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PNC - Pinnacle Technology Holdings Limited - Acquisition of Explix Pinnacle Technology Holdings Limited Registration number 1986/000334/06 Share Code: PNC ISIN: ZAE000022570 ("Pinnacle" or the "Company") ACQUISITION BY PINNACLE OF AN ADDITIONAL INTEREST IN EXPLIX BUSINESS SOLUTIONS PROPRIETARY LIMITED, (PREVIOUSLY MOYAHABO DIGITAL SOLUTIONS PROPRIETARY LIMITED) ("EXPLIX") FROM SEBMAT INVESTMENT GROUP PROPRIETARY LIMITED ("SEBMAT") AND BLADE FINANCIAL SERVICES PROPRIETARY LIMITED ("BLADE"), (COLLECTIVELY "THE SELLERS") - A SMALL RELATED PARTY TRANSACTION 1 Introduction Shareholders are advised that Pinnacle entered into a Sale of Shares Agreement on 14 October 2011 ("the Agreement"), whereby the Sellers will dispose of their 49% stake in Explix ("the Sale Shares") and their claim against their loan accounts with Explix amounting to R115 483 to Pinnacle for a total purchase price of R3 500 000 ("the Purchase Price") ("the Sale Transaction"). The effective date of the Sale Transaction is the completion date being the first business day following the day of fulfilment of the suspensive condition as set out below ("Effective Date"). The business of Explix is the marketing, distribution, installation and provisioning of Sharp branded multi-function printers ("MFPs") to both commercial and public sector entities. Explix is currently one of two distributors appointed by Sharp for MFPs. Pinnacle already owns 51% of Explix. 2 Rationale The Board of Pinnacle ("the Board") believes that the business of Explix should be managed within the business of one of its major trading arms, Pinnacle Africa. Doing this would eliminate the need for the separate overhead infrastructure currently in place at Explix therefore reducing overall costs and would place the brand within the much larger and more comprehensive distribution and selling organization of Pinnacle Africa. The Sharp MFP product line is known internationally to comprise high quality, reliable and well-priced equipment. Despite this the brand has yet to be fully recognised as such in the Southern African market. The Board believes that introducing the brand into the Pinnacle Africa infrastructure would allow the true potential that it sees in the Sharp MFP product line to be realised. 3 Salient terms In terms of the Agreement, the Sellers shall, for the Purchase Price, dispose of 49% of the issued ordinary share capital in Explix held by it to Pinnacle plus their loan account claims against Explix, which the Sellers warrant amounts to R115 483. The Sellers warrant in terms of the Agreement that they are the registered and beneficial owners of the Sale Shares and that the Sale Shares are not subject to any prior rights or encumbrances of any nature and no person has any right, title, interest in or option in and to the Sale Shares as of the Effective Date. The Sellers also warrant that they have jointly and/or individually disclosed to the Purchaser all facts and circumstances or knowledge that may be in their collective or individual possession, which may be material to the Sale Transaction and/or to any purchaser of the Sale Shares. The Sellers have indemnified the Purchaser against any loss that it may incur as a result of any breach of the warranties referred to above. Pinnacle shall make payment of the Purchase Price to the Sellers in cash within two business days of the Effective Date. Pinnacle Technology Shared Management Services Proprietary Limited, a subsidiary of Pinnacle ("PTSMS") has entered into a related and interdependent Enterprise Development and Co-operation Agreement with Sebtech Technologies Proprietary Limited ("Sebtech") ("the Enterprise Development Transaction"), a company that has substantially the same ownership as Sebmat, and is a black owned, controlled and managed office automation and telecommunications operating company in that grouping of companies. In terms of this Enterprise Development and Co-operation Agreement, PTSMS will make a grant within seven working days of the completion of the agreement to be known as the "Enterprise Development Contribution" amounting to R5 446 667 (inclusive of VAT) to Sebtech for the purposes of assisting and accelerating the development of Sebtech so that Sebtech may achieve sustainable financial and operational independence from the Company as a non-exclusive reseller. In terms of this agreement the Pinnacle group of companies (including Explix) and Sebtech will cooperate in the future to attract business to Sebtech for its benefit and for the benefit of Explix and the Pinnacle group of companies as one of their accredited resellers. PTSMS considers that the payment will qualify under Series 600 of the Codes of Good Practice as gazetted on 9 February 2007 and issued under section 9 of the BEE Act as Enterprise Development expenditure. 4 Suspensive conditions As of the date of publication of this announcement there were no unfulfilled suspensive conditions, save for the approval by the JSE Limited ("JSE") of the fairness opinion referred to in paragraph 6 below. 5 Pro forma financial effects The combined pro forma financial effects of the Sale Transaction and the Enterprise Development Transaction (collectively "both Transactions") on Pinnacle`s financial results for the six months ended 30 June 2011 are not significant. 6 Independent Opinion The Board has appointed Mazars Corporate Finance Proprietary Limited, an independent expert to provide the Company with a fairness opinion on the combined effect of both Transactions. The appointment of the independent expert has been approved by the JSE and the independent expert has issued a fairness opinion which is currently with the JSE for approval. 7 Small related party transaction Explix and Sebmat share a common director as do Explix and Blade. In addition Sebmat is material shareholder in Explix. The Purchase Price together with the Enterprise Development Contribution amount to 0.50% of the market capitalisation of Pinnacle calculated as at close of business on 14 October 2011 and therefore both Transactions are together classified to be a small related party transaction in terms of Section 10.7 of the Listings Requirements of the JSE. 8 Cautionary Announcement Pinnacle issued a cautionary announcement on 14 October 2011 advising that the Company has entered into negotiations which, if successfully concluded, may have a material effect on the price of the Company`s securities. This announcement, i.e. of both Transactions detailed above, is unrelated to the cautionary announcement which remains in effect until further notice. Midrand 17 October 2011 Sponsor Deloitte & Touche Sponsor Services (Pty) Ltd Date: 17/10/2011 16:56:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
