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DTP
DTP
DataPro - Acquisition of the shares and claims in Definity Telecommunications
(Pty) Ltd and withdrawal of cautionary announcement
Datapro Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/016433/06)
Share code: DTP ISIN: ZAE000058061
("DataPro" or "the company")
ACQUISITION OF THE SHARES AND CLAIMS IN DEFINITY TELECOMMUNICATIONS
(PROPRIETARY) LIMITED ("Definity") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
In terms of an agreement dated 07 April 2006, the directors are pleased to
announce the acquisition of 100% of the shares in, and loan account claims
against, Definity, ("the acquisition") from Daniel Leonard Edmiston (47%)
and Wayne Brandon Gordon (53%) ("the Vendors").
The acquisition was subsequently approved by the board of directors of
DataPro following completion of a due diligence process and will be
effective from 01 March 2006, subject to the remaining conditions precedent
as set out in paragraph 4 below.
2. Rationale for acquisition
DataPro is one of the largest growing, independent, telecommunications
companies in South Africa, providing mainstream Voice, Internet and Least
Cost Routing ("LCR") services to both consumers and corporate companies.
The company has been preparing for the advent of de-regulation in the
telecommunications industry for several years, especially with regard to
Voice over Internet Protocol ("VoIP") and LCR (collectively, "Voice").
Deregulation has, to a large extent, spurred recent market consolidation in
both the Data and Voice arenas as the opportunities for, and value of,
alternative telecommunication providers becomes increasingly evident.
DataPro has consistently set out to build and acquire critical mass in the
fragmented Internet Service Provider ("ISP") and Voice sectors. DataPro
has combined its Voice business into a separate brand called VoxTelecom.
DataPro is a significant player in the consolidation of the ISP and Voice
industry and has advanced its growth through strategic acquisitions in the
last 2 years. DataPro"s Voice acquisition strategy is driven both by an
effort to gain critical mass and to entrench its entry into complementary
market segments such as Consumer ISP and LCR.
Definity is a leading LCR business that supplies telephony services to
predominantly medium to large corporations in South Africa. The
acquisition is strategically important for DataPro as it provides the
company with a high-quality annuity customer base complementary to that of
VoxTelecom.
The Definity acquisition is expected to add approximately R9 million per
month to DataPro"s existing monthly annuity book. Accordingly, DataPro
considers itself well positioned to be amongst the leaders in the South
African ISP and alternative Voice markets.
3. Payment of purchase consideration and potential adjustment to the
acquisition price.
The purchase price for the acquisition is R70 million ("the purchase
consideration"), which is to be settled as follows:
- 50% in cash, to be raised by the issue of renounceable letters of
allocation on the transaction closing date, being a date not later
than 30 June 2006, which entitle the holders to subscribe for ordinary
shares in DataPro ("the vendor consideration shares") at the
subscription price stipulated therein, ranking pari passu in all
respects with DataPro"s existing issued ordinary shares, in a quantity
sufficient to enable payment to the Vendors the sum of R35 million in
cash, and the Vendors undertaking to renounce the relevant letters of
allocation in favour of the subscribers nominated by DataPro; and
- R35 million through the issue to the Vendors of 63 170 572 ordinary
shares at a price of 55.41 cents per share ("the retained vendor
consideration shares"), calculated by using the 60 day volume weighted
average price of DataPro shares traded on the JSE Limited ("JSE"),
30 days either side of the effective date, being 01 March 2006.
On the closing date of the acquisition, DataPro shall pay the sum of R35
million received pursuant to the subscription for the vendor consideration
shares, less R 7 million which shall be paid to a nominated escrow agent to
be retained as security for any claims of DataPro against the Vendors that
may arise from the breach of Definity"s warranties in terms of the
agreement, particularly with regard to the balance sheet of Definity. The
Vendors have not warranted profits in terms of the agreement.
4. Conditions precedent
The acquisition of Definity is subject to the approval of the Competition
Commission and, subject to this approval, by not later than 21 June 2006,
DataPro shall have obtained unconditional and irrevocable undertakings from
third parties to purchase such number of vendor consideration shares, in
accordance with the Listings Requirements of JSE Limited, as is sufficient
to enable DataPro on the Closing Date to discharge payment to the Vendors
in the sum of R35 million.
