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Acquisition of Viable Assets and Withdrawal of Cautionary Announcement
M FiTEC International Limited
Incorporated in the Republic of South Africa
(Registration number 2015/294800/06)
Share code: MFI ISIN: ZAE000209607
(“M-FiTEC” or “the Company”)
ACQUISITION OF VIABLE ASSETS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement dated 29 June 2016 and the subsequent renewal of cautionary
announcements, the last of which was dated 1 February 2017, the board of directors of M-FiTEC (“the
Board”) is pleased to advise shareholders that M-FiTEC has entered into sale of shares agreements
with the shareholders of each of three groups that collectively comprise the Viable Asset Acquisition.
M-FiTEC has entered into agreements with the shareholders of each of: WIZZIT Group Proprietary
Limited and WIZZIT Payments Proprietary Limited (collectively “WIZZIT”); Wavelengths 202
Proprietary Limited and Magix Security Proprietary Limited (collectively “Magix”); and Finteq Africa
Proprietary Limited (“Finteq Africa”) and its wholly owned subsidiary Finteq Proprietary Limited
(“Finteq”) (collectively “Finteq Group”) whereby M-FiTEC will, subject to the fulfilment or waiver of
the conditions precedent as set out in paragraph 2.4 below (“Conditions Precedent”), acquire the
entities as follows:
1.1 WIZZIT, in terms of which M-FiTEC will acquire 87.01% of the issued share capital from the
shareholders of WIZZIT (“WIZZIT Shareholders”), for an initial purchase consideration of
R104 413 815 and subject to the attainment of specified targets, a maximum purchase
consideration not exceeding R156 620 723 as detailed in paragraph 2.3.1 below (“WIZZIT
Purchase Price and Settlement Consideration”);
1.2 Magix, in terms of which M-FiTEC will acquire the entire issued share capital from the
shareholders of Magix (“Magix Shareholders”), for an initial purchase consideration of
R12.5 million and subject to the attainment of specified targets, a maximum total purchase
consideration not exceeding R60 million as detailed in paragraph 2.3.2 below (“Magix Purchase
Price and Settlement Consideration”); and
1.3 Finteq Group, in terms of which M-FiTEC will acquire the entire issued share capital from the
shareholders of Finteq Group (“Finteq Shareholders”), for an initial purchase consideration of
R60 million. Finteq will concurrently issue Finteq shares to its empowerment partner, Nonuq
Empowerment Partners Proprietary Limited (“Nonuq”) for a cash consideration of R7.2 million
such that Nonuq will hold 30% of the issued share capital of Finteq resulting in M-FiTEC paying
an initial net purchase consideration of R52.8 million and subject to the attainment of specified
targets, a maximum total purchase consideration not exceeding R95.2 million as detailed in
paragraph 2.3.3 below (“Finteq Purchase Price and Settlement Consideration”).
WIZZIT, Magix and Finteq Group are collectively referred to hereinafter as “the Viable Assets” and
the WIZZIT Acquisition, the Magix Acquisition and the Finteq Group Acquisition are collectively referred
to hereinafter as “the Viable Assets Acquisition”.
2. THE VIABLE ASSETS ACQUISITION
2.1 Nature of WIZZIT, Magix and Finteq Group
WIZZIT is an internationally recognised pioneer of cellphone banking. Its mobile banking
technology and accompanying deployment model is active in 13 countries across three continents.
WIZZIT has proprietary technology which it deploys with partner banks. The company has taken
its technology and branchless banking model to emerging markets in Africa, Central America and
Eastern Europe which collectively represent over 90% of its revenue. WIZZIT also provides a fully
secured internet banking channel for smart phones in addition to the traditional mobile channel. It
has over 6 million customers on its platform and has processed over $12 billion in transaction
value.
Magix specialises in cyber security. It focuses mainly on the threats posed by insiders who have
access to companies’ internal applications and networks and who use this status to collude with
third parties to commit crime. Its clients include life and short-term insurers, banks, retailers and
brokers. In addition, it provides cyber-crime prevention delivered using a “software as a service”
model which assists corporates to identify weaknesses and vulnerabilities in their network and
application infrastructure and obtain guidance as to remediation required. It also provides
accredited vendor scans for Payment Card Industry (PCI) compliance.
Finteq Group develops and implements robust payment solutions for the financial services
industry. In addition to South Africa and the SADC territories, it has deployed solutions in Nigeria,
Ethiopia, Kenya, Tanzania, Zimbabwe, Namibia and Botswana. Its clients include the major banks
in South Africa, who comprise approximately 40% of its revenue, while its international customers
comprise nearly 60% of its revenue.
