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Transaction Diluting Jasco's interest in Reflex Solutions Proprietary Limited
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1987/003293/06)
Share Code: JSC ISIN: ZAE000003794
("Jasco" or “the Group”)
TRANSACTION DILUTING JASCO’S INTEREST IN REFLEX SOLUTIONS PROPRIETARY
LIMITED
1 INTRODUCTION
Shareholders are advised that the minority shareholders, Gregory Michael Wilson (“Wilson”) and
David Edward Robinson (“Robinson”) (together the “Minority Shareholders”), of Reflex Solutions
Proprietary Limited (“Reflex” or the “Company”), a 51% owned subsidiary of Jasco, have entered
into a subscription agreement (“Subscription Agreement”) with Reflex through which Wilson and
Robinson will acquire, and Reflex will issue a total of 70 additional ordinary Reflex shares, at a share
price of R142,857.14 per share. This share subscription will effectively dilute Jasco’s current majority
interest of 51% in Reflex, to 47.7% (the “Transaction”).
2 BACKGROUND TO REFLEX
Jasco acquired its 51% interest in Reflex with effect from 1 May 2017, from Wilson and Robinson.
Reflex was established in 2000 by Wilson in Johannesburg and initially specialised in the IT
managed services market before adding hosted IT Infrastructure, cloud services and more recently,
fibre to the home (FTTH) solutions.
Reflex’s operations cover Johannesburg, Cape Town, Port Elizabeth and Durban. Its blue-chip
customer base spans the retail, logistics, education, telecommunications and financial services
industries. It has a solid track-record of double-digit revenue growth since 2013, with consistent
operating margins above 10%.
3 BACKGROUND AND RATIONALE FOR THE TRANSACTION
Due to growing demand for data services from its existing customers, Reflex requires additional
capital funding for its ongoing investment in its data centre and network infrastructure. Jasco has
agreed to the rights issue of R10 million in Reflex as this is in the best interest of the Company.
Jasco has decided not to follow its rights, but has entered into a Put Option Agreement as detailed
below.
4 KEY TERMS OF THE TRANSACTION
4.1 Transaction Agreements
The Parties have entered into a suite of agreements to effect the Transaction. The key terms,
effective dates and conditions precedent to each of the relevant agreements are detailed below:
4.1.1 Reflex Subscription Agreement
In terms of the Subscription Agreement, Wilson will acquire 58 and Robinson will acquire
12 additional Reflex ordinary shares at a purchase price of R142, 857,14 per share.
The Subscription Agreement will increase the Minority Shareholders’ current interest of
490 ordinary shares (49%) in Reflex, to 560 ordinary shares (52.3%), and as a result,
revert the majority interest in Reflex back to Robinson and Wilson.
The subscription date is the 2nd business day after the date on which the condition
precedent to the Subscription Agreement has been filled, expected to be 22 September
2020.
4.1.1.1 The Transaction Consideration
The Transaction Consideration is the value of the 70 additional Reflex ordinary
shares acquired by the Reflex Minority Shareholders, being R10 000 000.
R8 285 714.29 will be settled by Wilson and R1 714 285.71 will be settled by
Robinson, to Reflex, in cash payments.
As the Transaction is resultant from a new share issue by Reflex to the Minority
Shareholders, the funds will flow to Reflex and no consideration is payable to
Jasco.
4.1.1.2 Condition precedent of Subscription Agreement
The Subscription Agreement is subject to the fulfilment of the conditions
precedent that by no later than 14 days after the signature date of the
Subscription Agreement or such later date as is agreed in writing by the parties,
Jasco providing its signed written consent and waiver of any pre-emptive rights
and/or other rights it may have to be offered the 70 additional Reflex ordinary
shares, which consent and waiver has been provided.
4.1.2 Reflex Share Swap Agreement
In conjunction with the Subscription Agreement, Wilson, Robinson and Myriad Capital
Communications Proprietary Limited (“Myriad”) entered into a share swap agreement, in
terms of which, subject to the implementation of the Subscription Agreement, Wilson will
swap 462 Reflex ordinary shares and Robinson will swap 98 Reflex ordinary shares
(collectively the “Swap Shares”), both in exchange for an equal amount of Myriad
ordinary shares (“Share Swap Agreement”) in accordance with the provisions of
section 42 of the Income Tax Act, 1962.
The Share Swap Agreement will have the effect of transferring the direct interests of both
Wilson and Robinson in Reflex, to Myriad, with Wilson and Robinson holding an indirect
interest in Reflex through their newly acquired interest in Myriad.
