Spicer Holdings and the IQ Business Group are to merge into an entity with an expected market capitalisation of R1.4 billion, putting it among the top ten IT companies on the JSE.
Spicer is to acquire the IQ business in a R400 million deal, which values it at 30% of the new entity. The purchase will be settled with an issue of 178 million new Spicer shares, to be unbundled to IQ shareholders. The shares will be issued at R2.24, a substantial premium on the R1.55 at which the shares traded this morning.
"We certainly don't believe the Spicer market price is a true reflection of its worth," says Johan Roets, IQ MD, in explanation of the premium. Roets is to be the CEO of the new company while Sas du Toit, Spicer executive chairman will retain his position.
Although IQ brings cash resources of between R50 and R60 million to the table according to Roets, he says much of the purchase price goes toward intangible assets. "IQ is bringing a lot of intellectual capital with it," Du Toit says.
According to Roets, IQ shareholders have indicated their support for the deal, and most are expected to retain their Spicer holdings. IQ investors include a 22.2% stake held each by Hosken Consolidated Investments and the Mettle group.
Super Group, the JSE-listed diversified logistics company, holds 27.7% while management owns the balance. "Super Group has indicated that they still need to decide with their shareholders what to do with the shares," Roets says. "They are the only shareholders who have not indicated an intention to hang on to the shares."
Should Super Group opt to cash in those shares, an IQ management consortium would pre-emptively buy such shares, Roets says.
The new company would expect a turnover in excess of R500 million, and Du Toit says an after tax profit margin of 20% is theoretically possible once the deal is bedded down.
The deal is expected to be completed by early February next year. Approval of Spicer shareholders, the Competition Board and the JSE must still be obtained.
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