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ALVIVA HOLDINGS LIMITED - Acquisition Of The Synerg Group

Release Date: 14/06/2019 07:30
Code(s): AVV     PDF:  
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Acquisition Of The Synerg Group

ALVIVA HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1986/000334/06)
Share code: AVV ISIN: ZAE000227484
(“Alviva”)

ACQUISITION OF THE SYNERG GROUP

1. Introduction

Shareholders are advised that Alviva has on 13 June 2019, through its subsidiary DCT
Holdings Proprietary Limited (“DCT”), entered into a sale of shares agreement to acquire 70%
of the issued share capital of SynergERP Proprietary Limited (“Synerg SA”).

Through its subsidiary Alviva International Investments Proprietary Limited (“Alviva
International”), it also entered into sale of shares agreements to acquire 51% of the issued
share capital of Synergy DWC-LLC (“Synerg UAE”) and SynergERP Limited (“Synerg UK”)
respectively.

Synerg SA, Synerg UK and Synerg UAE are collectively referred to hereinafter as “the Synerg
Group”. The acquisition of Synerg SA will be effective from 1 July 2019 (“the Effective Date”)
and the acquisitions of Synerg UAE and Synerg UK will be effective from the Closing Date
(collectively “the Acquisitions”).

The Acquisitions will be implemented on the “Closing Date”, being the first day of the month
following the month in which the last of the conditions precedent to the Acquisitions, as set
out in paragraph 5 below is fulfilled or waived, as the case may be (“Conditions Precedent”).

2. Nature of the business of the Synerg Group and transaction rationale

The Synerg Group mainly consists of five trading companies, namely Synerg SA, including
subsidiaries, SynergIT Proprietary Limited (“Synerg IT”) and Synerg300 Proprietary Limited
(“Synerg 300”). In addition, it has two newly established regional operations, one in the
United Kingdom, Synerg UK, and one in the United Arab Emirates, Synerg UAE.

The Synerg Group enables businesses to leverage software in order to achieve operational
efficiency in all areas of a business, from operations to human capital. The business was
established in 1993 and has been a Sage Reseller for over 25 years. The Synerg Group has
earned Platinum reseller status and has been recognised as a top performing partner for three
consecutive years - 2016, 2017 & 2018.

The business is currently dedicated to the Enterprise Management Software suite (also known
as Sage X3 and Sage X3 People) and supports global organisations through its offices in South
Africa, United Kingdom and Middle East. The business is invested in the Sage Enterprise
product stack and has one of the largest complement of certified consultants in Africa. As a
business, they are closely aligned with Sage and Sage’s strategic growth areas, enabling them
to stay up to date with the latest initiatives and focus areas.

Alviva has increased its business exposure in the IT services and solutions space, a focus area
of our acquisition strategy. The Synerg Group will be an additional investment in this lucrative
sector of the IT industry.
3. The Vendors

DCT and Alviva International have entered into the Acquisitions with:

.   Ashley Bernard Regenass, the Firmly Rooted Family Trust, Duncan Mark Campbell, Jan
    Eduan van der Westhuizen, Frans Jacobus Du Toit, Gary John Janssens, Nicolette Joanne
    Janssens, Wessel Wilhelm Janse van Rensburg and Brennan Cordell Fritz in respect of the
    acquisition of Synerg SA. The ultimate beneficiaries of the Firmly Rooted Family Trust are
    Fritz-Jan van der Westhuizen and his family.

.   Ashley Bernard Regenass in respect of the acquisition of Synerg UAE; and

.   Ashley Bernard Regenass, Duncan Mark Campbell, Jan Eduan van der Westhuizen, Frans
    Jacobus Du Toit, Gary John Janssens, Wessel Wilhelm Janse van Rensburg and Fritz-Jan
    van der Westhuizen in respect of the acquisition of Synerg UK.

4. Details of the Acquisitions

In summary, the Synerg SA transaction comprises:

.   The purchase price of R90.1 million (subject to adjustment) for a 70% shareholding in
    Synerg SA, is payable in cash in two instalments.

.   Payment 1 is for R63.1 million, representing 70% of the total price payable. This payment
    is payable on the Closing Date of the transaction, expected to be around 1 July 2019.

.   Payment 2 is for R27 million, subject to a price adjustment formula linked to the actual
    profits achieved by Synerg SA in respect of the financial year ending 31 December 2019.
    Payment 2 will be made on the completion of the 2019 audited accounts.

.   The maximum purchase price payable by DCT in respect of the 70% acquisition of Synerg
    SA is R108 million.

