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PNC
PNC
PNC - Pinnacle Technology Holdings Limited - Acquisition of Explix
Pinnacle Technology Holdings Limited
Registration number 1986/000334/06
Share Code: PNC
ISIN: ZAE000022570
("Pinnacle" or the "Company")
ACQUISITION BY PINNACLE OF AN ADDITIONAL INTEREST IN EXPLIX BUSINESS SOLUTIONS
PROPRIETARY LIMITED, (PREVIOUSLY MOYAHABO DIGITAL SOLUTIONS PROPRIETARY LIMITED)
("EXPLIX") FROM SEBMAT INVESTMENT GROUP PROPRIETARY LIMITED ("SEBMAT") AND BLADE
FINANCIAL SERVICES PROPRIETARY LIMITED ("BLADE"), (COLLECTIVELY "THE SELLERS") -
A SMALL RELATED PARTY TRANSACTION
1 Introduction
Shareholders are advised that Pinnacle entered into a Sale of Shares
Agreement on 14 October 2011 ("the Agreement"), whereby the Sellers will
dispose of their 49% stake in Explix ("the Sale Shares") and their claim
against their loan accounts with Explix amounting to R115 483 to Pinnacle
for a total purchase price of R3 500 000 ("the Purchase Price") ("the Sale
Transaction").
The effective date of the Sale Transaction is the completion date being the
first business day following the day of fulfilment of the suspensive
condition as set out below ("Effective Date").
The business of Explix is the marketing, distribution, installation and
provisioning of Sharp branded multi-function printers ("MFPs") to both
commercial and public sector entities. Explix is currently one of two
distributors appointed by Sharp for MFPs. Pinnacle already owns 51% of
Explix.
2 Rationale
The Board of Pinnacle ("the Board") believes that the business of Explix
should be managed within the business of one of its major trading arms,
Pinnacle Africa. Doing this would eliminate the need for the separate
overhead infrastructure currently in place at Explix therefore reducing
overall costs and would place the brand within the much larger and more
comprehensive distribution and selling organization of Pinnacle Africa.
The Sharp MFP product line is known internationally to comprise high
quality, reliable and well-priced equipment. Despite this the brand has
yet to be fully recognised as such in the Southern African market. The
Board believes that introducing the brand into the Pinnacle Africa
infrastructure would allow the true potential that it sees in the Sharp MFP
product line to be realised.
3 Salient terms
In terms of the Agreement, the Sellers shall, for the Purchase Price,
dispose of 49% of the issued ordinary share capital in Explix held by it to
Pinnacle plus their loan account claims against Explix, which the Sellers
warrant amounts to R115 483.
The Sellers warrant in terms of the Agreement that they are the registered
and beneficial owners of the Sale Shares and that the Sale Shares are not
subject to any prior rights or encumbrances of any nature and no person has
any right, title, interest in or option in and to the Sale Shares as of the
Effective Date. The Sellers also warrant that they have jointly and/or
individually disclosed to the Purchaser all facts and circumstances or
knowledge that may be in their collective or individual possession, which
may be material to the Sale Transaction and/or to any purchaser of the Sale
Shares. The Sellers have indemnified the Purchaser against any loss that
it may incur as a result of any breach of the warranties referred to above.
Pinnacle shall make payment of the Purchase Price to the Sellers in cash
within two business days of the Effective Date.
Pinnacle Technology Shared Management Services Proprietary Limited, a
subsidiary of Pinnacle ("PTSMS") has entered into a related and
interdependent Enterprise Development and Co-operation Agreement with
Sebtech Technologies Proprietary Limited ("Sebtech") ("the Enterprise
Development Transaction"), a company that has substantially the same
ownership as Sebmat, and is a black owned, controlled and managed office
automation and telecommunications operating company in that grouping of
companies. In terms of this Enterprise Development and Co-operation
Agreement, PTSMS will make a grant within seven working days of the
completion of the agreement to be known as the "Enterprise Development
Contribution" amounting to R5 446 667 (inclusive of VAT) to Sebtech for the
purposes of assisting and accelerating the development of Sebtech so that
Sebtech may achieve sustainable financial and operational independence from
the Company as a non-exclusive reseller. In terms of this agreement the
Pinnacle group of companies (including Explix) and Sebtech will cooperate
in the future to attract business to Sebtech for its benefit and for the
benefit of Explix and the Pinnacle group of companies as one of their
accredited resellers. PTSMS considers that the payment will qualify under
Series 600 of the Codes of Good Practice as gazetted on 9 February 2007 and
issued under section 9 of the BEE Act as Enterprise Development
expenditure.
4 Suspensive conditions
As of the date of publication of this announcement there were no
unfulfilled suspensive conditions, save for the approval by the JSE Limited
("JSE") of the fairness opinion referred to in paragraph 6 below.
5 Pro forma financial effects
The combined pro forma financial effects of the Sale Transaction and the
Enterprise Development Transaction (collectively "both Transactions") on
Pinnacle`s financial results for the six months ended 30 June 2011 are not
significant.
6 Independent Opinion
The Board has appointed Mazars Corporate Finance Proprietary Limited, an
independent expert to provide the Company with a fairness opinion on the
combined effect of both Transactions. The appointment of the independent
expert has been approved by the JSE and the independent expert has issued a
fairness opinion which is currently with the JSE for approval.
7 Small related party transaction
Explix and Sebmat share a common director as do Explix and Blade. In
addition Sebmat is material shareholder in Explix. The Purchase Price
together with the Enterprise Development Contribution amount to 0.50% of
the market capitalisation of Pinnacle calculated as at close of business on
14 October 2011 and therefore both Transactions are together classified to
be a small related party transaction in terms of Section 10.7 of the
Listings Requirements of the JSE.
8 Cautionary Announcement
Pinnacle issued a cautionary announcement on 14 October 2011 advising that
the Company has entered into negotiations which, if successfully concluded,
may have a material effect on the price of the Company`s securities.
This announcement, i.e. of both Transactions detailed above, is unrelated
to the cautionary announcement which remains in effect until further
notice.
Midrand
17 October 2011
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 17/10/2011 16:56:01 Produced by the JSE SENS Department.
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