WORKFORCE HOLDINGS LIMITED - Acquisition of Quyn and Withdrawal of Cautionary Announcement

Acquisition of Quyn and Withdrawal of Cautionary Announcement

Workforce Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2006/018145/06)
Share code: WKF ISIN: ZAE000087847
(“Workforce” or “the Company”)

ACQUISITION OF QUYN AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT



1. INTRODUCTION

   Further to the ‘Cautionary Announcement’ dated 14 October 2015 and subsequent ‘Renewal of Cautionary
   Announcements’ dated 30 November 2015 and 14 January 2016, the board of directors of Workforce (“the
   Board”) is pleased to inform shareholders that Workforce has entered into an agreement with Quintonox
   Investments Proprietary Limited (“Quintonox” or “the Seller”) to acquire the entire share capital and
   claims in:
   
   -   Quyn International Outsourcing Proprietary Limited, Quyn Payroll Services Proprietary Limited, Quyn
       HR Consulting Proprietary Limited, Molapo Quyn Outsourcing Proprietary Limited; and
   -   Sizuluntu Staffing Solutions Proprietary Limited (“Sizuluntu”) (save for the shares held by the Broad-
       Based Black Economic Empowerment shareholders in Sizuluntu),
   
   collectively referred to hereinafter as “Quyn”, from Quintonox subject to the conditions set out in paragraph
   2.4 below (“the Acquisition”).

2. THE ACQUISITION
   
   2.1 Nature of the business Quyn
       Established in 1988, Quyn offers its clients, both local and international, a range of outsourced staff
       related services including temporary employment solutions, payroll administration and management,
       HR and IR consulting and permanent placements.

   2.2 The rationale for the Acquisition
       Quyn’s expertise, which is the provision of technical skills to its clients across a wide range of
       industries, represents diversification for Workforce, which operates predominantly in the non-technical
       labour segment. The combined entities will allow for the achievement of economies of scale,
       optimisation of operations and access to Workforce’s working capital will expedite Quyn’s growth.
       Additionally, Quyn’s existing client base will allow Workforce to cross sell its range of diversified human
       capital related services to these clients.

   2.3 Effective date and purchase consideration
       The effective date of the Acquisition is 1 February 2016 (“Effective Date”).
       The total amount payable by Workforce to the Seller as consideration for the Acquisition is R75 million
       (“Purchase Consideration”) payable in cash and will be discharged in six tranches as follows:

       2.3.1   an amount of R30 million by no later than 15 February 2016;
       2.3.2   an amount of R6.25 million after a period of three months from the Effective Date;
       2.3.3   an amount of R6.25 million after a period of six months from the Effective Date;
       2.3.4   an amount of R6.25 million after a period of nine months from the Effective Date;
       2.3.5   an amount of R18.75 million after a period of 12 months from the Effective Date; and
       2.3.6   an amount of R7.5 million after a period of 24 months from the Effective Date.

       The Purchase Consideration is based upon the achievement by Quyn of an audited Profit Before
       Interest and Tax (“PBIT”) of R15 million for the year ending 29 February 2016. In the event that PBIT
       for the 12 month period ending 29 February 2016 is lower than R14.5 million, the Purchase
       Consideration will be reduced by R5 for every R1 shortfall in PBIT below R15 million.
       Furthermore, the Purchase Consideration will be reduced by the value of any Accounts Receivable
       balances, as warranted by the Seller, that are unpaid after 90 days from the Effective Date. Workforce
       will have the right to put any such uncollected Accounts Receivable balances back to the Seller who
       will be required to pay the value thereof to Workforce within 14 days of such put.

   2.4 Conditions precedent
       In addition to the conditions precedent as are normal in transactions of this nature, including the
       conclusion of a due diligence investigation which will be performed to the satisfaction of Workforce,
       the following relevant conditions precedent to the Acquisition are disclosed:

       2.4.1    the signature of a Sale of Shares Agreement between the Seller and Workforce containing the
                various clauses and warranties as are normal and usual in a transaction of this nature and
                incorporating the aforementioned terms; and
       2.4.2    the signature of service agreements with all key Quyn personnel.

3. THE VALUE OF, AND PROFITS ATTRIBUTABLE TO, THE NET ASSETS OF QUYN

   The value of the net assets that are the subject of the Acquisition as at 28 February 2015 was R31.4
   million. The profit before interest and tax attributable to the net assets that are the subject of the Acquisition
   for the year ended 28 February 2015 was R27.9 million.

4. CLASSIFICATION OF THE ACQUISITION

   The Acquisition is classified as a Category 2 transaction in terms of the Listings Requirements of JSE
   Limited.

5. WITHDRAWAL OF CAUTIONARY

   Following this announcement, shareholders are advised that the cautionary is withdrawn and shareholders
   are no longer required to exercise caution when dealing in the Company’s securities.


Johannesburg
21 January 2016

Corporate and Designated Adviser
Merchantec Capital

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