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Proposed disposal of the following Information Services companies: HTCSA, MIE, XDS, and Zenaptix
EOH HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/014669/06)
JSE share code: EOH ISIN: ZAE000071072
(“EOH” or “the Group”)
PROPOSED DISPOSAL OF THE FOLLOWING INFORMATION SERVICES COMPANIES:
- HOONAR TEKWURKS CONSULTING SOUTH AFRICA PROPRIETARY LIMITED;
- MANAGED INTEGRITY EVALUATION PROPRIETARY LIMITED;
- XPERT DECISION SYTEMS PROPRIETARY LIMITED; AND
- ZENAPTIX PROPRIETARY LIMITED
1. Introduction
The board of directors of EOH are pleased to announce that EOH Mthombo Proprietary
Limited (“the Seller”), a wholly-owned subsidiary of EOH, has entered into a share purchase
agreement (“SPA”) to dispose of 100% of the issued shares of Hoonar Tekwurks Consulting
South Africa Proprietary Limited (“HTCSA”), Managed Integrity Evaluation Proprietary Limited
(“MIE”), Xpert Decision Sytems Proprietary Limited (“XDS”) and Zenaptix Proprietary Limited
(“Zenaptix”) (together “Information Services”), to Bachique 842 Proprietary Limited (“the
Purchaser”)(“the Transaction”).
The Transaction is subject to the fulfilment or waiver, to the extent permissible, of the
suspensive conditions detailed in paragraph 5.3 below.
2. Description of Information Services
Information Services provides credit checks, background screening and big data, analytics and
technology in South Africa. The Information Services platform provides access to a rich pool
of data across its business units, allowing it to provide unique insights to clients.
Information Services has evolved over the years from a data provider to a holistic solution
provider for risk mitigation and data analysis tools, with each division focusing on a specific
sub-set of data-driven solutions:
- HTCSA: Data engineering and risk management
- MIE: Background screening and vetting
- XDS: Credit information bureau
- Zenaptix: Software development covering various aspects of big data
3. Overview of the Purchaser
The Purchaser is a company incorporated under the laws of South Africa and is currently a
wholly-owned subsidiary of LR Africa Holdings Limited. LR Africa Holdings Limited is advised
by Lightrock, a global private equity platform that backs purpose-driven entrepreneurs
tackling the world’s biggest challenges. Since 2007, Lightrock and its predecessors in title have
invested in companies that pursue scalable and tech-driven business models around the key
impact themes of people, planet, and productivity/tech for good. Lightrock’s portfolio
includes more than 60 high-growth companies, supported by over 70 professionals based in
5 offices across Europe, Latin America, India and Africa. Lightrock is backed by the Princely
House of Liechtenstein and LGT, the international private banking and asset management
group.
4. Rationale for the Transaction
The Transaction is in line with EOH’s stated strategic intent of disposing of a targeted group
of IP companies as part of the Group’s deleveraging processes and represents a significant
milestone in the implementation of these processes. The achievement of a more sustainable
capital structure will allow the Group flexibility to execute on its long-term growth strategy.
EOH is confident that Lightrock is the right partner to unlock Information Services’ full
potential, enabling both future growth and international expansion in its operations.
5. Salient terms of the Transaction
5.1 Purchase consideration
Subject to the fulfilment or waiver, as the case may be, of the suspensive conditions (detailed
in paragraph 5.3 below), closing will take place on the last business day of the month in which
the last suspensive condition is fulfilled (“the Closing Date”).
The cash consideration payable by the Purchaser to the Seller on the Closing Date will be
calculated with reference to an enterprise value of R445 million and shall be an amount equal
to the base purchase price of R417 000 000 adjusted for final net debt and working capital
benchmarks, certain once-off items and locked box adjustments as at 31 July 2021 (“the
Locked Box Date”). Interest will accrue on the cash consideration from the Locked Box Date
up to (and including) the Closing Date.
The Purchaser will fund the purchase consideration from equity and third-party debt.
5.2 Use of proceeds
The proceeds of the Transaction, net of costs, will assist EOH in creating a more sustainable
capital structure and will primarily be applied to reduce debt.
5.3 Suspensive Conditions
The Transaction is subject to the fulfilment or waiver, as the case may be, of the suspensive
conditions contained in the SPA, including:
- Unconditional approval from the Financial Surveillance Department (“FSD”) of the South
African Reserve Bank, or, if any conditions are imposed by the FSD on any of the parties to
the Transaction, such party accepts such conditions;
- The shareholders of EOH approving the ordinary resolution as required in terms of the JSE
Limited (“JSE”) Listings Requirements to approve the Transaction;
- The counterparties to selected contracts that Information Services has a ‘consent
requirement’ clause in terms of change in control, providing the Seller such consent in
writing;
- Consent being received from the lenders to EOH;
- The acquisition financing agreements entered between the Purchaser and its third-party
lenders for the provision of funding for the Transaction becoming unconditional in
accordance with their terms;
- The Purchaser and the Seller entering into a transitional services agreement in respect of
Information Services and such agreement becoming unconditional; and
- The insurance policy providing no recourse to the Sellers in respect of any insured claim in
respect of the Sellers’ warranty, being concluded by the Purchaser, on terms satisfactory
to both the Seller and the Purchaser.
5.4 Other significant terms
The Purchaser shall be entitled to terminate the SPA at any time before the Closing Date if a
material adverse event occurs in relation to Information Services.
The SPA contains representations and warranties which are standard for a transaction of this
nature.
6. Financial information
6.1 Net Asset Value
The net asset value of Information Services as at 31 July 2021, being the date of the last
audited financial information of Information Services, was R344.0 million (R135.6 million
excluding related goodwill and identifiable intangible assets).
6.2 Profit After Tax
The audited profit after tax attributable to Information Services for the twelve months ended
31 July 2021 was R79.1 million (R37.9 million excluding identifiable amortisation on group
recognised intangible assets and once-off non-cash gain).
6.3 EBITDA
The EBITDA attributable to Information Services for the twelve months ended 31 July 2021
was R138.4 million (R88.0 million excluding the once-off non-cash gain mentioned in 6.2
above).
The Profit After Tax and Net Asset Value has been extracted from the Information Services
audited annual financial statements for the year ended 31 July 2021 which were prepared in
accordance with Information Services’ accounting policies and International Financial
Reporting Standards. The pro forma financial effects of the Transaction will be set out in the
circular to EOH shareholders (referred to in paragraph 8 below).
7. Categorisation
The Transaction meets the definition of category 1 transaction as contemplated in the JSE
Listings Requirements. As a result, the Transaction is required to be approved by way of an
ordinary resolution of EOH shareholders, which will require the support of more than 50% of
the votes exercised thereon.
8. Circular to shareholders
A circular setting out additional details of the Transaction (“the Circular”) will be distributed
to EOH shareholders in due course. Further details of the Transaction, together with, inter alia,
the pro forma financial effects of the Transaction, will be included in the Circular. The Circular
will incorporate a notice convening a general meeting of the EOH shareholders (“the General
Meeting”) at which EOH shareholders will be requested to vote on the relevant resolutions.
At the same time, the salient dates and times of the Transaction, including the date of the
General Meeting, will be announced on SENS.
11 March 2022
Sponsor
Java Capital
Financial Advisors
Rothchild & Co
Legal Advisor to EOH
Webber Wentzel
Overall Strategic and lead advisor to EOH
Rothchild & Co
Date: 11-03-2022 12:00:00
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