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Acquisition of Integr8 IT and withdrawal of cautionary
Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
(ISIN: ZAE000054631)
(Share code: BCX)
(ISIN: ZAE000156154)
(“A” Share code: BCA)
(“BCX” or “the Group”)
ACQUISITION BY BUSINESS CONNEXION GROUP LIMITED OF INTEGR8 IT PROPRIETARY
LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement dated 8 October 2012, BCX shareholders are hereby
advised that BCX has entered into a sale of shares, repurchase and subscription agreement with,
inter alia, Integr8 IT (Proprietary) Limited (“Integr8 IT”), Rola Rola Holdings (Proprietary) Limited,
Ideal Trading 620 (Proprietary) Limited, TS Family Holdings (Proprietary) Limited, Eritron
(Proprietary) Limited (“the Sellers”) and the trustees for the time being of each of the Alcatraz
Trust, the CW Holdings Trust, the Multi Icon Trust, the Triple Eight Trust and the TS Family Trust
on 05 November 2012 (“the Sale Agreement”), in terms of which, inter alia, it will become the
holder of 100% of the issued share capital of Integr8 IT, on, inter alia, the terms and conditions as
set out below (“the Acquisition”). BCX intends to cede and assign all of its rights and obligations
as purchaser under the Sale Agreement to its 70% held subsidiary, UCS Solutions (Proprietary)
Limited (“UCS Solutions”), which it is entitled to do in terms of the Sale Agreement.
2. The Acquisition
2.1. Rationale
BCX’s current strategy around developing the Connexion Zone is primarily focused at the
enterprise market. The Acquisition enhances our competitive advantage in the mid-
market corporates, creating a complementary platform of services markets and broadens
UCS Solutions’ historic retail focused infrastructure services.
2.2. The business of Integr8 IT
Integr8 IT is one of the largest privately owned ICT managed services companies. It was
established in 2001 and is a leader of annuity based infrastructure management and
managed services to the mid-market corporates throughout South Africa.
The company owns and operates the Nerve Centre, a digital hub of people, technology
and process, that regulates, monitors and maintains the technology infrastructure for
many leading corporations.
3. Details of the Acquisition
3.1. Terms of the Acquisition and the effective date of the Acquisition
In terms of the Sale Agreement, BCX will acquire 100% of the issued share capital of
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Integr8 IT on the 3 (third) business day after the date on which the last of the conditions
precedent referred to in paragraph 5 is fulfilled or waived, as the case may be, (“Closing
Date”) and after Integr8 IT has implemented a share repurchase from the Sellers.
If the last of the conditions precedent is fulfilled or waived, as the case may be, on or prior
th
to the 14 calendar day of the relevant calendar month, the effective date of the
Acquisition will be the first calendar day of that calendar month.
If the last of the conditions precedent is fulfilled or waived, as the case may, be on or after
th
the 15 calendar day of the relevant calendar month, the effective date of the Acquisition
will be first calendar day of the following calendar month.
3.2. The Purchase Consideration
The consideration payable by BCX to the Sellers in terms of the Sale Agreement is an
amount of up to R126,0 million (one hundred and twenty six million rand) in cash
(“Purchase Consideration”), and will be settled through an upfront initial payment of
R56,0 million (fifty six million rand) (“Initial Amount”) payable on the Closing Date and
three potential earn-out payments of up to a maximum amount of R70,0 million (seventy
million rand), portions of which shall be payable on 15 October 2013, 15 October 2014
and 15 October 2015, respectively, and which will be determined and calculated on the
achievement of certain profit warrantees. The Purchase Consideration will be funded
from the Group’s existing cash resources.
4. Pro forma financial effects of the Acquisition
The table below sets out the unaudited pro forma financial effects (“Financial Effects”) of the
Acquisition based on the Group’s published, audited results for the year ended 31 August 2012.
The Financial Effects are the responsibility of the board of directors of BCX and have been
prepared for illustrative purposes only to provide information about how the Acquisition may have
impacted shareholders on the relevant reporting date and because of their pro forma nature may
not give a fair reflection of BCX’s financial position, changes in equity results of operations or
cash flows after the Acquisition.