2.2 The rationale for the Viable Assets Acquisition
M-FiTEC was formed and listed as a SPAC on the AltX in order to pursue acquisitions of
companies focussed on and operating in the financial technology (“FinTech”) segment. The
Company aims to build a portfolio of profitable software, services and technology platforms to
enable the provision of financial services for all.
As stated in the pre-listing statement, M-FiTEC undertook to make anchor investments in either
of the major categories of Software, Payments and Platforms and acquire companies in the
R20 million to R200 million enterprise value range, followed by numerous smaller bolt-on
complementary acquisitions to support the anchor purchases.
The target companies comprising the Viable Asset Acquisition fulfill these requirements through
their provison of sofware, technology and services to banks, retailers and other organisations
involved in serving and extending the provision of financial services. Through these acquisitions,
M-FiTEC is taking its first step to fulfilling its vision.
The total consideration for the Viable Asset Acquisition will be settled in M-FiTEC shares in order
to ensure alignment of interests between existing M-FiTEC shareholders, WIZZIT Shareholders,
Magix Shareholders and Finteq Shareholders.
2.3 Purchase Price and Settlement Consideration
2.3.1 WIZZIT Purchase Price and Settlement Consideration
M-FiTEC will acquire 87.01% of the issued share capital of WIZZIT for R104 413 815.
The purchase price will be settled by the issue of 9 492 165 M-FiTEC shares at R11 per
share (“Issue Price”). A top-up payment, up to a maximum of R52 206 908 will be settled
in cash or shares or a combination thereof at M-FiTEC’s election, subject to the attainment
of defined profitability and growth targets by WIZZIT over three years.
2.3.2 Magix Purchase Price and Settlement Consideration
M-FiTEC will acquire the entire issued share capital of Magix for R12.5 million. The
purchase price will be settled by the issue of 1 136 364 M-FiTEC shares at the Issue
Price. A top-up payment, up to a maximum of R47.5 million will be settled in cash or
shares or a combination thereof at M-FiTEC’s election, subject to the attainment of
defined profitability and growth targets by Magix over three years.
2.3.3 Finteq Purchase Price and Settlement Consideration
M-FiTEC will acquire the entire issued share capital of Finteq Africa, and after the
allotment and issue of shares to Nonuq will hold 70% of the issued share capital of Finteq,
for an initial net purchase price of R52.8 million. The purchase price will be settled by the
issue of 4 800 000 M-FiTEC shares at the Issue Price. A top-up payment, up to a
maximum of R35.2 million will be settled in cash or shares or a combination thereof at
M-FiTEC’s election, subject to the attainment of defined profitability and growth targets
by Finteq Group over three years.
2.4 Conditions Precedent and effective date of the Viable Assets Acquisition
The Viable Assets Acquisition will be subject to the fulfilment or waiver, as the case may be of
inter alia, the following conditions precedent:
2.4.1 by no later than 31 March 2017:
2.4.1.1 insofar as may be necessary, the receipt by the parties of written consents and
approvals from third parties to any material agreements listed in the respective
purchase and sale agreements (“Agreements”), concluded with WIZZIT,
Magix, Finteq Group (collectively “the Subject Group”), that those
agreements shall not be accelerated, cancelled, amended or otherwise
adversely varied as a result of the signature and implementation by each of
WIZZIT Shareholders, Magix Shareholders and Finteq Shareholders and/or the
Subject Group of the Agreements;
2.4.2 by no later than 30 April 2017:
2.4.2.1 M-FiTEC obtaining irrevocable written undertakings from a sufficient number of
its shareholders to enable the passing of all shareholders resolutions required
for the purpose of implementing the Agreements;
2.4.2.2 insofar as may be necessary, the approvals of the JSE Limited (“JSE”) and/or
the Takeover Regulation Panel for the parties to carry out their respective
obligations under the Agreements including the granting of approval by the JSE
of a listing of M-FiTEC shares at the Issue Price, which are required to
discharge the respective purchase prices, in accordance with the terms and
conditions of the Agreements;
2.4.2.3 insofar as may be necessary, the approvals of the Competition Commission
and/or the Competition Tribunal;
2.4.2.4 the JSE approving the circular to be issued by M-FiTEC to its shareholders in
accordance with the Listings Requirements of the JSE (“JSE Listings
Requirements”), including a notice of general meeting to be convened by the
Company for the purpose of obtaining the approvals of its shareholders in terms
of the JSE Listings Requirements, the Companies Act and the regulations
promulgated in terms of the Companies Act; and
2.4.2.5 the shareholders of the Company in general meeting (other than the non-voting
shareholders, being Mr Charles Rowlinson, Mr Kevin Boyers and Mr Robin
Frew), passing all resolutions necessary to approve and implement the terms
and conditions of the Agreements including, without limitation, the authorisation
of the allotment and issue of the M-FiTEC shares required to discharge the
respective purchase prices.
