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Acquisition by ADvTECH of 100% of Centurus Colleges and Withdrawal of Cautionary
ADvTECH Limited
(Incorporated in the Republic of South Africa)
(Registration number 1990/001119/06)
Share code: ADH ISIN: ZAE000031035
("the Company" or “ADvTECH”)
ACQUISITION BY ADVTECH OF 100% OF CENTURUS COLLEGES COMPRISING PECANWOOD
COLLEGE, SOUTHDOWNS COLLEGE AND TYGER VALLEY COLLEGE (“the Acquisition”) AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Introduction
The board of directors of ADvTECH is pleased to announce that it has concluded comprehensive
agreements for the acquisition of Centurus Colleges. In terms of the agreements ADvTECH’s wholly
owned subsidiary, The Independent Institute of Education Proprietary Limited (“the Acquiror”), will
acquire 100% of the shares in Nanospan Investments Proprietary Limited (“Nanospan”) and
Innospan Investments Proprietary Limited (“Innospan”) (collectively “Centurus Colleges”),
respectively the property owning and operating companies of Centurus Colleges, from the
shareholders of Centurus Colleges (“the Vendors”).
Description of the business of Centurus Colleges
Centurus Colleges owns and operates three independent premium co-educational schools, namely
Pecanwood College, Southdowns College and Tyger Valley College (collectively “Centurus Schools”).
Each school includes pre-preparatory, preparatory and high school phases and boarding is offered at
Pecanwood College and Southdowns College. The spacious campuses, 41 hectares in extent, are
comprehensively resourced with teaching, extramural and sporting infrastructure. The Southdowns
campus also includes significant tertiary education infrastructure.
Pecanwood College was established in 2005 and is situated in the Broederstroom area adjoining the
Pecanwood Golf Estate and Country Club on the Hartebeespoort Dam. Southdowns College was
established in 2006 and adjoins the Southdowns Estate in Irene, Centurion. Tyger Valley College was
established in 2006 and is situated in the east of Pretoria on Lynwood Road extension.
Centurus Schools’ present enrolment is 3,080 students from grades 000 to 12 and student
enrolments have grown in each of the last 3 years by an average of 13%. The Centurus Schools are
now in a rapid growth phase and plans are for continued enrolment growth to approximately 4,200
students in 2018. Existing capacity together with committed capex of R31 million is expected to
cater for approximately 5,000 students, representing an additional 30% capacity within the ADvTECH
Schools division.
Rationale for the Acquisition
ADvTECH is pursuing an active investment and growth strategy evidenced by the investment of
R1 billion over the past 6 years. This has resulted in significant growth in student capacity and
numbers, especially in the Schools division. ADvTECH seeks to acquire businesses that complement
the Company’s core operations and enable growth in the markets within which it operates.
Centurus Colleges represents an established platform for further growth and expansion of the
ADvTECH Schools division by injecting three new schools which will increase current enrolments by
some 20%. The Centurus Schools are recognised as leading independent schools and are located in
growing nodes in or near Gauteng, South Africa’s most populous and economically vibrant province.
The Centurus Schools share a broad common ethos, but each retains a unique individual character.
Together they have sufficient students to become a separate brand within the ADvTECH Schools
division and ADvTECH will consider the option of building on the existing ethos to open additional
schools, and thus grow the brand beyond present planning.
The acquisition diversifies the existing schools portfolio and provides ADvTECH with a meaningful
presence in the areas in which the Centurus Schools are located. ADvTECH has conducted a detailed
due diligence investigation, and the Centurus Schools are expected to contribute to the academic
and educational reputation of ADvTECH as well as to enhance earnings and cash flow as unutilised
capacity is filled.
Strategic Implications
ADvTECH has previously reported on progress with its board approved R3 billion capital investment
programme. While the present acquisition falls within the same strategy it is not part of the
investment programme referred to above. Accordingly, shareholders are advised that the R3 billion
plan remains in place at the same level as previously reported.
