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UCS - UCS Group Limited - Proposed delisting of UCS, possible ancillary
transactions and cautionary announcement
UCS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/002253/06)
Share code: UCS
ISIN: ZAE000016150
("UCS"
PROPOSED DELISTING OF UCS, POSSIBLE ANCILLARY TRANSACTIONS AND CAUTIONARY
ANNOUNCEMENT
INTRODUCTION
The purpose of this announcement is to provide UCS shareholders
("Shareholders") with a strategic update regarding the considerations
pertaining to the continued listing of UCS on the exchange operated by JSE
Limited ("the JSE") and possible ancillary transactions.
Following the successful disposal of the majority of the business operations
of UCS to Business Connexion Group Limited ("BCG") ("the BCG Disposal"), as
more fully set out in the circular to Shareholders dated 9 March 2011, and
thereafter the unbundling of the BCG consideration shares received pursuant
to the BCG Disposal to Shareholders ("the Unbundling"), the board of
directors of UCS ("the Board") has considered the viability of continuing the
listing of UCS on the JSE.
The Board considered, inter alia, the following factors:
- the size of the remaining businesses held by UCS ("Remaining
Businesses), relative to the continued costs of remaining listed on the
JSE;
- the relative size and market capitalisation of UCS (post the
Unbundling), relative to other listed companies in the Software and
Computer Services sector of the JSE;
- the future capital requirements of the Remaining Businesses; and
- the development and/or maturity profile of the Remaining Businesses and
whether a listing would suit the stage of development and/or maturity of
these businesses.
Having considered the above and other relevant factors, the Board resolved,
in principle, to proceed towards seeking the delisting of UCS ("Proposed
Delisting"). The Board appointed One Capital as corporate advisors and Glyn
Marais Incorporated as legal advisors to advise the Board on the most
appropriate delisting strategy and the implementation thereof.
The Board furthermore appointed KPMG Services (Proprietary) Limited ("KPMG")
as independent expert ("Independent Expert") to provide the Board with an
independent indicative valuation in respect of the Remaining Businesses, as
more fully set out in paragraph 3.2 below.
2. PRINCIPLES PERTAINING TO THE PROPOSED DELISTING
The Board determined that the key principles influencing the Proposed
Delisting are as follows:
* ensuring that all Shareholders are treated fairly, equitably and
transparently;
* ensuring that all Shareholders have a choice between exiting their
investment in UCS prior to or at the time of the Proposed Delisting
("Exit Option"), alternatively, to allow Shareholders to remain invested
in UCS post the Proposed Delisting ("Continuation Option");
* ensuring that the Remaining Businesses are appropriately capitalised,
inter alia, to protect the interests of Shareholders that elect the
Continuation Option ("Capitalisation of UCS");
* ensuring that the Capitalisation of UCS, if applicable and implemented,
is clearly separated from the position of Shareholders that may elect
the Exit Option and, therefore, that the Capitalisation of UCS (if
implemented) would not affect the value that Shareholders stand to
receive from the Exit Option; and
* executing an efficient implementation process to combine, inter alia,
the Exit Option, the Continuation Option, and, if applicable, the
Capitalisation of UCS and the Proposed Delisting (collectively referred
to as the "Delisting Implementation").
3. PRELIMINARY VALUATION CONSIDERATIONS
3.1 Introduction
Various events and factors could impact upon the value of UCS at the time of
presenting the Delisting Implementation to Shareholders.
The most recent of such events relates to UCS` potential sharing in the
upside of the proposed disposal by BCG of its interests in Destiny Electronic
Commerce (Proprietary) Limited to VeriFone Singapore PTE Limited ("the
VeriFone Transaction"), as more fully set out in the UCS announcement dated
24 May 2011.
3.2 Preliminary value range of the Remaining Businesses
In the interest of providing Shareholders with a better preliminary
understanding of the current and potential future value of UCS at the time of
the Delisting Implementation, the Board has requested the Independent Expert
to provide an indicative, preliminary valuation range in respect of the
current position of UCS, i.e. in respect of the Remaining Businesses, but
specifically excluding certain contingent events which may materially affect
the future value of UCS ("Upside Events"), such as whether or not UCS
receives the upside from the VeriFone Transaction.