Before the After the %
(1)
Acquisition Acquisition Change
(2)
(4)
Headline earnings per share (“HEPS”) (cents) 39,0 39,9 2,3
(4)
Diluted headline earnings per share (“DHEPS”) 38,8 39,6 2,1
(cents)
(4)
Basic earnings per share (“EPS”) (cents) 37,5 38,7 3,2
(4)
Diluted earnings per share (“DEPS”) (cents) 37,2 38,6 3,8
(5)
Net asset value per share (“NAV”) (cents) 520,0 518,3 (0,3)
(5)
Net tangible asset value per share (“NTAV”) (cents) 339,9 310,9 (8,5)
Number of shares in issue (‘000’s) 404 972 404 972
Weighted average number of shares in issue (‘000’s) 398 550 398 550
Diluted weighted average number of shares (‘000’s) 401 097 401 097
Notes and assumptions:
1) The financial information in the “Before the Acquisition” column has been based on BCX’s
published audited results for the year ended 31 August 2012.
2) Based on the assumption that
- the Acquisition took place on 1 September 2011 for statement of comprehensive
income purposes and 31 August 2012 for statement of financial position
purposes;
- the Purchase Consideration has been paid and accrued; and
- UCS Solutions has been nominated as the purchaser.
3) The financial information relating to Intergr8 IT in calculating the Financial Effects was
extracted from Intergr8 IT’s audited financial statements for the year ended 30 June 2012.
4) HEPS, DHEPS, EPS and DEPS have been adjusted to include the pro forma consolidated
net profit after tax of Integr8 IT for the year ended 30 June 2012 of R12,2 million.
5) NAV and NTAV have been adjusted to include the pro forma consolidated net assets
attributable to Integr8 IT as at 30 June 2012 of R21,3 million and the goodwill arising on
the Acquisition of R111,1 million.
5. Conditions precedent
The Acquisition has been approved by the board of directors of BCX and Integr8 IT but remains
subject to the fulfilment or waiver (where applicable) of inter alia the following conditions
precedent:
5.1. the unconditional approval by the Competition Authorities in terms of the Competition
Act No. 89 of 1998 or the conditional approval on terms and conditions which each of
BCX or Integr8 IT confirms in writing to the other to be acceptable to it;
5.2. the conclusion of an independent expert’s report on the consequences and effect of
Integr8 IT’s share repurchase in terms of the Sale Agreement as contemplated in
terms of section 114 of the Companies Act, No. 71 of 2008 (“Companies Act”);
5.3. the passing of such resolutions by the shareholders of Integr8 IT as may be required
to implement the transactions contemplated in the Sale Agreement including such
special resolutions as contemplated in section 48(8) as read with the requirements of
sections 114 and 115 of the Companies Act;
5.4. the passing of such resolutions by the board of directors of Integr8 IT before the
effective date as may be required in terms of sections 46(1)(c) and 48(2) of the
Companies Act in respect of the payment of the Initial Amount to the Sellers in terms
of the Sale Agreement;
5.5. the granting of the compliance certificate or the exemption by the Takeover Regulation
Panel of the transactions contemplated in the Sale Agreement;
5.6. the declaration of certain dividend in specie and the distribution of loans in respect of
Integr8 Fax (Proprietary) Limited and Integr8 Rental (Proprietary) Limited;
5.7. the declaration and distribution in cash or by loan of the excess working capital
dividend by Integr8 IT to the Sellers; and
5.8. BCX receiving written proof that on receipt by the Sellers of the Initial Amount, a bank
guarantee will be issued in favour of BCX for inter alia the Sellers’ obligations under
the Sale Agreement and in the event that there is a degradation in the business of
Integr8 IT.
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6. Classification of the Acquisition
The Acquisition is classified as a category 2 transaction in terms of the JSE Limited (“JSE’)
Listings Requirements and does not require shareholder approval.
7. Memorandum of Incorporation
BCX undertakes that the memorandum of incorporation of Integr8 IT will conform to Schedule 10
of the JSE Listings Requirements, as required.
8. Further announcement
Shareholders will be notified once the last of the conditions precedent has been fulfilled or
waived, as the case may be.
9. Withdrawal of cautionary announcement
As all the transaction information is contained herein, caution is no longer required to be
exercised by shareholders when dealing in BCX securities.
Midrand
5 November 2012
Transaction Advisor
Imbewu Capital Partners
Legal Advisor
Edward Nathan Sonnenbergs
Competition Commission Attorneys
Cliffe Dekker Hofmeyr
Sponsor
One Capital
Date: 05/11/2012 08:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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