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PINNACLE HOLDINGS LTD - Further acquisition and intention to make a mandatory offer and withdrawal of cautionary announcement

Release Date: 15/10/2015 14:15
Code(s): PNC     PDF:  
Wrap Text
Further acquisition and  intention to make a mandatory offer and withdrawal of cautionary announcement

 Pinnacle Holdings Limited
 Incorporated in the Republic of South Africa
 (Registration number: 1986/000334/06)
 Share code: PNC
 ISIN: ZAE000184149
 (“Pinnacle”)


 FURTHER ACQUISITION IN DATACENTRIX HOLDINGS LIMITED (“DATACENTRIX”) AND INTENTION
 TO MAKE A MANDATORY OFFER TO THE REMAINING SHAREHOLDERS OF DATACENTRIX AND
 WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


1. INTRODUCTION

   Further to the cautionary announcement issued by Pinnacle on SENS on 1 October 2015 and in the press
   on 2 October 2015, the board of directors of Pinnacle (the “Board”) is pleased to announce that Pinnacle
   has acquired 20,000,000 Datacentrix ordinary shares (“Acquired Shares”) from RMB Securities Proprietary
   Limited (acting on behalf of Anchor Capital Proprietary Limited through a structured note product) (the
   “Seller”) in an off-market sale and purchase (the “Acquisition”). The Acquisition was settled by Pinnacle
   through the issuance of 7,691,486 new Pinnacle shares to the Seller. The Acquisition is not a categorised
   transaction in terms of the JSE Listings Requirements (“Listings Requirements”)


   The Acquired Shares represent approximately 10% of the issued ordinary share capital of Datacentrix. Prior
   to the Acquisition, Pinnacle owned 68,520,048 shares in Datacentrix constituting 34.995% of the total issued
   ordinary share capital (excluding 9,467,692 treasury shares) (“Voting Securities”) of Datacentrix. The
   Acquisition has resulted in Pinnacle increasing its shareholding to approximately 45% of the Voting
   Securities, prior to the offer to the minority shareholders of Datacentrix as set out in paragraph 2 below.

2. MANDATORY OFFER

   As a result of Pinnacle’s shareholding in Datacentrix surpassing 35% of the Voting Securities, Pinnacle is
   required, in terms of section 123 of the Companies Act, No. 71 of 2008 (the “Act”), to extend a mandatory
   offer to the remaining Datacentrix ordinary shareholders (the “Offer”) on the same terms as the Acquisition,
   which Offer must be made within one month of this announcement.

3. TERMS OF THE OFFER

   Under the terms of the Offer, Datacentrix minority shareholders will be entitled to receive 1 (one) Pinnacle
   share for every 2.6 (two point six) Datacentrix shares held (“Offer Consideration”). This equates to a
   consideration of R4.90 per Datacentrix share held by applying Pinnacle’s 30 day volume weighted average
   traded share price (“VWAP”) of R12.74 as at the close of business on 13 October 2015 (“Acquisition
   Finalisation Date”).
4. RATIONALE FOR ACCEPTANCE OF THE OFFER

  -       The Offer Consideration represents an 8.8% premium to Datacentrix’s 30 day VWAP of R4.50 as at the
          Acquisition Finalisation Date.
  -       Pursuant to the Offer, Pinnacle intends to further increase their interest in Datacentrix.
  -       The Acquisition and implementation of the Offer will:
          -     allow Pinnacle increased access to the fast growing enterprise services market;
          -     further allow for leveraging of synergies throughout the combined group; and
          -     allow for improved cost management.


5. CONDITIONS PRECEDENT

  The implementation of the Offer will be subject to the fulfilment of the following condition precedent:


      -       Receipt of the necessary approvals required from the Takeover Regulation Panel, the South African
              Reserve Bank and the JSE Limited (“JSE”).

  Pinnacle received approval from the Competition Authorities on 30 October 2013 in respect of the
  acquisition of Sanlam Private Equity’s shareholding in Datacentrix, which approval included Pinnacle
  acquiring any further interest in Datacentrix up to 100% of Datacentrix’s shares, and therefore the Offer will
  not be subject to any further Competition Commission approval.


6. PRO FORMA EARNINGS AND NET ASSET VALUE EFFECTS PERTAINING TO THE OFFER

  The pro forma financial effects of the Offer on Datacentrix shareholders who accept the Offer, for which the
  Board of Pinnacle is responsible, are provided for illustrative purposes only to provide information about
  how the Acquired Shares and the Offer will affect the financial position and performance of the Datacentrix
  shareholders by illustrating the effect on them thereof on the basic earnings per share (“Basic EPS”) and
  diluted basic earnings per share (“Diluted Basic EPS”), and headline earnings per share (“HEPS”) and
  diluted headline earnings per share (“Diluted HEPS”) as if the Acquisition and Offer had become operative
  on 1 March 2014, and, for the purpose of net asset value per share (“NAVPS”) and net tangible asset value
  per share (“NTAVPS”), as if the Acquisition and Offer had become operative on 28 February 2015. Because
  of their nature, the pro forma financial effects may not fairly represent the financial performance and position
  of a Datacentrix shareholder after the Acquired Shares and Offer. The pro forma financial effects below
  assumes Pinnacle acquires 100% of the Voting Securities.




