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Proposed Sale Of Shares And Claims, Proposed Specific Repurchase Of Shares, Changes To The Board Of Directors, Chang
Poynting Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1997/011142/06)
Share code: POY
ISIN: ZAE000121299
(“Poynting Holdings” or “the Company” or “the Group”)
PROPOSED SALE OF SHARES AND CLAIMS, PROPOSED SPECIFIC REPURCHASE
OF SHARES, CHANGES TO THE BOARD OF DIRECTORS, CHANGE IN CEO AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are hereby advised that the Company has entered into an
implementation agreement (“Implementation Agreement”) with, inter alia, its former
Chief Executive Officer (“CEO”), Dr Andries Petrus Cronje Fourie (“Dr Fourie”) and the
trustees for the time being of the Andries Petrus Cronje Fourie Trust (“the Trust”),
whereby the Company will dispose of its interests in Poynting Antennas Proprietary
Limited (“Poynting Antennas”) (excluding certain profitable divisions as set out below)
as well as Poynting Direct Proprietary Limited (“Poynting Direct”), Poynting Hong
Kong Limited (“Poynting HK”) and a minority interest in CrunchYard Holdings
Proprietary Limited (“CrunchYard”) (“the Composite Sale”) to an entity controlled by
Dr Fourie (“NewCo”)(the “Composite Transaction”).
Furthermore, in terms of the Implementation Agreement, the Composite Sale purchase
consideration will be settled through the specific repurchase of 14 000 000 Poynting
Holdings shares (“the Specific Repurchase”). The salient terms and conditions of the
Composite Transaction and the Specific Repurchase are set out in paragraphs 4 and 5
below.
2. RATIONALE FOR THE COMPOSITE TRANSACTION AND THE SPECIFIC
REPURCHASE
Poynting Holdings currently operates the following technology divisions through its
wholly owned subsidiaries, African Communications Proprietary Limited (“Aucom”)
and Poynting Antennas Proprietary Limited (“Poynting Antennas”):
- Digital Television;
- Poynting Defence & Specialised (“Poynting DS”) – a division of Poynting Antennas;
- Poynting Commercial Cellular End User Antennas (“Commercial”) – a division of
Poynting Antennas;
- Cellular Coverage Solutions (“CCS”) – a division of Poynting Antennas; and
- New product and business development unit (“Skunkworks”) – a division of
Poynting Antennas.
Poynting Antennas also operates a Shared Services Division (“Poynting SS”).
The Commercial, CCS and Skunkworks technology divisions (collectively referred to as
“Compart”) are all currently loss-making divisions, and have been generating losses
for some time.
After a critical review of the business prospects, the board of directors of Poynting
Holdings (“the Board”) resolved to either close or dispose of some of the Compart
business divisions for the following reasons:
- the losses in Compart are too big relative to the profitable segments within the
Group; and
- it would take significant time and further investment to make these businesses
profitable and it is uncertain how long it will take for these units to become
significant profit contributors to the Group.
In exploring the aforementioned decision whether to close or dispose of some or all of
these business divisions, the Group received an offer from Dr Fourie to acquire
Poynting Antennas (excluding the profitable Poynting DS and Poynting SS divisions),
as well as the Company’s interests in Poynting Direct, Poynting HK and CrunchYard (a
minority interest). The Poynting DS and Poynting SS divisions will be transferred out of
Poynting Antennas to another wholly owned subsidiary of Poynting Holdings prior to
the aforementioned Composite Sale. The Board has considered the offer, consulted
with large shareholders of Poynting Holdings, including the vendors of Aucom and
PSG Private Equity Proprietary Limited, and are of the view that the Composite
Transaction and the Specific Repurchase will be for the benefit of all shareholders.
3. DESCRIPTION OF THE BUSINESSES TO BE DISPOSED OF
3.1. Poynting Antennas (after transferring out the Poynting DS and Poynting SS
divisions)
Commercial
Commercial designs and manufactures commercial antennas that are used with or in
cellular and wireless data end-user equipment. Technologies include GSM, HSPA, 3G,
4G, LTE, WiFi, iBurst and related technology. These antennas enable and enhance
internet access for end users, while also making connections more consistent and
reliable.
CCS
CCS is engaged in the design, manufacture and sales of small and innovative base
station solutions to cellular networks.
Skunkworks
The designation “skunkworks” is widely used in business, engineering and technical
fields to describe a group within an organisation unhampered by bureaucracy and
given a high degree of autonomy, which is tasked with working on special projects.
Skunkworks is working on a range of different projects, with the aim of creating new
products and new businesses.
3.2. Poynting Direct
Poynting Direct distributes commercial antennas in South Africa.
3.3. Poynting HK
Poynting HK is currently a dormant entity, related to Commercial’s Chinese
manufacturing.
3.4. Minority Interest in CrunchYard
CrunchYard, a small start-up, offers an engineering simulation service over the Internet
on a pay per use basis.
