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JSC - Jasco - Acquisition by Jasco of the remaining interest in Telesciences

Release Date: 28/10/2011 07:30
Code(s): JSC
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JSC - Jasco - Acquisition by Jasco of the remaining interest in Telesciences (Proprietary) Limited JASCO ELECTRONICS HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1987/003293/06) Share Code: JSC & ISIN: ZAE000003794 ("Jasco" or "the company") ACQUISITION BY JASCO OF THE REMAINING INTEREST IN TELESCIENCES (PROPRIETARY) LIMITED ("TELESCIENCES") 1. Introduction On 1 July 2009, shareholders were advised that Jasco had acquired a 30% interest in Maringo Communications (Pty) Limited ("Maringo") and Maringo Software Solutions (Pty) Limited. This interest in Maringo was increased to 36,5% during the year ended 30 June 2010. Effective 1 January 2011, Jasco increased its effective stake in Maringo to 85% by restructuring its shareholding in Telesciences (a wholly owned subsidiary at the time) and Maringo (an associate company at the time) such that post the transaction, Jasco`s shareholding in Telesciences was reduced to 85% and Telesciences owned 100% of Maringo ("Phase 2 Maringo Transaction"). The purchase consideration paid by Jasco to the founding shareholders of Maringo ("Maringo Vendors") was R8,4 million and was discharged by issuing to the Maringo Vendors new shares in Telesciences for a 15% minority stake in Telesciences. Shareholders were advised of the Phase 2 Maringo transaction as part of the 31 December 2010 interim results that were announced on the Securities Exchange News Service of the JSE on 23 March 2011. Maringo Software Solutions (Pty) Ltd was excluded from Phase 2 and remains an associate at 30%, and continues to be equity accounted. Following on from the Phase 2 Maringo Transaction, Jasco wishes to advise shareholders that it has concluded an agreement with the Maringo Vendors to acquire their 15% minority stake in Telesciences ("the Acquisition") for a cash consideration of R6,5 million ("purchase consideration"). 2. Nature of Telesciences and Maringo businesses Telesciences holds the sole and exclusive right to distribute 3M telecommunication products into the fixed line networks. Telesciences also sells fibre and wireless technologies in the form of products and services into the fixed line and mobile networks. These products are mainly imported in terms of exclusive agency agreements with foreign principals. The products are often combined into a customised technology solution for deployment into the "last mile" of a fixed line or wireless telecommunications network. Maringo is a value added reseller of converged voice and data connectivity solutions and hosted solutions sourced from a major mobile telecommunications operator. It is specifically focused on the small corporate and SMME markets in South and southern Africa. 3. Rationale for the Acquisition Jasco`s recently announced strategy involves building effective scale to ensure competitiveness and relevance. Furthermore, focused business development and a unified brand and marketing strategy incorporating an effective product offering to clients as well as diversification of markets and geographies is considered as key in the company achieving its growth goals. To ensure a more integrated business development focus and a "one-group" performance culture, the group was restructured into three verticals: * Information and Communication Technology ((ICT) Solutions) This vertical has historically been the backbone of Jasco and Spescom. * Industry Solutions The second vertical offers innovative solutions for industry and commerce outside of the ICT sector. * Energy Solutions The third vertical includes the Jasco businesses of Special Cables and T- Components, now combined as Jasco Electrical Manufacturers. The acquisition of the remaining 15% stake in Telesciences fits well into Jasco`s strategy of an integrated business. The consolidated business will provide the ICT Solutions vertical with critical mass and wider service offerings in line with market demands and will allow for a significant up-sale of its connectivity solution. 