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ANSYS LIMITED - Acquisition of LAWtrust

Release Date: 30/10/2017 12:00
Code(s): ANS     PDF:  
Wrap Text
Acquisition of LAWtrust

Ansys Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/001222/06)
JSE Share Code: ANS ISIN: ZAE000097028
(“Ansys” or “the Company”)


Acquisition of LAWtrust


1. INTRODUCTION

Ansys is pleased to advise its shareholders that on 27 October 2017, it entered into a letter of intent (the “LOI”)
with the shareholders (the “Sellers”) of Law Trusted Third Party Services (Pty) Ltd (“LAWtrust”) to acquire 100%
of the issued share capital and outstanding shareholder claims, if any, of LAWtrust (“the Transaction”).

The effective date of the Transaction shall be the date on which all the conditions precedent in the definitive sale
agreement are met or waived (“Effective Date”).

The Sellers are The Brett Gage Family Trust, CF Maherry, Corocap Investments Limited, The Gordon Family
Trust, The Law Data Trust, Law Holdings Proprietary Limited, M Maherry, The Perry Naidoo Family Trust, The
Sirius Trust and The Vintage Investments.


2. NATURE OF THE BUSINESS OF LAWtrust

LAWtrust is an information technology developer and provider of cyber / information security solutions. Its
solutions include:

- Authentication - Products and services used to verify the authenticity of digital identities and counterparty
   systems in transactions ;
- Encryption – of data sent and received over secure online environments with Secure Socket Layer (“SSL”)
   certificates, as well as the encryption of information sent via email;
- Digital signatures – to enable the sending and receiving of sensitive documents; and
- Biometrics - Solutions that utilise a variety of technologies for identity management. These include fingerprint
   and facial recognition technologies;

LAWtrust was founded by Christi and Maeson Maherry (“Founders”) and began operations in 2006. Today it
provides services to over 500 clients in the private and public sectors and is considered to be one of the leading /
cyber / information security companies in South Africa, providing for a range of requirements within the sector.

LAWtrust was one of the first accredited authentication service providers in the country, and the only accredited
private company to provide advanced electronic signature solutions. It is legally qualified to be a certificate
authority and has a trust centre which is able to create, issue and revoke advanced digital certificates.

LAWtrust owns and develops its own intellectual property which it uses in combination with third party solutions
to deliver services to its clients.

3. RATIONALE FOR THE TRANSACTION

Ansys has repositioned as a digital technology solutions provider, as announced in its annual financial results
statement. The repositioning is structured around core competencies in: safety and productivity, digital network
connectivity, cyber security, defense digital solutions and original design manufacturing. The repositioning is part
of the group’s strategy that will allow it to leverage existing technologies, capabilities and processes to offer
solutions that go beyond the existing business segments. A key component of the strategy is to achieve growth
both organically and through the acquisition of companies aligned to its core business.
The global cyber security market has grown over 35 times since 2005, primarily as a result of an unprecedented
increase in criminal activity. Recent reports published by Markets and Markets indicates that the cyber security
market will grow from $137 billion in 2017 to $232 billion in 2022. Gartner similarly predicts that spending on
information security, a subset of cyber security and the sector in which LAWtrust operates, will reach $93 billion
in 2018. The extensive use of authentication, encryption, and biometrics in enterprise applications and on the
Internet means that LAWtrust is actively engaged across twelve solution segments within the cyber security
market. The segments in which LAWtrust operates are high-growth segments with a compound annual growth
rate in excess of 20%.
The acquisition of LAWtrust will enhance Ansys’ current cyber security business by introducing strategically
aligned products and by providing access to new markets which, in turn will provide significant annuity revenue.
The incorporation of LAWtrust’s technical team into the Ansys team will allow Ansys to develop and provide an
expanded range of solutions to a combined client base.

4. SALIENT TERMS AND CONDITIONS OF THE TRANSACTION

4.1 Consideration

    Ansys shall make a maximum payment of R108.5 million for 100% of the issued share capital and
    shareholder claims (if any) of LAWtrust using cash and Ansys shares.