4. SALIENT TERMS OF THE COMPOSITE TRANSACTION AND SPECIFIC REPURCHASE
The salient terms of the Composite Transaction are as follows:
- Dr Fourie will incorporate a new company (“NewCo”) and NewCo will be controlled
by Dr Fourie;
- the Trust will transfer 14 000 000 ordinary shares held by it in the Company to
NewCo in exchange for an issue of shares by NewCo;
- Poynting Antennas will transfer the businesses comprising Poynting DS and
Poynting SS to Poynting Inventions Proprietary Limited (“Poynting Inventions”), a
wholly-owned subsidiary of Poynting Holdings, in exchange for the issue of shares
by Poynting Inventions;
- Poynting Antennas will unbundle and distribute all the aforesaid shares it receives
from Poynting Inventions as a dividend in specie to the Company. The dividend
from Poynting Antennas to Poynting Holdings, will remain outstanding on loan
account;
- in terms of the Composite Sale, NewCo will acquire all the shares in and loan claims
in Poynting Antennas, Poynting Direct, Poynting HK and CrunchYard from the
Company for a purchase consideration of R35 840 000 (which is equal to the 30 day
volume weighted average trading price per share of the Company, on 1 December
2014, being R2.56, multiplied by 14 000 000) (“Purchase Consideration”) which
Purchase Consideration will remain outstanding on loan account (“NewCo Loan”);
- NewCo will pledge to the Company 14 000 000 ordinary shares which it holds in the
Company, as security for NewCo’s obligations pursuant to the NewCo Loan;
- Poynting Antennas will use the Poynting brand going forward, as it is most relevant
in the Commercial business. Poynting Holdings will change its name within 12
months and Poynting DS will change its name within 36 months (the Company will
make an announcement to this effect in due course);
- Dr Fourie, although still remaining a large shareholder, has resigned as CEO and
director of the Company; and
- The effective date of the Composite Transaction shall be 1 December 2014.
The salient terms of the Specific Repurchase are as follows:
- subject to the receipt of applicable regulatory and shareholder approval, the
Purchase Consideration will be settled through the Specific Repurchase by the
Company, on loan account, of 14 000 000 shares held by NewCo in the Company
(“Poynting Holdings Loan”) ,whereafter such shares shall be cancelled; and
- the NewCo Loan and the Poynting Holdings Loan will then be set-off.
The Composite Transaction and Specific Repurchase are not inter-linked and are
capable of being implemented independently.
5. THE IMPLEMENTATION AGREEMENT AND FORMAL AGREEMENTS
The Implementation Agreement is subject to standard conditions precedent for a
transaction of this nature. The Company has concluded formal agreements to give
effect to the Composite Transaction and the Specific Repurchase (the “Formal
Agreements”). The Formal Agreements incorporate the terms agreed in the
Implementation Agreement, together with such additional terms, limited warranties,
indemnities and suspensive conditions as would usually be found in transactions of this
nature.
6. CHANGE TO THE BOARD
In compliance with paragraph 3.59 of the JSE Limited Listings Requirements,
shareholders are hereby advised that Dr André Fourie has resigned as CEO and
director of the Group with effect from 19 December 2014, in order to allow him to direct
his energies in managing the Compart business. Mr Juergen Dresel has been
appointed as interim CEO, with immediate effect, whilst the Board considers the
appointment of a new CEO to take the Group forward.
Mr. Juergen Dresel co-founded the Company and currently serves as Managing
Director of Poynting Antennas and head of Poynting DS. Mr. Dresel completed Diplom-
Ingenieur at the Technical University of Munich in 1993, specialising in IT and
Telecommunication studies. He then came to South Africa and was awarded an MSc
in Electrical Engineering from the University of the Witwatersrand in 2000. Mr. Dresel
started his engineering career with work that comprised antenna design and
development in the frequency range from 10 kHz up to 6 GHz, antenna placement
simulations, and project management. Mr. Dresel took over the management of the
defence section of Poynting Antennas in 2005 and has been instrumental in its profit
growth since then.
The Board wishes to thank Dr Fourie for the immense contribution he has made in
growing the business he started into the listed entity that it is today. The Board also
wish him well with the new endeavours.
7. PROSPECTS OF POYNTING HOLDINGS
Poynting DS
Poynting DS designs and manufactures specialised broadband antennas and other
related radio frequency (RF) products. Poynting DS’ products sell in the EW (Electronic
Warfare), frequency spectrum monitoring, test and measurement, communication and
other specialised markets. Our clients are located across the globe, mostly outside of
South Africa (Americas, Europe and Asia) and operate mainly as system integrators,
frequency spectrum regulators and in the homeland security market space. Poynting
DS has consistently grown turnover and profits since establishment in 2005. Our
operational EBIT has grown with a CAGR (Cumulative Annual Growth Rate) of more
than 24% over the past 9 years. Our organic growth is achieved by continuously
adding new and innovative products into our product portfolio, adding new system
houses, distributors and agents, and diversifying in terms of territories. We are
continuously on the lookout for new market segments where our core competencies
find application. Currently Poynting DS is only scratching the surface of this market.
The immediate and biggest opportunity remains to target the US market. Management
is optimistic about the growth potential of this business.
