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Category 1 Announcement: Disposal By Kelly Group Limited Of Its 100% Stake In M Squared Consulting Incorporated And
KELLY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/026249/06)
Share code: KEL
ISIN: ZAE000093373
CATEGORY 1 ANNOUNCEMENT: DISPOSAL BY KELLY GROUP LIMITED OF ITS
100% STAKE IN M SQUARED CONSULTING INCORPORATED AND WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT
1. THE TRANSACTION
Shareholders are hereby advised that Kelly Group Limited
(“Kelly Group” or “the Seller”), has entered into an
agreement with SolomonEdwardsGroup, LLC (“SolomonEdwards” or
“the Purchaser”), dated 10 April 2013 (“the Sale Agreement”),
in terms of which the Kelly Group will dispose of its entire
equity interest in M Squared Consulting Incorporated (“M
Squared Consulting”), a Delaware corporation, on the terms
and conditions set out below (“the Transaction”).
2. BUSINESS OF M SQUARED CONSULTING
M Squared Consulting is the sole shareholder of Collabrus
Incorporated (“Collabrus”), a California corporation.
M Squared Consulting and Collabrus are engaged in the
business of providing project management, business
improvement, management consulting and employment (including
payroll and compliance) services.
3. BACKGROUND INFORMATION ON THE PURCHASER
SolomonEdwards is a National Professional Services firm. Its
customized solutions provide the right combination of talent,
expertise and experience to help clients achieve their
business objectives. Operating from eight major U.S. markets,
it serves domestic and multinational clients.
4. RATIONALE FOR THE TRANSACTION
Kelly Group currently has a strategy of focusing on
activities that are core to the group. The disposal of
M Squared Consulting, a non-core asset, will allow Kelly
Group to focus on the growth and expansion of activities in
South Africa.
5. THE EFFECTIVE DATE OF THE TRANSACTION
In terms of the Sale Agreement, the effective date and the
closing date of the Transaction will be the 10th business day
following the fulfillment or waiver of the Conditions
Precedent to the Sale Agreement (“Closing Date”).
6. PURCHASE CONSIDERATION
6.1. The purchase consideration (“the Purchase
Consideration”) payable by the Purchaser to the Seller
in terms of the Sale Agreement is an amount equal to
$11 000 000 (eleven million dollars), adjusted for:
6.1.1. the amount by which working capital is greater or
less than $2 700 000 (two million seven hundred
thousand dollars); and
6.1.2. qualifying cash and cash equivalents on hand on the
Closing Date.
6.2. The Purchase Consideration shall be paid by the
Purchaser on the Closing Date of the Sale Agreement in
the following manner:
6.2.1. an amount equal to $1 000 000 (one million dollars)
will be paid into an escrow account (“the Escrow
Amount”). The Escrow Amount will remain in escrow
for a period of 15 months, after which it will be
released to the Seller, net of any amounts claimed
for breach of any warranties or claims in terms of
the Sale Agreement that may arise, if any; and
6.2.2. the balance of the Purchase Consideration will be
paid to the Seller.
7. CONDITIONS PRECEDENT
The Transaction is subject to the fulfillment or waiver of
the following outstanding material conditions precedent by
no later than 31 July 2013:
7.1. the Sale Agreement being approved by the
shareholders of the Seller in terms of the JSE
Listings Requirements (“Listings Requirements”);
7.2. M Squared Consulting’s material clients consenting
to the Transaction;
7.3. no material adverse effect occurring in relation to
the business of M Squared Consulting between the
entering into the Sale Agreement and the Closing
Date;
7.4. the Seller settling its intercompany loan with M
Squared Consulting;
7.5. no revenue deficiency event occurring in relation to
specific customers of M Squared Consulting as
defined in the Sale Agreement. Such event shall have
occurred if the actual revenue from these customers
varies by more than an agreed amount when compared
to their forecasted revenue, over the period between
the entering into the Sale Agreement and the Closing
Date;
7.6. the delivery by the Seller to the Purchaser of the
original share certificates and other company
documentation for both M Squared Consulting and
Collabrus;
7.7. where necessary, M Squared Consulting or the
Purchaser entering into employment agreements with
the key employees of M Squared Consulting; and
7.8. M Squared Consulting offering continued employment
to substantially all of the employees of M Squared
Consulting that are employed by M Squared Consulting
on the Closing Date.
