Wrap Text
Empowerment Transaction Relating to the Section 112 Disposal of the Software Group Companies
Sebata Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)
Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company”)
EMPOWERMENT TRANSACTION RELATING TO THE SECTION 112 DISPOSAL OF
THE SOFTWARE GROUP COMPANIES, BEING THE MAJORITY OF SEBATA’S ASSETS
1. INTRODUCTION
The board of directors of Sebata (“the Board”) is pleased to inform shareholders that the Company has
entered into a Sale of Shares Agreement and a Donation Agreement (“Agreements”) with Inzalo Capital
Holdings Proprietary Limited (“Inzalo” or “the Purchaser”), for:
o the disposal of 55% of the total issued share capital in each of the companies that collectively
comprise the “Software Group Companies” (“Sale Shares”) to Inzalo for the consideration detailed in
paragraph 2.3.1 below (“Disposal”); and
o the donation of 5% of the total issued share capital in each of the companies that collectively
comprise the “Software Group Companies” (“Donation Shares”) to Inzalo as detailed in paragraph
2.5 below (“Donation”),
collectively referred to hereinafter as the “Transaction”.
The directors and majority shareholders of Inzalo are Sihle Lloyd Ndlovu and Sbonelo Trinity Mazibuko.
The “Software Group Companies” comprise Sebata Municipal Solutions Proprietary Limited (“Sebata
Municipal Solutions”), R-Data Proprietary Limited (“R-Data”) and MICROmega Accounting and
Professional Services Proprietary Limited (“MAPS”), which are all wholly owned subsidiaries of the
Company.
The effective date of the Transaction is 1 February 2020 (“Effective Date”).
2. THE TRANSACTION
2.1 Nature of the businesses of the Software Group Companies
2.1.1 Sebata Municipal Solutions is a leading provider of enterprise management systems,
integrated technology solutions and multi-disciplinary professional services, focusing on
servicing municipalities and the provincial governments. Sebata Municipal Solutions’
flagship product, SebataEMS was developed specifically to meet the requirements set
out by National Treasury through its municipal standard chart of accounts (mSCOA)
financial reporting framework and provides for full integration across the various required
modules. Through its team of innovative and solutions-driven professionals, who are all
specialists in their respective fields, Sebata Municipal Solutions’ services extend to
numerous local government institutions and public utilities.
2.1.2 R-Data, founded in 1991, specialises in providing public sector accounting system
solutions throughout Southern Africa mainly through the development and subsequent
enhancement of the PROMUN accounting system. This system-based solution is
supplemented by system implementation, system training, system development and
database design, carried out by R-Data’s highly-skilled technical and support personnel.
R-Data’s consistent and market-leading delivery on these support functions, along with
the robust and comprehensive nature of the development of the PROMUN system, has
ensured long-term and valued relationships with its clients.
2.1.3 MAPS is an accredited training office, focusing on the upskilling and education of
prospective accounting students as they complete their studies. MAPS, through its
relationship with Sebata Municipal Solutions, facilitates the provision of key experiences
to its candidates through secondments to municipalities as trainee accountants. MAPS
holds accreditations from the South African Institute of Professional Accountants
(SAIPA), the Chartered Institute of Management Accountants (CIMA) and the South
African Institute of Chartered Accountants (SAICA) with a level 1 SAICA status. MAPS is
one of few companies that holds accreditations with all three of these accounting bodies.
2.2 Rationale for the Transaction
The Software Group Companies are presently experiencing significant difficulty in attracting new
customers and retaining existing customers as a result of their unacceptable empowerment
status. As sole shareholder the Seller wishes to find a solution to the Software Group Companies’
empowerment challenge. However, this must be done in a manner that protects the value of the
Software Group Companies for Sebata while recognising that it will not be possible at this time for
Sebata to dispose of the Software Group Companies at their perceived economic value. It is
considered that a transaction with Inzalo is the best solution as it will allow the Software Group
Companies to immediately achieve an appropriate empowerment rating with a considerable
immediate uplift in profitability. This Transaction is predicated upon an immediate improvement in
profitability and offers Inzalo protection in the event that this does not materialise.
