JSC/ SPS - Jasco/ Spescom - Offer by Jasco to acquire the entire issued share
JSC SPS
JSC SPS
JSC/ SPS - Jasco/ Spescom - Offer by Jasco to acquire the entire issued share
capital of Spescom
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1987/003293/06)
Share code: JSC & ISIN: ZAE000003794
("Jasco")
SPESCOM LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1987/001083/06)
Share code: SPS & ISIN: ZAE000017919
("Spescom")
OFFER BY JASCO TO ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL OF SPESCOM,
CONTINUATION OF CAUTIONARY ANNOUNCEMENT TO JASCO SHAREHOLDERS AND WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT TO SPESCOM SHAREHOLDERS
1. INTRODUCTION
1.1 Jasco ordinary shareholders ("Jasco Shareholders") are referred to the
renewal of the cautionary announcement released on the Securities
Exchange News Service ("SENS") of the JSE Limited ("JSE") and in the
press, dated 17 August 2010. Spescom ordinary shareholders ("Spescom
Shareholders") are referred to the cautionary announcement released on
SENS and in the press, dated 2 July 2010.
1.2. Jasco Shareholders and Spescom Shareholders are hereby advised that Jasco
has made a firm offer (the "Firm Offer") to
acquire the entire issued
share capital of Spescom and its subsidiaries ("the Transaction"), to be
settled by the issue of 31 889 901 new Jasco ordinary shares at a switch
ratio of 1 Jasco ordinary share for every 2.47 Spescom ordinary shares
held by Spescom Shareholders, as well as a cash consideration of 15 cents
per Spescom ordinary share equivalent to R11 815 208 million, further
details of which are set out in paragraph 6 below.
1.3 Jasco and Spescom collectively (the "Combined Group") will have an annual
turnover of more than R1 billion. The Transaction will create an
integrated business that will combine Jasco`s telecommunications
experience and Spescom`s information & communications technology ("ICT")
experience to effectively participate in the growing converged
communications environment.
2.
BACKGROUND INFORMATION ON JASCO
2.1 Jasco has been a leading player in high technology businesses since 1976
and was listed on the JSE in 1987. The greater Jasco group employs more
than 1 000 people.
2.2 Jasco has a diversified portfolio of four divisions operating in the
sectors of Telecommunications, Domestic Products, Security and
Electrical. Jasco`s portfolio of businesses distributes, designs,
installs, assembles and/or manufactures electronic and electrical
products, services and solutions:
- The Telecommunications division focuses on the provision of
products, services and solutions to the access and transmission
network of both fixed-line and wireless telecommunications
operators. These solutions are supplied
through a combination of in-
house manufactured products and design and install services,
complemented by strategically sourced products on an exclusive basis
from leading overseas suppliers.
- The Domestic Products division focuses on the domestic appliances,
automotive and leisure industries. The division cuts wire, moulds
plastic, presses steel and assembles these into components and
harnesses for use by domestic product manufacturers. The division
recently acquired the well-known Snapper brand with an extensive
range of plugs, adaptors and cable sets.
- The Security division provides full turnkey solutions in electronic
security systems through the design, supply, installation and
maintenance of solutions including CCTV, access control, fire and
perimeter
protection.
- The Electrical division includes Jasco`s 34% share in Malesela
Taihan Electrical Cable (Pty) Ltd ("M-Tec"), a major cable manufacturer.
M-Tec supplies products to the power and telecommunications markets.
Products include aluminum overhead conductors, aluminum and copper power
cables and fibre optic and copper telecommunications cables. The recently
acquired subsidiary, LeBLANC Lighting Structures (Pty) Limited,
manufactures and installs steel towers for the electrical and
telecommunications sector.
3. BACKGROUND INFORMATION ON SPESCOM
3.1 Spescom is a JSE listed company, listed in 1987, operating in the ICT
sector. Founded in 1977, Spescom has developed and delivered a number of
world first technologies, such as the voice over
IP recorder, as well as
innovative products and services to both local and global markets.
Spescom was substantially restructured in 2006, with consistent growth
achieved since 2007.
Spescom employs 258 people, with offices in Johannesburg, Cape Town,
Durban and London.
For the six months ended 31 March 2010, Spescom generated a profit
attributable to equity owners of R3.8 million and had net assets of R88.8
million.