5. Call option and retained vendor consideration share sale restriction.
The Vendors have irrevocably granted to DataPro an American call option,
which, subject to any applicable JSE Listings Requirements, entitles the
company, at any time during the period commencing on the Closing Date and
ending 18 months thereafter, to purchase the retained vendor consideration
shares in whole or in part. The purchase price of the shares will be
calculated at the volume weighted average traded price of DataPro"s
ordinary shares on the JSE over the period of 30 business days prior to the
exercise date and the 30 business days after the exercise date. During the
period of the call option, the Vendors shall not be entitled to dispose of,
encumber, pledge, sell, grant options or liens over, or, in any manner
transfer the Retained Vendor Consideration Shares other than as
contemplated in the Agreement.
6. Financial effects
The table below sets out the pro-forma financial effects of the acquisition
and the issue of shares on the reviewed, published interim financial
results of DataPro for the six months ended 28 February 2006. The
financial information, which is the responsibility of the directors, has
been prepared for illustrative purposes only and does not necessarily
fairly present the company"s financial position and operational results.
Fully diluted information Reviewed Pro Forma % Change
28 February after
2006 acquisition
"Before"(1) "After"
Earnings per share (cents) (6) 1.5 1.6 8.1%
Headline earnings per share 1.2 1.4 20.3%
(cents) (6)
Net asset value per share 32.2 37.0 22.8%
(cents) (5)
Net tangible asset value per 0.06 2.3 4180.0%
share (cents) (5)
Weighted average number of 306 371 445 152 45.3%
shares in issue (`000)
Shares in issue at period end 335 164 462 437 38.0%
(`000)
Notes:
1. The `before" financial information is based on fully diluted
information as detailed in the published interim results for the six
months ended 28 February 2006.
2. The accounting policies of Definity have been amended so as to comply
with those utilised by the DataPro group. Certain items of fixed
assets that were expensed by Definity have been capitalised and
depreciated according to the accounting policies of the DataPro group,
resulting in a reduction to depreciation of R111 000. In addition,
certain items previously expensed have been treated as being debited
to shareholder"s loans in the amount of R683 000, after taking into
account the effects of taxation. Taxation has been assumed at a
notional rate of 29% on estimated taxable income.
3. The historical balance sheet and income statement figures of Definity
have been extracted from the management accounts for the period ended
28 February 2006, adjusted for matters referred to in note 2 above.
4. A charge of R110 000 has been assumed for amortisation of intangible
assets acquired in accordance with DataPro group"s accounting
policies.
5. The net asset value per share and net tangible asset value per share
have been calculated on the assumption that:
a. The transaction was effected on 28 February 2006;
b. The total capital amount of R70 million was raised at that date
through the issue of a maximum of 127 272 727 new ordinary shares
being issued at a price of 55 cents per share;
c. Goodwill and other intangibles amounting to approximately R59
million arises on the acquisition.
6. The earnings per share and headline earnings per share in the "Pro-
forma after the acquisition" column were calculated on the assumption
that the acquisition took place with effect from 01 September 2005;
7. Vendor Placement
The placing of the vendor consideration shares will be done in accordance
with JSE Listings Requirements and is expected to be finalised by
31 May 2006.
8. Withdrawal of cautionary
Following the publication of this announcement, the cautionary announcement
has been withdrawn and shareholders need no longer exercise caution when
dealing in the company"s securities on the JSE.
In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on AltX and that the JSE does not
guarantee the viability or the success of a company listed on AltX. In terms of
JSE Listings Requirements a Designated Advisor has to be retained by the
company. The Designated Advisor is required to, inter alia, attend all board
meetings held by the company to ensure that all JSE 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 Advisor it must make arrangement to
appoint a new Designated Advisor within 10 business days, failing which the
company faces suspension of trading of its securities. If a Designated Advisor
is not appointed within 30 days of its suspension the company faces the
termination of its listing without an offer to minorities.
Johannesburg
16 May 2006
Designated Advisor Corporate Advisor
Arcay Corporate Services Metier Advisory (Proprietary)
Limited
Date: 16/05/2006 04:45:58 PM Produced by the JSE SENS Department
