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Johannesburg - Jasco Electronics Holdings [JSE:JSC] announced on Friday that it has made a firm offer to acquire the entire issued share capital of ICT solutions company Spescom [JSE:SPS] and its subsidiaries.
The offer is to be settled by the issue of 31.89 million new Jasco ordinary shares, at a switch ratio of 1 Jasco ordinary share for every 2.47 Spescom ordinary shares, as well as a cash consideration of 15 cents per Spescom share, equivalent to R11.8m.
Jasco and Spescom collectively would have an annual turnover of more than R1bn. The transaction would create an integrated business combining Jasco's telecommunications experience and Spescom's information and communications technology experience to effectively participate in the growing converged communications environment, the companies said.
They added that there would be enhanced earnings potential of the combined group through various operational and financial synergies. The diversified income streams resulting from the merger of the two firms would reduce the business risk of the combined group.
The deal would create a single listed entity with an increased base of broad-based black economic empowered shareholders, and would increase the free float of issued shares in the combined group, thus creating a more widely-held company.
The two companies have complementary businesses with limited overlap and no conflicting businesses. There are enhanced cross-selling opportunities of the different product ranges between the respective blue-chip client bases of Jasco and Spescom.
In addition, several divisions within the combined group could work together to create integrated and more diverse client offerings.
These include Spescom NewTelco's co-location facility, the ECNS and ECS licences (previously a VANs licence) and Jasco'shi-site network, which provides a wider and more comprehensive service offering to the combined group's client base.
Furthermore, Spescom's presence in East Africa could be leveraged together with Jasco's presence in West Africa to grow the combined group's African revenues.
They added that significant cost savings within the combined group could be achieved by eliminating duplicated costs. These include listed regulatory compliance costs, management costs, and head office costs.
It would also create an enhanced balance sheet for the combined group, which would include partly encumbered land and
buildings to the value of R50m as well as cash on hand of about R38m.
Transaction nuts and bolts
Martin Lotz, current CEO of Jasco, will be CEO of the combined group and the current CEO of Spescom, Jene Palmer, will assist in facilitating the transition and successful conclusion of the merger. Warren Prinsloo, current CFO of Jasco will be CFO of the combined group.
Jasco will propose a scheme of arrangement between Spescom and Spescom shareholders for the purpose of acquiring the entire issued share capital of Spescom.
If the scheme fails or does not become operative, Jasco will make a conditional offer to Spescom shareholders to acquire all their shares. This will be conditional on acceptance by Spescom shareholders holding no less than 90% of the total issued ordinary shares of Spescom.
The firm offer 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 August 31 2010.
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.
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.
The deal will be subject to shareholder and regulatory approval.
Jasco shareholders were advised to continue exercising caution when dealing in their securities until a further announcement disclosing the pro forma financial effects of the transaction on Jasco is made.
Spescom shareholders were advised that they no longer need to exercise caution when dealing in their Spescom securities.
The offer is to be settled by the issue of 31.89 million new Jasco ordinary shares, at a switch ratio of 1 Jasco ordinary share for every 2.47 Spescom ordinary shares, as well as a cash consideration of 15 cents per Spescom share, equivalent to R11.8m.
Jasco and Spescom collectively would have an annual turnover of more than R1bn. The transaction would create an integrated business combining Jasco's telecommunications experience and Spescom's information and communications technology experience to effectively participate in the growing converged communications environment, the companies said.
They added that there would be enhanced earnings potential of the combined group through various operational and financial synergies. The diversified income streams resulting from the merger of the two firms would reduce the business risk of the combined group.
The deal would create a single listed entity with an increased base of broad-based black economic empowered shareholders, and would increase the free float of issued shares in the combined group, thus creating a more widely-held company.
The two companies have complementary businesses with limited overlap and no conflicting businesses. There are enhanced cross-selling opportunities of the different product ranges between the respective blue-chip client bases of Jasco and Spescom.
In addition, several divisions within the combined group could work together to create integrated and more diverse client offerings.
These include Spescom NewTelco's co-location facility, the ECNS and ECS licences (previously a VANs licence) and Jasco'shi-site network, which provides a wider and more comprehensive service offering to the combined group's client base.
Furthermore, Spescom's presence in East Africa could be leveraged together with Jasco's presence in West Africa to grow the combined group's African revenues.
They added that significant cost savings within the combined group could be achieved by eliminating duplicated costs. These include listed regulatory compliance costs, management costs, and head office costs.
It would also create an enhanced balance sheet for the combined group, which would include partly encumbered land and
buildings to the value of R50m as well as cash on hand of about R38m.
Transaction nuts and bolts
Martin Lotz, current CEO of Jasco, will be CEO of the combined group and the current CEO of Spescom, Jene Palmer, will assist in facilitating the transition and successful conclusion of the merger. Warren Prinsloo, current CFO of Jasco will be CFO of the combined group.
Jasco will propose a scheme of arrangement between Spescom and Spescom shareholders for the purpose of acquiring the entire issued share capital of Spescom.
If the scheme fails or does not become operative, Jasco will make a conditional offer to Spescom shareholders to acquire all their shares. This will be conditional on acceptance by Spescom shareholders holding no less than 90% of the total issued ordinary shares of Spescom.
The firm offer 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 August 31 2010.
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.
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.
The deal will be subject to shareholder and regulatory approval.
Jasco shareholders were advised to continue exercising caution when dealing in their securities until a further announcement disclosing the pro forma financial effects of the transaction on Jasco is made.
Spescom shareholders were advised that they no longer need to exercise caution when dealing in their Spescom securities.
