arising on the FIOS acquisition.
The results for the six months ending 28 February 2006 will be prepared in
terms of International Financial Reporting Standards ("IFRS"). The impact
of any adjustments that may be made in adopting IFRS have not been taken
into account in calculating the above financial effects.
Conditions precedent of the FIOS acquisition and other conditions
There are no conditions precedent relating to the FIOS acquisition. Should the
vendors receive Sekunjalo shares in settlement of the second and third tranche
considerations, they have the option to swap such Sekunjalo shares for shares in
Sekunjalo Informatics should Sekunjalo Informatics list on the JSE Limited ("the
JSE") or AltX exchanges. The swap ratio shall be determined based on the VWAP of
the Sekunjalo shares in comparison to the initial listing price of the Sekunjalo
Informatics shares at the time of the exercising of the option. The option must
be exercised 30 days before Sekunjalo Informatics lists.
Categorisation of the FIOS acquisition
The FIOS acquisition is a Category 3 transaction in terms of the JSE Listings
Requirements.
THE DISPOSAL OF CERTAIN PREMIER FISHING CONSUMER BRANDS
Introduction
Shareholders are referred to the announcement to shareholders dated 4 July 2005
("the previous announcement") regarding the disposal of certain Premier Fishing
consumer brands ("the disposal"). Certain terms of the disposal have been under
review since 4 July 2005 and shareholders were advised of this in announcements
dated 10 August 2005, 21 September 2005, 2 November 2005 and 14 December 2005
("the cautionary announcements"). Following this, however, the terms of the
initial agreement dated 30 June 2005 have remained unchanged. The financial
effects of the disposal were not published in the previous announcement and are
set out below.
Financial effects of the disposal
The unaudited pro forma financial effects of the disposal on Sekunjalo"s
earnings, headline earnings, NAV and tangible NAV per ordinary share are set out
below. The unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature may not give a true picture
of Sekunjalo"s financial position and results of operations. The preparation of
the pro forma financial effects is the responsibility of Sekunjalo"s directors.
Per Sekunjalo ordinary Before the After the Percentage
share (cents) disposal(1) disposal(2) change
(4) %
Earnings 14.69 16.02 9.05
Headline earnings 4.76 6.09 27.94
NAV for the group 57.50 57.50 -
(consolidated)
Tangible NAV for the group 37.11 37.11 -
(consolidated)
NAV for the company 291.00 291.00 -
Sekunjalo Investments
Limited
Shares in issue at 31 283 840 283 840
August 2005 ("000)
Weighted shares in issue 255 120 255 120
used for calculating
earnings and headline
earnings per share ("000)
Notes:
Based on Sekunjalo"s audited earnings, headline earnings, NAV and tangible
NAV per ordinary share for the year ended 31 August 2005.
Based on the assumption that the disposal was effected on1 September 2004
for income statement purposes; and 31 August 2005 for balance sheet
purposes.
The earnings and headline earnings per ordinary share have been adjusted to
exclude the consolidated portion of income and expenses relating to the
business disposed of for the year ended 31 August 2005. An adjustment was
made to take into account a reduced interest expense as a result of R10
million of the total consideration being used to reduce Sekunjalo"s short
term borrowings. The reduced interest expense was arrived at by using 11%
being the average interest rate incurred by Sekunjalo on its long-term
borrowings for the year ended 31 August 2005. A further adjustment was made
to take into account after tax interest received on the remaining cash
consideration of R36 million at the 12-month deposit rate applicable on 1
September 2004.
The profit on sale arising of R34.4 million was accounted for in the
audited results for the year ended 31 August 2005.
The results for the six months ending 28 February 2006 will be prepared in
terms of International Financial Reporting Standards ("IFRS"). The impact
of any adjustments that may be made in adopting IFRS have not been taken
into account in calculating the above financial effects.
Documentation
The disposal is a Category 2 transaction in terms of the JSE Listings
Requirements. Further to this, a circular setting out details of the disposal
will be despatched to shareholders in due course.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the above information regarding the disposal Sekunjalo shareholders
are referred to the announcements dated 28 June 2005 and 4 July 2005 regarding
Sekunjalo"s subscription for 4 100 new ordinary shares in Bioclones
(Proprietary) Limited ("Bioclones") ("the first tranche subscription"), the
option granted to Sekunjalo to acquire a further 800 ordinary shares in
Bioclones ("the second tranche option") and the further acquisition by Sekunjalo
of 1 800 ordinary shares in Bioclones by no later than 15 July 2006, ("the third
tranche acquisition") (collectively "the acquisition"). Shareholders are advised
that certain terms regarding the acquisition are still being re-negotiated.
Shareholders will be advised in due course of any material changes to the terms
and conditions of the acquisition, the financial effects of the acquisition and
the expected time of the posting of a circular containing details of the
acquisition, if required ("the information"). Shareholders are therefore advised
to continue exercising caution when dealing in Sekunjalo"s securities until the
information is published.
Cape Town
9 February 2006
Sponsor
Nedbank Capital
Attorneys regarding the FIOS acquisition and disposal
Grant Gunston Incorporated
Reporting accountants and auditors
PKF
Date: 09/02/2006 04:11:12 PM Produced by the JSE SENS Department
