Simeka BSG, Sahara to merge

Johannesburg, 28 Aug 2007

AltX-listed Simeka BSG and Sahara Holdings are to merge.

Yesterday, Simeka BSG told the market the merger would be facilitated through its R867 million acquisition of Sahara's operational subsidiaries. The acquisition includes Sahara's operations in SA, Mozambique and India.

Simeka BSG says the merger will be effected by the issue of up to 510 million of its shares at R1.70 each to Sahara's vendors. As a result, the Gupta family and Sahara's black empowerment partners Tokyo Sexwale's Mvelaphanda Holdings, Lazarus Zim's AfriPalm consortium and Sahara's Employee Trust will become shareholders in Simeka BSG.

Simeka BSG CEO Mohammed Varachia says the merger is in line with its strategy to extend and entrench the group's footprint in Africa and establish a global presence.

"Apart from the obvious value enhancement to the technology solutions cluster, this merger will have an equal, though indirect, value-add to the higher margin consulting and applications cluster.

"This will come largely through direct access to business process outsourcing and application capabilities from India and the pronounced African presence of Sahara. These are both core to the fundamental growth strategies of Simeka BSG," he explains.

People moves

Despite the size of the merger, Simeka BSG says its executive committee will remain unchanged under Varachia.

Sahara representatives will join Simeka BSG's board in time, it explains. Varachia adds the shares only transaction is "pleasing" as it is indicative of a long-term commitment from Sahara shareholders and executives.

However, its management will be restructured to ensure, at an operational level, that the new businesses will be best guided to capitalise on growth opportunities going forward.

Explains Varachia: "We intend to restructure and reduce the current 12 companies in the group, excluding Sahara and [recently acquired] Premium Ideas, to three operating entities. This will enable us to harness the strength of each cluster."

Targeting growth

Yesterday, Simeka BSG posted its financial results for the year ended 31 May.

In line with its earlier trading update, the company reported a 37% increase in revenue, to R447 million, and an 82% increase in headline earnings. The company's earnings per share (EPS) and headline EPS saw increases of 11% and 5%, to 12.5c and 13c, respectively.

Varachia told shareholders that organic growth was the key driver of the group's performance.

"The consulting and applications cluster contributed the lion's share of group revenue - 53% - with secured print and payment solutions and technology solutions and support contributing the balance of 28% and 19%, respectively."

The benefits of the Sahara merger and recent Premium Ideas acquisition are expected to be reflected in its 2008 financial year, he added.

Both transactions require approval from competition authorities. At the close of trading yesterday, Simeka BSG shares had gained 1c, to R1.51.