| Fri 13 Oct 2006, 10:00 | | Synergy - Abridged Revised Listing Particulars And |
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SNG
SNG
Synergy - Abridged Revised Listing Particulars And Transaction Update:
Synergy Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1995/006315/06
(Date of registration: 5 July 1995)
Share code: SNG & ISIN: ZAE000017760
("Synergy" or "the Company")
ABRIDGED REVISED LISTING PARTICULARS AND TRANSACTION UPDATE:
* ACQUISITION OF SDT FINANCIAL SOFTWARE SOLUTIONS (PTY) LTD ("SDT");
* CHANGE OF NAME TO SILVERBRIDGE HOLDINGS LIMITED;
* LISTING ON THE ALTERNATIVE EXCHANGE;
* CONSOLIDATION OF SHARES AND PAR VALUE CHANGE; AND
* RELATED MATTERS
("THE SDT TRANSACTION")
1. INTRODUCTION
Further to the announcements dated 2 May, 1 June, 1 August and 31 August
2006, the board is pleased to announce that the JSE Limited ("JSE") has
approved the transfer of Synergy"s listing from the Development Capital
Market ("DCM") to the Alternative Exchange of the JSE ("AltX") with
effect from the commencement of business on Monday, 27 November 2006.
The transfer and listing on AltX, in respect of 30 247 285 consolidated
Synergy shares of 1 cent each (as defined below), are subject to
shareholders, in general meeting to be held on Monday, 6 November 2006,
approving all the necessary ordinary and special resolutions to give
effect to the SDT transaction.
A circular incorporating full revised listings particulars and setting
out the details of the SDT transaction as well as a notice of a general
meeting to shareholders, was posted to shareholders today ("circular").
The salient terms of the SDT transaction are set out below.
2. SDT TRANSACTION OVERVIEW
On 2 May 2006, the terms and conditions of the agreement between Synergy
and the SDT vendors were announced. Upon shareholder approval of the
transaction, Synergy will acquire, with effect from midnight between 1
March 2006 and 2 March 2006, the entire authorised and issued share
capital in SDT from the SDT vendors for a consideration of R50 million to
be settled by the issue of 25 million consolidated Synergy shares at 200
cps ("acquisition"), after a share capital restructure.
In terms of the share capital restructure, the pre-consolidated ordinary
share capital of the company will be restructured into new consolidated
ordinary shares by way of a 1-for-10 consolidation, a par value
reduction, the issue of the consideration shares and an increase in the
authorised share capital of the company. This will have the effect of
adjusting the share capital of the company to consist of 200 000 000
authorised consolidated ordinary shares with a par value of 1 cps and 30
247 285 issued consolidated ordinary shares with a par value of 1 cps
after implementation of the transaction. Shareholders are advised that
no fractions of shares will be issued on consolidation and that the
rounding principle will be applied.
3. CATEGORISATION AND WAIVER OF MANDATORY OFFER
The acquisition is categorised as a Category 1 transaction and a reverse
take-over in terms of the Listings Requirements of the JSE.
With the exception of the SDT Share Trust, the vendors of SDT are also
shareholders in the company before the SDT transaction. Accordingly, the
acquisition will be categorised as a related party transaction in terms
of the JSE Listings Requirements. Consequently, the board of directors
has requested an independent professional expert to provide an opinion on
the fairness and reasonableness of the terms and conditions of the
acquisition, which opinion is set out in the circular. The effective
controlling shareholder of Synergy before the transaction, comprising the
i capital Growth Fund I Trust ("i capital Trust"), the Rowan Nigel
Williams Family Trust, JS Swanepoel, F du Toit and i capital (Pty)
Limited, being related parties to the company, will be excluded from
voting on the ordinary resolution approving the acquisition.
In the view of the directors, the acquisition does not give rise to a
change in control and the two main shareholders after the transaction, JS
Swanepoel and F du Toit, are not parties acting in concert. However, the
SRP has ruled the acquisition an affected transaction, which in the
normal course, would require a mandatory offer to the minority
shareholders of Synergy at a price of 200 cents per consolidated share in
accordance with the SRP Code. The SRP has agreed to dispense with this
requirement provided that a majority of independent shareholders agree to
waive their rights to a mandatory offer in terms of Rule 8.7 of the SRP
Code. Accordingly, a resolution to this effect is included in the
resolutions to be proposed at the general meeting of the company.
