1.Introduction
Shareholders are advised that in terms of an agreement, dated 14 March 2007, UCS has acquired, subject to the fulfilment of the condition precedent referred to below, a 51% interest in the equity of 3J Holdings ("the transaction").
2.Background information
UCS is an IT business with a primary focus on the provision of software, solutions and services for selected markets. UCS has achieved a leadership position in South Africa's retail sector and is well positioned for further growth locally and internationally through a number of defined initiatives.
3J Holdings is the holding company of a number of trading entities which supply computer consumables, equipment, software or services. Prior to the implementation of the transaction, all of the equity in 3J Holdings was held by management members of the 3J Holdings group of companies (the "vendors").
The net asset value of 3J Holdings, which is the subject of the 51% equity acquisition, as at 28 February 2007, was R5 million.
3.Rationale
The 3J Holdings group of companies provides computer consumables, equipment, software and/or services in the retail environment and shares a number of common customers with Computerkit Holdings (Pty) Limited ("Computerkit") an existing 100%-held subsidiary company of the UCS Group. The transaction should enable UCS to position a "one-stop shop" for Computerkit clients, while aligning the interest of the respective management teams and providing the appropriate incentivisation and retention mechanism.
4.Purchase consideration and settlement
The maximum purchase price payable by UCS to the vendors for the 51% interest in 3J Holdings will be R12 240 000, which will be settled by the allotment and issue of a maximum of 4 837 945 UCS ordinary shares (the "consideration shares") to the vendors, pro rata to their current holdings, at an issue price of R2.53 each. The consideration shares are to be issued in two tranches as follows:
* 50% on the closing date (ie on fulfilment of the condition precedent referred to below and receipt of audited effective date financial statements); and
* 50% after the receipt of the audited accounts of 3J Holdings for the seven months ended 30 September 2007.
Certain profit warranties pertain to the transaction, which may result in a lesser number of consideration shares being allotted and issued to the vendors if such warranties are not achieved. UCS also has a call option on a portion of the consideration shares which will be bought back, pro rata at par value, if profit after tax requirements in respect of the year ending 30 September 2008 are not met.
In addition to the above, the consideration shares issued have a five year selling restriction attached to them in that full value can only be realised over the five years from the effective date if the vendors remain in the employ of the UCS Group as follows: 2008: 10%; 2009: 25%; 2010: 45%; 2011: 70%; 2012: 100%.
5.Effective date
The transaction will be effective from 1 March 2007.
6.Conditions precedent The transaction remains conditional on Competition Commission approval being granted by the competition authorities.
7.Financial effects
The unaudited pro forma financial effects, for which the directors are responsible, are provided for illustrative purposes only to show the effect of the transaction on earnings and headline earnings as if the transaction had taken effect on 1 October 2005 and on net asset value and net tangible asset value per share as if the transaction had taken effect on 30 September 2006. Because of their nature, the unaudited pro forma financial effects may not give a fair presentation of the UCS Group's financial position and performance. The unaudited pro forma financial effects have been compiled from the audited consolidated financial statements for the year ended 30 September 2006 and are presented in a manner consistent with the format and accounting policies adopted by UCS and have been adjusted as described in the notes below:
Notes: 1. The "audited before the transaction" column reflects the audited results of UCS for the 12 months ended 30 September 2006.
2. The latest available financial results for 3J Holdings being the consolidated management accounts for the financial year ended 28 February 2007 were used to determine the "after the transaction" pro forma results.
3. Net asset and tangible net asset value calculations in the "after the transaction" column were completed assuming the transaction was concluded at the balance sheet date of 30 September 2006.
4. Basic earnings and headline earnings per share calculations in the "after the transaction" column are based on the following assumptions:
- 2 418 973 UCS ordinary shares were issued on 1 October 2005.
- A further 2 418 972 UCS ordinary shares were issued on 1 June 2006 (ie, eight months after the effective date and on the assumption that actual profits achieved for the seven-month period 1 October 2005 to 31 May 2006 exceeded warranted profits.)
- The pro forma financial effects assume that the fair value of the purchase consideration at 1 March 2007 will approximate the fair value at the payment dates which values can only be determined at that date.
8.Details of the vendors and classification of the transaction Two of the vendors, being directors and beneficial shareholders of 3J Holdings (ie, Messrs KC Venn and G Matheson) are also directors of ComputerKit and are therefore considered to be "related parties" in terms of the listings requirements of the JSE Limited ("JSE").
The transaction is classified as a small related party transaction in terms of paragraph 10.7 of the listings requirements of the JSE and no action is required by UCS shareholders in regard thereto.
9.Fair and reasonable opinion In terms of the listings requirements of the JSE, an independent opinion relating to the fairness and reasonableness of the transaction has been issued by KPMG Services (Proprietary) Limited and this opinion is available for inspection at the company's registered office (20th Floor, 209 Smit Street, Braamfontein, Johannesburg) until 26 April 2007.
Share