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SQE
SQE
Square One - Acquisition Announcement
Square One Solutions Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/026822/06)
Share code: SQE & ISIN: ZAE000023768
("Square One" or "the company")
Acquisition of the business of NETIntellect as a going concern
1. Introduction
Shareholders are advised that the company has entered into an agreement dated
4 August 2006 with NETIntellect (Pty) Limited ("NETIntellect") and the five
individual shareholders of NETIntellect, Messrs John, Brown, Cronje, and
Rombouts Ramsey ("the sellers") for the purchase of NETIntellect"s business
("the business") as a going concern with effect from 1 January 2006 ("the
effective date"), ("the acquisition").
2. The acquisition consideration
Square One will acquire the business with effect from the effective date for a
maximum purchase consideration of R5 million ("the acquisition
consideration"). The acquisition consideration will be satisfied as follows:
* R1.5 million in cash payable to the sellers in four equal six-monthly
instalments over a two-year period ("the cash consideration"). The cash
consideration will be paid out of existing cash resources; and
* R3.5 million by the issue of 3 465 346 new Square One shares at 101 cents
per share, being the weighted average share price on the JSE Limited ("the
JSE") over the 30 days prior to the signature date, 4 August 2006 ("the share
consideration"). The share consideration is payable to the sellers on 31 July
2009 ("the expiry date") provided that NETIntellect and the sellers enter into
a consultancy agreement with Square One ("the consultancy"), the consultancy
continues for a continuous period up to the expiry date and the sellers
continuously render a service to NETIntellect in the course of its delivery
requirements in terms of the consultancy up to the expiry date. Within 30 days
of the signature date, Square One and the sellers will enter into an agreement
in terms of which NETIntellect and the sellers shall provide a range of
consultancy services to Square One relating to the business for a
predetermined management fee.
3. Rationale for the acquisition
Square One is a South African-based company offering a range of Information
Technology ("IT") solutions. NETIntellect is involved in the provision of IT
and related services and offerings. The business is comprised of a team of
dedicated business and IT professionals who specialise in the following
IT-infrastructure services: network security services, enterprise networking
services and solutions, mobile solutions, infrastructure architectural
services, service management and managed network services. The parties have
been in discussions for the last two years and through working together on
specific assignments have identified complimentary and obvious synergies.
Square One"s rationale for the acquisition is as follows:
* to expand its Business Solutions division into KwaZulu-Natal;
* to enhance and increase its overall skills complement;
* to enhance and increase its suite of services offerings with market leading
services;
* to enhance and secure new and additional clients; and
* to expand its services offering portfolio to include a suite of managed
services.
The acquisition of the business is a further step in Square One"s strategy to
position itself as a niche Business Solutions provider in South Africa. The
NETIntellect team strengthens Square One"s strong foothold, particularly in
KwaZulu-Natal.
The skills and experience of the NETIntellect team are complementary to those
of Square One and will result in increased capacity to deliver, and a national
footprint that will enable the enlarged Square One to offer its services to a
wider range of clients.
Since the commencement of negotiations the parties have identified several
lucrative opportunities that should enhance returns to shareholders in due
course.
4. Financial effects of the acquisition
Set out in the table below are the pro forma financial effects of the
acquisition based on Square One"s published audited results for the twelve
months ended 31 December 2005. The pro forma financial effects are the
responsibility of the company"s directors. The pro forma financial effects
have been prepared for illustrative purposes only to provide information of
how the acquisition may have impacted on the results and financial position of
Square One. Because of their nature, the pro forma financial effects may not
give a fair reflection of Square One"s financial position after the
acquisition or the effect on future earnings.
Before the After the Percentage
Acquisition acquisition change
Note (cents) 1 (cents) (%)
Earnings per share (cents) 2 5.27 6.60 25.26
Headline earnings
per share (cents) 2 9.40 10.20 8.55
Net asset value per
share (cents) 3 53.53 47.16 (11.90)
Net tangible asset value
per share (cents) 3 10.59 9.71 (8.32)
Notes:
1. Extracted from the audited results of Square One for the twelve months
ended 31 December 2005.
2. Earnings and headline earnings per share are based on the following
assumptions:
* the acquisition was effective 1 January 2005;
* the business"s results for the twelve months ended 31 December 2005 have
been used in the calculations; and
* the weighted average number of shares in issue during the twelve month
period were 23 640 500 and 27 105 846 before and after the acquisition,
respectively.
3. Net asset and net tangible asset value per share are based on the following
assumptions:
* the acquisition was effective 31 December 2005;
* the net assets of the business at 31 December 2005 of R128 148 have been
used for this purpose; and
* the number of shares in issue at 31 December 2005 were 23 640 500 and
27 105 846 before and after the acquisition, respectively.
Johannesburg
23 August 2006
Sponsor
BRIDGE CAPITAL
Date: 23/08/2006 05:26:54 PM Produced by the JSE SENS Department
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