Subject to the implementation of the Share Swap Agreement, Myriad will own a total of
560 Reflex ordinary shares and Jasco will own the remaining 510 Reflex ordinary shares.
The effective date of the Share Swap Agreement is, subject to the fulfilment of the
conditions precedent to the Share Swap Agreement, the same date as the Subscription
Date of the Subscription Agreement (“Completion Date”), on which date the ownership,
risk in and benefit attaching to the Swap Shares will pass to Myriad. The effective date
is expected to be 22 September 2020.
4.1.2.1 Conditions Precedent of Share Swap Agreement
In addition to the Subscription Agreement becoming unconditional and
effective, the Share Swap Agreement is subject to the fulfilment of the following
conditions precedent by no later than 14 days after the signature date of the
Share Swap Agreement (or such dates agreed to in writing between the
parties):
• the written waiver by Jasco of any pre-emptive rights it may have to
purchase the Swap Shares in priority to Myriad;
• an amended and restated shareholders agreement in respect of Reflex,
recording Myriad as a shareholder, being concluded and becoming
unconditional in accordance with its terms (which amended and restated
shareholders agreement requires, amongst other things, each of Wilson
and Robinson to sign written restraint of trade agreement in favour of
Reflex); and
• board resolutions approving the Share Swap being provided by the boards
of directors of Myriad and Reflex.
As at the date of this announcement all the above conditions precedent were
fulfilled.
4.1.3 Reflex Put Option Agreement
Further to the Subscription and Share Swap Agreements, Myriad, Reflex and Jasco
entered into a put option agreement, in terms of which Myriad has granted Jasco an
option, exercisable at Jasco’s sole discretion, to require Myriad to purchase from Jasco,
its entire Reflex shareholding of 510 Reflex Ordinary shares (“Put Option Shares”), for a
transaction consideration of R72 857 143 (the “Put Option Agreement” and the “Put
Option”).
Jasco will have 90 days from the effective date, 18 September 2020, in which to exercise
the Put Option, by written notice to Myriad (the “Put Option Period”). On the expiry of the
Put Option Period, the Put Option will, to the extent that it has not been exercised, lapse
and be of no further force or effect.
The further disposal of the Put Option Shares will be voetstoots and Jasco will not be
obliged to provide any warranties other than the warranties that it is the legal, beneficial
and registered owner of the Put Option Shares and that, other than pursuant to a pledge
and cession of the Put Option Shares provided by Jasco to Myriad as security for a loan
to be advanced by Myriad to Jasco pursuant to the Myriad Loan Agreement detailed in
4.1.6, the Put Option Shares are not encumbered.
If Jasco elects to exercise the Put Option within the Put Option Period, the Put Option
will be effective on the date of the last fulfilment or waiver of the Put Option Conditions
Precedent as detailed in 4.1.3.3 (the “Put Option Effective Date”) and the closing date of
the Put Option will fall on date which is six weeks after the Put Option Effective Date.
In the event that the Put Option is exercised by Jasco, the further disposal will be
categorised as a category 1 disposal in terms of the Listings Requirements of the JSE
Limited and will require Jasco shareholders’ approval. Shareholders will be advised
through a further SENS announcement of this potential event and a circular regarding
the Put Option, including a notice of general meeting will be distributed to shareholders.
4.1.3.1 Put Option Consideration
The Put Option Consideration of R72 857 143 will be valued at the same value
as the Disposal Consideration at R142, 857,14 per Put Option Share. The total
outstanding amount of the Myriad Loan Agreement detailed in 4.1.5 will be
offset against the Put Option Consideration.
If Reflex at any time between the Signature Date and the Closing Date of the
Put Option Agreement, declares and pays any dividends to its shareholders,
such that Jasco receives dividends with a total value:
• greater than R3,233,000.00, the Put Option Consideration will be
reduced by an amount equal to the difference between the total value
of all dividends received by Jasco and R3,233,000.00 on a Rand for
Rand basis; or
• less than R3,233,000.00, the Put Option Consideration will be
increased by an amount equal to the difference between
R3,233,000.00 and the total value of all dividends received by Jasco
on a Rand for Rand basis.
4.1.3.2 Conditions Precedent to the Put Option Agreement
The Put Option Agreement is subject to the fulfilment or waiver of the
following conditions precedent:
• The signature of the following agreements together with the signature
of the Put Option Agreement:
- the Reflex Master Services Agreement detailed in 4.1.4;
- the Reflex Subscription Agreement detailed in 4.1.1;
- the Reflex Share Swap Agreement detailed in 4.1.2; and
- the Myriad Loan Agreement detailed in 4.1.6.
