Acquisition of Hi-Tech 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 100% OF THE FRANCHISING SECURITY BUSINESS AND ICASA LICENCES CURRENTLY MANAGED, OWNED AND OPERATED BY HI- TECH SEKURITEIT LAEVELD PROPRIETARY LIMITED (“HI-TECH LAEVELD”) AS A GOING CONCERN; - THE ACQUISITION OF A 100% INTEREST IN THE ISSUED SHARE CAPITAL OF THE FRANCHISEE, HI-TECH SECURITY NELSPRUIT PROPRIETARY LIMITED, PROVIDING SECURITY AND ARMED RESPONSE SERVICES (“HI-TECH NELSPRUIT”); - THE ACQUISITION OF A 100% INTEREST IN THE ISSUED SHARE CAPITAL OF WHITE RIVER HI-TECH SECURITY SERVICES PROPRIETARY LIMITED (“HI- TECH WHITE RIVER”) PROVIDING SECURITY AND ARMED RESPONSE SERVICES; AND - WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. Introduction CSG shareholders (“Shareholders”) are advised that: - CSG, through its wholly owned subsidiary (“the Purchaser”) has entered into an agreement with Hi-Tech Laeveld, in terms of which the Purchaser will acquire the franchising security business currently owned, managed and operated by Hi-Tech Laeveld (“the Business”) as a going concern (“Laeveld Acquisition”). The Laeveld Acquisition includes the purchase of all franchise contracts together with the operating contracts and ICASA licences, supplier contracts, debtors, goodwill, intellectual property and stock used in the conduct of the Business; - CSG has entered into an agreement with The Future Kerswill Trust (represented by Mr. J Kerswill), in terms of which CSG will acquire a 100% interest in the issued share capital of Hi-Tech Nelspruit (“Nelspruit Acquisition”); and - CSG has entered into an agreement with Mr. J Kerswill and Mr. JP Kerswill in terms of which CSG will acquire a 100% interest in the issued share capital of Hi-Tech White River (“White River Acquisition”). The monitoring business, including the contracts, customers and related assets of the White River franchisee of Hi-Tech Laeveld (“White River Business”) was transferred to Hi-Tech White River prior to the effective date (defined in paragraph 4 below). The Laeveld Acquisition, the Nelspruit Acquisition and the White River Acquisition will be referred to collectively as “the Acquisitions” while Hi- Tech Laeveld, Hi-Tech Nelspruit and Hi-Tech White River will be referred to collectively as “the Entities” in this announcement. 2. Nature of business of the Entities Hi-Tech Laeveld Hi-Tech Laeveld was started in 1990 and provides alarm installations, security monitoring services and guarding services on a franchise basis and currently has six fully fledged franchises located in Mpumalanga, each being owner operated and managed. Hi-Tech Nelspruit Hi-Tech Nelspruit is wholly owned by the Future Kerswill Trust and managed by Mr. J Kerswill. Hi-Tech Nelspruit provides alarm installation, monitoring and reaction services to the Nelspruit area and surrounds and is the largest franchisee of Hi-Tech Laeveld contributing approximately 60% to the income of Hi-Tech Laeveld. Hi-Tech White River Hi-Tech White River is wholly owned by Mr. J Kerswill and Mr. JP Kerswill and provides alarm installation, monitoring and reaction services to the White River and Hazyview areas. 3. Rationale for the Acquisitions The Acquisitions align with CSG’s strategy to expand the basket of services in its Facility Management division. The Acquisitions provide a platform for future acquisitions of security companies in the Mpumalanga province at lower price earnings multiples. Hi-Tech is a major security player in the Lowveld area. It is expected that entering the security industry will increase the operational margins of CSG. 4. Conditions precedent and effective date All conditions precedent to the Acquisitions have been met and the Acquisitions are effective from 1 November 2015 (“Effective Date”). 5. Consideration for the Acquisitions The consideration for the Acquisitions is set out below. Laeveld Acquisition The total consideration for the Laeveld Acquisition is R52.5 million, to be settled in cash as follows: - R5 million to be paid on or about the Effective Date; - R37.5 million to be paid 21 calendar days after the Effective Date; and - R10 million to be paid into a trust account 21 calendar days after the Effective Date and paid to the sellers upon confirmation that, inter alia, the operating contracts and licences have been transferred to the Purchaser. Nelspruit Acquisition - R26.6 million to be paid in four tranches of varying amounts, with the first tranche being paid on or about the Effective Date and the final tranche being paid on or before 10 December 2015; - a final amount (less the R26.6 million upfront payment) to be based on the financial performance of Hi-Tech Nelspruit for the twelve months immediately following the Effective Date (at a price earnings multiple of 4 times), which amount will be payable within 7 days of the finalisation and acceptance by both parties of the managements accounts relating to that period; and - the maximum consideration for the Nelspruit Acquisition will be R55 million. White River Acquisition - R200 000 directly to the White River franchisee as and when this amount becomes due in terms of a separate agreement with the franchisee; - a final amount (less the R200 000 upfront payment) based on the financial performance of Hi-Tech White River for months 13 to 24 after the Effective Date (at a price earnings multiple of 4 times). The final amount will be settled as follows: - 50% as to cash by no later than 31 December 2017; and - 50% through the issue of CSG shares. The shares will be issued within 60 days of the finalisation and acceptance by both parties of the managements accounts relating to that period at the volume weighted average share price of CSG for the 30 business days prior to the last day of the 24th month after the Effective Date; and - the maximum consideration for the White River Acquisition will be R25 million. The maximum total consideration for the Acquisitions is R132.5 million of which R79.3 million will be settled upfront in cash. The remaining amount of R53.2 is to be based on the future financial performance of Hi-Tech Nelspruit and Hi-Tech White River at a price earnings multiple of 4 times. 6. Profits and net asset value attributable to the Acquisitions The post-tax profit attributable to the Acquisitions for the year ended 28 February 2015 (being the most recent financial year end of the Entities) was R11.4 million, while the value of the net assets attributable to the Acquisitions being acquired as at 28 February 2015 was R6.7 million. Revenue attributable to the Acquisitions for the year ended 28 February 2015 was R50.6 million. 7. Categorisation Collectively, the Acquisitions are a Category 2 transaction in terms of the JSE Limited Listings Requirements (“LRs”). 8. Memorandum of Incorporation (“MOI”) CSG will adhere to the provisions of paragraph 10.21 of Schedule 10 of the LRs with regard to the Hi-Tech Nelspruit MOI and the Hi-Tech White River MOI. 9. Withdrawal of cautionary announcement Shareholders are referred to the cautionary and renewal of cautionary announcements published on the Stock Exchange News Service on 7 September 2015 and 20 October 2015 respectively. Further to the information set out in this announcement regarding the Acquisitions, caution is no longer required to be exercised by Shareholders when dealing in their CSG securities. Pretoria 4 November 2015 Designated Advisor Sasfin Capital (a division of Sasfin Bank Limited) Date: 04/11/2015 01:38:00 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.