3.2 Spescom`s core focus is to deliver integrated business communications
solutions. It allows businesses to communicate with their customers
through leveraging voice, video and data technologies. Spescom has five
divisions:
-
Spescom DataFusion
A business communications and customer interaction solutions
specialist. It provides world-class contact centre and enterprise
telephony solutions to medium and large organisations that manage
high volumes of internal and customer interactions.
- Spescom DataVoice
Researches and develops proprietary workforce optimisation solutions
as well as risk mitigation technologies which record, manage, re-
create and analyse voice and screen transactions.
- Spescom Telecommunications
Systems integrator for fixed and mobile telecommunications network
operators, utilities, transportation and government communications
backbones, as well as for carrier of carrier
network operators`
transmission and access networks.
- Spescom Media IT
Provides solutions, services and enabling technologies and equipment
that progresses the broadcast industry from image capturing through
to transmission.
- NewTelco South Africa
A recently created carrier neutral co-location services provider
that provides a telecommunications inter-connection hub for
national, regional and international carriers. The division partners
with NewTelco GmbH, a German company that is a leader in this arena
with more than five carrier neutral co-location hubs including
Frankfurt, London, New York, Kiev and Vienna. With points of
presence (POPs) in other
major centres in Europe and Asia, it
provides a carrier market place for more than 1 000 carriers.
4. RATIONALE FOR THE TRANSACTION
The rationale for the Transaction is detailed under three broad
categories, namely:
4.1 Strategic
- Enhanced earnings potential of the Combined Group through various
operational and financial synergies, as described in paragraph 4.2
and 4.3, respectively;
- Diversified income streams resulting from the merger of Jasco`s
telecommunications and Spescom`s information and communications
businesses will reduce the business risk of the Combined Group;
- The creation of a single listed entity with turnover in excess of R1
billion;
- Increased base of broad based black economic empowered shareholders;
and
- Increased free float of issued shares in the Combined Group, thus
creating a more widely-held company.
4.2 Operational
- Complementary businesses with limited overlap and no conflicting
businesses;
- Enhanced cross-selling opportunities of the different product ranges
exist between the respective blue-chip client bases of Jasco and
Spescom;
- Several divisions within the Combined Group can work together to
create integrated and more
diverse client offerings, which include,
inter alia Spescom NewTelco`s co-location facility, the ECNS and ECS
licenses (previously a VANs license)and Jasco`s hi-site network
which provides an opportunity for a wider and more comprehensive
service offering to the Combined Group`s telecommunications customer
base; and
- Spescom`s presence in East Africa can be leveraged together with
Jasco`s presence in West Africa to grow the Combined Group`s African
revenues.
4.3 Financial
- Significant cost savings within the Combined Group can be achieved
by eliminating duplicated costs which include, inter alia, the
listed regulatory compliance costs, management costs, as well as
head office costs; and
- Creation of an enhanced balance sheet for the Combined Group, which
will include partly encumbered land and buildings to the value of
R50m as well as cash on hand of circa R38 million.
5. PROPOSED OPERATIONAL AND MANAGEMENT STRUCTURE
5.1 As there are very similar company cultures, Jasco`s management team is
confident that the combined businesses can work together effectively to
ensure a smooth integration of the businesses;
5.2 As Jasco and Spescom both operate with a central head office structure
and autonomous divisions, the divisions can continue operating in a
similar fashion to that in the past, and benefit from the experienced
divisional teams;
5.3 Martin Lotz, current Chief Executive Officer
("CEO") of Jasco, will be
CEO of the Combined Group. The current CEO of Spescom, Jen? Palmer, will
assist in facilitating the transition and successful conclusion of the
merger; and
5.4 Warren Prinsloo, current Chief Financial Officer ("CFO") of Jasco will be
CFO of the Combined Group.
6. OFFER
6.1 The Firm Offer will be discharged by issuing 31 889 901 new Jasco
ordinary shares at a switch ratio of 1 Jasco ordinary share for every
2.47 Spescom ordinary shares held by Spescom Shareholders, plus a cash
consideration of 15 cents per share, totalling R11 815 208.
6.2 Jasco will propose a scheme of arrangement between Spescom and Spescom
Shareholders, in terms of section 311 of the Companies Act, 1973 (Act 61
of 1973), as amended ("the Companies Act"), for the purpose of acquiring
the entire issued share capital of Spescom ("the Scheme"). The Scheme
will be subject to the suspensive conditions set out in paragraph 8.
