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Acquisition of African Union Communications Proprietary Limited and Renewal of Cautionary Announcement
POYNTING HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/011142/06)
Share code: POY ISIN: ZAE000121299
(“Poynting”)
ACQUISITION OF AFRICAN UNION COMMUNICATIONS PROPRIETARY LIMITED AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the announcements released on SENS on 10 July 2013 and 4 October 2013,
and are hereby provided with an update thereto.
1. INTRODUCTION
The board of directors of Poynting (“Board”) is pleased to advise shareholders that Poynting has entered
into a Sale of Share and Cession of Claims Agreement dated 31 October 2013 and the addendum
thereto dated 1 November 2013 (“Agreement”) with The MAS Trust (Master’s Reference IT 6611/01),
Rudolph Rashama, Tebogo Rashama (collectively referred to hereinafter as the “Vendors”) and African
Union Communications Proprietary Limited (“Aucom”) to acquire 100% of the issued share capital of
Aucom (“Shares”) and certain claims which the Vendors may have against Aucom (“Claims”), for a
purchase price of R49.5 million (“Purchase Price”) with effect from 1 July 2013 (“Effective Date”),
subject to the fulfilment or waiver, as the case may be, of the conditions precedent (“Conditions
Precedent”) set out in clause 2.4 below (“Acquisition”).
2. THE ACQUISITION
2.1 Purchase consideration
The Purchase Price is to be settled by way of the issue and allotment to the respective Vendors of
66.0 million Poynting shares (“Share Consideration”) at an issue price of 75 cents per Poynting
share in the proportion in which each of the Vendors will be liable for any claims by Poynting in
terms of the Agreement (“Aliquot Share”), which proportion, expressed as a percentage, is: The
MAS Trust: 55%, Rudolph Rashama: 15% and Tebogo Rashama: 30%.
In the event that the actual cumulative Net Profit After Tax of Aucom for the three financial years
ending 30 June 2016 (“Profit Period”) is less than the warranted minimum cumulative Profit After
Tax of R38.0 million (“Minimum Cumulative PAT”) for the Profit Period, 75% of the Share
Consideration will be adjusted downwards pro rata to the shortfall.
In the event that the actual Net Profit After Tax of Aucom for the Profit Period exceeds the
Minimum Cumulative PAT, in addition to the Share Consideration, the Purchase Price will be
increased by an amount equal to 50% of the actual Net Profit After Tax of Aucom achieved in
excess of the Minimum Cumulative PAT (“Earn-Out Amount”).
2.1.1 Share Consideration
The Share Consideration will be settled as follows:
- an amount equal to 25% of the 66 million Poynting shares, being 16.5 million Poynting
shares, (“Upfront Amount Shares”) will be issued to the respective Vendors in the
Aliquot Share on the seventh Business Day after all the Conditions Precedent have
been fulfilled or waived (“Closing Date”);
- an amount equal to 75% of the 66 million Poynting shares, being 49.5 million Poynting
shares, will be issued on the Closing Date, but held in trust by Poynting’s auditors
(“Auditors”), until the release thereof to the Vendors and/or the repurchase thereof by
Poynting;
- the number of Poynting shares which may be released from the trust to the Vendors is
subject to a maximum amount of 16.5 million, 33.0 million and 49.5 million Poynting
shares in the financial years ending 30 June 2014, 30 June 2015 and 30 June 2016,
respectively and will be determined by the Auditors based on a pre-determined formula;
- in the event that the Vendors receive more Poynting shares in regard to the financial
years ending 30 June 2014 and 30 June 2015 than they ought to, such excess Poynting
shares will be adjusted after the determination of the number of Poynting shares to be
released in terms of the financial year ending 30 June 2016 and if applicable, the excess
Poynting shares will be repurchased by Poynting at a nominal amount of R0.00005
cents;
- the Poynting shares not released to the Vendors as a result of Aucom not achieving the
Minimum Cumulative PAT will be repurchased by Poynting at a nominal amount of
R0.00005 cents; and
- any dividends declared in regard to the Poynting shares held in trust plus interest
thereon will be held in trust and released to the Vendors pro rata to the Poynting shares
released to the Vendors.
In addition to warrantying that Aucom will have free cash of between R5.0 million and R7.5 million,
and a minimum net tangible asset value (“NTAV”) of R3.0 million as at the Effective Date, the
Vendors have provided warranties which are normal in a transaction of this nature. Any shortfall in
this warranted free cash or NTAV will result in an equal decrease in the claims retained by the
Vendors against Aucom.