Over the last six months, Sebata has entered into two transactions with Inzalo namely, the
disposal of 60% of the “Water Group” comprising of USC Metering Proprietary Limited (“USC”)
and Amanzi Meters Proprietary Limited (“Amanzi”), which disposal was approved by
shareholders of Sebata in January 2020, and the disposal of 100% of IPES-Utility Management
Services Proprietary Limited (“UMS”) to USC Metering Proprietary Limited. All of the
aforementioned businesses had encountered the same challenge of increasing their respective
empowerment statuses to an acceptable level in order to operate within the public sector
environment. Ultimately the Board has identified that Inzalo is best placed as the majority owner
to take these businesses, including the Software Group Companies, forward.
2.3 The Transaction
2.3.1 Consideration
2.3.1.1 The purchase price of R501.9 million for the Sale Shares (“Purchase Price”)
is payable in cash on the aggregate achievement by the Software Group
Companies of:
2.3.1.1.1 earnings before interest, taxes, depreciation and amortisation
(“EBITDA”) of R35 million for the 12-month period beginning at
the Effective Date, based on the finalised management accounts
of the Software Group Companies for the period in question.
2.3.1.1.2 EBITDA of R45 million for the 12-month period beginning the day
after the 12-month period set out in paragraph 2.3.1.1.1 above.
2.3.1.1.3 In the event that the EBITDA for the period set out in paragraph
2.3.1.1.1 above is not achieved, the shortfall which is not
achieved will be added onto the requirements of paragraph
2.3.1.1.2 above, thereby increasing the required target for this
period accordingly.
2.3.1.2 Achievement of the targets set out in paragraph 2.3.1.1 above and full
settlement of the Purchase Price will constitute full settlement of the payment
obligations in respect of the Sale Shares.
2.3.1.3 The Purchaser will have the right at any time to make accelerated payments
in full or in part of the Purchase Price prior to the achievement of the
EBITDA targets referred to in paragraph 2.3.1.1 above.
2.3.1.4 All dividends received by the Purchaser, through its ownership of the Sale
Shares post the Effective Date, will be appropriated to the settlement of the
Purchase Price until the Purchase Price has been fully settled.
2.3.1.4.1 In the event that the Software Group Companies fails to achieve
the EBITDA targets set out in paragraph 2.3.1.1 above and the
Transaction is terminated as envisaged in paragraph 2.3.1.5
below, any dividends appropriated by the Purchaser to the
Company in terms of paragraph 2.3.1.4 above prior to such
termination, will not be returned to the Purchaser.
2.3.1.5 In the event that the EBITDA targets set out in paragraph 2.3.1.1 and
2.3.1.1.2 above are not achieved, the Transaction will be terminated with
neither party having any claim against the other in respect of the
Agreements.
2.3.1.6 The Purchase Price will be payable in full by no later than 31 March 2022.
2.3.2 Suspensive conditions to the Transaction
2.3.2.1 The Disposal is subject to the fulfilment of the following suspensive
conditions by no later than 31 March 2020, or such later date as the parties
may agree in writing prior thereto:
2.3.2.1.1 the Seller obtaining the approval of the Transaction by the
Board and shareholders of Sebata;
2.3.2.1.2 the Purchaser obtaining the approval of the Transaction by the
board and shareholders of the Purchaser;
2.3.2.1.3 such statutory and regulatory approvals including, inter alia,
approval by the Takeover Regulation Panel (“Panel”) and the
JSE Limited (“JSE”) that may be required are obtained and to
the extent that the approval of such authorities is conditional, the
parties agreeing in writing to such conditions; and
2.3.2.1.4 the execution by and between both parties of shareholder’s
agreements in respect of each Software Group Company.
2.3.2.2 The conditions set out in paragraph 2.3.2.1 above are stipulated for the
benefit of the Company which may in writing, on or before the day of
fulfilment of such conditions, waive, where possible, any of such conditions.
2.3.2.3 Notwithstanding the provisions of paragraph 2.3.1 above, on full satisfaction
of the conditions, as set out in paragraph 2.3.2.1 above, the documents of
title will be held as a form of surety by the appointed lawyers of Sebata
against full satisfaction of the payment obligations of the Purchaser.
2.3.2.4 If the conditions referred to in paragraph 2.3.2.1 above are not fulfilled on or
before the date referred to therein (and fulfilment thereof is not waived), the
Sale of Shares Agreement will be of no further force and effect and, inter
alia, to the extent that such agreement may have been partially implemented
the parties will be restored to their status quo ante, except insofar as
provided for in such agreement.
