Nature of business of Afiboom
Afriboom, founded in 2007, has an excellent track record as a cleaning company specialising in the hospitality and healthcare industries.
Rationale for the Acquisition
In line with CSG’s acquisition strategy, the Acquisition allows for CSG to obtain a substantial market share in the hospitality and healthcare cleaning industries. The cleaning contracts already in place within the CSG group will eventually be transferred to Afriboom, thus creating a major cleaning brand in South Africa.
Consideration for the Acquisition
The purchase consideration payable by CSG in terms of the Acquisition will be an initial amount of R5 million (“Initial Amount”), which may be increased by a maximum amount of R30 million (“Performance Guarantee Amount”) based on the financial performance of Afriboom for the twelve months immediately following the Effective Date (referred to in paragraph 6 below) (“Performance Guarantee Period”).
The purchase consideration will be settled as follows:
- the Initial Amount will be paid in cash seven days after the Effective Date, subject to the conditions precedent referred to in paragraph below having been fulfilled; and
- The Performance Guarantee Amount will be settled as follows:
- *30% of the final Purchase Price by the issue of new CSG shares (“Consideration Shares”) following the finalisation of Afriboom’s profit before tax achieved during the Performance Guarantee Period. The number of new CSG shares to be issued will be determined based on the volume weighted average price of CSG shares traded on the exchange operated by JSE Limited 30 traded days before the Effective Date; and
- *the balance will be settled in cash on the same day that the Consideration Shares are issued.
Conditions precedent
The Offer is subject to inter alia:
- the conclusion of the Full Agreement;
- the Seller entering into a restraint of trade agreement with CSG in respect of the business carried on by Afriboom; and
- the completion of a due diligence and that CSG in its sole and absolute discretion is satisfied with the outcome thereof.
Effective date
The Acquisition will be effective from 1 October 2015 (“Effective Date”).
Profits and net asset value attributable to Afriboom
The post-tax profit attributable to Afriboom for the year ended 28 February 2015 (being the most recent financial year end) was R648 076 (upon which the Initial Amount was based), while the Performance Guarantee Amount was based on forecast earnings. The Acquisition consideration was therefore concluded at an average price earnings multiple of 5 times. Revenue attributable to Afriboom for the year ended 28 February 2015 was R108 729 949. The net asset value of Afriboom as at 28 February 2015 was R4 033 672 (this includes directors’ loans which will be settled prior to the Effective Date).
Categorisation
Based on current share price information, the Acquisition is a Category 2 transaction in terms of the LRs.
Memorandum of Incorporation (“MOI”)
CSG will adhere to the provisions of paragraph 10.21 of Schedule 10 of the LRs, with regard to Afriboom’s MOI.
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