4. NEW NATURE OF BUSINESS
Simultaneously with the implementation of the acquisition and share
capital restructure, the company"s name will be changed to SilverBridge
Holdings Limited, new appointments made to its board of directors (as
indicated below) and its listing transferred to the AltX. The vendors
are in advanced negotiations with a BEE group to acquire a portion of the
issued share capital of the company from the SDT vendors following the
AltX transfer. These actions will reconstitute the company as a
specialist software holding company with BEE credentials, with SDT as an
operating subsidiary.
At holding company level, the core of SilverBridge"s corporate strategy
following the acquisition will be to build a group of niche business
application software and related service businesses operating on a
decentralised basis, through an acquisitive growth strategy.
SDT, which will become SilverBridge"s first operating subsidiary, focuses
on the provision of proprietary back office administration software
solutions and related services to the financial services industry with a
particular focus on the long term insurance industry in South Africa and
Africa. SDT has developed a number of cost-effective and business-
oriented proprietary software solutions on the Microsoft platform to
satisfy the growing demands of the financial services industry.
SDT currently provides financial product administration software
solutions for the following areas of financial services:
* Long-term Assurance;
* Unit-linked Investments;
* Group Risk and Investment;
* Pensions Management;
* Employee Benefits Management; and
* Term-loan administration.
SDT has 22 installed client sites throughout Africa, including
installations for some of the leading life insurers on the African
continent. The company is a Microsoft Gold Certified Partner and all of
its systems are based on Microsoft"s development and operating
environments. SDT"s systems enable its clients to bring flexible,
innovative products to market rapidly, through SDT"s unique product
development approach and integration of product administration into the
product design.
SDT Exergy, the company"s strategic product focus going forward, is a
consolidated software solution designed for application in the broader
financial services market. SDT Exergy has been designed to provide the
financial services industry with the flexibility and agility required to
enable the provision of improved service levels at a lower cost of
administration.
During the past financial year, SDT signed several new clients, including
RealPeople, Lesotho Insurance Corporation, Alliance Lesotho and CFC Life
Kenya and expanded its presence at existing clients such as Metropolitan
International and Old Mutual Kenya, which will be using SDT Exergy for
Group Life Administration.
SDT has a staff complement of 73 highly skilled professionals, the
majority of which are software engineers with Microsoft certification.
Competitive advantages
SDT has a number of competitive advantages that will be enhanced through
the establishment of SilverBridge:
* Development and ownership of proprietary software based on latest
technology and underlying business process models that addresses the long
terms insurance industry"s current requirements;
* In depth knowledge and understanding of the long term insurance
market;
* Understanding and knowledge of local and emerging market operating
environment;
* Strong local presence and large number of highly skilled and
experienced IT professionals;
* Largest number of installed sites in the long-term insurance market on
the African continent;
* Established client engagement models and implementation processes;
* Black ownership through SilverBridge; and
* Increased credibility by being part of a listed technology group.
Business model
SDT earns its revenue across four major business areas:
* License revenue on the sale of its proprietary software systems,
principally SDT Life and SDT Exergy;
* Implementation revenue on the implementation of new systems;
* Ongoing maintenance and rental revenue for use of the installed
system; and
* Consulting revenue for ongoing enhancements and configuration of the
installed sites.
5. PROSPECTS
The board is confident that the prospects of the company will be enhanced
by the successful implementation of the transaction considering the sound
nature and, in the directors" opinion, sound prospects of the SDT
business.
SilverBridge has strong prospects for growth and increased profitability
driven by a number of industry trends as follows:
* The continued growth of the financial services sector and requirements
for next generation software;
* Increased demand for locally developed software solutions;
* Requirement of financial services firms to procure from black
empowered companies;
* Need for niche software players to become black empowered, thereby
presenting acquisition opportunities; and
* Growth into the African market.
SDT also has strong prospects for growth driven by:
* The trends in the life insurance industry driving demand for cost
effective software solutions;
* The maturity of the SDT Exergy solution creating the opportunity to
aggressively penetrate the enterprise market in South Africa;
* The continued development of the African life insurance market and the
continued expansion of South African players into this market;
* Maturity in servicing the current enterprise clients;
* A higher rental income base creating an ability to invest more in
products and processes and the ability to capitalise on these
opportunities; and
* The BEE credentials of SDT through ownership by SilverBridge, making
the company a relatively more attractive supplier.
6. PROPOSED PRIVATE PLACEMENT OF SHARES
It is the intention of the company to privately place a total of 2 350
000 ordinary shares in the share capital of the company with public
shareholders immediately following its transfer to the AltX. The primary
rationale for the private placement is to comply with the public
shareholder spread requirement of the JSE Listings Requirements. The
private placement represents 7.8% of the issued share capital of the
company following the implementation of this transaction and will be
executed in terms of the general authority to issue shares for cash
obtained from shareholders in general meeting on 14 October 2005. For
purposes of calculating the pro forma financial effects and profit
forecast, it has been assumed that the shares will be placed at a post-
consolidation issue price of 200 cents per share, which is the same price
level at which the consideration shares are being issued.