2.4 Application of the sale proceeds
It is intended that the majority of the net proceeds of the Transaction will be distributed to
shareholders of Sebata.
2.5 The Donation
2.5.1 In terms of the Donation Agreement, Sebata as the donor, will donate the Donation
Shares to Inzalo. The Donation is made concurrently with the execution of the Sale of
Shares Agreement in respect of the Disposal. The Donation Shares will be transferred
to Inzalo as follows:
2.5.1.1 on the Effective Date, the documents of title in respect of 50% of the
Donation Shares; and
2.5.1.2 on 1 February 2021, the documents of title in respect of remaining 50% of the
Donation Shares.
2.5.1.2.1 In the event that the EBITDA targets set out in paragraph
2.3.1.1 above are not achieved, Sebata will purchase the
Donation Shares from Inzalo for a consideration calculated as
the difference between the net asset value per share of the
Donation Shares at the Effective Date, and the net asset value
per share of the Donation Shares at 31 January 2022, as
evidenced by the management accounts.
2.5.1.2.2 In the event that the EBITDA targets set out in paragraph
2.3.1.1 above are not achieved and the difference between the
net asset value per share of the Donation Shares at the
Effective Date and the net asset value per share of the Donation
Shares at 31 January 2022, as evidenced by the management
accounts, is a negative value, the consideration payable by
Sebata to Inzalo for the Donation Shares will be the par value of
the Donation Shares.
3. FINANCIAL INFORMATION
The audited value of the net assets of the Software Group Companies as at 31 March 2019 is
R274.3 million. The audited profit after tax for the Software Group Companies for the year ended
31 March 2019 is R58.9 million.
The unaudited value of the net assets of the Software Group Companies as at 30 September 2019 is
R205 million. The unaudited profit after tax for the Software Group Companies for the six month period
ended 30 September 2019 is R69.3 million.
The financial statements were prepared in accordance with International Financial Reporting Standards
and the Companies Act, 2008 (Act 71 of 2008), as amended (“Companies Act”).
4. RECOMMENDATION AND FAIRNESS OPINION
In accordance with Companies Regulation 90(1), Sebata’s Independent Board, consisting of Siphiwe
Nodwele (Chairperson), Don Passmore, Ross Lewin and Deborah Di Siena, will appoint an independent
expert acceptable to the Panel (“Independent Expert”), to provide it with external advice in relation to
the Transaction and to make appropriate recommendations to the Independent Board in the form of an
Independent Expert Report.
The substance of the external advice received from the Independent Expert and the views of the
Independent Board will be detailed in the Circular referred to in paragraph 5 below.
5. CLASSIFICATION OF THE TRANSACTION AND FURTHER DOCUMENTATION
The Transaction constitutes a Category 1 transaction in terms of section 9.5(b) of the Listings
Requirements of the JSE (“Listings Requirements”) and a proposal to dispose of all or the greater part
of the assets of Sebata in terms of section 112 of the Companies Act. Accordingly, the Transaction is
subject to, inter alia, the approval thereof by the requisite majority, being 75% of Sebata shareholders
(as contemplated in section 115(2) of the Companies Act) entitled to exercise voting rights, in general
meeting, called for such purpose and at which sufficient persons are present to exercise, in aggregate at
least 25% of all the voting rights that are entitled to be exercised in respect of the Transaction and
requires a circular to shareholders (“Circular”) incorporating, inter alia, pro forma financial effects of the
Transaction, the fairness opinion obtained from an Independent Expert and a notice to convene a
general meeting of shareholders of Sebata in order to consider and, if deemed fit to pass, with or without
modification, the resolutions necessary to approve and implement the Transaction.
Accordingly, the Circular containing full details of the Transaction will be distributed to shareholders of
Sebata in due course.
6. RESPONSIBILITY STATEMENT
The Independent Board accepts responsibility for the information contained in this announcement to the
extent that it relates to Sebata. To the best of their knowledge and belief, the information contained in
this announcement is true and nothing has been omitted which is likely to affect the import of the
information.
Johannesburg
25 February 2020
Corporate Advisor and Sponsor
Merchantec Capital
Date: 25-02-2020 04:50:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
