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PRIMESERV GROUP LIMITED - Acquisition of Lapace Group businesses and withdrawal of cautionary announcement

Release Date: 24/04/2020 16:00
Code(s): PMV     PDF:  
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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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