7. PRO FORMA FINANCIAL EFFECTS
The table below summarises the pro forma effects of the SDT transaction
and the intended private placement on the published audited annual
financial statements ("AFS") of Synergy for the 12 months ended 28
February 2006, using the audited AFS of SDT for the same 12-month period.
The pro forma information is the responsibility of the directors. The
pro forma net asset value figures illustrate the possible financial
effects if the transaction and private placement had been effected on 28
February 2006, whereas the pro forma earnings figures illustrate the
possible financial effects if the transaction and private placement had
been undertaken on 1 March 2005. The pro forma financial effects should
be considered together with the reporting accountants report thereto,
which form part of the circular. Due to their nature, the pro forma
financial effects may not give a fair reflection of the consolidated
Synergy after the transaction.
Before the Pro forma % Pro forma %
transaction after the change after the change
(1) transaction private
placement
Net asset value 78.8 44.4 (2) -44% 55.6 (3) +25%
(cps)
Net tangible asset 78.8 13.9 (2) -82% 27.3 (3) +96%
value (cps)
Earnings (cps) (11.5) 10.3 (4,5) +189% 9.5 (6) -8%
Headline earnings (12.3) 10.1 (4,5) +182% 9.4 (6) -7%
(cps)
Number and 5 247 30 247 +476% 32 597 +8%
weighted average
number of
consolidated
shares (`000) (7)
Assumptions:
(1) the figures in the "before the transaction" column have been
extracted from Synergy"s audited annual financial statements for the
year ended 28 February 2006 and adjusted to reflect the effect of the
share consolidation on a 1-for-10 basis.
(2) The following assumptions were taken into account in arriving at
the net asset value and net tangible asset value in the "pro forma
after the transaction" column:
- the investment shares in Synergy held by Synergy at 28 February 2006
were cancelled (per paragraph 1 of Appendix 4) on 28 February 2006;
- the transaction was implemented on 28 February 2006;
- the value of SDT before the proposed transaction at 28 February 2006
was R50 million; and
- 25 million new consolidated Synergy shares were issued for the
acquisition of SDT.
(3) The following assumptions were taken into account in arriving at
the net asset value and net tangible asset value in the "pro forma
after the private placement" column:
- 2 350 000 shares were issued at 200 cps on 28 February 2006.
(4) The following assumptions were taken into account in determining
the earnings and headline earnings in the "pro forma after the
transaction" column:
- the investment shares in Synergy held by Synergy at 28 February 2006
were cancelled (per paragraph 1 of Appendix 4) on 1 March 2005;
- the transaction was implemented on 1 March 2005;
- the value of SDT before the proposed transaction at 28 February 2006
was R50 million; and
- 25 million new consolidated Synergy shares were issued for the
acquisition of SDT.
(5) The SDT audited income statement for the 12 months ended 28
February 2006 incorporated the effect of an STC charge related to the
payment of a special dividend to the SDT vendors. If the STC charge is
adjusted to reflect the company"s stated dividend policy of two times
cover, normalised historic earnings and headline earnings for SDT of
16.6 cps are calculated (using the number of consolidated shares in
issue after the transaction and excluding the audited "before the
transaction" Synergy losses and the effects of the private placement).
(6) The following assumptions were taken into account in determining
the earnings and headline earnings in the "pro forma after the private
placement" column:
- 2 350 000 shares were issued at 200 cps on 1 March 2005; and
- no adjustment was made for interest earned.
(7) All per share calculations are based on the number of consolidated
shares in issue.
8. PROFIT FORECASTS
The table below summarises the forecast income statements of Synergy, to
be renamed SilverBridge, for the financial years ending 28 February 2007
and 29 February 2008, which must be read in conjunction with the
reporting accountant"s report thereon contained in the circular. The
forecast relies on realising the prospects of SDT that is to be acquired
in terms of the acquisition, the material assumptions to which are also
summarised below. It is expected that the company will realise net
income of R7.0 million (equivalent to 23.6 cps in attributable earnings)
and R8.9 million (27.3 cps in attributable earnings) during the February
2007 and February 2008 financial years, respectively.
