Square One Solutions Group is to buy NETIntellect, an IT services company.
Square One told shareholders on Wednesday that it has entered into an agreement, dated 4 August 2006, with NETIntellect and its five individual shareholders to acquire the company as a going concern with effect from the beginning of this year.
Square One will pay a total of R5 million for the acquisition, of which R1.5 million will be paid in cash over a period of two years and R3.5 million through the issue of shares.
Some 3.5 million shares are to be issued at 101c each, payable on 31 July 2009. However, this is contingent on NETIntellect and its individual shareholders entering into a consultancy agreement with Square One. Consultancy services must be rendered until the end of July 2009.
Square One said its aims in acquiring the company included expanding its business solutions division into KwaZulu-Natal; enhancing and increasing its skills complement; enhancing and increasing its suite of services offerings; securing additional clients as well as expanding its service portfolio.
"The acquisition of the business is a further step in Square One's strategy to position itself as a niche business solutions provider in SA. The NETIntellect team strengthens Square One's strong foothold, particularly in KwaZulu-Natal," it told shareholders.
NETIntellect focuses on IT-infrastructure services such as network security services, enterprise networking services and solutions, mobile solutions, infrastructure architectural services, service management and managed network services.
The parties have been in discussions for two years and have recognised complementary and obvious synergies. Since the start of negotiations, the parties have "identified several lucrative opportunities that should enhance returns to shareholders in due course".
On an illustrative basis, Square One expects its earnings per share to be enhanced by 25% as a result of the acquisition. This will take earnings per share to 6.60c from 5.27c. Headline earnings per share are expected to move from 9.40c to 10.20c, an 8.55% increase.
However, net asset value per share and net tangible asset value per share are expected to come down somewhat, it said.
The company, which made use of its audited results of Square One for the financial year ended 31 December 2005, assumed that the calculation had taken place at around that time in preparing the pro forma financial effects.
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