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ADCORP HOLDINGS LIMITED - Acquisition of shares in All About Project Management Proprietary Limited (AAPM) by Paracon Holdings Limited

Release Date: 07/10/2013 10:04
Code(s): ADR     PDF:  
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Acquisition of shares in All About Project Management Proprietary Limited (“AAPM”) by Paracon Holdings Limited

ADCORP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share Code: ADR ISIN: ZAE000000139
(“Adcorp” or “the Company”)


ACQUISITION OF SHARES IN ALL ABOUT PROJECT MANAGEMENT
PROPRIETARY LIMITED (“AAPM”) BY PARACON HOLDINGS LIMITED
(“PARACON”) (A SUBSIDIARY OF ADCORP) (“THE TRANSACTION”) –
A SMALL RELATED PARTY TRANSACTION

INTRODUCTION
Shareholders are advised that Paracon has entered into a sale of shares agreement (“the agreement”)
with the Mappit Trust, the Grant Family Trust and the Emms and Walters Trust (“the sellers”) whereby Paracon
will acquire the remaining 30% shares in AAPM for a total purchase price of R45 million (“the purchase
price”) (“the transaction”). The effective date of the transaction is 1 March 2013.
The business of AAPM is the provision of project management and project office related products and
services.
RATIONALE
The acquisition cements Paracon’s leading position in the project management space. Acquiring 100% of
the equity of AAPM will ensure efficient group cross-selling opportunities and investment therein as well as
extracting further value from AAPM’s strong growth and excellent client base.
SALIENT TERMS
Paracon shall make payment of the purchase price as follows:
• R3	million	upfront	cash	payment;		
   
• the	balance	of	the	purchase	price	is	payable:
   – in equal tranches over the three years on 1 March 2014, 1 March 2015 and 1 March 2016 by Paracon
       paying	half	of	the	aforesaid	amounts;	and	
   – 50% in Adcorp shares and 50% in cash, however Paracon may (at its election) settle such amounts
       partly or entirely in cash.
CONDITIONS PRECEDENT
All the conditions precedent to the transaction have been fulfilled and the transaction is therefore
unconditional.
PRO FORMA FINANCIAL EFFECTS
The pro forma financial information has been prepared for illustrative purposes only and because of its
nature may not fairly present Adcorp’s financial position, changes in equity, results of operations or cash
flows after the transaction.
The pro forma financial information is the responsibility of the directors of Adcorp. The pro forma financial
information has been adjusted to reflect the impact of the transaction on earnings per share (“EPS”) and
headline earning per share (“HEPS”) for the twelve months ended 28 February 2013 and net asset value per
share (“NAV”), and tangible net asset value per share (“TNAV”) at 28 February 2013, as if the transaction
had occurred on 1 March 2012 for purposes of the pro forma adjustments made to the EPS and HEPS and
on 28 February 2013 for purposes of the pro forma adjustments made to the NAV and TNAV.
The pro forma financial information has been compiled in accordance with the JSE Listings Requirements,
IFRS, the Revised Guide on Pro Forma Financial Information issued by The South African Institute of Chartered
Accountants and the accounting policies of Adcorp.

                                                                        Before the      After the             %
                                                                      transaction    transaction        Change
Basic earnings per share (cents)                                             221,6         225,3           1,7%
Headline earnings per share (cents)                                          236,7         240,4           1,6%
Net asset value per share (cents)                                            2 065         2 023          (2,0%)
Net tangible asset value per share (cents)                                     252            210        (16,7%)
Weighted Average number of shares                                      78 989 220     78 989 220
Number of shares at year end                                           91 811 776     91 811 776
1) The financial information in the “Before the transaction” column has been prepared based on Adcorp’s
   audited consolidated financial results for the twelve months ended 28 February 2013.
2) The financial information included in the “After the transaction” column has been prepared based on
   Adcorp’s audited consolidated financial results for the 12 (twelve) months ended 28 February 2013 and
   by adding AAPM’s financial results for the 12 (twelve) months to 28 February 2013, taking into account
   the following:
   2.1)	The	purchase	price	is	funded	solely	in	cash;	
   2.2) There is loss of interest income of R2,4 million on the cash and cash equivalents applied in the
         transaction, assuming an interest rate of 7,5%. The interest adjustment is subject to tax rate of 28%.
         This	is	having	a	continuing	effect;	and
   2.3) The Balance Sheet included in the “After the transaction” has been adjusted to reflect the removal
         of the minority interest.
3) Once-off transaction costs are immaterial and have not been adjusted in the pro forma financial
   information;	and
4) There are no post balance sheet events that need adjustments to the pro forma financial information.
SMALL RELATED PARTY TRANSACTION AND INDEPENDENT OPINION
The transaction is categorised as a small related party transaction in terms of section 10 of the Listings
Requirements of the JSE as the vendors each own 10% of AAPM and Matthew Pitman, a beneficiary of
the Mappit Family Trust is a director of AAPM. The transaction therefore requires a fairness opinion from
an independent expert. The board of directors has appointed Grant Thornton (“GT”) as the independent
expert to determine if the terms and conditions of the transaction are fair to shareholders. GT has confirmed
that the terms and conditions of the transaction are fair to shareholders. Their fairness opinion is available
for inspection at Adcorp’s registered office for a period of 28 days from the date of this announcement.
Bryanston
7 October 2013


Independent Expert: Grant Thornton
Corporate Legal Adviser: Werksmans Attorneys                      
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd




                                                                                                    Midnight Star

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