Projected Projected
Feb 2007 Feb 2008
(Rand) (Rand)
Revenue 53 079 357 63 695 228
Costs 43 683 236 51 582 278
Profit before interest and 9 396 121 12 112 950
taxation
Net finance charges 400 000 400 000
Profit before taxation 9 796 121 12 512 950
Normal income taxation 2 840 875 3 628 756
Profit after taxation 6 955 246 8 884 195
Earnings per share (cents) 23.6 27.3
Headline earnings per share 23.6 27.3
(cents)
Weighted average number of 29 431 749 32 597 285
shares in issue
Key ratios
Operating profit margin 17.7% 19.0%
Turnover growth 38.7% 20.0%
Operating profit growth 25.7% 28.9%
PAT growth 87.5% 27.7%
EPS growth n/a 15.3%
HEPS growth n/a 15.3%
Assumptions
(1) Turnover for 2007 is based on 40% projected annuity
revenue, in the form of rental and support, and 60%
project revenue. Annuity revenue is based on expected
increases from mainly the current client base. Project
revenue is based on current orders and weighted projected
sales from current sales proposals.
(2) The expected increase of 38.7% (or R14.8 million) in
revenue between 2006 and 2007 is made up by the following
contributing factors:
- forecast organic growth of 25%, equivalent to
additional turnover of R9.7 million, per note 1 above;
- an unusually high level of work-in-progress of R1.8
million not recognised in the income statement, but
executed and invoiced shortly after the Feb-06 year-end;
and
- the introduction of a new consulting service revenue
line expected to generate an initial R4 million in
revenue - during the last two years, SDT invested in
documenting its best practise process blue prints; these
blue prints will be utilised in a consulting capacity in
the future, either before the client purchases or before
the client implements the SDT software system.
(3) Turnover for 2008 is projected on a 20% year-on-year
growth basis, of which 50% of total revenue is expected
to be annuity-based income.
(4) Normal tax expense is based on a 29% tax rate
applicable to companies.
(5) The profit forecasts have been prepared on a basis
consistent with IFRS.
(6) The forecast does not include any subsequent
acquisitions of the group or the effect of IFRS3 of such
acquisitions.
(7) The forecast does not include any write off or
decrease of goodwill created by the SDT acquisition as
the expectation is that the goodwill will not be
impaired.
(8) The profit forecast incorporates the effect of an
intended private placement of 2 350 000 consolidated
shares at 200 cps, including in the calculation of the
weighted average number of shares in issue.
9. DIRECTORS
The full names, ages, qualifications, functions and business addresses of
the directors of Synergy upon approval of the SDT transaction are set out
below:
Director Qualifications Function Business address
Jacobus BSc (Econ) Chief Executive First Floor,
Stephanus Officer, Castle View
Swanepoel SilverBridge; North, 195
(46) Executive Prieska Street,
Director, SDT Erasmuskloof,
Pretoria
Freda du BSc (Hons) Executive First Floor,
Toit (39) Director, Castle View
SilverBridge & North, 195
SDT Prieska Street,
Erasmuskloof,
Pretoria
Jaco BCompt (Hons), Financial First Floor,
Maritz CA (SA) Director, Castle View
(32) SilverBridge North, 195
Prieska Street,
Erasmuskloof,
Pretoria
David L CA (SA), CFA Executive Ground Floor, 18
Smollan Director, Hurlingham Road,
(33)* i capital Fund Illovo,
Managers Johannesburg
Rowan BSc, MPhil, Executive Ground Floor, 18
Nigel CFA Director, Hurlingham Road,
Williams i capital Fund Illovo,
(34)* Managers Johannesburg
Ashley Chief Executive 33 Silversands
Bernard Officer, Prime Avenue,
Regenass Support (Pty) Wendywood
(35)# Ltd
*Non-Executive
#Independent non-executive
The directors are all South African citizens.