6.3 In the event that the Scheme fails or does not become operative, Jasco
will make a conditional offer to Spescom Shareholders to acquire all
their ordinary shares at a switch ratio of 2.47 Spescom shares for 1
Jasco share, plus a cash consideration of 15 cents per share in terms of
section 440 of the Companies Act. This will be conditional on acceptance
by Spescom Shareholders holding no less than 90% of the total issued
ordinary shares of Spescom and be on such terms that Jasco will invoke
the provisions of section 440K of the Companies Act to acquire the shares
of the remaining Spescom Shareholders if the offer becomes unconditional
("the Substitute Offer"). If the Scheme
becomes operative, the Substitute
Offer will not be implemented.
6.4 Restrictions
- The Firm Offer, as per paragraph 6.1, is made on the condition that
Spescom will not pay a dividend, make any distribution of reserves
or effect any transaction that will reduce the Spescom Shareholders
equity after 31 August 2010.
6.5 Irrevocable Undertakings
- Jasco has obtained irrevocable undertakings to pass all resolutions
required to approve the Transaction from Jasco Shareholders
representing 58.8% of the total issued shares of Jasco.
- Spescom has obtained irrevocable undertakings to pass all
resolutions required to approve the Transaction, from Spescom
Shareholders
representing 40.1% of the total issued shares of
Spescom.
6.6 Cash confirmation
- The Securities Regulation Panel ("SRP") has been provided with
confirmation from an appropriate third party that resources are
available to Jasco to fully satisfy the cash component of the Firm
Offer.
7. EFFECTIVE DATE
The Transaction will become effective on the first day after the Firm
Offer becomes fully unconditional, following which an application will be
made by Spescom for the termination of the listing of its issued share
capital on the JSE.
8. SUSPENSIVE CONDITIONS
The Transaction will be subject, inter alia, to the following suspensive
conditions:
8.1 The approval of the Scheme by a majority of Spescom Shareholders
entitled to vote ("Scheme Members") at the meeting of Scheme Members
("the Scheme Meeting") convened by the High Court of South Africa
("the Court"), representing not less than three-fourths (75%) of the
votes exercisable by Scheme Members present and voting either in
person or by proxy at the Scheme Meeting;
8.2 The approval of the Transaction by the requisite majority of Jasco
Shareholders at a meeting convened to approve the Transaction;
8.3 Spescom and Jasco obtaining the requisite regulatory approvals
(where appropriate), including without limitation, the approval of
the SRP and the JSE of the
documentation/circulars relating to the
Scheme and/or the Transaction;
8.4 The Court sanctioning the Scheme in terms of the Companies Act;
8.5 A certified copy of the Order of Court sanctioning the Scheme being
lodged with and registered by CIPRO in terms of the Companies Act;
and
8.6 The unconditional approval of the Transaction by the Competition
Authorities and any other regulatory approvals to the extent
required.
9. FINANCIAL EFFECTS
A further announcement to be released on SENS and in the press,
disclosing the pro forma financial effects of the Transaction on Jasco,
will be made in due course. As outlined above, the Transaction will be
earnings enhancing.
10. CLASSIFICATION OF THE TRANSACTION AND CIRCULAR TO JASCO SHAREHOLDERS
The Transaction is classified as a Category 1 transaction for Jasco in
terms of the Listings Requirements of the JSE. Accordingly, a circular
(incorporating revised listing particulars) will be sent to Jasco
Shareholders in due course.
11. SCHEME CIRCULAR AND INDEPENDENT OPINION
A Scheme circular will be sent to Scheme Members in accordance with the
requirements of the SRP. As the Transaction is deemed to be an "Affected
Transaction" as defined by the Securities Regulation Code on Takeovers
and Mergers and the Rules of the SRP, the directors of Spescom will
appoint an independent expert to advise the board of directors of Spescom
on whether the Transaction is
fair and reasonable to Scheme Members.
12. CONTINUATION OF JASCO CAUTIONARY ANNOUNCEMENT
Jasco Shareholders are advised to continue exercising caution when
dealing in their Jasco securities until a further announcement disclosing
the pro forma financial effects of the Transaction on Jasco is made.
13. WITHDRAWAL OF SPESCOM CAUTIONARY ANNOUNCEMENT
Spescom Shareholders are advised that the cautionary announcement is
hereby withdrawn and caution need no longer be exercised when dealing in
their Spescom securities.
Johannesburg
3 September 2010
Corporate Adviser and Sponsor to Jasco
Grindrod Bank Limited
Corporate Adviser and Sponsor to Spescom
Investec Bank Limited
Date: 03/09/2010 07:05:02 Produced by the JSE SENS Department.
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