CSG HOLDINGS LIMITED - Acquisition of the businesses of 7 Arrows and Cubed systems

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 THE BUSINESSES OF

7 ARROWS SECURITY PROPRIETARY LIMITED ('7 ARROWS') AND CUBED
SYSTEMS PROPRIETARY LIMITED ('CUBED SYSTEMS')

1.    Introduction


      CSG shareholders are advised that CSG, through its 70% owned subsidiary,
      Security Operations Group Proprietary Limited, ('the Purchaser') has entered
      into an agreement with 7 Arrows and Cubed Systems ('Agreement') in terms
      of which the Purchaser will acquire:

      - the monitoring and guarding business currently owned, managed and
          operated by 7 Arrows as a going concern ('7 Arrows Acquisition'); and
      - the security products installation and maintenance business which is
          currently being provided to 7 Arrows as a going concern ('Cubed Systems
          Acquisition').


        The 7 Arrows Acquisition and the Cubed Systems Acquisition are indivisible
        and will occur simultaneously and will be referred to collectively as 'the
        Acquisitions' and the businesses conducted by each of 7 Arrows and Cubed
        Systems will be referred to as 'the Businesses'.


      The Acquisitions include the purchase of all client contracts, operating
      contracts, licenses and supplier contracts together with assets, debtors,
      goodwill, intellectual property and stock used in the conduct of the Businesses.

2.    Nature of business

      7 Arrows


      7 Arrows provides a full suite of security services and products to residential
      and commercial clients in the Greater Johannesburg Metropolitan Area
      ('Greater Johannesburg'). The company has grown to approximately 700
      staff members in its 7 year history.

      Cubed Systems


      Cubed Systems specialises in the supply and maintenance of integrated
      systems to 7 Arrows, with an emphasis on all aspects of security using the latest
      proven technology, in a cost effective and reliable manner.
3.    Rationale for the Acquisitions


      The Acquisitions align with CSG's strategy to expand the basket of services
      in its Facility Management division and complement the group's recent
      acquisitions in the security industry. The Acquisitions also provide a platform
      for the further acquisition of security companies in Greater Johannesburg.
      Given that the Businesses operate in the security industry, it is expected that
      the Acquisitions will contribute to increasing CSG's operating margins.

4.    Suspensive conditions and effective date


      All suspensive conditions to the Acquisitions have been fulfilled and the
      Acquisitions will be effective from 1 March 2016 ('Effective Date').

5.    Consideration for the Acquisitions


      The maximum total consideration payable for the Acquisitions by the Purchaser
      is R25.640 million ('Acquisition Consideration'), to be settled in cash as
      follows:

      - R16 million to be paid on or about the Effective Date ('Initial Amount');
           and

      - the final amount of up to R9.640 million to be based on the financial
           performance of the Businesses for the twelve months immediately following
           the Effective Date ('Performance Guarantee Amount').


      Consequently, the purchase consideration for the Businesses will not be less
      than R16 million, nor more than R25.640 million.


6.    Profits and net asset value attributable to the Businesses


      The post-tax profit attributable to the Businesses to be acquired by the
      Purchaser, as extracted from the most recent management accounts for the
      year ended 28 February 2015, (being the most recent financial year end relating
      to the Businesses) was R2.676 million (upon which the Initial Amount was
      based), while the Performance Guarantee Amount was based on forecast
      earnings. The Acquisition Consideration was therefore finalised at a maximum
      forward price earnings multiple of 5.82 times. The value of the net assets
      attributable to the Businesses being acquired by the Purchaser as at
      28 February 2015 was R8.152 million. Revenue attributable to the Businesses
      for the year ended 28 February 2015 was R78.697 million.

7.    Categorisation


      Based on the Acquisition Consideration, the Acquisitions are a Category 2
      transaction in terms of the JSE Limited Listings Requirements.

Pretoria
29 February 2016

Corporate Advisor and Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)


Date: 29/02/2016 03:19:00 Supplied by www.sharenet.co.za                     
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