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Acquisition of Lapace Group businesses and withdrawal of cautionary announcement
Primeserv Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/013448/06)
("Primeserv” or “the company”)
Share code: PMV ISIN: ZAE000039277
Acquisition of Lapace Group businesses and withdrawal of cautionary announcement
1. INTRODUCTION
Shareholders are advised that on 24 April 2020, the Company, with its subsidiaries,
Primeserv Denverdraft Proprietary Limited, Primeserv Employee Solutions Proprietary
Limited and Primeserv Properties 1 Proprietary Limited (the “Purchasers”), entered
into an agreement ("Agreement") with the Lapace Group, comprising Lapace
Construction Proprietary Ltd, Lapace Ken Proprietary Limited, Lapace Let Proprietary
Limited, Lapace Training Centre CC and Gamton Industries Proprietary Limited
("Sellers"), in terms of which the Purchasers will purchase the Temporary Employment
Services and the Training Support Services businesses of the Sellers in regard to the
clients named in the Agreement for a maximum purchase consideration of R10 million
as set out in paragraph 4 below ("Purchase Consideration") ("Acquisition").
2. DESCRIPTION OF THE ASSETS
The Temporary Employment Services and the Training Support Services businesses
include certain fixed assets, primarily computer equipment, office furniture and
equipment and artisan training and testing equipment (the “Tangible Assets”), client
relationships and Temporary Employment Services and Client Service Level
Agreements, goodwill and tradenames attaching to the businesses.
3. RATIONALE FOR THE ACQUISITION
Primeserv has acquired the businesses in order to further enhance its operations in
the artisan and skilled labour, temporary employment services sector. The Lapace
Business has traded for, in excess of, 25 years and its skills base and industry
relationships will add considerable value to the Primeserv artisanal and semi-
professional temporary staffing services offering.
4. PURCHASE CONSIDERATION
The Purchase Consideration is a maximum amount of R10 million, to be determined
based on the net profit after tax achieved by the businesses in the financial years
ending 30 April 2021, 2022 and 2023, to which a profit multiple of 3.75 will be applied
and in respect of which an annual appreciation of profits of 12% per annum is required.
The dates for determination of profits and the 12 month period to be included in the
calculation may be deferred, for up to three months by agreement with the Purchasers,
based upon the anticipated impact of COVID-19 restrictive business measures.
Payments will take place every six months, based upon the net profit after tax
achieved at the close of each period and is payable within 30 business days of the
close of each period. There will be an initial payment in respect of the Tangible Assets
acquired, in the sum of R629 920, as may be adjusted by an appointed professional
valuator, payable on or before 16 June 2020.
The purchase price will be paid in cash from existing reserves and facilities of the
Purchasers.
5. CONDITIONS PRECEDENT
The Acquisition is subject to the fulfilment of the following outstanding conditions
precedent ("Conditions Precedent"):
5.1 The completion of a due diligence by the Purchaser;
5.2 A major client of the Sellers confirming acceptance of the cession of rights and
obligations under an agreement of cession and assignment;
5.3 Confirmation of insurability of the debtors of the businesses acquired;
5.4 The approval of the transaction by the Board of the Company.
The Conditions Precedent must be fulfilled, or waived to the extent possible by not
later than 31 May 2020, unless the date for fulfilment is extended in writing.
6. EFFECTIVE DATE OF THE ACQUISITION
The effective date of the Acquisition is 17 April 2020.
7. FINANCIAL INFORMATION
The value of the net assets comprising the Tangible Assets as at 29 February 2020,
being the date of the latest available management accounts, was R620 920. The date
of the last annual financial statements of the Sellers is February 2019, April 2019 and
June 2019, respectively. These annual financial statements were reviewed but not
audited by the Auditors/Accounting Officer of the Sellers and due to the fact that the
latest annual financial statements were too historical to present relevant financial
information and were not coterminous in regard to year ends, reliance has been placed
on the management accounts for the presentation of the information in this
announcement.
The businesses realised a net loss before tax attributable to the Assets for the year
ended 29 February 2020, in an amount of R 2 387 958. This amount was determined,
based on the aggregated management accounts of the Sellers for the year ending
29 February 2020, adjusted for income and expenses of the Sellers in regard to
elements of the businesses not acquired by the Purchasers.
Primeserv is satisfied with the quality of the management accounts from which the
above financial information has been extracted.
8. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT
The Agreement contains representations and warranties by the Sellers in favour of the
Company which are standard for a transaction of this nature.
9. CATEGORISATION OF THE ACQUISITION
The Acquisition is categorised as a category 2 transaction in terms of the JSE Limited
Listings Requirements of the JSE Limited and is therefore not subject to shareholder
approval.
10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcements released on SENS on
Friday, 6 March 2020 and renewed on 21 April 2020 and are advised that all the
details of the Acquisition are published in this announcement, the cautionary is
withdrawn and shareholders are no longer required to exercise caution when dealing
in the Company’s securities.
Illovo
24 April 2020
Sponsor
Grindrod Bank Limited
Date: 24-04-2020 04:00:00
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