• The Myriad board of directors and the shareholders having passed the
requisite resolutions approving the Put Option Agreement and the grant
of the Put Option to Jasco.
• The Reflex board of directors having passed the requisite resolutions
approving the Put Option Agreement.
• The Jasco board of directors having passed a resolution approving the
Put Option Agreement.
As at the date of this announcement all the above conditions precedent were
fulfilled.
4.1.3.3 Conditions Precedent to the Put Option
If Jasco elects to exercise the Put Option within the Put Option Period, the
implementation of the Put Option transaction will be subject to the fulfilment of
the following Put Option Conditions Precedent:
• on the date of the Put Option Notice, the board of directors of Jasco will
have passed a resolution approving the exercise by Jasco of the Put
Option and giving the directors of Jasco the power to exercise the Put
Option and to perform all acts required of Jasco in order to implement the
Put Option ttransaction;
• by not later than 120 days after the date of the Put Option Notice, the
requisite majority of shareholders of Jasco will have passed the requisite
resolution(s) in accordance with the Companies Act and/or the JSE
Listings Requirements approving the exercise by Jasco of the Put Option
and giving the directors of Jasco the power to exercise the Put Option and
to perform all acts required of Jasco in order to implement the Put Option
ttransaction;
• by not later than 120 days after the date of the Put Option Notice, to the
extent applicable, the regulatory approvals required by, amongst others,
the Competition Authorities and the Takeover Regulation Panel
established in terms of the Companies Act, for the implementation of the
Put Option Transaction shall have been granted;
• by not later than 14 days after the date of the Put Option Notice,
? the Reflex Master Service Agreement will have become unconditional
in accordance with its terms;
? the Reflex Subscription Agreement will have become unconditional in
accordance with its terms; and
? the Reflex Share Swap Agreement will have become unconditional in
accordance with its terms.
4.1.4.4 Call Option
The Put Option Agreement further provides Jasco with a call option which will
allow Jasco, in the event that Myriad fails to pay the Put Option price (“Trigger
Event”), to purchase 36 additional Reflex ordinary shares at the same value
per share as the Disposal and Put Option shares, within 180 days from the
Trigger Event.
If exercised, the call option will result in Jasco’s interest in Reflex being restored
to a majority interest of 51% as it was prior to the Disposal. In the event that
the call option is exercised it is expected to be classified as a category 2
acquisition in terms of the JSE Listings Requirements. Shareholders will be
advised through a further SENS announcement should this event take place.
4.1.4 Reflex Master Services Agreement
Jasco, Reflex and four of its wholly owned subsidiaries (namely Jasco Trading (Pty) Ltd
(“Jasco Trading”), Jasco Systems (Pty) Ltd, Jasco Enterprise (Pty) Ltd and Jasco
Security and Fire (Pty) Ltd (“Jasco Subsidiaries”) entered into a revised written master
services agreement in terms of which, amongst other things, Jasco agrees to appoint
Reflex, and Reflex agrees to accept such appointment, to continue to provide certain
services and certain products to the Jasco group of companies for a period of three
years, with the option to renew the agreement for a further two years (“Reflex Master
Services Agreement”). The Reflex Master Services Agreement replaces the existing
master services agreement entered into between Reflex and Jasco Trading on 21
November 2019 (“Existing Master Services Agreement”).
4.1.4.1 Conditions Precedent to the Reflex Master Services Agreement
The Reflex Master Services Agreement is subject to the fulfilment or waiver
of the following cconditions precedent within 7 days of the signature date of the
Reflex Master Services Agreement:
• the Guarantee and Indemnity Agreement detailed in 4.1.5 being
concluded and becoming unconditional; and
• the passing of resolutions of the directors and shareholders of Jasco
and the Jasco Subsidiaries (including resolutions in terms of section
44, 45 and 46 of the Companies Act) to the extent required, authorising
the conclusion of the Reflex Master Services Agreement.
Subject to the fulfilment of the conditions precedent, the Reflex Master Services
Agreement will only commence if Jasco elects to exercise the Put Option
detailed in 4.1.3, such that the commencement date of the Reflex Master
Services Agreement will be the first day of the month following the date on
which Jasco exercises the Put Option. If Jasco does not elect to exercise the
Put Option, the Existing Master Services Agreement will remain in place. If
Jasco exercises the Put Option but the Put Option transaction fails to become
unconditional in accordance with its terms or Myriad fails to pay the Put Option
price, then the Reflex Master Services Agreement will cease to apply and the
Existing Master Services Agreement shall apply with effect from the first day of
the month following the applicable failure event.