The date for the fulfillment of the conditions precedent may
be extended by the Seller, for a period of 30 days, on
written notice to the Purchaser, or until such later date as
may be agreed in writing between the Purchaser and the
Seller.
8. WARRANTIES AND INDEMNITIES
The Transaction is subject to warranties and indemnities that
are normal for a transaction of this nature.
9. APPLICATION OF THE SALE PROCEEDS
The sale proceeds will be applied towards the repayment of
debt, funding working capital requirements, and the
furthering of local activities or investments to the extent
that cash is available.
10. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
The pro forma financial effects of the Transaction are
presented for illustrative purposes only and because of their
nature may not give a fair reflection of Kelly Group’s
financial position nor of the effect on future earnings after
the Transaction.
Set out below are the unaudited pro forma financial effects
of the Transaction, based on the audited results for the year
ended 30 September 2012. The unaudited pro forma financial
effects have been prepared in accordance with the Listing
Requirements, the Guide on Pro Forma Financial Information
issued by SAICA and the measurement and recognition
requirements of International Financial Reporting Standards
(IFRS). Accounting policies used to prepare the unaudited pro
forma financial effects are consistent with those applied in
the preparation of the audited annual results for the year
ended 30 September 2012.
The directors of Kelly Group are responsible for the
preparation of the unaudited pro forma financial information.
Audited Pro forma Change (%)
before the after the
Transaction Transaction
(cents per (cents per
share) share)
Basic (loss)/ (27.5) 19.6 171.2
earnings per
share
Basic (25.9) (33.8) (30.9)
headline loss
per share
Net asset 231.0 265.2 14.8
value per
share
Net tangible 74.6 130.5 75.0
asset value
per share
Notes and assumptions:
1. The basic earnings per share and basic headline earnings
per share figures in the “Pro forma after the
Transaction” column have been calculated on the basis
that the Transaction was effected on 1 October 2011.
2. In calculating the effects of the pro forma adjustments
that affected the earnings for the period, a spot
exchange rate on 1 October 2011 of R8.04 was used in
calculating the profit on the Transaction, and an average
exchange rate of R8.08 was used in calculating the effect
of the Transaction on the 2012 financial year.
3. The net asset value per share and net tangible asset
value per share figures in the “Pro forma after the
Transaction” column have been calculated on the basis
that the Transaction was effected on 30 September 2012.
4. A spot exchange rate of R8.32 as at 30 September 2012 was
used in calculating the effects of the pro forma
adjustments that affected the net asset values for the
period.
5. Interest on the Purchase Consideration and other related
cash flows has been calculated based on the Seller’s
applicable prime-linked funding facility.
6. Due to the Seller’s assessed tax loss and its decision
not to increase the size of its deferred tax asset, no
adjustment for South African taxation has been made for
purposes of the pro forma adjustments.
7. In terms of the Sale Agreement, Kelly Group will dispose
of M Squared Consulting for the Purchase Consideration of
$11 000 000 (eleven million dollars). Transaction costs
of R950 000 (nine hundred and fifty thousand Rand) are
assumed to be applicable to the Transaction.
8. The basic earnings per share and basic headline earnings
per share figures are calculated based on a weighted
average number of shares in issue of 98 442 190 shares as
at 30 September 2012.
9. The net asset value per share and net tangible asset
value per share have been calculated based on 98 442 190
shares in issue as at 30 September 2012.
10. All adjustments, except for Transaction costs, are
expected to have a continuing effect.
11. CLASSIFICATION OF THE TRANSACTION
The Transaction is classified as a category 1 transaction in
terms of section 9 of the Listings Requirements, requiring
shareholder approval. A circular convening a general meeting
and providing further detail of the Transaction will be
posted to shareholders in due course.
12. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement
dated 5 December 2012 and the subsequent renewals of same on
21 January 2013 and 4 March 2013, and are hereby advised that
as the details of the Transaction referred to above have been
announced to shareholders caution is no longer required to be
exercised by shareholders when dealing in their Kelly Group
securities.
Sandton
12 April 2013
Sponsor
PSG Capital
Date: 12/04/2013 09:04:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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