    The cash portion shall be R88.4 million and the share portion shall be R20.1 million. The Founders will
    receive 75% of their payment consideration in Ansys shares and 25% of their consideration in cash while the
    remaining shareholders, all external to the business, will receive 100% of their consideration in cash.

        4.1.1   Pre-effective date distribution

        The Sellers shall be entitled to receive a maximum pre-effective date distribution of R10 million
        (“Distribution”) which will be paid by LAWtrust into an escrow account before the Effective Date of the
        Transaction and after the fulfilment of the conditions precedent specified in 5 below.

        The payment of the Distribution to the Sellers will be subject to the following:
        - LAWtrust achieving a minimum audited net profit after tax (“Minimum Audited NPAT”) for the year
          ending 31 March 2018 (“FY18”) of R14 million; and
        - LAWtrust having a minimum cash balance (“Minimum Audited Cash Balance”) of R25 million as at 31
          March 2018.
        The Distribution will be paid to the Sellers should LAWtrust achieve the Minimum Audited NPAT and
        Minimum Audited Cash Balance for the year ending 31 March 2018.

        In the event that the Minimum Audited NPAT and Minimum Audited Cash Balance amounts have not
        been met, the Distribution to the Sellers shall be reduced by the shortfall between the actual audited net
        profit after tax for the year ending 31 March 2018 and the Minimum Audited NPAT and by the shortfall
        between the actual audited cash balance for the year ending 31 March 2018 and the Minimum Audited
        Cash Balance, before distribution to the Sellers. Any Distribution not distributed to the Sellers will be
        paid to Ansys.

    Based on the pre-effective date distribution targets being met, the maximum consideration will therefore be
    R108.5 million and the minimum will be R98.5 million.

4.2 Lock-in Period

    The Founders will be required to remain in the employ of LAWtrust for a period of three years, with such
    period beginning on the Effective Date of the Transaction.

5. Conditions precedent

    The Transaction is subject to the following:

    - Completion of detailed financial, tax, legal, technical, commercial and human resources due diligence to
      the satisfaction of Ansys;
    - Review of key projects, accreditations and intellectual property and intangible assets to the satisfaction
      of Ansys;
    - The conclusion of the necessary agreements with the Founders to continue their employment with
      LAWtrust during the Lock-In Period;
    - The approval of the Transaction by the board of Ansys;
    - If required, the approval of the Transaction by the shareholders of Ansys;
    - To the extent required, the consent of third parties to material contracts in respect of the change of
      control of LAWtrust;
    - The definitive sale agreements being accepted by Ansys and the holders of 100% of the issued shares
       of LAWtrust;
    - The absence of any material adverse change in the business of LAWtrust from the date hereof to the
       Effective Date;
    - LAWtrust retaining all regulatory licenses required to continue to operate;
    - All such other statutory and regulatory approvals and requirements as may be necessary in order to
       implement the Transaction are duly obtained and complied with, as the case may be (including, without
       limitation, in terms of the Companies Act No. 71 of 2008, the Takeover Regulation Panel regulations and
       the Competition Act No. 89 of 1998).

6.   FINANCIAL INFORMATION FOR THE TRANSACTION

     The net value of the assets attributable to the Transaction was approximately R30.6 million as at the year
     ended 31 March 2017. Earnings attributable to the net assets that are the subject of the Transaction, was
     R 10.6 million for the year ended 31 March 2017.


7.   MEMORANDUM OF INCORPORATION

     Ansys undertakes that the memorandum of incorporation of LAWtrust will conform to Schedule 10 of the
     JSE Listings Requirements, as required.

8.   CATEGORISATION OF THE TRANSACTION

     The Transaction is a category 2 transaction as defined by the JSE Listings Requirements.

Designated advisor
Exchange Sponsors

Corporate advisor to Ansys
Vunani Capital (Pty) Ltd

Corporate advisor to LAWtrust
Kipanga Capital


30 October 2017
Pretoria

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