The Upside Events and the indicative, preliminary value range implications
pertaining to same are set out in more detail in paragraph 3.3 below.
The midpoint of the preliminary value range arrived at by the Independent
Expert equates to approximately R62.3 million (approximately 21.1 cents per
UCS share), excluding any Upside Events ("Preliminary Value"). The
Preliminary Value was arrived at by the Independent Expert in terms of a
signed opinion letter addressed to the Board, dated 27 May 2011, with a
valuation date of 30 April 2011 (for the avoidance of doubt, although the BCG
Disposal was not yet unconditional as at 30 April 2011, the Independent
Expert assumed that this transaction was fully implemented at the valuation
date).
Shareholders are cautioned that the Preliminary Value is disclosed for
illustrative purposes only and the Board emphasises that the Preliminary
Value may differ materially from the final value at the time of announcing
the Delisting Implementation, including as a result of the outcome of the
Upside Events.
The Board will request the Independent Expert to update its indicative
valuation opinion (and at such time to include the possible impact of the
Upside Events) and such valuation will be disclosed and be open to inspection
by Shareholders at the time of UCS proceeding with the Delisting
Implementation, in accordance with the Listings Requirements of the JSE and
any other statutory and regulatory requirements.
3.3 Indicative value range implications of Upside Events on the potential
total value of UCS
In estimating the potential total value of UCS at the time of the Delisting
Implementation, the Board has estimated the potential outcome of the Upside
Events ("Maximum Upside") for purposes of this announcement. The potential
total value of UCS, as estimated in this announcement, is the sum of the
Preliminary Value and the Maximum Upside ("Total Value").
The following events constitute Upside Events that the Board are aware of at
the time of this announcement:
* the potential upside pertaining to the VeriFone Transaction ("VeriFone
Upside");
* the potential upside pertaining to the disposal of the enterprise
services business ("Enterprise Services Business") to HCL Axon
(Proprietary) Limited and UCS` on-going interest in this transaction
("HCL Axon Upside"), which transaction was announced on 16 July 2009;
and
* the potential upside pertaining to the disposal of UCS` shareholding in
TSS Managed Services (Proprietary) Limited ("TSS Managed Services") and
UCS` on-going interest in this transaction ("TSS MS Upside"), which
transaction was announced on 23 September 2009 and a circular to
Shareholders was issued on 19 October 2009.
To the extent that the Board becomes aware of material developments affecting
any one of the Upside Events, the Board will publish an announcement to
inform Shareholders of such developments, which announcement may include a
revised estimation of the Maximum Upside and, therefore, the Total Value.
3.3.1 VeriFone Upside
In terms of the VeriFone Transaction, UCS could receive an estimated upside
participation amounting to approximately R67.6 million, which equates to
approximately 22.9 cents per UCS share.
Shareholders are referred to the UCS announcement dated 24 May 2011, which
sets out the terms and conditions pertaining to the VeriFone Transaction.
Shareholders are specifically referred to the various conditions precedent to
the VeriFone Transaction set out in the aforementioned announcement.
3.3.2 HCL Axon Upside
Shareholders are referred to the UCS announcement dated 16 July 2009. A copy
of this announcement is available on the UCS website home page at the
following link: www.ucs.co.za.
At the date of this announcement, the Board has calculated the maximum
potential HCL Axon Upside to be R19 million, which equates to approximately
6.4 cents per UCS share.
The key driver of the HCL Axon Upside is the revenue achieved by the
Enterprise Services Business for the twelve months ending 31 July 2011 and
the abovementioned potential HCL Axon Upside amount is based upon information
available as at 17 March 2011.