                                                                   Before the           Post the       % Change
                                                                 Offer (1)           Offer
    Basic EPS (cents) (2 - 4)                                       52.9              56.7             7.2%
    Diluted Basic EPS (cents) (2 - 4)                               52.6              60.0            14.1%
    HEPS (cents) (2 - 4)                                            53.0              57.6             8.7%
    Diluted HEPS (cents) (2 - 4)                                    52.8              61.0            15.5%
    NAVPS (cents) (4 - 7)                                          312.8             395.0            26.3%
    NTAVPS (cents) (4 - 7)                                         262.4             288.1             9.8%
    Weighted average number of shares in issue ('000)            195,798           195,798
    Diluted average number of shares in issue ('000)             196,780           196,780
    Number of shares in issue (ex. treasury shares)
    ('000)                                                       195,798           195,798


  Notes:

      1. The ”Before the Offer” financial results of Datacentrix are extracted without adjustment from
         Datacentrix’s audited annual financial statements for the year ended 28 February 2015 and the “Post
         the Offer” column is based on the combined merged entity of Pinnacle (based on Pinnacle’s audited
         annual financial statements for the year ended 30 June 2015) and Datacentrix;
      2. Transaction costs of R3 million are expensed and the resultant tax effect recorded. This adjustment
         will not have a continuing effect;
      3. Total finance costs, at a weighted average cost of debt of 9.5% per annum of R0.29 million are
         incurred to settle transaction costs. Taxation is accounted for where applicable. This adjustment will
         have a continuing effect;
      4. Amortisation of R32 million is recorded in respect of the intangible assets acquired. This adjustment
         will have a continuing effect. Intangible assets based on previous business combinations were
         derecognised and the related amortisation charges were therefore reversed. This adjustment will not
         have a continuing effect. Deferred tax is accounted for on both adjustments;
      5. Pinnacle issues 50,314,667 new Pinnacle shares to Datacentrix shareholders in the ratio of 1
         Pinnacle share for every 2.6 Datacentrix shares held (the number of Datacentrix Shares subject to
         the Offer is assumed to be 107,277,943 (i.e. excluding the Acquired Shares)). The issue of
         50,314,667 new Pinnacle shares takes into account the Acquired Shares as well as the Datacentrix
         share option scheme shares that are in-the-money (amounting to approximately R17.4 million) and
         exercisable prior to 28 February 2020 (as per note 29 of Datacentrix’s annual report for the year
         ended 28 February 2015).
      6. Marketing related intangible assets to the value of R52 million and customer related intangible assets
         to the value of R185 million have been recognised in respect of the Acquisition and the Offer.
         Corresponding deferred tax liabilities of R15 million and R52 million have been recorded for the
         marketing related and customer related intangible assets respectively. The marketing related
         intangible assets have a useful life of 20 years and the customer related intangible assets have a
         useful life of 5 – 7 years;
      7. A provisional purchase price allocation has been performed resulting in an indicative goodwill value
         of R108 million in respect of the Acquisition and Offer. This calculation will be revised in terms of
         IFRS 3: Business Combinations once the Offer is implemented



7. FUNDING OF THE OFFER CONSIDERATION

  Pinnacle has confirmed to Datacentrix that the necessary authority to issue Pinnacle shares is in place and
  appropriate approvals have been obtained, for the payment of the Offer Consideration in terms of
  implementation of the Offer, and, as required in terms of the Act and the Companies Regulations, 2011.


  Pinnacle has enough authorised share capital in place to settle the Offer Consideration.


8. RESPONSIBILITY STATEMENT

  The Board accepts responsibility for the information contained in this announcement, and to the best of its
  knowledge and belief, the information is true and, where appropriate, this announcement does not omit
  anything likely to affect the importance of the information included.


9. CIRCULAR TO DATACENTRIX SHAREHOLDERS

  A circular containing details of the Offer and the terms and timing thereof will be posted to Datacentrix
  shareholders in due course.


10. CATEGORISATION

  The Acquisition and the Offer aggregated will constitute a Category 2 transaction in terms of the Listings
  Requirements.


11. WITHDRAWAL OF CAUTIONARY

  The cautionary dated 1 October 2015 is herewith withdrawn and shareholders therefore no longer have to
  exercise caution in trading in Pinnacle securities.


 Johannesburg

 15 October 2015

 Investment bank, corporate adviser and transaction sponsor
 Investec Bank Limited

 Sponsor
 Deloitte & Touche Sponsor Services Proprietary Limited


 Legal Adviser
 Tugendhaft Wapnick Banchetti and Partners

 Reporting accountant
 BDO South Africa Incorporated

Date: 15/10/2015 02:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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