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HUGE GROUP LIMITED - Acquisition of the businesses of Otel Communications Proprietary Limited and Otel Business Proprietary Limited

Release Date: 14/03/2019 17:45
Code(s): HUG     PDF:  
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Acquisition of the businesses of Otel Communications Proprietary Limited and Otel Business Proprietary Limited

(Registration number 2006/023587/06)
Share code: HUG ISIN: ZAE000102042
(“Huge” or “the Company”)


Shareholders are advised that Huge and its wholly-owned subsidiaries,
Huge Networks Proprietary Limited (Huge Networks) and Huge Telecom
Proprietary Limited (Huge Telecom) have entered into acquisition of
business agreements (the Agreements) with Ohren SPV Proprietary
Limited (Ohren SPV), OTEL Communications Proprietary Limited and OTEL
Business Proprietary Limited (collectively referred to as Otel) in terms of
which, amongst other matters, Huge Networks will acquire the businesses
of Otel, in consideration for shares in Huge Networks, culminating in the
merger of Huge Networks and Otel (the Transactions).

The Transactions will be implemented on 14 March 2019 (the
Implementation Date) and will result in Huge Telecom owning 50.03%
and OTEL Communications Proprietary Limited owning 49.97% of Huge
Networks respectively. The Otel brand will be migrated to the Huge
Networks brand during the course of 2019.

Huge Networks is a data service provider and communications
company and, prior to implementation of the Transactions, a wholly
owned subsidiary company of Huge Telecom, which in turn is a wholly
owned subsidiary company of Huge. Huge Networks and Huge Telecom
comprise the Telecom Grouping of Huge. Otel is an ICASA-licenced
provider of Voice over Internet Protocol (VoIP) and broadband
Infrastructure-as-a-Service telecommunications solutions, including
voice, connectivity and hosted services, to some 2 500 SME customers,
nationally throughout South Africa.

The Transactions allow Huge to progress its ‘Growing Huge Strategy’ by
scaling its operations and growing Huge’s real estate of customers. In
addition, the Transactions expand both the national reach and footprint
of Huge, while also increasing its network capacity and connectivity
options and allowing for network synergies and efficiencies. The
Transactions are expected to be revenue accretive for Huge Networks.
The combination of the Huge Networks and Otel management teams is
expected to significantly enhance the intellectual capacity within the
Telecom Grouping.

The VoIP and related products and services acquired through the
Transactions will allow Huge Networks to become a more substantial
provider of end-to-end ICT services. It will also provide Huge Networks
with an opportunity to enter new customer segments. Economies of
scale leveraged from the Transactions will enable Huge Networks to
provide its customers with a diversity of cost-effective ICT products and
services. Following the Transactions, Huge Networks will be well-
positioned to capitalise on the further expansion of the ISP and ICT
service provider industry through various organic and acquisition growth

The relationship between the shareholders in respect of their respective
shareholding in Huge Networks will be governed by a Shareholders
Agreement. In terms of a Loan Facility Agreement, Huge Telecom will
make a loan facility in an aggregate amount of R20 000 000 available
to Huge Networks, which will be available for a three year period
following the tenth business day after the Implementation Date. Huge
Networks will pay Huge an arrangement fee based on a formula relating
to the net assets of Huge Networks prior to the Implementation Date and
the net assets of Otel acquired by Huge Networks.

Huge Networks has been independently valued at an aggregate value
of R69 million and therefore the Transactions have been valued, for JSE
categorisation purposes, at a fair value of R34.5 million (being the fair
value of the dilution in Huge Telecom’s shareholding in Huge Networks).
The Transactions are accordingly uncategorised and not subject to
shareholder approval in terms of the JSE Listings Requirements and this
announcement is therefore for information purposes only.

14 March 2019

Questco Corporate Advisory (Pty) Ltd

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