Datatec Limited, the international Information and Communications Technology (ICT) group, announces that its subsidiary Logicalis Group and its partner in Latin America, Promon SA have agreed changes to their ownership of Promon Logicalis Latin America Limited that will result in Promon continuing as a long term partner of Datatec in Latin America.
Promon is a large privately held technology, engineering and investment group that was formed in 1960 and which has regional business interests. It has been a good partner for Logicalis and has assisted in the growth of PLLAL operations in multiple countries in Latin America since 2008. Promon currently owns 30% of PPLAL and has a put option on this interest to Logicalis.
Promon has now purchased an additional 10% of PLLAL from Logicalis for $15 million in cash, increasing its share of the business to 40%. As a result Datatec’s equity ownership of PLLAL through Logicalis will reduce to 60%, with effect from 31 August 2011. At the same time Promon has agreed to cancel its put option on its shareholding in PLLAL.
In accordance with IFRS, the fair value adjustments to this put option liability have been accounted for by Datatec through its income statement in previous reporting periods. This substantial charge (as the valuation of PLLAL increased annually) has been the major component of the negative difference between underlying earnings per share and headline earnings per share / earnings per share reported by Datatec. This charge to the income statement associated with this put option will now fall away. The effects are set out in the table below.
Jens Montanana, Datatec CEO, commented:
“Since Logicalis first partnered with Promon in May 2008 and formed PLLAL to develop its existing Latin American business, the PLLAL business has gone from strength to strength. We are delighted that Promon has committed to the long term future of PLLAL by acquiring a further 10% interest in the business. We both see exciting potential for further growth of our shared business in Latin America”
Small related party transaction per the Listings Requirements of the JSE
Promon is defined as a related party to Datatec due to its existing shareholding in PLLAL. The Listings Requirements of the JSE require Datatec to obtain written confirmation from an independent professional expert that the Transaction is fair to Datatec’s shareholders. Accordingly, Datatec has appointed BDO Corporate Finance (Pty) Ltd (“BDO”), as the independent professional expert to provide this fairness opinion. The fairness opinion is still subject to approval by the JSE and a further announcement will be made once JSE approval has been received. The Transaction is conditional on receipt of this approval.
The pro forma financial effects of the Transaction calculated relative to the year ended 28 February 2011 are set out in the following table:
|(US cents)||As reported||Pro- forma after transaction||% change|
|Earnings per Share||22.8||29.8||+30.9%|
|Headline Earnings per Share||23.9||30.9||+29.4%|
|Underlying Earnings per Share||37.9||37.5||-0.8%|
|NAV per Share||392||419||+6.9%|
|NTAV per Share||159||192||+20.8%|
The following assumptions have been made:
- Figures as reported are the audited results of Datatec for the year ended 28 February 2011;
- 186 million Datatec shares in issue at 28 February 2011;
- Interest rate of 5.5% in South Africa where sale proceeds assumed to be held;
- Tax rate of 28% on interest receivable;
- the NAV and NTAV pro-forma assumes the disposal occurred on 28 February 2011 and that the put option had never existed;
- earnings per share pro-forma assumes the sale proceeds invested and no mark-to market adjustment relating to the put option in the year ended 28th February 2011 (minor effect on underlying earnings per share as this mark-to market adjustment is already excluded from underlying earnings).