Spicer to pay more for IQ

By Staff Writer for Spicer

Johannesburg, 13 Jan 2000

Amendments to the proposed merger between Spicer Holdings and the IQ Business Group could see Spicer pay up to R635 million for IQ. When the merger was announced at the beginning of December the purchase price was estimated to be in the region of R400 million. The amendments follow the completion of mutual due diligence investigations.

"The re-rating of the value of the merger is a reflection of the differing businesses," notes Spicer executive chairman Sas du Toit. He says Spicer invests in new technologies that provide revenue only in the medium-term. "Some of our start-up businesses have taken longer to establish and become profitable, due to delays in IT spend attributable to year 2000 projects."

Spicer will issue almost 280 million new shares at R1.75 as a minimum consideration. Should IQ conclude two acquisitions it is currently negotiating, that consideration increases to 327 million shares, or R572 million. A further increase in the price will depend on the value of MIS Corporate Defence Solutions, the UK company in which Spicer has a substantial equity stake. If the MIS holding is valued at less than R300 million by the end of this year, 35 million Spicer shares will be issued to IQ. The consideration does not apply if the MIS stake is valued at more than R400 million.

"Our MIS data security business in Europe, while highly regarded, has not come into full earnings potential yet," says Du Toit. He blames this on the linkage between earnings and the growth of e-commerce, which he describes as early in its growth curve.

The issue price of the shares has also been adjusted to R1.75 from an initial expectation of R2.24 per share.

The amended agreement will see IQ shareholders hold an approximate 40% of the merged entity. These shareholders, which include Super Group, Hosken Consolidated Investments and the Mettle Group, are expected to retain their shares. IQ MD Johan Roets has indicated that any shares put up for sale would probably be taken up by an IQ management consortium.