4.1.5 Guarantee and Indemnity Agreement
Jasco and Reflex entered into a written guarantee and indemnity agreement in terms of
which, amongst other things, Jasco agrees to unconditionally and irrevocably guarantee,
as a principal obligation, the due and punctual payment of all monies which the Jasco
Subsidiaries may owe to Reflex, and the due and punctual performance and discharge
by the Jasco Subsidiaries of their respective obligations, under the Existing Master
Services Agreement (“Guarantee and Indemnity Agreement”),
4.1.5.1 Condition Precedent to the Guarantee and Indemnity Agreement
The Guarantee and Indemnity Agreement is subject to the fulfilment of the
condition precedent that, within 7 days of the signature date of the Guarantee
and Indemnity Agreement, resolutions are passed of the directors and
shareholders of Jasco (including resolutions in terms of section 44, 45 and 46
of the Companies Act) to the extent required, authorising the conclusion of the
Guarantee and Indemnity Agreement.
4.1.6 Myriad Loan Agreement
Myriad, Reflex, Jasco and a 100% owned subsidiary of Jasco, Jasco Trading entered
into a loan agreement in terms of which Myriad will lend to Jasco up to an amount not
exceeding the sum of R25 000 000, (the “Myriad Loan Agreement”).
The loan amount will be advanced to Jasco within two weeks of Jasco providing a written
request to Myriad for the payment of the loan amount, provided that such written request
may only be made if Jasco has exercised the Put Option. The Loan will be repayable on
the earlier of:
• the date on which the Put Option price is payable by Myriad to Jasco, if
the effective date of the Put Option transaction falls on a date on or before
31 December 2020, in which event, the loan amount and interest accrued
thereon will be offset against the Put Option Consideration;
• 31 December 2020, if the effective date of the Put Option transaction has
not occurred by 31 December 2020; or
• the date on which the condition precedent to the Put Option transaction
relating to the passing of the requisite resolutions by the shareholders of
Jasco in accordance with the Companies Act and/or the JSE Listings
Requirements fails.
The loan amount will accrue interest at the prime interest rate plus four percent from the
advance date to the earlier of the date of final repayment or the effective date of the Put
Option transaction provided that the Put Option Shares are subsequently transferred into
the name of Myriad. In the event that the Put Option transaction has not become effective
by 31 December 2020, the loan amount will accrue interest at the prime interest rate plus
ten percent, from the advance date until the date of final repayment save that if the Put
Option price is due and payable and has not been paid by Myriad on or before 15
February 2021, the interest rate increase from prime plus four percent to prime plus ten
percent will only apply if the loan amount and accrued interest is repaid by Jasco after
31 March 2021.
In terms of the Myriad Loan Agreement, Jasco has pledged all of the 510 Put Option
Shares to Myriad as security for the Myriad Loan, in the event that Jasco fails to pay any
amount due by it to Myriad in terms of the Myriad Loan Agreement, or in the event of an
order relating to the liquidation or commencement of business rescue proceedings of
Jasco.
As additional security for the Myriad Loan, Jasco Trading has agreed to provide a
suretyship in favour of Myriad for the due performance by Jasco of its repayment
obligations to Myriad in terms of the Myriad Loan Agreement.
4.1.6.1 Conditions Precedent to the Myriad Loan Agreement
The Myriad Loan Agreement is subject to the fulfilment of condition precedent
that within 10 business days of the signature date of the Myriad Loan
Agreement, resolutions of the directors and shareholders of Jasco and Jasco
Trading (including resolutions in terms of section 44, 45 and 46 of the
Companies Act) to the extent required, authorising the conclusion of the Myriad
Loan Agreement are passed.
5 PROFIT AND NET ASSET VALUE ATTRIBUTABLE TO REFLEX
The net assets of Reflex as per the unaudited interim financial results for the 6 months ended 31
December 2019, was R34,4 million, and the net operating profit after tax attributable to the net assets
for the same period was R7,4 million. The unaudited interim financial results for the 6 months ended
31 December 2019 was prepared in accordance with IFRS.
6 CATEGORISATION OF THE TRANSACTION
The Disposal constitutes a category 2 transaction in terms of the Listings Requirements of the JSE
Limited, and is therefore not subject to Jasco shareholder approval.
Midrand
21 September 2020
Legal Advisor to Jasco
Stein Scop Attorneys Inc.
Corporate Advisor to Jasco
Samuel Kennedy
Joint Corporate Advisor and Sponsor
Grindrod Bank Limited
Date: 21-09-2020 09:20:00
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