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BUSINESS CONNEXION GROUP LIMITED - Sale of the QDD business to Arinso SA (Pty) Ltd and the concurrent acquisition of a 50% interest in Arinso

Release Date: 03/05/2013 17:15
Code(s): BCX BCA     PDF:  
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Sale of the QDD business to Arinso SA (Pty) Ltd and the concurrent acquisition of a 50% interest in Arinso

Business Connexion Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005282/06)
JSE code: BCX        ISIN: ZAE000054631
JSE code: BCA        ISIN: ZAE000156154
(“BCG”)


SALE OF THE QDD BUSINESS TO ARINSO SA PROPRIETARY LIMITED (“ARINSO”) AND THE
CONCURRENT ACQUISITION OF A 50% INTEREST IN ARINSO


1.   Introduction


     BCG’s wholly-owned subsidiary Business Connexion Proprietary Limited (“BCX”), has entered
     into a business for share agreement, a sale of shares agreement, and a shareholders' agreement
     with NorthgateArinso UK Limited ("NorthgateArinso") and Arinso (NorthgateArinso’s wholly-
     owned subsidiary) (collectively “the Agreements”) on 3 May 2013 (“Signature Date”).

     In terms of the Agreements, BCX will:

     •      sell, as a going concern, its QDD business to Arinso (“Disposal”);


     •      in exchange for the Disposal subscribe for and receive 49.96% of the ordinary shares in
            Arinso ("Consideration Shares"); and


     •      acquire on loan account from NorthgateArinso 0.04% of the ordinary shares in Arinso
            (“Acquisition”), such that, following the Disposal and Acquisition (collectively “the
            Transaction”), BCX will hold 50% of the ordinary shares in Arinso.

2.   The Transaction



     2.1.   Nature of business

            BCG is Africa’s leading black-owned ICT services provider, with over 30 years of
            operational experience. BCG runs mission-critical information, communications and
            telecommunication systems and manages products, services and solutions for
            companies listed on the exchange operated by JSE Limited (“JSE”) and key public sector
            organisations, parastatals and medium-sized companies.

            Arinso forms part of the NorthgateArinso group, which is a leading global human
            resources software and services provider offering human resources business solutions to
            employers of all sizes, including Global Fortune® 500 companies and public sector
            organisations.

     2.2.   Rationale for the Transaction

            The merged businesses of QDD and Arinso will create an organisation that will deliver
            Human Capital Management Technologies and Services for local, multinational and
            public sector organisations across the African continent. These technologies and
            services will cover the whole spectrum of HR and Payroll as well as Workforce and
            Security Management.



            BCG’s positioning as Africa’s leading ICT services provider and NorthgateArinso’s
            strategic objective to expand its global footprint into the African market, will create a
            means of capturing market share and growing revenues which will exceed the
            independent capabilities of both organisations.


            The merger between QDD and Arinso will provide current and future clients with a trusted
            service and solution partner who has an absolute focus on the Human Capital
            Management market, underpinned by BCG’s data centre capabilities and
            NorthgateArinso’s best practise global processes and global delivery centres. The
            solutions offering will cover an end-to-end range from SMME to Enterprise Solutions.


            The Transaction is in line with BCG’s stated intention of being a leader in certain vertical
            markets. Human Capital Management is such a vertical market and therefore, the
            merged entity will provide BCG with the opportunity to apply absolute focus in this niche
            market and to move up the value chain with respect to Business Process Outsourcing.


3.   Details of the Transaction


     3.1.   Terms of the Transaction

            In terms of the business for share agreement, BCX shall sell, and Arinso shall purchase,
            the QDD business as a going concern in exchange for which BCX shall subscribe for,
            and Arinso shall issue and allot to BCX, the Consideration Shares.

            In terms of the sale of shares agreement, BCX shall acquire on loan account from
            NorthgateArinso and NorthgateArinso shall sell to BCX 0.04% of the shares in Arinso
            ("Sale Shares"). The purchase price payable for the Sale Shares is R67 500. The
            purchase price will be discharged by BCX raising in its books an unsecured loan
            equivalent to the purchase price in favour of NorthgateArinso which loan shall bear
            interest at the prime rate less 2% and which will be discharged by the 3rd anniversary
            date of the Effective Date (as that term is defined in 3.2 below) ("Acquisition Loan").

            For as long as the Acquisition Loan is outstanding, any dividends declared by Arinso and
            which are due and payable to BCX shall be used by BCX for the repayment of the
            Acquisition Loan.

            Following the implementation of the Agreements, BCX and NorthgateArinso will exercise
            joint control over Arinso.

     3.2.    Effective date of the Transaction

             The effective date of the Transaction shall be the first day after the fulfilment of the last of
             the conditions precedent referred to in paragraph 5 below (“Effective Date”).

     3.3.    Adjustment of the purchase price for the Sale Shares and Acquisition Loan

             On the Effective Date the purchase price for the Sale Shares (and thus the Acquisition
             Loan) will be adjusted (either increased or decreased) by half of the difference between
             the target net asset values for each of the QDD business and Arinso, which targets are
             set out in the sale of shares agreement.

4.   Transfer of business


     BCX shall transfer to Arinso the QDD business as a going concern on and with effect from the
     Effective Date.

     The parties have agreed that Arinso will not directly or indirectly assume or be responsible for
     those liabilities of BCX relating to the QDD business, the cause of action of which arose prior to
     the Effective Date (“Excluded Liabilities”).

     BCX has provided an indemnity to Arinso and NorthgateArinso in respect of the Excluded
     Liabilities and NorthgateArinso has provided an indemnity in respect of the conduct of the Arinso
     business prior to the Effective Date.

     BCX and NorthgateArinso have granted warranties, which are considered standard for a
     transaction of this nature.

5.   Conditions precedent


     The Transaction is subject to the fulfilment or waiver (where applicable) of inter alia the following
     conditions precedent:

     •    by no later than 90 business days after the Signature Date, the unconditional approval by the
          Competition Authorities in terms of the Competition Act No. 89 of 1998 or conditional
          approval on terms and conditions acceptable to the party on whom such conditions are
          imposed; and

     •    to the extent required, the obtaining of the requisite shareholder and board approvals by the
          respective parties to give effect to the Transaction.

     The conditions precedent set out in the Agreements are inter-conditional.

6.   Categorisation of the Transaction


     The Transaction falls below the Category 2 transaction threshold in terms of the JSE Listings
     Requirements and does not require shareholder approval. This announcement is made to keep
     shareholders informed of the ongoing activities of the Company.

7.   Further announcement


     Shareholders will be notified once all the conditions precedent referred to in paragraph 5 have
     been met.



Midrand
3 May 2013


Sponsor
One Capital


Legal Advisor
Webber Wentzel

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