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Acquisition of ARA
POYNTING HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/011142/06)
Share code: POY ISIN: ZAE000121299
(“Poynting”)
ACQUISITION OF ARA
1. INTRODUCTION
The board of directors of Poynting Holdings (“the Board”) is pleased to advise shareholders
that Poynting has entered into a binding Heads of Agreement (“HOA”) with Antenna
Research Associates Inc. (“ARA”) to acquire 100% of the issued share capital of ARA from
its existing shareholders (“the Sellers”)(“the Acquisition”).
2. THE ACQUISITION
2.1 Nature of Poynting Defence & Specialised Division (“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. Poynting DS’ 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. Poynting DS’
operational EBIT has grown with a CAGR (Cumulative Annual Growth Rate) of 26% over the
past 8 years. Poynting DS’ 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. Poynting DS is 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.
2.2. Nature of ARA
ARA, based in the United States of America (“USA”), is a world class supplier of RF and
antenna systems to predominantly the military system integrator and homeland security
markets. ARA has been “Creating The World's Most Remarkable Antennas Since 1963”.
ARA has built up significant knowhow and an extensive product range over its more than 50
years history. ARA is considered to be almost a replication of Poynting DS, but with more
than 90% of sales being in the USA.
2.3 The rationale for the Acquisition
Poynting DS primarily sells to clients in various countries in the World but with relatively
limited sales in the USA. ARA is a company operating in similar market segments in the
USA.
Poynting wishes to establish a larger market presence in the USA and Poynting and ARA
wish to combine their businesses in order to benefit from synergies between the companies
and to grow their businesses into a significant business in the defence market. For this
purpose Poynting wishes to purchase the entire issued share capital of ARA, and the
shareholders of ARA are willing to sell those shares to Poynting.
ARA is a logical extension of the Poynting DS business and all parties are excited about the
apparent culture fit between the two organisations.
On the date that the transaction becomes effective, current majority shareholder of ARA
Pradeep Wahi will join the Poynting Holdings board, and ARA CEO Logen Thiran will join the
Poynting Group Exco.
- Mr Pradeep Wahi acquired ARA in 1989 from its founder after completing his MBA at
the University of Pennsylvania, Wharton School of Business. Mr. Wahi has extensive
experience serving on the boards of various privately held and publicly traded
companies. Mr. Wahi has over 35 years’ experience in technology development and
management of technology companies and Poynting looks forward to the contribution
he will make on the Board.
- Mr Logen Thiran is an American dream success story. After starting as a young
immigrant to the USA, Logen received his bachelor and master’s degrees in
Electrical Engineering from North Carolina State University and received his MBA
degree from Duke University. He had a successful career working for a number of
corporates in the Defence industry and is also an entrepreneur, having successfully
sold a start-up company. For the last 9 years before joining ARA he managed
another defence business with more than $200m revenue, 5 facilities, and over 500
employees.
2.4 Purchase Consideration
The total purchase consideration is comprised of USD 5 million in cash, payable upon
closing of the Acquisition and 75 577 634 Poynting shares to be issued at the closing price
on the date of closing of the Acquisition.
Given that Poynting DS and ARA will be working closely together and there are significant
synergistic benefits anticipated, no profit warranties were deemed appropriate.
The Sellers will provide warranties which are normal in a transaction of this nature.
2.5 Suspensive conditions 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 approval by the South African Reserve Bank and the
USA Department of Defence.
The effective date of the Acquisition is anticipated to be 1 July 2015.
3 UNDERLYING FINANCIAL INFORMATION OF ARA
As at 30 April 2014 (last audited financial statements) the value of total assets of ARA was
$9.6m and the value of net assets was $2.1m. ARA reported a loss before tax of $933 000
for the year ended 30 April 2014.
Logen Thiran joined the ARA board of directors in February 2014 and was named the
President & CEO of ARA in August 2014. Logen established a strategic plan for growth and
a tactical plan for profitability of ARA that has already showed results. ARA is on track to
report in excess of $1m profit after tax for their year ended 30 April 2015. ARA has a clear
growth plan and the synergies with Poynting DS will provide an additional boost to their
ambitious targets. Subsequent to the Acquisition, Logen will continue to drive the USA
business as CEO and will closely work with Poynting Holdings in South Africa to build out a
global business.
4 CLASSIFICATION OF THE ACQUISITION AND CIRCULAR TO SHAREHOLDERS
The Acquisition is classified as a Category 1 transaction in terms of the JSE Listings
Requirements and requires shareholder approval. Accordingly, a circular containing full
details of the Acquisition 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 posted to
Poynting shareholders in due course.
In addition shareholders are advised that, subsequent to the Acquisition, the Memoranda of
Incorporation of ARA and its subsidiaries will be reviewed to ensure that they do not prevent
Poynting from complying with its obligations in terms of the JSE Listings Requirements.
Johannesburg
19 February 2015
Designated Adviser
Merchantec Capital
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