.   On the Effective Date, the Vendors warrant a minimum net asset value of Synerg SA of
    R11.5 million.

In summary, the Synerg UK and Synerg UAE transactions comprise:

.   The purchase prices payable by Alviva International in respect of the acquisition of Synerg
    UK and Synerg UAE will only be calculated and paid following the completion of the audited
    accounts of Synerg UK and Synerg UAE for the year ending 30 June 2022 (payment must
    be made on or before 30 September 2022).

.   The purchase prices will be based on a PE of 9.1 in respect of the actual profits achieved
    by Synerg UK and Synerg UAE respectively, for the financial year ending 30 June 2022.

.   The maximum purchase price payable by Alviva International in respect of the acquisition
    of Synerg UK is £2.7 million (R 51.7 million) and Synerg UAE is AED12.8 million (R 52.3
    million).
Alviva International also has an option to acquire a further 19% of each of Synerg UK and
Synerg UAE on the same pricing formula as above in the following two option periods:

     .   In the period 1 July 2022 to 30 September 2022, or

     .   In the period 1 July 2024 to 30 September 2024.

The Acquisitions are also subject to warranties and indemnities normal to transactions of this
nature.


5.   Conditions precedent

In addition to the conditions precedent as are normal with a transaction of this nature,
including the conduct of a due diligence investigation which has been performed to the
satisfaction of Alviva, the following relevant conditions precedent are applicable to the
Acquisitions:

     .   the conclusion of 3-year key employment agreements and 2-year restraint of trade
         agreements with each of Ashley Bernard Regenass, Duncan Mark Campbell, Jan Eduan
         van der Westhuizen, Frans Jacobus Du Toit, Gary John Janssens, Brennan Cordell Fritz
         and Fritz-Jan van der Westhuizen;

     .   the conclusion of new shareholders’ agreements for Synerg SA, Synerg UK and Synerg
         UAE;

     .   the adoption of a new MOI for Synerg SA;

     .   the approval by Sage of the change in shareholder control of the Synerg Group;

     .   the restructuring of Synerg SA, resulting in Synerg IT and Synerg 300 becoming wholly
         owned subsidiaries of Synerg SA before the Effective Date;

     .   the delivery by Alviva to the Vendors of written confirmation that it is satisfied, in its
         sole discretion, that from the signature date of the agreements until the date of
         fulfilment of the other conditions precedent there has been no material adverse effect
         as defined; and

     .   the approval of the South African Reserve Bank in respect of the Synerg UK and
         Synergy UAE acquisitions.

These conditions precedent need to be fulfilled by no later than 1 September 2019.

6. Financial Information

The reviewed value of the net assets of Synerg SA (including Synerg IT and Synerg 300) that
are the subject of the Acquisitions as at 31 December 2018 was R9.4 million.

The reviewed profit after tax attributable to the net assets of Synerg SA (including Synerg IT
and Synerg 300) that are the subject of the Acquisitions for the year ended 31 December
2018 was R14.8 million. The unaudited profit after tax attributable to the net assets of Synerg
SA (including Synerg IT and Synerg 300) that are the subject of the Acquisitions for the 6
months ended 31 December 2018 was R7.5 million.
The reviewed annual financial statements for the year ended 31 December 2018 and the
unaudited results for the 6 months ended 31 December 2018, for Synerg SA, Synerg IT and
Synerg 300, were prepared in accordance with International Financial Reporting Standards
and the Companies Act, no.71 of 2008.

The unaudited net assets of Synerg UK (incorporated 14 December 2017) as at 31 December
2018 were negative R0.8 million and profit after tax for the 6 months ended 31 December
2018 was a loss of R0.8 million respectively. The unaudited results for the 6 months ended
31 December 2018, for Synerg UK were prepared in accordance with International Financial
Reporting Standards. Synerg UAE (incorporated 14 October 2018), had no results for the 6
months period ended 31 December 2018.

7. Classification of the Acquisitions

The Acquisitions are classified as a Category 2 transaction in terms of the Listings
Requirements of JSE Limited, and therefore do not require shareholder approval.

8. Subsidiaries

Upon implementation of the Acquisitions, Synerg SA, Synerg UAE and Synerg UK will become
subsidiaries. Their respective memorandums of incorporations do not in any way influence or
relieve Alviva’s compliance with its obligations in terms of the JSE Listings Requirements.

Johannesburg
14 June 2019

Legal Adviser – Tugendhaft Wapnick Banchetti

Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd

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