| Wed 15 Nov 2006, 7:00 | | DataPro Group - Detailed Cautionary Announcement |
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DTP
DTP
DataPro Group - Detailed Cautionary Announcement
Datapro Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/016433/06)
Share code: DTP ISIN: ZAE000058061
("DataPro Group", "DataPro" or "the Company")
DETAILED CAUTIONARY ANNOUNCEMENT REGARDING A PROPOSED TRANSACTION IN RESPECT OF
ORION TELECOM INVESTMENT HOLDINGS (PROPRIETARY) LIMITED ("ORION") AND RENEWAL OF
RELATED CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published on 23 October 2006, the
board of directors of DataPro Group announce that DataPro Group has entered
into an agreement dated 10 November 2006, in terms of which DataPro Group
will acquire 100% of the shares in and loan account claims against Orion
("the Sale Equity"), with effect from 1 December 2006 (the "Proposed
Transaction"), from Mogala Investments (Pty) Limited ("Mogala") (56.061%),
Arch Equity Telecom Holdings (Pty) Limited ("Arch") (30.789%) and
management of Orion who hold shares in Orion ("the Management
Shareholders") (13.15%) ("the Vendors"), which vendors are unrelated to
DataPro Group.
The purchase price is R380 million to be settled partly in cash and partly
by way of a placement of DataPro Group shares to the Vendors, which in turn
DataPro Group will be obliged to place in the market by way of a vendor
placement. The spilt of cash to vendor shares, as well as the issue price
of the shares, is still to be determined based on the amount of loan
funding to be raised and further details will be announced in due course.
The acquisition is regarded a being substantial to DataPro Group and will
materially improve the scale and strategic position of DataPro Group.
The effective date of the acquisition, subject to all the necessary
approvals as detailed in conditions precedent below, is 01 December 2006.
The purchase consideration will accordingly bear interest at prime, less 4%
from this date.
The Proposed Transaction remains subject to the conditions precedent set
out in paragraph 4 below.
2. RATIONALE FOR ACQUISITION
The Proposed Transaction is in line with the DataPro Group"s vision to be
the leading independent alternative supplier of voice and data services in
South Africa. DataPro Group is a significant player in the consolidation of
the Internet Service Provider ("ISP") and voice industry, and has advanced
its growth both organically and through strategic acquisitions over the
last 2 years. As announced on SENS on 10 July 2006, DataPro Group acquired
Definity Telecommunications (Pty) Limited ("Definity"), a leading Least
Cost Routing (LCR) supplier, with effect from 01 July 2006, which now forms
part of DataPro Group"s voice business, namely VoxTelecom.
DataPro Group is a fast growing, independent, telecommunications service
provider, providing mainstream Voice over Internet Protocol ("VoIP") and
Least Cost Routing ("LCR") (collectively, "Voice") and internet, hosting,
and virtual private networks ("VPN") (collectively "Data") services to both
consumers and corporate businesses, mainly in southern Africa. DataPro
Group competes primarily through its wholly owned subsidiaries, namely
DataPro (Pty) Ltd (the traditional Data business), VoxTelecom and @lantic
Internet Services and has operations in South Africa and Namibia.
The Company has been preparing for the advent of de-regulation in the
telecommunications industry for several years, especially with regard to
VoIP. De-regulation has, to a large extent, spurred recent market
consolidation as the opportunities for, and value of, alternative
telecommunication providers becomes increasingly evident. DataPro Group
has consistently set out to build and acquire critical mass in the
fragmented ISP and voice sectors.
Orion represents the latest such acquisition and consolidation opportunity
for DataPro Group. Orion is a leading supplier of LCR and VoIP telephony
services to corporate South Africa. Orion not only supplies the largest
domestic corporations with voice solutions but also services a considerable
segment of provincial and municipal government organizations. The Proposed
Transaction will create a leading independent alternative telecommunication
service provider that can provide a comprehensive portfolio of voice and
data products to the South African market.
The Proposed Transaction enhances DataPro Group"s growth profile, allows
the Company to gain scale not otherwise easily achievable in voice, and
further diversifies its financial profile, thereby unlocking potential for
voice and data growth. The advent of rapidly converging Voice, Data and
Video services (commonly called "triple play services") coupled with the
critical mass and quality customer bases of Orion, DataPro and VoxTelecom,
places DataPro Group as a serious contender in data and voice convergence
in South Africa.
The Proposed Transaction would be strategic for DataPro Group as it
provides the Company with premier quality spend customers via higher
average revenues per subscriber ("ARPU"s") underpinning DataPro Group"s
Voice annuity customer base. DataPro Group operates in a competitive
environment of large, well-funded competitors, who can withstand
significant price pressure to safeguard their operations and market
positions. The quality and scale of the customer base of the enlarged
DataPro Group following the Proposed Transaction would mitigate this risk
for DataPro Group.
