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Acquisition of ARA Update
POYNTING HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1997/011142/06)
Share code: POY ISIN: ZAE000121299
(“Poynting”)
ACQUISITION OF ARA UPDATE
1. INTRODUCTION
As announced on SENS by Poynting on 19 February 2015 (“Initial Announcement”), Poynting
entered into a binding Heads of Agreement on 17 February 2015 (“Original 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”). Shareholders of Poynting
(“Shareholders”) are hereby advised that the parties have agreed to replace the Original HOA
with a binding amended and restated Heads of Agreement dated 27 March 2015 (“Restated
HOA”), setting out the principle terms and conditions of the Acquisition. The principle terms
and conditions of the Acquisition contained in the Restated HOA are as set out below.
2. THE ACQUISITION
2.1 Nature of ARA and rationale for the Acquisition
Shareholders are referred to the Initial Announcement, which in addition to the nature of
Poynting Defence & Specialised Division, sets out the nature of the business of ARA and the
rationale for the Acquisition in detail, as these remain unchanged.
2.2 Purchase Consideration
The total purchase consideration is comprised of:
- USD 5 000 000 in cash (“Initial Cash Consideration”), payable upon closing of the
Acquisition to all Sellers pro-rata to their shareholding in ARA, with the exception of ARA
CEO, Logen Thiran, who shall not share in the Initial Cash Consideration and instead
only receive Poynting shares;
- 46 000 000 Poynting shares to be issued on the date of closing of the Acquisition;
- an additional 7 731 707 Poynting shares (“First Additional Share Consideration”) and an
additional cash consideration of USD 1 500 000 (“First Additional Cash Consideration”)
payable should the audited IFRS recurring headline profit before tax of ARA for the 12
month period ending 30 June 2016 be at least USD 2 500 000 (“First Profit Target”); and
- a further additional 7 731 707 Poynting shares (“Second Additional Share
Consideration”) and a further additional cash consideration of USD 3 000 000 (“Second
Additional Cash Consideration”) payable should the audited IFRS recurring headline
profit before tax of ARA for the 12 month period ending 30 June 2017 be at least
USD 4 000 000 (“Second Profit Target”).
The First Additional Cash Consideration and the First Additional Share Consideration in
respect of the First Profit Target, and the Second Additional Cash Consideration and the
Second Additional Share Consideration in respect of the Second Profit Target, shall be
adjusted downwards to the extent that the First Profit Target and Second Profit Target are not
achieved.
The First Profit Target and the Second Profit Target are not cumulative and will be calculated
separately each year.
Poynting may elect in its sole discretion, to pay all or part of the First Additional Share
Consideration and/or the Second Additional Share Consideration in cash at a fixed
consideration of 17.083 USA cents per share (irrespective of currency or share price
movements), instead of issuing the respective Poynting shares, provided that in the event that
the aforementioned election right of Poynting shall have the effect that the Acquisition would
no longer qualify as a tax-free reorganisation in terms of the applicable taxation laws in the
USA ("Tax-free Reorganisation"), then Poynting shall only be entitled to exercise the
aforementioned election right in respect of 6 731 707 Poynting shares in respect of the First
Additional Share Consideration, and 6 731 707 Poynting shares in respect of the Second
Additional Share Consideration, or such higher number of Poynting shares that would still
qualify the Acquisition as a Tax-free Reorganisation. Failing which, the parties shall in good
faith renegotiate the terms of the Acquisition.
2.3 Principle terms
The Sellers will provide:
- warranties as at the closing of the Acquisition, that the Sellers shall have no claims
against ARA, whether on loan account or otherwise, and no personal charges/costs shall
be charged to ARA on or after the closing of the Acquisition;
- customary warranties and undertakings relating to the conduct of ARA and its
businesses between the date of signature of the Original HOA and the closing of the
Acquisition; and
- all such other warranties and indemnities that are customary for a transaction similar to
the Acquisition, specifically also including warranties relating to inventory, debtors,
warranty claims and tax liabilities.
In the event that the Acquisition is not implemented due to a breach by any of the parties to
the Acquisition ("Breaching Party") of their obligation to negotiate and enter into a sale of
shares agreement in good faith ("Break Event"), the Breaching Party shall within 14 days after
written demand from the other party, pay the other party a break fee of USD 250 000.
2.4 Suspensive conditions and effective date
In terms of the Acquisition, the Restated HOA is legally binding, and the parties to the Restated
HOA will conclude a formal sale of shares agreement within 30 business days of the date of
signature of the Restated HOA.
The Acquisition will be subject to the fulfilment of at least the following suspensive conditions:
- the requisite approvals required to implement the Acquisition, including approval by the
South African Reserve Bank, the USA Department of Defence (“DoD”) and any
competition authority (if applicable) being obtained;
- there shall be no USA proxy-company requirement imposed on the Acquisition or
Poynting in respect of the Acquisition and, with the exception of a DoD Special Security
Agreement (“SSA”), the DoD shall not impose any other requirement in respect of the
Acquisition or Poynting which may detract from ARA functioning as an ordinary
subsidiary of Poynting with the normal commercial and corporate governance oversight
and control being exercisable by Poynting over ARA;
- written confirmation by the Committee on Foreign Investment in the USA (“CFIUS”) that
it has completed its review (or, if applicable, investigation) under the Exon-Florio
Amendment to the Defense Production Act of 1950, 50 U.S.C. app. § 2170, as amended
(“Exon-Florio”) and determined that there are no unresolved national security concerns
with respect to the Acquisition and, notwithstanding such written confirmation, CFIUS
shall not have required any mitigation arrangement or imposed any condition on
Poynting and/or ARA, including mitigation or conditions pursuant to Section 721(l) of
Exon-Florio, that are unacceptable to Poynting;
- ARA to obtain a ruling from the USA Internal Revenue Services or a tax opinion from
external legal counsel confirming that the Acquisition qualifies or will qualify as a tax-
free reorganisation in terms of the applicable taxation laws in the USA and Poynting
confirming to ARA that it is satisfied that the Acquisition would not have any material tax
consequences for ARA or Poynting;
- written employment agreements are concluded between ARA and all key staff of ARA
with a duration of at least 3 years from the date on which the Acquisition closes, to the
satisfaction of Poynting; and
- the required approval of the Shareholders.
The effective date of the Acquisition is anticipated to be 30 June 2015.
3. 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 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 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
1 April 2015
Transaction and corporate adviser
PSG Capital Proprietary Limited
Designated Adviser
Merchantec Capital
Date: 01/04/2015 09:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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