The effective date of the Viable Assets Acquisition shall be once all the Conditions Precedent have
been fulfilled or waived.
2.5 Financial information pertaining to the Viable Assets Acquisition
2.5.1 The value of the net assets that are the subject of the acquisition of WIZZIT (“WIZZIT
Acquisition”) as at 29 February 2016, being the date of the last audited accounts, was
R27.7 million. The profit attributable to the net assets that are the subject of the WIZZIT
Acquisition for the year ended 29 February 2016 was R14.2 million.
2.5.2 The value of the net assets that are the subject of the acquisition of Magix (“Magix
Acquisition”) as at 30 June 2016, being the date of the last audited accounts, was
R3.0 million. The profit attributable to the net assets that are the subject of the Magix
Acquisition for the year ended 30 June 2016 was R0.8 million.
2.5.3 The value of the net assets that are the subject of the acquisition of Finteq Group (“Finteq
Group Acquisition”) as at 29 February 2016, being the date of the last reviewed
accounts, was R8.1 million. The profit attributable to the net assets that are the subject of
the Finteq Group Acquisition for the year ended 29 February 2016 was R4.3 million.
2.6 Related party implications, classification of the Viable Asset Acquisition and circular to shareholders
Mr Charles Rowlinson, Mr Kevin Boyers and Mr Robin Frew are directors of M-FiTEC and
shareholders in WIZZIT.
Accordingly, the WIZZIT Acquisition constitutes a ‘related party transaction’ in terms of the JSE
Listings Requirements and will be subject to approval by shareholders present or represented in
general meeting and voting (excluding the related party/ies and their associates), and in terms of
paragraph 10.4(f) of the JSE Listings Requirements, M-FiTEC will be required to obtain a fairness
opinion on the WIZZIT Acquisition from an independent expert (“Fairness Opinion”) and the
Board is required to include a statement in the circular to be issued to shareholders (“Circular”)
confirming whether the WIZZIT Acquisition is fair to shareholders.
As related parties, current directors of M-FiTEC Charles Rowlinson, Kevin Boyers and Robin Frew
and their associates will be precluded from voting on the resolutions to approve the Viable Assets
Acquisition. However, as shareholders in M-FiTEC, they may be taken into account in determining
a quorum for the purposes of the general meeting. The remaining seven directors of M-FiTEC are
not related parties and will be able to exercise their votes on all resolutions at the general meeting.
There are no related parties to either of Magix or Finteq Group.
The Circular incorporating, inter alia, full details of the Viable Assets Acquisition, Revised Listings
Particulars, pro forma financial effects of the Viable Assets Acquisition, the Fairness Opinion and
a notice to convene a general meeting of shareholders in order to consider and if deemed fit, to
pass with or without modification, inter alia, the interdependent resolutions necessary to approve
and implement the Viable Assets Acquisition, will be sent to shareholders in due course.
Post the successful conclusion of the Viable Assets Acquisition, the JSE will no longer classify
M-FiTEC as a SPAC and subject to the approval of the JSE the Company will remain listed on
the AltX with the potential to consider moving to the Main Board in the future.
3. CHANGE OF YEAR END
Shareholders are advised that due to the February year ends of WIZZIT and Finteq Group, M-FiTEC
has changed its year end to February. The year end of Magix will also be changed post the Viable
Assets Acquisition so as to align the reporting periods of the group companies.
Accordingly, the Company’s next set of year end results will be reported for an 11 month period from
1 April 2016 to 28 February 2017 and its first set of consolidated results will be reported for the six
month period from 1 March 2017 to 31 August 2017.
4. WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement dated 29 June 2016 and the subsequent
renewal of cautionary announcements, the last of which was dated 1 February 2017, and are hereby
advised that further to the details contained in this announcement, caution is no longer required to be
exercised by shareholders when dealing in the Company’s securities.
Johannesburg
15 March 2017
Corporate Adviser and Designated Adviser
Merchantec Capital
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