| Tue 6 Jun 2006, 11:40 | | Sethold - Acceleration of deferred payments for fo |
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STO
STO
Sethold - Acceleration of deferred payments for four
separate acquisitions
SET POINT TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/014334/06)
Share code: STO
ISIN: ZAE000013629
("Sethold" or "the company")
ACCELERATION OF DEFERRED PAYMENTS FOR FOUR SEPARATE ACQUISITIONS,
PREVIOUSLY ANNOUNCED TO SHAREHOLDERS
1. Background
Following previous circulars and announcements regarding the
acquisitions made by Set Point Technology Holdings Limited
("Sethold") and its wholly owned subsidiary Set Point Industrial
Technology (Pty) Ltd ("SIT") of the businesses of Seran Engineering
and Supplies ("Seran"), Fixtrade 1092 CC ("Fixtrade"), Northwest
Gopro CC ("Gopro") and Vikori Trading CC ("Vikori"), details
regarding accelerated payments to be made in respect of each of the
four separate acquisitions are detailed below.
2. Seran - Terms of the agreement
Sethold and SIT have recently reached agreement with the seller of
Seran to pay a further R4.5 million in full and final settlement of
all amounts outstanding for this acquisition. This amount will be
paid to the seller by the issue by Sethold of 5 million ordinary
shares at 90 cents each cum dividend (the price ruling at the date
agreement was reached).
In terms of clause 7.3.6 of the acquisition agreement, which was
available for inspection by shareholders, Sethold was entitled to
prepay part of the acquisition consideration before the completion
of the Calculation Period, which runs from 1 September 2005 to 31
August 2008, In addition, clause 7.3.3 allows for part of the
purchase consideration to be settled in shares.
The target issue date of the shares is 15 June 2006, with these
shares not being subject to any claw back conditions.
The 30 million Sethold shares issued to the sellers on 16 January
2006 remain subject to the original claw back conditions.
3. Fixtrade and Gopro - Terms of the agreement
Sethold and SIT have recently reached agreement with the sellers of
Fixtrade and Gopro to pay R8.5 million each in full and final
settlement of all amounts outstanding for these acquisitions. This
amount will be paid to the sellers by the issue by Sethold of 9.45
million ordinary shares at 90 cents each cum dividend ie. a total
of 18.9 million shares at 90 cents.
The Parties have now agreed to pay the Purchase Price at an earlier
date than the date provided for in clause 6.2 of the Sale of
Business Agreements (prior to the amendment envisaged by these
Addendums). As a quid pro quo for early payment the vendors will
accept a price earnings ratio based on multiples of PAT reduced
from 3 to 2.5.
The target issue date of these shares is 15 June 2006 and these
shares may not be sold or otherwise alienated until 30 November
2008 as Sethold retains a claw back should the profits be
insufficient to support the value of the shares issued.
4. Vikori - Terms of the agreement
Sethold and SIT have recently reached agreement with the seller of
Vikori to pay R3.6 million, being approximately 25% (twenty-five
percent) of the estimated purchase consideration, through the issue
of 4 million Sethold shares at 90c cum dividend as an early payment
of the estimated total purchase consideration.
This is in accordance with and subject to the terms of Clause 6.3
of the acquisition agreement.
The purchase price is based on a multiple of future earnings of
Vikori. The purchase consideration is an amount equal to the
average profit after tax over three annualised periods from 1 March
2006 to 31 August 2008, multiplied by three. The first period from
1 March 2006 to 31 August 2006 will be annualised.
Vikori have undertaken, not to sell, alienate or in any manner
trade in the Sethold Shares prior to 31 August 2008.
5. Unaudited pro forma balance sheet as at 2 March 2006 as a
result of the transactions outlined in 2 - 4 above.
The unaudited pro forma balance sheet prepared as at 2 March 2006
is the responsibility of the directors and it has not been reviewed
nor reported upon by the company"s auditors. The income statement
has not been shown below as the director"s believe the financial
effects of the above-mentioned transactions on the income statement
would not be significant.
The financial effects of the above-mentioned transactions on the
balance sheet of Sethold, are shown in the table below.
Before After Movement
R000 R000 R000
Assets
Non-current assets 157 030 142 012 (15 018)
Property, plant and 27 621 27 621 -
equipment
Goodwill and intangibles 122 099 107 081 (15 018)
Deferred taxation 7 310 7 310 -
Current assets 124 470 124 470 -
Inventories 50 385 50 385 -
Receivables 74 269 74 269 -
Cash and cash (184) (184) -
equivalents
Total assets 281 500 266 482 (15 018)
Equity and liabilities
Total equity 117 735 142 845 25 110
Share capital and 117 110 142 220 25 110
reserves
Minority interests 625 625 -
Non-current interest 66 381 26 253 (40 128)
bearing liabilities
Contingent purchase 55 999 15 871 (40 128)
consideration
Interest bearing 10 382 10 382 -
liabilities
Current liabilities 97 384 97 384 -
6. Rationale for the transactions
The above transactions will serve to further strengthen Sethold"s
balance sheet and to further improve the Company"s debt equity
ratio. The debt equity ratio of Sethold improves from 85% to 42%
including the contingent purchase consideration, and from 37% to
31% excluding the contingent purchase consideration.
The prepayments will remove the uncertainty relating to the
remaining deferred purchase consideration for the Seran, Fixtrade
and Gopro acquisitions, and some uncertainty relating to the Vikori
acquisition.
The seller of Vikori, by sharing in the future upside or downside
of the Sethold share price, will be further motivated to grow the
Vikori business for the benefit of shareholders.
Early repayment now, based on the reduced multiples of PAT,
substantially further improves Sethold"s position by reducing the
overall purchase price to the Company.
Johannesburg
6 June 2006
Lead sponsor Sponsor
KPMG Services (Pty) Limited Investec Bank
Auditors and reporting accountants
KPMG Inc
Date: 06/06/2006 11:40:17 AM Produced by the JSE SENS Department