3.3.3 TSS MS Upside
Shareholders are referred to the UCS announcement dated 23 September 2009 and
the circular to Shareholders dated 19 October 2009. A copy of this
announcement is available on the UCS website home page at the following link:
www.ucs.co.za.
At the date of this announcement, the Board has calculated the maximum
potential TSS MS Upside to be approximately R25.8 million, which equates to
approximately 8.7 cents per UCS share.
The key driver of the TSS MS Upside is a combination of a profit and/or
revenue threshold achieved by TSS Managed Services during the financial years
ending 30 September 2012, 2013 and 2014, or an earlier elected settlement (at
the election of Tactical Software Systems (Proprietary) Limited, the parent
company of TSS Managed Services).
3.3.4 Maximum Upside
The estimated potential Maximum Upside that may arise from the Upside Events
is illustrated in the table below.
Upside Event 1 Rand Cents per UCS
(million) share 2
VeriFone Upside 3 67.6 22.9
HCL Axon Upside 19.0 6.4
TSS MS Upside 25.8 8.7
Costs relating to the (2.9) (1.0)
Delisting Implementation 4
Maximum Upside 109.5 37.0
Notes:
1. All calculations were performed as at 27 May 2011 and are net of
estimated taxes and costs specifically relating to the transactions.
2. Assuming 295 038 376 UCS shares in issue.
3. Assuming an exchange rate R6.98 per US$ and a closing price of US$ 47.23
per VeriFone share on the New York Stock Exchange at 26 May 2011.
4. Assumed total costs excluding value-added tax of R4 million after
accounting for the related reduction in tax at the marginal rate of 28%.
3.4 Illustrative Total Value range
Assuming that none of the Upside Events materialise, then the estimated
potential Total Value equates to approximately R62.3 million (21.1 cents per
UCS share) pre costs relating to the delisting estimated at R2.9 million net
of tax (1 cent per UCS share), assuming the Independent Expert arrives at the
same value at the time of the Delisting Implementation.
Assuming the Maximum Upside materialises, the estimated potential Total Value
equates to approximately R171.8 million (58.1 cents per UCS share), assuming
the Independent Expert arrives at the same value at the time of the Delisting
Implementation.
4. PROCESS PRECEDING THE DELISTING IMPLEMENTATION
The Board is in the process of taking and considering advice from its
corporate and legal advisors and finalising its understanding of and, to the
extent practical, accelerating the outstanding Upside Events in order to
arrive at a final value range in order to proceed with the Delisting
Implementation.
As soon as the Board is in a position to proceed with the Delisting
Implementation, it will make a public announcement to this effect.
The Board will provide further detail regarding the value of UCS and how this
has been arrived at the time of presenting the Delisting Implementation to
Shareholders, as well as an updated valuation from the Independent Expert
(including in respect of the Upside Events), as more fully referred to in
paragraph 3.3 above.
5. DISCLAIMER
This announcement does not constitute an offer or an undertaking to make an
offer to Shareholders by any party, including by UCS. The value ranges
disclosed in this announcement and statements relating thereto have been
disclosed on the basis that these are indicative and preliminary and may
change. Furthermore, these values are dependent on a variety of contingent
factors, the outcome of which remains uncertain at the date of this
announcement and which may materially affect the values and/or value ranges
referred to in this announcement or in future announcements.
The information contained in this announcement has not been reviewed or
reported on by UCS` auditors.
The Independent Expert provided its written consent to the disclosure of the
Preliminary Value and the reference to the opinion letter dated 27 May 2011,
as referred to in paragraph 3.2 above.
6. CAUTIONARY ANNOUNCEMENT
Shareholders are advised to exercise caution when dealing in their UCS shares
until the Board announces the Delisting Implementation and/or provides
further clarity in regard to Upside Events and/or withdraws this cautionary
announcement.
30 May 2011
Corporate Advisor and Sponsor
One Capital
Legal Advisor
Glyn Marais
Independent Expert
KPMG Services (Pty) Limited
Date: 30/05/2011 09:51:57 Supplied by www.sharenet.co.za
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