Significantly, the acquisition of Orion would provide DataPro Group with a
service provision agreement held with Mobile Telephone Networks Limited
("MTN") and dealer agreements in respect of Vodacom (Pty) Limited, Cell C
(Pty) Limited and Transtel . Added to DataPro Group"s interconnection
agreements with Telkom and Vodacom, DataPro Group is now ideally positioned
as a value added network service ("VANS") and alternative
telecommunications service provider.
The Proposed Transaction also offers the enlarged DataPro Group the
potential for increased revenue and reduced costs through regional and
inter-divisional cross-selling opportunities, enhanced economies of scale,
technology and product sharing and the alignment of centralised
administrative systems. The addition of Orion"s experienced personnel would
also broaden the management capacity of DataPro Group, facilitate knowledge
transfer and enable the Company to develop its business further in the
triple play services evolution.
For the year ended 28 February 2006, Orion had revenues of approximately
R680 million and net income of approximately R47 million. Orion generates
nearly R60 million in free cash annually. Orion"s cash generative
operations would make a sizeable contribution to the financial performance
of the DataPro Group, enhancing its growth profile and diversifying
revenues and earnings. The Proposed Transaction is expected to add at
least R60 million per month to DataPro"s existing monthly annuity revenue,
with the last reported VoxTelecom contribution being R9.5 million per
month, DataPro (Pty) Ltd (the traditional Data business) contributing a
further R10.5 million per month and @lantic Internet Services, R4.1 million
per month.
3. OVERVIEW OF ORION
Orion is a telecommunication services solution provider, providing a range
of telecommunication services, aimed specifically at the South African
corporate market. Orion was formed pursuant to the merger of three
telecommunication service providers in 1997, and currently is comprised of
the following group of companies:
Orion Telecom Investment Holdings (Pty) Limited
Holding company of the Orion subsidiaries.
Orion Telecom South Africa (Pty) Limited
Orion Telecom South Africa sells the services of Orion Telecom Corporation
(international voice), Orion Cellular (corporate cellular and LCR
services), Orion Data Services (data faxing services) and Orion TMS
(telephone management systems). It is the business unit responsible for the
installation and maintenance of these services. Additionally, OTSA houses
the Orion VoIP infrastructure, the NOC (National Operations Centre)
equipment and termination contracts, as well as the termination points
across South Africa.
Orion Telecom Corporation (Pty) Limited
Holds agency agreements with suppliers in the USA and UK to act as agent
for the Voice operations, essentially call back services, in South Africa.
Orion Cellular (Pty) Limited
Holds the service provision agreement with Mobile Telephone Networks
Limited ("MTN"), dealer agreements in respect of Vodacom (Pty) Limited,
Cell C (Pty) Limited and Transtel and the termination contracts with the
respective network providers. Provides SMS (short message service)
services.
Orion Data Services
Provides faxing and e-mail solutions. Sales, marketing and support is
performed by Orion Telecom South Africa.
4. CONDITIONS PRECEDENT
The Proposed Transaction remains subject to conditions precedent usually
associated with a transaction of this nature, including all necessary
regulatory and shareholder approvals.
5. PRO FORMA FINANCIAL EFFECTS
Pro forma financial effects of the Proposed Transaction will be published
once a full announcement of the transaction is made.
6. CIRCULAR TO SHAREHOLDERS
The Proposed Transaction will constitute a Category 1 transaction in terms
of the JSE Listings Requirements. Accordingly, DataPro Group will be
required to issue a circular to shareholders containing full details of the
Proposed Transaction and to seek shareholder approval to undertake the
Proposed Transaction. A circular to shareholders will be issued within 28
days from date of publication of the full announcement.
7. RENEWAL OF CAUTIONARY ANNOUNCEMENT
A further announcement will be made on SENS as soon as the split of cash
and shares, the issue price of the shares and financial effects of the
Proposed Transaction are finalised and any of the conditions precedent have
been fulfilled or waived, as the case may be. Accordingly, DataPro Group
shareholders are advised to exercise caution when trading in their
securities until such time as a further announcement is made.
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
15 November 2006
Corporate Advisor to DataPro Group
Metier Advisory (Proprietary) Limited
Designated Advisor to DataPro Group
Arcay Moela Sponsors
Attorneys to Mogala, Orion and the Management Shareholders
Matisonn Fury Inc
Date: 15/11/2006 07:00:39 AM Produced by the JSE SENS Department