10. SHAREHOLDERS
The following table summarises the directors" shareholding as well as
shareholders beneficially interested in 5% or more of Synergy"s issued
share capital before and after the private placing:
Before the SDT After the SDT
transaction (pre- transaction and
consolidation private placement
shares) (consolidated
shares)
Shares Percentage Shares Percentage
held held held held
(`000) (`000)
Directors and
associates:
JS Swanepoel 3 143 6.0% 314 326 1.0%
264
JS Swanepoel - - 9 875 30.3%
Trust 000
F du Toit 3 143 6.0% 314 326 1.0%
264
F du Toit - - 9 875 30.3%
Family Trust 000
i capital Trust 24 847 47.4% 7 484 23.0%
849 785
i capital (Pty) 9 317 17.8% 931 794 2.9%
Ltd 942
RN Williams 3 105 5.9% 310 598 1.0%
Family Trust 982
Total 83.0% 89.3%
11. SALIENT DATES
2006
Last day for lodging forms of proxy for Friday, 3 November
Synergy general meeting (by 10:00)
General meeting of shareholders (at 10:00) Monday, 6 November
Announcement of results of Synergy general Monday, 6 November
meeting published on SENS
Announcement of results of Synergy general Tuesday, 7 November
meeting published in the press
Last day to dematerialise, rematerialise or Friday, 24 November
trade in Synergy shares in pre-consolidated
form
Abridged pre-listing statement published on Friday, 24 November
SENS and in the press
Change of sector, consolidation of shares, Monday, 27 November
listing of new consolidated ordinary shares
issued in terms of the transaction, change
of name to SilverBridge Holdings, new JSE
code "SVB" and new ISIN ZAE000086229
effected, and commencement of trading in
consolidated SilverBridge Holdings shares
Record date for transaction Friday, 1 December
Safe custody accounts of dematerialised Monday, 4 December
shareholders updated at their CSDP or broker
so as to reflect the company"s share capital
restructure and change of name
New share certificates reflecting the Monday, 4 December
company"s share capital restructure and
change of name posted to certificated
shareholders who have surrendered their
documents of title by 12:00 on Friday, 1
December 2006 (or failing such surrender,
within five business days of the date of
surrender)
Notes:
(1) The above-mentioned dates and times are subject to change.
Any such change will be released on SENS and published in the
press.
(2) The attention of certificated Synergy shareholders is drawn to
the fact that, notwithstanding that the company is now settling
trades through the STRATE settlement system, these shareholders
will receive a share certificate reflecting the consolidation
referred to in this circular and will be required to dematerialise
such share certificate in order to trade their shares on the JSE.
The dematerialisation process can take between 24 hours and 10
days, depending on the volumes being processed by STRATE at the
time of dematerialisation.
(3) Certificated shareholders who wish to anticipate the exchange
of their existing share certificates for new certificates
reflecting the proposed consolidation referred to in this circular
should complete and return the attached form of surrender in
accordance with the instructions contained therein.
(4) Dematerialised shareholders must take no further action
regarding the form of surrender, as their safe custody accounts
will be automatically updated in terms of the agreement between
them and their CSDP or broker.
(5) Certificated shareholders and "own name" dematerialised
shareholders who are unable to attend the general meeting but wish
to be represented thereat must complete and return the attached
form of proxy in accordance with the instructions contained
therein.
(6) Dematerialised shareholders, other than "own-name" registered
shareholders, who wish to attend the general meeting or vote by way
of proxy must contact their CSDP or broker who will provide them
with the necessary authority to vote or will carry out their
instructions as to how they wish their vote to be cast if unable to
attend the general meeting. This must be effected in terms of the
agreement between them and their CSDP or broker.
(7) It should be noted that in the STRATE environment, there can
be no dematerialisation or rematerialisation of pre-consolidation
shares in the "old" name after Friday, 24 November 2006.
12. COPIES OF THE PRE-LISTING STATEMENT
Copies of this circular to shareholders (in English only), incorporating
the revised listing particulars, may be obtained during normal business
hours at the registered offices of Synergy (being First Floor, Castle
View North, 195 Prieska Street, Erasmuskloof, Pretoria, 0048) and Sasfin
Capital (being Sasfin Place, North Block, 13-15 Scott Street, Waverley,
2090) from Wednesday, 11 October 2006 to Friday, 3 November 2006.
13. NOTICE IN COMPLIANCE WITH JSE LISTINGS REQUIREMENTS FOR ALTX ("LR")
Synergy"s listing will transfer from the DCM of the JSE to the AltX upon
implementation of the transaction. Investors are warned that investing
in such companies is speculative in nature and the JSE does not guarantee
the viability or success of the company. In accordance with the LR,
Synergy is required to appoint a Designated Adviser ("DA") whose
responsibility it will be to guide and assist the company in complying
with and discharging its responsibilities under the LR. If Synergy fails
to retain a DA it faces possible suspension and the subsequent
termination of its listing without the prospect of an appropriate offer
being made to shareholders.
Pretoria
13 October 2006
Sponsors and Designated Adviser
Sasfin Capital
(A division of Sasfin Bank Limited)
Corporate Advisers
i capital fund managers (Pty) Ltd
Independent professional expert
Moores Rowland
Reporting Accountants
KPMG Inc
Auditors
Van Sitterts Du Toit (Inc)
Legal Advisers
edward nathan sonnenbergs incorporated
Date: 13/10/2006 10:00:25 AM Produced by the JSE SENS Department
