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Acquisition of Radio Network Solutions Proprietary Limited and further 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 RADIO NETWORK SOLUTIONS PROPRIETARY LIMITED AND FURTHER
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The board of directors of Poynting (“the Board”) is pleased to advise shareholders that Poynting has
entered into a Heads of Agreement (“HoA”) with Radio Network Solutions Proprietary Limited (“RNS”),
Graham Diss, Richard Hill, Willie Keulder and Neil Nordgaard, to acquire 100% of the issued share
capital of RNS from Graham Diss, Richard Hill, Willie Keulder and Neil Nordgaard (collectively referred
to hereinafter as the “Sellers”) – who have agreed to dispose of their individual shareholdings of 31%,
31%, 7% and 31%, respectively, for a total purchase consideration of R110 million to be settled by way
of R60 million in cash (“Cash Consideration”) and the issue of 18 181 818 Poynting shares at an issue
price of 275 cents per share (“Share Consideration”), as well as an additional earn-out amount, limited to
a maximum of R10.2 million to be settled in cash or in Poynting shares in terms of the earn-out structure
as detailed in paragraph 2.3.3 below, or in the event of the actual Cumulative Net Profit After Tax
achieved by RNS during the next 36 months (“Earn-Out Period”) being 50% or less of the requisite
minimum Cumulative Net Profit After Tax of R51 million, the total purchase consideration will be adjusted
downwards to R55 million as detailed in paragraph 2.3.2 below (collectively the “Purchase
Consideration”) (“the Acquisition”).
2. THE ACQUISITION
2.1 Nature of RNS
RNS was established in 2006 and is a focused system integrator in the wireless network arena,
providing implementation and support services for all enterprise networks in South Africa and Sub
Saharan Africa. With a combined expertise of over 60 years, the RNS engineers have the
capability to design, implement and support wireless networks in any environment.
2.2 The rationale for the Acquisition
Poynting is currently investing in the entry into the cellular micro base station market and has
established the Cellular Coverage Solutions (“CCS”) Division for this purpose. The CCS Division is
fundamentally different from the Commercial Division, which mainly supplies antenna based
solutions used to connect end user equipment, while CCS products are aimed at the base station
(network operator or infrastructure) market.
RNS already has a significant presence in the network operator coverage solution market, with
clients in the network operator and infrastructure industries, and is therefore better equipped to
market the Poynting CCS range to this important segment. The Acquisition allows the businesses
to combine Poynting’s intellectual property and product innovation with RNS’ sales excellence.
2.3 Purchase Consideration
2.3.1 Upfront amount
The upfront amount will comprise of R50 million in cash, equal to 83.3% of the Cash
Consideration and 3 636 364 Poynting shares, equal to 20% of the Share Consideration
(collectively the “Upfront Amount”), in terms of which the Upfront Amount will be paid upon
fulfilment of the Conditions Precedent to the Acquisition.
2.3.2 Residual amount
The residual amount will comprise of 10 million in cash, equal to 16.7% of the Cash
Consideration and 14 545 455 Poynting shares, equal to 80% of the Share Consideration
(collectively the “Residual Amount”) in terms of which the Residual Amount will be paid,
upon fulfilment of the Conditions Precedent to the Acquisition, but subject to the
achievement of the pre-determined Cumulative Net Profit After Tax of R51 million during the
Earn-Out Period.
In the event of the actual Cumulative Net Profit After Tax during the Earn-Out Period being
50% or less of the requisite minimum Cumulative Net Profit After Tax of
R51 million, the Purchase Consideration will be adjusted downwards to R55 million, which
amount represents the guaranteed minimum purchase consideration in respect of the
Acquisition. This reduction will apply proportionately to the Cash Consideration and the
Share Consideration to effect a final Purchase Consideration of R55 million.
In the event that the Actual Net Profit After Tax achieved during the Earn-Out Period is
greater than 50% but less than 100% of the Cumulative Net Profit After Tax of R51 million,
the Cash Consideration and the Share Consideration will be reduced proportionately in
relation to the achievement of the Cumulative Net Profit After Tax of R51 million.
2.3.3 Earn-Out Amount
The Sellers will receive an amount of 40% of the Actual Net Profit After Tax achieved during
the Earn-Out Period in excess of the minimum Net Profit After Tax of R51 million required to
be achieved during such period, limited to a maximum of R10.2 million (“Earn-Out Amount”).
Poynting will have the right to elect to pay the Earn-Out Amount in cash or in Poynting
shares. The Poynting shares will be issued at a price equal to the three month Volume
Weighted Average Price calculated as at the end of the Earn-Out Period.
The Sellers have provided warranties which are normal in a transaction of this nature.
2.4 Conditions Precedent and effective date
In terms of the Acquisition, the HOA are legally binding, and the parties to the HOA will conclude a
formal sale of shares agreement subject to the successful completion of a due diligence
investigation.
The Acquisition will be subject to the fulfilment of, inter alia, the requisite approvals required to
implement the Acquisition, including Board approval.
The effective date of the Acquisition is 1 August 2014.
3 PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the Acquisition on the reported financial information of Poynting are in
the process of being finalised and will be announced in due course.
4 CLASSIFICATION OF THE ACQUISITION
The Acquisition is classified as a Category 2 transaction in terms of the JSE Listings Requirements.
5 FURTHER CAUTIONARY ANNOUNCEMENT
In addition to the cautionary announcement dated 11 July 2014 (“Cautionary Announcement”),
shareholders are advised to continue exercising caution when dealing in Poynting securities until the pro
forma financial effects of the Acquisition and further details in respect of the acquisition of Poynting
Europe GmbH (as contained in the Cautionary Announcement) have been published.
Johannesburg
16 July 2014
Designated Adviser
Merchantec Capital
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