SAB&T Ubuntu under pressure

Johannesburg, 12 May 2008

SAB&T Ubuntu shareholders and management team have until the end of the week to agree to the requests of acquirer Simeka Business Solutions Group.

The merger, which is valued at around R135 million, is to be settled in a share swap with SAB&T shareholders receiving one Simeka share for each 2.1 shares held.

Simeka is seeking to acquire the entire issued share capital of the company through a section 440K of the Companies Act, No 61 of 1973 move. This means that if 90% of SAB&T's shareholders agree to the deal, its remaining shareholders will be forced to go along with the acquisition.

In a joint statement on Friday, the companies revealed full documentation would be sent to SAB&T shareholders on Saturday past. Investors would then have until Friday, 16 May, to decide and make this known to the companies. Simeka expects to make an announcement on the level of acceptance on the same day.

The companies are planning to launch the merged operation on 1 June, with operations beginning 2 June.

Tying down management

The companies noted Simeka still needed to conclude agreements with SAB&T's shareholding management team. This includes a three-year employment contract, including a three-year restraint of trade preventing management from competing with Simeka.

Simeka says it wants this team to warrant that sustainable headline profit after tax earned by SAB&T for the year ending 31 May 2009 be no less than R30 million. Additionally, headline earnings per share for the year ended 29 February 2008 must be at least 30% higher year-on-year.

The team must grant Simeka a call option to repurchase up to 60 million of their shares at a price of R0.001 should the management warranties be "breached". Simeka says it will claw back four shares for every R1 below the warranted R30 million.

SAB&T's shareholding management will also be restricted in their own share trades. A maximum of 5% of shares can be traded in the first year; a second 5% in the second year; and thereafter no more than 33% may be traded in a particular year or 10% in any month.

For now, it is proposed that post-implementation the merged board will consist of four directors from SAB&T - Bashier Adam, Nishani Singh, Jeffrey van Rooyen and Fatima Jakoet; and eight Simeka directors - Mohammed Varachia, Surendranath Singh, Madoda Papiyana, Alex Evan, Dr Popo Molefe, Tozamile Botha, Kabote Johanna Molefe and Yvonne Mhinga.

The new board will determine the directors and officers of Simeka's subsidiaries. The merger still requires approval from the competition authorities.