Updated: Jul 3
Legal Advisor to Jasco Rashaad Sujee Legal
Acquisition of Ramm Technologies Proprietary Limited
JASCO ELECTRONICS HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration Number: 1987/003293/06) Share Code: JSC ISIN: ZAE000003794 ("Jasco" or “the Group”)
ACQUISITION OF RAMM TECHNOLOGIES PROPRIETARY LIMITED
Shareholders are advised that Jasco has entered into a sale of shares agreement (“Transaction Agreement”) with Sudant Investments CC, Mr. Lindsay Welham and Mr. Quinton Ramsay (“the Vendors”) and Ramm Technologies Proprietary Limited (“Ramm”). In terms of the Transaction Agreement, Jasco will acquire 51% of Ramm for a maximum aggregate purchase price of R30,6 million (“the Transaction”).
2 BACKGROUND TO RAMM
Ramm was established in 1998 by Mr. Lindsay Welham in Johannesburg and initially specialised in the development of asset tracking systems based on GSM networks and geographic information systems (“GIS”) platforms. More recently, Ramm has upgraded its commercial model for “Internet of Things” (“IOT”) services, which allows for data analytics from several thousand devices deployed at customer premises. Ramm operates its own National Operations Centre (“NOC”), from where it monitors its customers’ assets and productivity. This service offering has resulted in Ramm’s revenue consisting of more than 80% annuity revenue.
Ramm’s operations cover Gauteng and the Western Cape with offices in both provinces. Its customer base is predominantly the major municipalities, which it has serviced for more than ten years. Ramm assists these municipal customers by ensuring that all services that are rendered are being billed correctly. Ramm’s customers’ payment records have been consistently good and in line with contracted payment terms. Client contracts are generally long-term and range from three years and longer.
Ramm has had a solid track record of double-digit revenue growth since 2015, with consistent operating margins above 15%.
3 BACKGROUND AND RATIONALE FOR THE ACQUISITION
The Jasco management team is executing its strategy of measured acquisitions that either bulk up existing business units or fill gaps in its portfolio to supplement organic growth. Additionally, Jasco continues to align its portfolio of businesses and related products and service offerings that serve its blue-chip customer base in niche markets. The Ramm acquisition will ensure an entry for Jasco into the asset tracking market through IOT, as well as further growth into the public sector. The acquisition creates the opportunity to cross-sell the Jasco product and service offering to Ramm customers and Ramm’s technology solutions to Jasco’s blue-chip corporate customer base. These would include Jasco’s customers with significant investments in assets or human resources who require data analytics to improve their operating efficiencies. The acquisition fulfils Jasco’s strategic intent of moving up the value chain towards a higher-margin professional service and annuity-based offering.
4 BENEFITS OF THE TRANSACTION
The acquisition of Ramm will provide the following benefits: – Entry into the asset tracking market through IOT platforms with the ability to offer real- time asset monitoring and management; – Workforce tracking and productivity analysis; – Access to Ramm’s NOC, which will enable Jasco to offer proactive monitoring services to its existing customer base; – Cross-selling to the Ramm customer base; and – Access to an experienced and capable management team within the information technology solutions market.
5 KEY TERMS OF THE TRANSACTION
5.1 Sale of Shares and Shareholding
Jasco will acquire 51% of the total issued share capital in Ramm from the Vendors. The remaining shares, held by the Vendors, will remain unchanged. The management team and founder will stay in place, with retention agreements for a minimum of three years.
5.2 The Purchase Consideration
The purchase price of the Vendors’ 51% shareholding in Ramm is calculated as R30,600,000 (“the Purchase Consideration”). The Purchase Consideration will be settled in cash in the following tranches: - an initial payment of R15,300,000; - a second payment of R15,300,000, following the completion of the audited 15-month period ending 31 May 2018.
5.3 Suspensive Conditions
The conclusion of the Transaction is subject to the fulfilment or waiver of certain suspensive conditions, which include, but are not limited to: - delivery by the Vendors of written proof that the counterparties to key supplier and customer agreements have consented to the transaction contemplated in the sale of shares and claims agreement and to the change of control of Ramm; and - any other suspensive conditions, as may be necessary in relation to the Transaction.
The Transaction Agreement contains legal warranties and indemnities which are considered normal in respect of a transaction of this nature.
6 EFFECTIVE DATE
The Transaction Agreement is effective as of 1 March 2018. All the suspensive conditions must be met by no later than 30 April 2018. Failing this, the Transaction Agreement will be of no force and effect.
7 PROFIT AND NET ASSET VALUE ATTRIBUTABLE TO RAMM
The net assets of Ramm, as per the audited financial statements for the 12 months ended 28 February 2017, were R4,1 million. The Transaction Agreement warrants a Net Asset Value (NAV) of R4,2 million on the Effective Date of 1 March 2018. The audited revenue of Ramm for the 12 months ended 28 February 2017 was R47,1 million, with compound annual revenue growth of 45% over five years, at an operating profit in excess of 15%.
8 CATEGORISATION OF THE TRANSACTION
The Transaction constitutes a category 2 acquisition in terms of the Listings Requirements of the JSE Limited. The Transaction is therefore not subject to Jasco shareholder approval.
Midrand 23 February 2018
Sponsor Grindrod Bank Limited
Legal Advisor to Jasco Rashaad Sujee Legal
Corporate Advisor to Jasco SamuelKennedy Investments (Proprietary) Limited
Date: 23/02/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.