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IQG - IQuad Group Limited - Disposal by IQuad of Its 90% Equity Interest in
IQuad Verification Services (Pty) Limited and Renewal of Cautionary
Announcement
IQuad Group Limited
Incorporated in the Republic of South Africa
(Registration Number 2004/025177/06)
Share Code: IQG ISIN: ZAE000101622
("IQuad" or "the Company" or "the Group")
DISPOSAL BY IQUAD OF ITS 90% EQUITY INTEREST IN IQUAD VERIFICATION SERVICES
(PTY) LIMITED AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1 THE DISPOSAL
Shareholders are hereby advised that IQuad ("the Seller"), has entered
into an agreement with Messrs Trevor Hayter and Wade van Rooyen
(collectively hereafter referred to as "the Purchasers"), dated 2
August 2011 ("the agreement"), in terms of which the Seller will
dispose of its` 90% equity interest in IQuad Verification Services
(Pty) Limited ("IQuad Verification Services"), a subsidiary of IQuad,
on the terms and conditions set out below ("the disposal").
2 BUSINESS OF IQUAD VERIFICATION SERVICES
IQuad Verification Services is a provider of verification support
services. Their services are mainly focussed on Broad Based Black
Economic Empowerment ("BBBEE") compliance evaluations, BBBEE
verification, BBBEE training, BBBEE consulting and BBBEE strategy
planning.
3 BACKGROUND INFORMATION ON THE PURCHASERS
Messrs Trevor Hayter and Wade van Rooyen are the Purchasers in terms of
the disposal. Wade van Rooyen is part of the management team and is an
executive director of IQuad Verification Services. Until his recent
resignation from the boards of Iquad Verification Services and Iquad
Group Limited, Trevor Hayter was a non-executive director of both
entities.
4 RELATED PARTY TRANSACTION
As a result of the fact that Mr Wade van Rooyen currently is and Mr
Trevor Hayter recently was a director on the board of IQuad
Verification Services, the disposal is regarded as a related party
transaction in terms of the Listings Requirements of the JSE Limited. A
fairness opinion is however not required as stipulated in terms of rule
21.11(d) of the Listings Requirements, as the categorisation of the
disposal is less than 10%.
5 RATIONALE FOR THE DISPOSAL
IQuad Verification Services was founded in 2006 as the Group recognised
the BBBEE verification industry as a major growth area. The IQuad board
has considered the financial impact the investment has had on the Group
since inception and recent changes in legislation surrounding BBBEE
verification, and accordingly believe that the business model of IQuad
Verification Services no longer fits in with the Group`s long term
strategy.
6 THE EFFECTIVE DATE OF THE DISPOSAL
In terms of the agreement the effective date of the disposal will be 1
August 2011.
7 PURCHASE CONSIDERATION
The purchase consideration payable by the Purchasers to the Seller in
terms of the agreement is R1 500 000.
The Purchasers have a period of 90 days, from the effective date, to
settle the purchase consideration in cash, failing which the
consideration will be vendor financed by the Seller ("the vendor
loan"). The vendor loan for the purchase consideration payable in terms
of the agreement will be repaid over a 36 month term, with the first
repayment commencing 6 months after the effective date. The vendor loan
will bear interest at the prime interest rate plus 2%, compounded
monthly.
Iquad shares will be provided by the Purchasers to the Sellers as
security for the vendor financed portion of the purchase consideration
payable, if applicable. The number of shares will be calculated on the
loan value divided by the market value of the shares as at the
effective date. The market value of the shares will be calculated using
the 30 day VWAP on the effective date.
8 OTHER SIGNIFICANT TERMS OF THE AGREEMENT
Other significant terms of the disposal includes the following:
8.1 in the event that the Seller provides a vendor loan, the
Purchasers shall repay R750 000 or such lesser amount outstanding
of the vendor loan granted by the Seller, in the event that the
Purchasers conclude an agreement to resell the shares in IQuad
Verification Services to a third party, excluding management and
employees of IQuad Verification Services;
8.2 IQuad Verification Services will cease trading as IQuad BEE
Verification or IQuad Verification by 31 October 2011; and
8.3 the transfer of Iquad Verification Services shares to the
Purchasers shall only take place on receipt of the purchase
consideration in cash or upon shareholders approval of the vendor
loan.
9 CONDITIONS PRECEDENT
The disposal is subject to shareholder approval, should the purchase
consideration be financed by the vendor loan.
10 PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the disposal are presented for
illustrative purposes only and because of their nature may not give a
fair reflection of the Company`s financial position nor of the effect
on future earnings after the disposal.
Set out below are the Unaudited Pro Forma financial effects of the
disposal, based on the audited financial results for the year ended 28
February 2011. The directors of Iquad are responsible for the
preparation of the unaudited pro forma financial information.
Audited Unaudited Pro Change (%)
before the Forma after
disposal the disposal
(cents per (cents per
share) share)
Basic (loss) / (56.9) (54.9) 3.5%
earnings per share
Headline earnings per 37.3 39.3 5.4%
share
Net asset value per 403.9 402.6 (0.3%)
share
Net tangible asset 148.5 149.7 0.8%
value per share
Notes and assumptions:
1.The basic earnings per share and headline earnings per share figures
in the "Unaudited Pro Forma after the disposal" column have been
calculated on the basis that the disposal was effected on 1 March
2010.
2.The net asset value per share and the tangible net asset value per
share figures in the "Unaudited Pro Forma after the disposal" column
have been calculated on the basis that the disposal was effected on
28 February 2011.
3.Interest on the purchase consideration payable has been calculated
based on the ruling prime interest rate plus 2%.
4.The taxation rate applicable is assumed to be 28%.
5.The basic earnings per share and headline earnings per share figures
are calculated based on weighted average number of shares in issue,
net of treasury shares, of 27 382 113 shares as at 28 February 2011.
6.The net asset value per share and net tangible asset value per share
have been calculated based on 27 382 113 shares in issue, net of
treasury shares, as at 28 February 2011.
11 RENEWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement dated 6 July
2011 and are advised that negotiations are still in progress which, if
successfully concluded may have a material effect on the price of the
Company`s securities. Accordingly shareholders are advised to continue
exercising caution when dealing in their IQuad shares until a further
announcement is made.
5 August 2011
Port Elizabeth
Corporate Adviser
PSG Capital (Pty) Limited
Designated Adviser
Questco Sponsors (Pty) Limited
Date: 05/08/2011 15:55:01 Supplied by www.sharenet.co.za
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