Aucom
Aucom provides end to end solutions for radio and TV broadcasters. The business has
specific expertise in digital television distribution, multiscreen and over-the-top (OTT)
systems. Aucom is well positioned to assist broadcasters with the migration to digital
television and radio services across Africa. There is also a large expected increase in
private content providers, private TV companies and private broadcasters.
Opportunities in South Africa remain and Aucom will continue to grow their revenue in
the rest of Africa. Aucom is still subject to a cumulate profit warranty of R38 million
being made up of a 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.
The Group
The Composite Transaction and Specific Repurchase result in reduced complexity for
the Group, which better equips the Group to focus on its profitable businesses.
Management has spent a disproportionate amount of time and energy over the last few
months finding the best way forward with regards to the loss-making businesses. The
focus for the next 6-12 months will be to ensure growth and improved profitability of the
Poynting DS and Aucom businesses. Innovation and product development is part of
our DNA and will remain core to what we do – “real” engineering.
Shareholders are advised that the results of the loss making businesses being sold will
still be included for the first half of this financial year, and consequently the interim
results to 31 December 2014 will be subdued, with the benefits of the Composite
Transaction and the Specific Repurchase being realised only in the second half of the
financial year.
The Group will maintain the existing acquisition pipeline and continue engaging with
potential targets, locally and internationally, where it makes strategic sense. The Group
has been looking to secure a European or USA footprint to support the Poynting DS
product range and distribution potential and to continue to grow the Aucom customer
base and offering.
8. FINANCIAL EFFECTS
The value of the net assets being disposed of is R30.4 million and the attributable
losses thereto are R11.7 million for the year ended 30 June 2014. The Composite
Transaction will be settled by the specific repurchase of 14 000 000 shares
(representing 7.9% of the shares in issue).
The financial information contained in this announcement has not been reviewed or
reported on by the Company’s auditors.
9. CLASSIFICATION OF THE COMPOSITE SALE
The Composite Sale, which forms part of the Composite Transaction, is classified as a
Category 2 transaction in terms of the JSE Listings Requirements.
The Composite Sale constitutes a transaction with a related party as contemplated in
paragraph 21.11 of the JSE Listings Requirements, by virtue of the fact that in terms of
the Composite Sale, the interests will be disposed of to an entity controlled by Dr
Fourie, the previous CEO of Poynting Holdings.
The Composite Sale however falls below the threshold stipulated in paragraph 21.11 of
the JSE Listings Requirements and therefore the fairness opinion contemplated in
paragraph 21.11(d) is not required. Accordingly, shareholder approval is not required
for the Composite Sale or for any other step that forms part of Composite Transaction
pursuant to the JSE Listings Requirements.
10. PROPOSED SPECIFIC REPURCHASE
As detailed above, the Purchase Consideration shall be settled through the transfer to
Poynting Holdings of 14 000 000 Poynting Holdings ordinary shares held by NewCo.
Given that the Specific Repurchase will entail the acquisition of more than 5% of the
issued share capital of Poynting Holdings, the Specific Repurchase is subject to the
requirements of section 48, 114 and 115 of the Companies Act and paragraph 5.69 of
the JSE Listings Requirements. In terms of section 48 and 115 of the Companies Act
and section 5.69 of the JSE Listings Requirements, the Specific Repurchase will
require shareholder approval by way of a special resolution.
In accordance with the Companies Act, an independent Poynting Holdings board,
comprised of independent non-executive directors, will be appointed by the board of
directors of Poynting Holdings to evaluate the Specific Repurchase (“Poynting
Holdings Independent Board”).
The Poynting Holdings Independent Board will appoint an independent expert
acceptable to the Takeover Regulation Panel (“TRP”) to provide the Poynting Holdings
Independent Board with external advice in regard to the Specific Repurchase and to
make appropriate recommendations to the Poynting Holdings Independent Board for
the benefit of Poynting Holdings shareholders. The substance of the external advice
and the opinion of the Poynting Holdings Independent Board on the Specific
Repurchase will be detailed in a circular (“Circular”) which will be posted to Poynting
Holdings shareholders in due course.
The Circular will:
- contain full particulars relating to the Specific Repurchase;
- incorporate the report on the Specific Repurchase from the independent expert; and
- incorporate a notice of general meeting (“General Meeting”) of Poynting Holdings
shareholders.
The required resolutions authorising the Specific Repurchase will be tabled at the
General Meeting.
Irrevocable undertakings to support the Specific Repurchase have been obtained from
shareholders holding more than 75% of the Poynting Holdings shares that are eligible
to vote at the General Meeting.
11. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the ‘cautionary announcement and withdrawal of previous
cautionary’ announcement dated 27 November 2014 and are hereby advised that as
the terms of the Composite Transaction and the Specific Repurchase are disclosed in
this announcement, caution is no longer required to be exercised by shareholders
when trading in the Company’s securities.
22 December 2014
Johannesburg
Transaction and corporate adviser:
PSG Capital Proprietary Limited
Designated Adviser:
Merchantec Capital
Date: 22/12/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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