Sep 3rd, 2010

Jasco Electronics Holdings (Jasco) and Spescom Limited (Spescom) today announced the proposal by Jasco to acquire the ordinary shares of Spescom.

The combined group is expected to achieve an annual turnover in excess of R1 billion.

The transaction will be settled through the issue of 32,9 million ordinary shares, made up by one Jasco ordinary share for every 2.47 Spescom ordinary shares. In addition, a cash consideration of R11,8 million, which represents 15 cents per Spescom share, will be paid.

The transaction will create an integrated business that will combine Jasco’s telecommunications experience and Spescom’s information and communications (ICT) experience to increasingly participate in the growing converged communications environment.

Both companies were established in the middle 70s and listed in 1987. Jasco is a leading player in high technology businesses and its portfolio of businesses distributes, designs, installs, assembles and/or manufactures electronic and electrical products, services and solutions.

Spescom’s core focus is to deliver integrated business communication solutions that allow businesses to communicate with their clients through leveraging voice, video and data technologies. Spescom has five divisions.

“We are extremely excited about this milestone in Jasco’s progression, as this transaction is earnings enhancing for Jasco from the start. It increases our size, enhances the earnings potential of the combined group through various operational and financial synergies and further diversifies our income streams through the addition of the ICT businesses of Spescom to that of Jasco, which will reduce the business risk of the combined group.

“Importantly, following this transaction, the consolidated statement of financial position (balance sheet) will be strengthened, as Spescom’s net asset value of R88,8 million, as published in the interim results on 31 March 2010, includes cash on hand of R38 million and partly encumbered land and buildings valued at R55 million.

“Also, the two groups have very similar cultures, which will enable a smooth integration. Jasco and Spescom also 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 and numerous opportunities for divisions to work together to create integrated and more diverse client offerings,” said Jasco’s CEO Martin Lotz.

The opportunities (outside of integration and cross-selling opportunities) for the businesses to work together include:

•    Spescom NewTelco’s data centre for co-location services, the ECNS license (previously a VANs license) and Jasco’s hi-site network provides an opportunity for a wider and more comprehensive service offering to Jasco’s Telecommunications customer base
•    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

As Spescom and Jasco 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 experienced divisional teams.

Martin Lotz, current CEO of Jasco, will be the CEO of the combined group.

Warren Prinsloo, current CFO of Jasco will be CFO of the combined group. The CEO of Spescom, Jene Palmer, will remain involved in the business to assist in facilitating the transition and successful conclusion of the merger.

Significant savings are expected through cost reductions in areas such as listed regulatory compliance costs, management costs, as well as rental savings.

“The proposed acquisition will allow us to unlock long-term shareholder value on a strategic, operational and financial level.  The merged entity will be a larger and more formidable player in the market through the combined strength of both organisations,” said Jené Palmer, the CEO of Spescom.

The transaction is subject to a number of conditions. These include approvals by Spescom and Jasco shareholders, as well as a number of regulatory and legal requirements. Jasco has obtained irrevocable undertakings from 58.8% of shareholders and Spescom from 40.1% of its shareholders. Jasco remains over 50% black-owned after the transaction.

A further announcement disclosing the pro forma financial effects of the transaction on Jasco, will be made on SENS in due course. However, as outlined above, the transaction will be earnings enhancing.