ADvTECH is considering its balance sheet and capital financing requirements and further
announcements will be made in this regard.
Regulatory reporting requirements
Classification of the transaction
The Acquisition is classified as a Category 2 transaction in terms of the Listings Requirements of the
JSE Limited (“Listings Requirements”).
Vendors
Investec Bank Limited, the Aljo Trust, the Hennops Valley Trust, the Inverkloof Trust (collectively
holding 66.20%) and certain individuals.
Effective date
While the Acquisition is subject to a number of conditions precedent as set out below, the effective
date of the Acquisition is recorded in the transaction agreements as 1 January 2015.
Purchase consideration
The aggregate consideration payable for the acquisition of Centurus Colleges is R712 000 000,
payable in cash.
Conditions precedent
The Acquisition is subject, inter alia, to the following outstanding conditions precedent:
-the loan funding agreements with Absa Bank Limited being executed and becoming
unconditional;
-the receipt of the consent for the Acquisition by the Gauteng Department of Education, to
the extent required;
-the receipt of the unconditional approval of the Acquisition by the competition authorities;
and
-confirmation prior to the closing date that no material adverse changes have occurred.
Pro forma financial effects
The results of the Centurus Group will be consolidated into the ADvTECH Group’s results from 2015
onwards.
However, the unaudited pro forma financial effects have been prepared in accordance with the
Listings 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 Company’s interim results for the six months ended 30 June
2014.
The table below sets out the unaudited pro forma financial effects of the Acquisition on the Group’s
results for the six months ended 30 June 2014.
The unaudited pro forma financial effects are the responsibility of the ADvTECH directors and have
been prepared in compliance with the Listings Requirements. Due to the nature of pro forma
financial information, in particular the significant differences in the financial position and results of
both ADvTECH and the Centurus Group between the 2014 pro forma financial position and the
actual case in 2015, it may not give a true reflection of the Company’s actual financial position,
changes in equity, results of operations or cash flows after implementation of the Acquisition nor
the Company’s future earnings.
Unaudited
interim results Unaudited pro Percentage
before the forma after the increase /
Acquisition Acquisition (decrease)
Operating profit (million) 117.4 141.7 21%
Earnings per share (cents) 20.1 17.1 -15%
Headline earnings per share (cents) 20.1 17.1 -15%
Net asset value per share (cents) 216.3 213.3 -1%
Tangible net asset value per share (cents) 185.2 120.4 -35%
Number of shares in issue (million) 421.3 421.3 0%
Weighted average number of shares in issue (million) 404.1 404.1 0%
Notes
1. It has been assumed that the Acquisition took place on 1 January 2014 when determining the
effect of the Acquisition on the statement of comprehensive income.
2. It has been assumed that the Acquisition took place on 30 June 2014 when determining the
effect of the Acquisition on the statement of financial position.
3. Where applicable the tax rate has been assumed at 28% for income tax.
4. It has been assumed that the ADvTECH Group has foregone interest income on the cash held in
2014 as the cash would have been used to fund a portion of the Acquisition.
5. The Acquisition will be funded via loan funding provided by ABSA Bank Limited. The effect of
interest on this loan has been taken into account in determining the ADvTECH Group’s profits
after the implementation of the Acquisition.
6. The decline in the tangible net asset value per share after the Acquisition is due to an estimated
amount of R250 million being allocated to goodwill.
Withdrawal of cautionary announcement
Following the release of this announcement, the cautionary announcement published by ADvTECH
on 8 September 2014 is hereby withdrawn and caution is no longer required to be exercised by
ADvTECH shareholders when dealing in ADvTECH shares.
Johannesburg
16 September 2014
Financial advisor and sponsor to ADvTECH: Bridge Capital Advisors (Pty) Limited
Legal advisor to ADvTECH: Cliffe Dekker Hofmeyr Inc
Financial advisor to Innospan, Nanospan and the Vendors: Investec Bank Limited
Legal advisor to Innospan, Nanospan and the Vendors: Webber Wentzel
Date: 16/09/2014 10:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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