4. Salient features of the Acquisition The purchase consideration will be discharged in cash by utilising existing cash resources, and will be settled in three tranches as follows: * R2,500,000 payable three business days after the signing of the Agreement or such other date as may be determined in writing by all the parties; * R2,000,000 plus interest thereon calculated at the prime rate from 3 October 2011 (being the effective date of the Acquisition) up to and including the date of payment thereof, on or before 3 April 2012; and * R2,000,000 plus interest thereon calculated at the prime rate from 3 October 2011 up to and including the date of payment thereof, on or before 3 October 2012. In addition to the purchase consideration, Telesciences will settle all claims amounting to R2,922,626 on shareholder loan account, that the Maringo Vendors have against Telesciences existing on the effective date ("Claims"), to be settled as follows: * R1 million payable three business days after the signing of the Agreement or such other date as may be determined in writing by all the parties; and * the balance plus interest thereon, commencing from 28 November 2011 to 28 June 2012. These shareholder loans did not have fixed terms of repayment at 30 June 2011 and attracted interest at prime overdraft rates 5. Conditions precedent There are no outstanding conditions to the Agreement. All conditions precedent have been met. 6. Pro forma financial effects The unaudited pro forma financial effects, for which the directors are responsible, are provided for illustrative purposes only to show the effect of the Acquisition on the earnings, headline earnings, diluted earnings and diluted headline earnings per share as if the Acquisition had taken effect on 1 July 2010 and on the net asset value and net tangible asset value per share as if the Acquisition had taken effect on 30 June 2011. Because of their nature, the unaudited pro forma financial effects may not give a fair presentation of Jasco`s financial position and performance. The unaudited pro forma financial effects have been compiled from the audited consolidated financial statements of Jasco for the twelve months ended 30 June 2011 and are presented in a manner consistent with the format and accounting policies adopted by Jasco and have been adjusted as described in the notes below. Before the After the Change Change Acquisition Acquisition
(Published) (Pro forma) (1) (cents) (cents) (cents) (%)
Earnings per 7.8 6.8 -1.0 -12.7 share(2)(3)(4) Headline Earnings 14.0 13.0 -1.0 -7.1 per share (2)(3)(4) Diluted earnings 7.8 6.8 -1.0 -12.7 per share (2)(3)(4) Diluted headline 14.0 13.0 -1.0 -7.1 earnings per share (2)(3)(4) Net asset value 234.4 234.0 -0.4 -0.2 per share (5)(6) Net tangible 156.3 151.9 -4.4 -2.8 asset value per share (5)(6) Shares in issue 122 745 469 122 745 469 (`000) (7) Weighted average 122 745 469 122 745 469 number of shares in issue (`000) (7) Diluted weighted 122 745 469 122 745 469 average number of shares in issue (`000) (7) Notes (1) The "Before Published" financial information has been extracted, without adjustment, from Jasco`s published audited final results for the year ended 30 June 2011. (2) Net earnings attributable to equity holders of the parent and non- controlling interests have been adjusted by R782,262 (respectively) to reflect the once-off effect on minorities share of losses in Telesciences and Maringo during the second half of FY2011. (3) The adjustment to interest paid represents the ongoing interest charge on the R6,5 million purchase consideration. The after tax effect of this adjustment calculated at 28% is R194,400. (4) The once-off R85,000 in transaction costs has been expensed as per the revised IFRS 3 - Business Combinations. No tax deduction is permitted. (5) The balance sheet of Telesciences and Maringo is already consolidated at 30 June 2011. The minorities share of losses of R782,262 for the second six months is transferred to the ordinary shareholders. (6) Adjustments including a net bank overdraft worth R6,5 million relating to the purchase consideration and the related effect of adjusting non- controlling interest worth R669,000 and goodwill worth R5,831 million. (7) The weighted average number of shares is unchanged. 7. Categorisation of the Acquisition In terms of the Listings Requirements, transactions entered into by the company during the 12 months prior to the date of the latest transaction, with the same party and/or involve the acquisition of an interest in one particular company, need to be aggregated. Accordingly, the Acquisition is categorised as a Category 2 transaction for purposes of the Listings Requirements of the JSE. In terms of the JSE Listings Requirements a category 2 transaction does not require shareholder approval. Johannesburg 28 October 2011 Sponsor: Grindrod Bank Limited INCORPORATING: Jasco ICT Solutions, Jasco Industry Solutions and Jasco Energy Solutions www.jasco.co.za Date: 28/10/2011 07:30:01 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.

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