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Acquisition of Hi-Tech
CSG HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/011359/06)
Share code: CSG
ISIN code: ZAE000184438
("CSG" or "the Company")
ANNOUNCEMENT REGARDING:
- THE ACQUISITION OF 100% OF THE FRANCHISING SECURITY BUSINESS AND
ICASA LICENCES CURRENTLY MANAGED, OWNED AND OPERATED BY HI-
TECH SEKURITEIT LAEVELD PROPRIETARY LIMITED (“HI-TECH LAEVELD”) AS
A GOING CONCERN;
- THE ACQUISITION OF A 100% INTEREST IN THE ISSUED SHARE CAPITAL OF
THE FRANCHISEE, HI-TECH SECURITY NELSPRUIT PROPRIETARY LIMITED,
PROVIDING SECURITY AND ARMED RESPONSE SERVICES (“HI-TECH
NELSPRUIT”);
- THE ACQUISITION OF A 100% INTEREST IN THE ISSUED SHARE CAPITAL OF
WHITE RIVER HI-TECH SECURITY SERVICES PROPRIETARY LIMITED (“HI-
TECH WHITE RIVER”) PROVIDING SECURITY AND ARMED RESPONSE
SERVICES; AND
- WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
CSG shareholders (“Shareholders”) are advised that:
- CSG, through its wholly owned subsidiary (“the Purchaser”) has
entered into an agreement with Hi-Tech Laeveld, in terms of which the
Purchaser will acquire the franchising security business currently
owned, managed and operated by Hi-Tech Laeveld (“the Business”)
as a going concern (“Laeveld Acquisition”). The Laeveld Acquisition
includes the purchase of all franchise contracts together with the
operating contracts and ICASA licences, supplier contracts, debtors,
goodwill, intellectual property and stock used in the conduct of the
Business;
- CSG has entered into an agreement with The Future Kerswill Trust
(represented by Mr. J Kerswill), in terms of which CSG will acquire a
100% interest in the issued share capital of Hi-Tech Nelspruit
(“Nelspruit Acquisition”); and
- CSG has entered into an agreement with Mr. J Kerswill and Mr. JP
Kerswill in terms of which CSG will acquire a 100% interest in the
issued share capital of Hi-Tech White River (“White River
Acquisition”). The monitoring business, including the contracts,
customers and related assets of the White River franchisee of Hi-Tech
Laeveld (“White River Business”) was transferred to Hi-Tech White
River prior to the effective date (defined in paragraph 4 below).
The Laeveld Acquisition, the Nelspruit Acquisition and the White River
Acquisition will be referred to collectively as “the Acquisitions” while Hi-
Tech Laeveld, Hi-Tech Nelspruit and Hi-Tech White River will be referred to
collectively as “the Entities” in this announcement.
2. Nature of business of the Entities
Hi-Tech Laeveld
Hi-Tech Laeveld was started in 1990 and provides alarm installations, security
monitoring services and guarding services on a franchise basis and currently
has six fully fledged franchises located in Mpumalanga, each being owner
operated and managed.
Hi-Tech Nelspruit
Hi-Tech Nelspruit is wholly owned by the Future Kerswill Trust and managed
by Mr. J Kerswill. Hi-Tech Nelspruit provides alarm installation, monitoring and
reaction services to the Nelspruit area and surrounds and is the largest
franchisee of Hi-Tech Laeveld contributing approximately 60% to the income
of Hi-Tech Laeveld.
Hi-Tech White River
Hi-Tech White River is wholly owned by Mr. J Kerswill and Mr. JP Kerswill and
provides alarm installation, monitoring and reaction services to the White
River and Hazyview areas.
3. Rationale for the Acquisitions
The Acquisitions align with CSG’s strategy to expand the basket of services in
its Facility Management division. The Acquisitions provide a platform for future
acquisitions of security companies in the Mpumalanga province at lower price
earnings multiples. Hi-Tech is a major security player in the Lowveld area. It is
expected that entering the security industry will increase the operational
margins of CSG.
4. Conditions precedent and effective date
All conditions precedent to the Acquisitions have been met and the
Acquisitions are effective from 1 November 2015 (“Effective Date”).
5. Consideration for the Acquisitions
The consideration for the Acquisitions is set out below.
Laeveld Acquisition
The total consideration for the Laeveld Acquisition is R52.5 million, to be
settled in cash as follows:
- R5 million to be paid on or about the Effective Date;
- R37.5 million to be paid 21 calendar days after the Effective Date; and
- R10 million to be paid into a trust account 21 calendar days after the
Effective Date and paid to the sellers upon confirmation that, inter alia, the
operating contracts and licences have been transferred to the Purchaser.
Nelspruit Acquisition
- R26.6 million to be paid in four tranches of varying amounts, with the first
tranche being paid on or about the Effective Date and the final tranche
being paid on or before 10 December 2015;
- a final amount (less the R26.6 million upfront payment) to be based on the
financial performance of Hi-Tech Nelspruit for the twelve months
immediately following the Effective Date (at a price earnings multiple of 4
times), which amount will be payable within 7 days of the finalisation and
acceptance by both parties of the managements accounts relating to that
period; and
- the maximum consideration for the Nelspruit Acquisition will be
R55 million.
White River Acquisition
- R200 000 directly to the White River franchisee as and when this amount
becomes due in terms of a separate agreement with the franchisee;
- a final amount (less the R200 000 upfront payment) based on the financial
performance of Hi-Tech White River for months 13 to 24 after the
Effective Date (at a price earnings multiple of 4 times).
The final amount will be settled as follows:
- 50% as to cash by no later than 31 December 2017; and
- 50% through the issue of CSG shares. The shares will be issued
within 60 days of the finalisation and acceptance by both parties of
the managements accounts relating to that period at the volume
weighted average share price of CSG for the 30 business days prior
to the last day of the 24th month after the Effective Date; and
- the maximum consideration for the White River Acquisition will be
R25 million.
The maximum total consideration for the Acquisitions is R132.5 million of
which R79.3 million will be settled upfront in cash. The remaining amount of
R53.2 is to be based on the future financial performance of Hi-Tech Nelspruit
and Hi-Tech White River at a price earnings multiple of 4 times.
6. Profits and net asset value attributable to the Acquisitions
The post-tax profit attributable to the Acquisitions for the year ended
28 February 2015 (being the most recent financial year end of the Entities)
was R11.4 million, while the value of the net assets attributable to the
Acquisitions being acquired as at 28 February 2015 was R6.7 million.
Revenue attributable to the Acquisitions for the year ended 28 February 2015
was R50.6 million.
7. Categorisation
Collectively, the Acquisitions are a Category 2 transaction in terms of the JSE
Limited Listings Requirements (“LRs”).
8. Memorandum of Incorporation (“MOI”)
CSG will adhere to the provisions of paragraph 10.21 of Schedule 10 of the
LRs with regard to the Hi-Tech Nelspruit MOI and the Hi-Tech White River
MOI.
9. Withdrawal of cautionary announcement
Shareholders are referred to the cautionary and renewal of cautionary
announcements published on the Stock Exchange News Service on
7 September 2015 and 20 October 2015 respectively. Further to the
information set out in this announcement regarding the Acquisitions, caution is
no longer required to be exercised by Shareholders when dealing in their
CSG securities.
Pretoria
4 November 2015
Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
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