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disposal of Morevest's shareholding in R and S Consulting Proprietary Limited and further cautionary
MORVEST BUSINESS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: MOR ISIN code: ZAE000152567
(“Morvest”)
DISPOSAL OF MORVEST’S SHAREHOLDING IN R and S CONSULTING
PROPRIETARY LIMITED AND FURTHER CAUTIONARY
1. Introduction and Background
Shareholders are advised that Morvest has entered into a
sale of shares and claims agreement (“Sale Agreement”) to
dispose of its current shareholding of 5,001 ordinary
shares (“Morvest Sale Shares”) in R and S Consulting
(Proprietary) Limited “R&S”), to a newly established
company, Zukubu (Proprietary)Limited (“Zukubu” or the
“Purchaser”)(“the Transaction”).
In terms of the Sale Agreement, Zukubu will acquire the
entire issued share capital of R&S from the existing
shareholders. The total purchase consideration payable by
Zukubu will be dependent on the financial performance of
R&S for the 12 month period ended 31 May 2014 and makes
provision for an agterskot payment.
2. Particulars of the Transaction
The maximum total purchase consideration is an amount of
R142 million, which includes an Agterskot payment of
approximately R15 million payable in the event that a major
client’s contract is renewed. The payment due to Morvest is
proportional to its current shareholding in R&S. Morvest
which holds a 50.01% interest, Ebrahim Valli Investments
Proprietary Limited (“EVI”) which holds a 24.99% interest
and Ms Shehnaaz Kadwa (“Kadwa”) who holds a 25% interest in
R&S (collectively the “Sellers”) will sell their respective
shares and any outstanding claims held in R&S to Zukubu.
2.1. Purchaser
Zukubu is a newly established investment holding company
which is majority-owned by Pan-African Private Equity Fund
2012 (RF) (Proprietary) Limited (“PAPEF”).
PAPEF is the private equity arm of Pan-African Capital
Holdings (Proprietary) Limited (“PACH”) and is a black-
owned and managed private equity fund manager.
PACH has two defined core operations being, making equity
investments primarily in unlisted companies in South Africa
and elsewhere in Africa and managing the Pan-African
Private Equity Fund.
3. Rationale and nature of business of R&S
Morvest is a diversified investment holding company.
Morvest has an established local and international
footprint and is well positioned to invest and partner with
leading businesses across a range of industries.
R&S provides delivery, implementation and support of mobile
and fixed line broadband and fixed mobile convergence
technologies to Tier 1 telecommunication operators to
assist with the rollout of their data strategies.
Morvest believes that it is the appropriate time to dispose
of its shareholding at an acceptable return on its initial
investment.. The cash proceeds will be utilised to explore
certain alternative opportunities in line with its
diversified investment holding strategy.
4. Effective Date
The effective date of the Transaction will be the day on
which the last of the conditions precedent to the
Transaction has been fulfilled, but it will be implemented
with effect from 1 June 2014. Thus all risk and reward in
R&S will pass to Zukubu on such date.
5. Conditions Precedent
The Transaction and the Sale Agreement are subject to the
fulfilment or waiver, of inter alia the following
conditions precedent by no later than the dates as
specified below:
5.1. the approval of the Transaction by the board of
directors of R&S by no later than 15 July 2014;
5.2. the approval of the Transaction by the
shareholders of Morvest by no later than 31 August
2014;
5.3. the approval by the JSE and/or the Takeover
Regulation Panel of the Transaction, to the extent
required, by no later than 15 August 2014;
5.4. the delivery of the management accounts of R&S for
the 12 month period ended 31 May 2014 by Seller to
Zukubu by no later than 15 July 2014 and Zukubu’s
written confirmation as to its satisfaction
thereof;
5.5. the Sellers delivering written confirmation from
key clients that these clients have given their
consent to the change in control of R&S by 15 July
2014; and
5.6. the unconditional approval by the Competition
Authorities in terms of the Companies Act of the
Transaction and all agreements contemplated in
terms of the Sale Agreement by no later than 31
August 2014.
6. Consideration
The total consideration, less transaction costs will be
settled in cash to Morvest and Kadwa and will include an
agterskot payment which will be subject to the renewal of
certain agreements with a key client on or before 30
September 2014 (“Agterskot”). The consideration due to EVI
will be settled by the issue of new shares in Zukubu.
6.1. The Purchase Consideration
The purchase consideration for the Transaction due to
Morvest and Kadwa, which will be subject to the profit
after tax (“PAT”) achieved by R&S during the 12 month
period ended 31 May 2014 (“Purchase Consideration”), will
be calculated as follows:
6.1.1. If the PAT of R&S for the 12 month period ended 31
May 2014 is more than R28 million, the Purchase
Consideration (excluding the Agterskot) will be
R126,666,666.67 of which an aggregate amount of
R95 million will be payable to Morvest and Kadwa;
or
6.1.2. If the PAT of R&S for the 12 month period ended 31
May 2014 is between R26 million and R28 million,
the Purchase Consideration will be an amount equal
to a price earnings multiple of 5 (five) times the
PAT, less the amount of the agterskot as
calculated in paragraph 6.2 below.
Morvest and Kadwa will share in the Purchase Consideration
in proportion to their current shareholdings in R&S.
6.2. Agterskot
In the event that certain agreements are renewed with a key
client prior to 30 September 2014 on terms which are
substantially the same or better, and:
6.2.1. The PAT achieved by R&S during the 12 month period
ended 31 May 2014 is in excess of R28 million,
Zukubu will pay Morvest and Kadwa a total amount
equal to R15 million; or
6.2.2. The PAT achieved by R&S during the 12 month period
ended 31 May 2014 is between R26 million and R28
million, Zukubu will pay Morvest and Kadwa an
amount calculated according to the formula below:
X = ((Y x 75%)/ R110 million) x R15 million where:
X = the total agterskot payable to Morvest and Kadwa;
and
Y = the amount of the PAT referred to in 6.2.2
multiplied by 5 (five).
Morvest and Kadwa will share in the Agterskot in proportion
to their current shareholdings in R&S.
7. Financial Effects and Further Cautionary Announcement
Further to the renewal of the cautionary announcement
released on 03 June 2014, shareholders are advised to
continue to exercise caution when dealing in Morvest’s
securities until a further announcement setting out the
financial effects of the Transaction and the acquisition of
certain business assets and business liabilities of Simmons
(South Africa) (Proprietary) Limited is made.
8. Categorisation of the Transaction
The Transaction constitutes a Category 1 transaction in
terms of the JSE Limited Listings Requirements and requires
shareholder approval. Accordingly, a circular detailing the
terms of the Transaction and incorporating a notice
convening a general meeting of shareholders will be posted
to shareholders in due course.
Johannesburg
3 July 2014
Sponsor: Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 03/07/2014 05:14:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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