2.1.2 Earn-Out Amount
In addition to the Share Consideration, in the event that the actual Net Profit After Tax of
Aucom for the Profit Period exceeds the warranted Minimum Net Profit After Tax of
R11.0 million, R12.5 million and R14.5 million in the financial years ending 30 June 2014, 30
June 2015 and 30 June 2016, respectively on a cumulative basis, the Purchase Price will be
increased by the Earn-Out Amount.
Any amount payable to the Vendors in terms of the Earn-Out Amount will be determined by
the Auditors based on a pre-determined formula and paid to the Vendors in the Aliquot
Share.
The Vendors will be entitled to receive the amount payable in terms of the Earn-Out Amount
in cash or in Poynting shares. If the Vendors elect to receive:
- cash, consideration of Poynting’s ability to obtain free cash to make the payment is
required;
- Poynting shares, these will be issued at a price equal to the three month volume
weighted average price calculated as at the date of the applicable financial year end
during the Profit Period.
If the Vendors receive more cash and/or Poynting shares than they ought to, such cash
amount will be repaid by the Vendors to Poynting and/or such excess amount of Poynting
shares will be repurchased by Poynting at a nominal amount of R0.00005 cents.
2.2 Restrictions on the sale of the Poynting shares
The Vendors have undertaken that the sale of any Poynting shares issued to them will be, inter
alia, subject to the Listings Requirements of the JSE Limited (“JSE”), effected in a manner that
would not damage the market price of Poynting’s shares and limited to a maximum of 75% of the
number of such shares prior to 31 December 2016.
2.3 Management
The Vendors have undertaken that within six months of the signature date of the Agreement,
Aucom will appoint additional employees (which may result in an annual increase in overheads by
R2.0 million) who will, together with Rudolph Rashama and Villiers Joubert (being the
representative and a trustee of the MAS Trust) (collectively referred to hereinafter as
“Management”), be involved in the management of Aucom to ensure that the operations of Aucom
are not solely reliant on Management, and that Management will introduce senior employees of
Aucom to its key customers and suppliers.
Each of Management will be appointed by Poynting as a representative to two separate
committees to be established to ensure that Aucom has sufficient working capital to meet the
warranted Minimum Cumulative PAT, and to determine whether additional payments of working
capital, which are subject to an aggregate maximum amount of R2.0 million, will be required from
The MAS Trust and Rudolph Rashama.
The Vendors will be entitled to nominate Management for appointment to Poynting’s management
committee, which appointment will subsist at least until the end of the Profit Period.
2.4 Conditions Precedent
The Acquisition is subject to the fulfilment or waiver, as the case may be, of inter alia the following
conditions precedent:
- by no later than 30 November 2013, to the extent required in terms of all the material contracts
that Aucom is party to, unconditional written consent to the Acquisition having been obtained
from the counterparties to the material contracts to ensure that the material contracts remain
in full force and effect;
- by no later than five business days after the expiry of the due diligence period, being the
period terminating on 31 October 2013, Poynting having confirmed in writing to the Vendors
that it is satisfied with the results of the due diligence investigation, and by no later than five
business days thereafter, key personnel identified by Poynting during such due diligence
investigation having entered into employment contracts and restraint of trade agreements;
- by no later than 31 January 2014, the requisite regulatory approvals from the JSE and the
Takeover Regulation Panel (“Panel”) having been obtained;
- by no later than 31 January 2014, Poynting having obtained approval of the Acquisition from
its shareholders who have waived any rights which they may have to a mandatory offer in
terms of section 123 of the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies
Act”).
3. CIRCULAR TO SHAREHOLDERS
The circular containing full details of the proposed Acquisition, Revised Listing Particulars of Poynting,
waiver of Mandatory Offer, and, a notice to convene a general meeting of Poynting shareholders in order
to consider and if deemed fit, to pass with or without modification, the resolutions necessary to approve
and implement, inter alia, the Acquisition, will be sent to Poynting shareholders in due course.
4. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the Acquisition of African Union Communications Proprietary Limited and
cautionary announcement dated 10 July 2013 and the subsequent renewal of cautionary
announcements, the last of which was dated 4 October 2013, and are hereby advised that the pro forma
financial effects of the Acquisition are still in the process of being finalised. Accordingly, shareholders are
advised to continue exercising caution when dealing in Poynting securities, until a further announcement
is made.
Johannesburg
4 November 2013
Corporate and Designated Adviser
Merchantec Capital
Attorneys in respect of the Acquisition
Fluxmans Inc.
Date: 04/11/2013 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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