Jasco acquisition of Reflex Solutions Proprietary Limited

Legal Advisor to Jasco Rashaad Sujee Legal

JSC 201705250047A ACQUISITION OF REFLEX SOLUTIONS 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 REFLEX SOLUTIONS PROPRIETARY LIMITED

1 INTRODUCTION

Shareholders are advised that Jasco has entered into a sale of shares agreement (“Transaction Agreement”) with Mr. Greg Wilson and Mr. David Robinson (“the Vendors”) and Reflex Solutions Proprietary Limited (“Reflex”). In terms of the Transaction Agreement, Jasco will acquire 51% of Reflex for a maximum aggregate purchase price of R39.78 million (“the Transaction”).

2 BACKGROUND TO REFLEX

Reflex was established in 2000 by Mr. Greg Wilson in Johannesburg and initially specialised in the IT managed services market before adding hosted IT Infrastructure, cloud services and more recently fibre to the home (FTTH) solutions.

Reflex’s operations cover Johannesburg, Cape Town, Port Elizabeth and Durban. Its blue-chip customer base spans the retail, logistics, education, telecommunications and financial services industries. It has a solid track-record of double-digit revenue growth since 2013, with consistent operating margins above 10%.

3 BACKGROUND AND RATIONALE FOR THE ACQUISITION

Following the restructure of Jasco, the reduction of gearing to within the group’s internal range of less than 50% and an improving operating performance, the 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 services offerings that serve its blue-chip customer base in niche markets.

The Reflex acquisition will ensure that the Jasco Enterprise offering in the blue-chip corporate market is further enhanced by now being able to supply IT WAN (wide area network) / LAN (local area network), desktop and server managed services, hosted IT Infrastructure, cloud unified communications and contact centre solutions. Jasco will now also gain access to the lucrative growth market of FTTH solutions. Reflex’s customer base further expands Jasco’s existing customer base within the retail, logistics, education, telecommunications and financial services sectors. 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 Reflex will provide the following benefits:

– Additional managed services capability in the IT WAN / LAN market; – Ability to offer a world-class UCaaS (Unified Communication as a Service) to the group’s existing and new enterprise customers, complementing Jasco’s existing offerings; – Further expansion of Jasco’s PaaS (Platform as a Service) offering through Reflex’s VM (Virtual Machine) server environment; – Access to the FTTH growth market; – Reflex operates its own NOC (Network Operation Centre) / SOC (Service Operations Centre), which will enable Jasco to offer proactive monitoring services to its existing customer base; – Further opportunity for Reflex to cross-sell to the Jasco customer base and Jasco to cross-sell the rest of the products and solutions portfolio to the Reflex customer base; and – Access to an experienced and capable management team within the information technologies 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 Reflex 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 two years.

5.2 The Purchase Consideration

The purchase price of the Vendors’ 51% shareholding in Reflex is calculated at a maximum aggregate amount of R39,780,000 (“the Purchase Consideration”). The Purchase Consideration will be settled in cash in the following tranches: - an initial payment of R30,000,000; - a second maximum payment of R9,780,000, subject to the financial performance of Reflex for the audited 14-month period ending 30 June 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, to Jasco, 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 Reflex; 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 May 2017. All the suspensive conditions must be met by no later than 31 May 2017. Failing this, the Transaction Agreement will be of no force and effect.

7 PROFIT AND NET ASSET VALUE ATTRIBUTABLE TO REFLEX

The net assets of Reflex, as per the audited financial statements for the 12 months ended 30 April 2016, were R11,4 million. The Transaction Agreement warrants a Net Asset Value (NAV) of R6,4 million on the Effective Date of 1 May 2017. The audited revenue and profit attributable to the net assets of Reflex for the 12 months ended 30 April 2016 was R75,2 million and R7,4 million respectively.

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 25 May 2017

Sponsor Grindrod Bank Limited

Legal Advisor to Jasco Rashaad Sujee Legal

Corporate Advisor to Jasco SamuelKennedy Investments (Proprietary) Limited

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