| Mon 13 Mar 2006, 8:00 | | Control Instruments - Acquisition Of Tripmaster |
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CNL
CNL
Control Instruments - Acquisition Of Tripmaster, USA And Further Cautionary
CONTROL INSTRUMENTS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1964/003987/06)
Share code: CNL & ISIN: ZAE000001665
("Control Instruments" or "the Company")
ACQUISITION OF TRIPMASTER, USA AND FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Further to the cautionary announcement dated 18 November 2005, subsequent
cautionary renewal announcements dated, 3 January 2006 and 14 February 2006 and
the further cautionary announcement dated 24 February 2006, Investec Bank
Limited is authorised to announce that agreement was reached between Control
Instruments and Richard M. Geib ("RMG"), whereby Control Instruments has
acquired 51% of the shares in Tripmaster Corporation ("Tripmaster") for US$3.5
million. The purchase agreement includes put and call options in respect of the
remaining shares over a three year period (from December 2006 to December 2008).
NATURE OF BUSINESS OF TRIPMASTER
Tripmaster is based in Dallas Fort Worth, Texas. It is a leading supplier of
high-end onboard computers to the North American trucking market. Tripmaster is
a very well recognised brand in its market segment in North America and
worldwide.
For the year ended 31 December 2004, Tripmaster"s audited turnover was US$8.7
million and profit after tax US$223 524.
RATIONALE FOR THE ACQUISITION
Tripmaster is an established, profitable and successful business in the North
American fleet management market with an experienced management team and
excellent brand equity in the North American market. Tripmaster also has
patented technology in respect of state line crossing calculations that will be
incorporated into the Control Instruments Fleet Management products and which
will add significant value to Control Instruments" Bureau Service offerings.
Control Instruments designs, manufactures and owns the Intellectual Property
("IP") for the Fleet Manager ("FM") range onboard computers ("OBCs") that have
been sold outside the USA under the Siemens VDO FM brand for nearly ten years.
It is Control Instruments" and Tripmaster"s intention to sell the FM range of
OBCs under the Tripmaster brand in North America. The FM range of OBCs fills a
market segment that is not occupied by Tripmaster and it is therefore
complementary to Tripmaster"s products.
In addition, Control Instruments" ASP (Application Service Provider) products
and internet based Bureau Service will be added to the Tripmaster product range
in the second half of 2006.
The acquisition of Tripmaster creates strategic opportunities for Control
Instruments in the largest fleet management market in the world and should, if
successfully implemented, enable Control Instruments to grow its Fleet
Management and Bureau Service businesses rapidly.
At the outset, Control Instruments and Tripmaster have a combined installed user
base of 250 000 onboard computers and telematics units in over 40 countries.
SALIENT TERMS OF THE ACQUISITION
* The purchase consideration
Initial 51% of the shares in Tripmaster
The purchase consideration of US$3.5 million will be settled by the payment in
cash against delivery to Control Instruments of 51% of the shares in Tripmaster.
Remaining 49% of the shares in Tripmaster
The balance of the purchase consideration will be based on the percentage
variance of the actual EBITDA to a target EBITDA for the years 2006, 2007 and
2008. The minimum amount payable in terms of this formula will be US$1.5 million
and the maximum amount US$10 million.
* Financing the acquisition
Control Instruments will pay cash for both the initial 51% of the shares in
Tripmaster and the remaining 49%.
* Warranties and indemnities
Warranties and indemnities normal in transactions of this nature have been
provided by Tripmaster and RMG.
* The effective date
The acquisition of 51% of the shares in Tripmaster was effective from 1 January
2006.
UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
Unaudited pro forma financial effects of the acquisition of 51% of the shares in
Tripmaster were prepared for the six months ended 30 June 2005 based on Control
Instruments" and Tripmaster"s unaudited results for the six months ended 30 June
2005.
The unaudited pro forma financial effects have been disclosed in terms of the
JSE Limited ("JSE") Listings Requirements and because of their nature may not
fairly present Control Instruments" financial position, changes in equity,
results of operations or cash flows. The unaudited pro forma financial effects
are the responsibility of the directors of Control Instruments and are provided
for illustrative purposes only.
In terms of sections 9.15 (d) and (e) of the JSE Listings Requirements, the
acquisition has no significant effect on the earnings per share, headline
earnings per share or net asset value per share of Control Instruments.
The acquisition results in a decrease of 22.4% in tangible net asset value per
share, from 105.2 cents per share before the acquisition to 81.6 cents per share
after the acquisition, as a result of the goodwill paid. See notes (i) to (iii)
below.
The tangible net asset value per share before the acquisition, is based on the
unaudited balance sheet of Control Instruments at 30 June 2005 and 66 599 758
shares in issue.
The tangible net asset value per share after the acquisition is based on the
combined unaudited balance sheets of Control Instruments and Tripmaster at 30
June 2005; 66 599 758 shares in issue; and the assumptions that the acquisition
became effective on 30 June 2005 and the purchase consideration was paid on 30
June 2005 at a closing US dollar rate of exchange of 6.77.
The difference between the purchase consideration and the net asset value has
provisionally been treated as goodwill and not amortised. Post completion of the
acquisition, Control Instruments will analyse the difference further into
identifiable assets and goodwill as required by IFRS 3: Business Combinations.
CONDITIONS PRECEDENT TO THE ACQUISITION
The acquisition was subject to the approval from the South African Reserve Bank
and this was received on 9 March 2006. Accordingly, the transaction is now
unconditional.
CATEGORISATION OF THE ACQUISITION
The acquisition has been categorised as a category 3 transaction in terms of
section 9.5(b) of the JSE Listings Requirements.
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the further cautionary announcement dated 24
February 2006 and are advised that negotiations are still taking place which, if
successfully concluded, may have a material effect on the price of Control
Instruments" securities. Accordingly, shareholders are advised to continue
exercising caution when dealing in the Company"s securities until a further
announcement is made.
Cape Town
10 March 2006
Sponsor: INVESTEC BANK
Attorneys: JAN S DE VILLIERS
Date: 13/03/2006 08:00:21 AM Produced by the JSE SENS Department
