| Thu 25 Jan 2007, 15:00 | | UCS - UCS Group Limited - Acquisition and withdraw |
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UCS
UCS
UCS - UCS Group Limited - Acquisition and withdrawal of cautionary
UCS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/002253/06)
JSE code: UCS
ISIN: ZAE000016150
("UCS" or "the Group")
ACQUISITION BY UCS OF THE 25.1% SHAREHOLDING IN UCS SOLUTIONS HOLDINGS
(PROPRIETARY) LIMITED ("UCS SOLUTIONS") HELD BY TACTICAL SOFTWARE SYSTEMS
(PROPRIETARY) LIMITED ("TSS") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement, dated 20 December 2006 ("cautionary
announcement"), shareholders are advised that UCS, TSS and UCS Solutions
entered into a heads of agreement ("the agreement"), dated 21 December
2006, in terms of which TSS agreed to sell its 25.1% shareholding in UCS
Solutions to UCS ("the transaction").
2. Background information
UCS is an IT business with a primary focus on the provision of software,
solutions and services for selected markets. UCS has achieved a leadership
position in South Africa`s retail sector and is well positioned for further
growth locally and internationally through a number of defined initiatives.
TSS is an established group of diversified technology based businesses,
which group is well-aligned with the activities of UCS Solutions.
As a consequence of an earlier transaction, effective 1 July 2006, UCS
Solutions acquired 60% of the equity of TSS Managed Services (Proprietary)
Limited ("TSS MS") and 100% of the equity of Quadrant Consulting
(Proprietary) Limited ("Quadrant Consulting"). The purchase price for these
acquisitions was settled through the issue of 25.1% of the equity of UCS
Solutions to TSS. UCS and TSS have now agreed to "roll" the TSS 25.1%
shareholding in UCS Solutions to UCS.
The transaction has been concluded at commercial values on a relative basis
and there is no discount or debt funding behind the structure.
3. Rationale
Having regard to the Group`s Black Economic Empowerment ("BEE") strategy,
the transaction will result in UCS Solutions, once again, becoming a 100%
held subsidiary of UCS as well as providing TSS with a level of BEE
ownership (i.e. 9.8% based on total shares in issue and including the 2 793
296 UCS ordinary shares acquired in July 2006) at UCS level.
4. Purchase consideration and settlement
The purchase price payable by UCS to TSS for its 25.1% shareholding in UCS
Solutions will be R80 million, settled as follows:
- by the issue of 24 217 900 UCS ordinary shares to TSS at an issue
price of R3.00 each. In terms of the agreement, TSS may not dispose
of the these shares for a period of 52 months from 1 March 2007; and
- to the extent that the 24 217 900 UCS ordinary shares are worth less
than R80 million three months after the effective date, using the 10
day volume weighted average price for the 10 workings days preceding
and including 1 June 2007, then the difference between the actual
value of those shares at that date, fixed at no less than R72 653 700
and the agreed value of R80 million will be settled by UCS in cash by
30 June 2007 at the latest. Therefore, the maximum cash payment,
excluding interest, is an amount of R7 346 300. Interest will be paid
on such amount at the Nedbank Limited prime lending rate for the
period 1 March 2007 to the date of payment thereof.
5. Effective date
The transaction will become effective on 1 March 2007 subject to the
successful fulfilment of the conditions precedent set out in paragraph 6
below.
6. Conditions precedent
The transaction is conditional, inter alia, upon:
- UCS and TSS board approval;
- the approval of the transaction by UCS shareholders; and
- compliance with all regulatory obligations to the extent necessary to
effect the transaction.
7. Financial effects
The unaudited pro forma financial effects, for which the directors are
responsible, are provided for illustrative purposes only to show the effect
of the transaction on earnings and headline earnings as if the transaction
had taken effect on 1 October 2005 and on net asset value and net tangible
asset value per share as if the transaction had taken effect on 30
September 2006. Because of their nature, the unaudited pro forma financial
effects may not give a fair presentation of the Group`s financial position
and performance. The unaudited pro forma financial effects have been
compiled from the audited consolidated financial statements for the year
ended 30 September 2006 and are presented in a manner consistent with the
format and accounting policies adopted by UCS and have been adjusted as
described in the notes below:
Movement
Audited Unaudited Unaudited (cents) (%)
Before the Adjusted After the
transaction Before the transaction
Notes transaction
Basic 4 34.3 37.4 39.9 2.5 6.7
earnings
per share
(cents)
Basic 4 23.4 26.5 30.0 3.5 13.2
headline
earnings
per share
(cents)
Net asset 3 120.8 - 136.9 16.1 13.3
value per
share
(cents)
Net 3 37.8 - 34.0 (3.8) (10.1)
tangible
asset
value per
share
(cents)
Weighted 4 243 134 - 267 352 24 218 10.0
average
number of
shares in
issue
(000`s)
Notes:
1. The "Audited Before the transaction" column reflects the audited
results of UCS for the 12 months ended 30 September 2006.
2. The "Unaudited Adjusted Before the transaction" reflects what the
results would have been had the TSS MS and Quadrant Consulting
acquisitions been effective for the full financial year. This was
calculated by annualising the actual results contributed to UCS by TSS
MS and Quadrant Consulting for the period 1 July 2006 to 30 September
2006 to reflect a full 12 month contribution.
3. Net asset and tangible net asset value calculations were completed
assuming the transaction was concluded at the balance sheet date of 30
September 2006 and therefore the "Audited Before the transaction"
figures are as per the audited balance sheet as at 30 September 2006.
4 The pro forma financial effects in the "Unaudited After the
transaction" column are based on the following assumptions:
- 24 217 900 UCS ordinary shares were issued on 1 October 2005 to
acquire the 25.1% interest in UCS Solutions and due to the fact
that the current share price is in excess of R3.30 per share, it
is assumed that this is in full and final settlement of the R80-
million purchase price tabled under paragraph 4 above.
- The transaction costs are estimated to be approximately R 525,000
and have been included in the calculation of the net asset value
and tangible net asset value as these costs are to be capitalised
as part of the purchase consideration.
- The pro forma financial effects assume that the original agreed
purchase consideration and settlement reflect the fair value of
the transaction however these are likely to differ from the
actual fair values at the proposed effective date of 1 March 2007
which values can only be determined at that date.
8. Details of the vendors and classification of the Transaction
Messrs. DCK Mackay and J Mackay are trustees of the Kopane ke Matla Trust
which is the sole shareholder of TSS.
In terms of the Listings Requirements of the JSE Limited ("Listings
Requirements"), the transaction is classified as a related party
transaction as the vendors of the UCS Solutions shares are holders of 2 793
296 UCS ordinary shares and are also directors of UCS Solutions as well as
being directors of TSS.
Accordingly, shareholder approval for the transaction and an independent
opinion relating to the fairness and reasonableness thereof is required in
terms of the Listings Requirements. KPMG Services (Proprietary) Limited
has been appointed to provide UCS shareholders with an independent opinion
on the transaction.
9. Withdrawal of cautionary announcement
The cautionary announcement is hereby withdrawn.
Johannesburg
25 January 2007
Corporate adviser and Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Independent expert
KPMG Services (Pty) Limited
Legal adviser
Mallinicks
Independent Reporting Accountants
Deloitte & Touche
Transaction Adviser to TSS
Ian Dry
Date: 25/01/2007 15:00:01 Produced by the JSE SENS Department.
