Wrap Text
Acquisition of further 38.1% of Ukweza
CSG HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/011359/06)
Share code: CSG
ISIN code: ZAE000184438
("CSG" or "the Company")
ANNOUNCEMENT REGARDING THE ACQUISITION OF A FURTHER 38.1%
INTEREST IN UKWEZA HOLDINGS PROPRIETARY LIMITED (“UKWEZA”)
1. Introduction
CSG shareholders (“Shareholders”) are advised that Thyme 2 Proprietary
Limited and Mr. Gary Davis (collectively the “Sellers”) have accepted an offer
from the Company to acquire their respective shareholdings in Ukweza
(“Offer”). CSG currently holds a 61.9% interest in the Ukweza while Ukweza
currently holds a 55% interest in Phakamani Solutions Proprietary Limited
(“Phakamani”) and a 25.5% interest in Significant Site Services Proprietary
Limited (“SSS”). CSG holds a further 74.5% direct interest in SSS.
In terms of the Offer, CSG will acquire a further 38.1% in Ukweza from the
Sellers (“Acquisition”). Following the Acquisition, CSG will hold 100% of
Ukweza, 100% of SSS and 55% of Phakamani.
2. Nature of business of Ukweza
Ukweza was established more than 20 years ago and offers contract catering,
events management and contract cleaning to both the public and private
sectors. Ukweza’s mission is to deliver a customised service to its clients that
fits their needs and budgets, while maintaining a high standard of service
excellence. The contract catering and food services include managing staff
canteens and supplying meals to students, patients in hospitals, corporate
head offices, mines and construction sites. Ukweza offers various professional
and specialised cleaning services ranging from office and commercial
cleaning to specialist plant and high level cleaning programmes, including a
dedicated cleaning team qualified in safe high level window cleaning.
Rationale for the Acquisition
In line with CSG’s acquisition strategy, CSG wishes to acquire a further 38.1%
in Ukweza increasing its shareholding to 100% for both Ukweza and SSS and
55% for Phakamani which will result in increased earnings from these entities
attributable to Shareholders. CSG has an excellent knowledge of Ukweza’s
business, management and prospects through its controlling interest and the
integration of the remaining 38.1% of Ukweza would be seamless. The
Acquisition aligns with CSG’s strategy to become a major player in the
contract catering and cleaning arena and the increased shareholding in
Ukweza will increase CSG’s exposure to this industry.
3. Consideration for the Acquisition
The purchase consideration payable by CSG in terms of the Acquisition will
be an initial amount of R7 million (“Initial Amount”), which may be increased
by a maximum amount of R33 million (“Performance Guarantee Amount”)
based on the financial performance of Ukweza for the year ending 31 March
2016.
The purchase consideration will be settled as follows:
- the Initial Amount will be paid in cash, shortly after the publication of this
announcement; and
- The Performance Guarantee Amount will be settled by the issue of new
CSG shares following the finalisation of the audited accounts of both
Ukweza and SSS for the year ending 31 March 2016, based on the profit
after tax targets achieved by these entities. The number of new CSG
shares to be issued will be determined based on the volume weighted
average price of CSG shares traded on the exchange operated by JSE
Limited (“VWAP”) 30 traded days after the Effective Date (as referred to in
paragraph 4 below). The new CSG shares will be issued ex any dividend
declared by CSG for the year ending 31 March 2016.
4. Conditions precedent and effective date
All conditions precedent to the Offer have been waived or fulfilled and the
Acquisition will be effective from 1 October 2015 (“Effective Date”).
5. Financial effects
The pro forma financial effects of the Acquisition (“Financial Effects”) on
CSG’s basic earnings per share (“EPS”), headline earnings per share
(“HEPS”), fully diluted EPS, fully diluted HEPS, net asset value per share
(“NAVPS”) and net tangible asset value per share (“NTAVPS”) are set out
below.
The Financial Effects have been prepared in terms of the JSE Limited Listings
Requirements (“LRs”) and the Guide on Pro Forma Financial Information
issued by the South African Institute of Chartered Accountants.
The Financial Effects have been prepared to illustrate the impact of the
Acquisition on CSG’s audited results for the year ended 31 March 2015 as
published on 1 June 2015 (“Year End Results”), had the Acquisition occurred
on 1 March 2014 for consolidated statement of comprehensive income
purposes, and on 31 March 2015, for consolidated statement of financial
position purposes. The Financial Effects have been prepared using
accounting policies that comply with IFRS and are consistent with those
applied in the Year End Results.
The Financial Effects are the responsibility of CSG’s directors and have been
prepared for illustrative purposes only and, due to their nature, may not fairly
present the financial position, results of operation or cash flows of CSG after
the Acquisition.
Before the After the Change
Acquisition Acquisition %
EPS (cents) 17.95 19.39 8
Fully diluted EPS (cents) 17.72 19.15 8
HEPS (cents) 17.76 19.20 8
Fully diluted HEPS (cents) 17.53 18.96 8
NAVPS (cents) 76.10 74.50 (2)
NTAVPS (cents) 45.30 43.70 (4)
Number of ordinary shares in issue at 31
417 010 437 385 5
March 2015 (‘000)
Weighted average number of shares in
issue for the period ended 31 March 2015 409 746 430 121 5
(‘000)
Fully diluted number of shares in issue for
415 029 435 404 5
the period ended 31 March 2015 (‘000)
Notes:
1. The information in the “Before the Acquisition” column has been extracted, without
adjustment from the Year End Results.
2. The “After the Acquisition” column is based on the “Before the Acquisition”
column and after the following:
2.1 Taking into account the consideration for the Acquisition of R7 000 000 in cash
and 20 375 401 new CSG shares (assuming that the maximum Performance
Guarantee Amount of R33 million is paid and the consideration shares are issued
at a price of R1.6196 per share (being the VWAP for the 30 traded days prior to
this announcement).
2.2 In calculating EPS, HEPS, fully diluted EPS and fully diluted HEPS, a decrease in
non-controlling interest was taken into account. The financial information relating
to Ukweza, SSS and Phakamani was extracted from the audited financial of these
entities for the year ended 31 March 2015.
2.3 The cash portion of the consideration is to be funded out of existing cash
resources. Interest forgone on the cash resources (previously held on call) has
been taken into account at an interest rate of 4.45%.
2.4 As CSG already controlled Ukweza at the date of acquiring the additional interest,
the Acquisition is not accounted for as a business combination in terms of IFRS 3.
The excess above Ukweza’s additional net asset value has been accounted for
against retained earnings.
3. NAVPS and NTAVPS have been calculated based on the number of shares in issue
at 31 March 2015.
4. EPS, fully diluted EPS, HEPS and fully diluted HEPS have been calculated based on
the weighted average number of shares in issue during the period ended 31 March
2015.
6. Categorisation
Based on current share price information, the Acquisition is a Category 2
transaction in terms of the LRs.
Pretoria
1 September 2015
Designated Advisor
Sasfin Capital
(a division of Sasfin Bank Limited)
Date: 01/09/2015 02:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
