DTC - Datatec Limited - 100% Ownership of Westcon Group
7 October 2010 8:00
DTC
DTC                                                                             
DTC - Datatec Limited - 100% Ownership of Westcon Group                         
DATATEC LIMITED                                                                 
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1994/005004/06)                                           
ISIN: ZAE000017745                                                              
Share Code: DTC                                                                 
("Datatec")                                                                     
100% OWNERSHIP OF WESTCON GROUP                                                 
1.   Introduction and Rationale                                                 
    Datatec announces that its subsidiary Westcon Group, Inc. ("Westcon") has   
    agreed to acquire the outstanding 2.6% interest in its own share capital    
which is not already owned by Datatec for a consideration of $14.252        
    million.                                                                    
    As a result of this agreement (the "Transaction") Datatec will hold 100% of 
    the equity and voting rights in Westcon.                                    
2.   The Transaction                                                            
    2.1  Business and structure                                                 
         Westcon is the holding company of Westcon Group, a global distributor  
         of ICT equipment which is Datatec`s largest subsidiary.                
Prior to the Transaction, the equity of Westcon was owned 97.4% by     
         Datatec and 2.6% by Routine Capital Corporation ("Routine Capital").   
         The Transaction has been effected by a Stock Purchase Agreement signed 
         on 6 October 2010 under the terms of which the Westcon shares held by  
Routine Capital will be repurchased and then cancelled by Westcon.     
    2.2  Consideration                                                          
         The consideration for the Transaction is US$ 14.252 million made up of 
         US$ 2.375 million in cash and a loan note for US$11.877 million        
bearing interest at 4% per annum and repayable in five equal annual    
         instalments starting on 30 September 2011.                             
         The consideration was arrived at by using an independent external      
         valuation for 100% of the shares in Westcon as at 28 February 2010,    
and then applying a 23% discount for lack of control, and a further    
         20% discount for lack of marketability in the subsidiary.              
    2.3  Financial effects                                                      
         The financial effects have been prepared for illustrative purposes     
only and because of its nature may not fairly present the issuer`s     
         financial position, changes in equity, results of operations or cash   
         flows. The financial effects are the responsibility of the directors.  
         The pro forma financial effects of the Transaction on Datatec`s        
earnings per share, headline earnings per share, net asset value       
         ("NAV") per share and net tangible asset value ("NTAV") per share for  
         the period ended 28 February 2010 are illustrated in the table below.  
                                                                                

(US cents)                                Before the   Pro-Forma    Change      
                                         Transaction  after the                 
                                                      Transaction               
Earnings per Share                        17.0         17.3         +1.9%       
Headline Earnings per Share               17.0         17.3         +1.9%       
Underlying* Earnings per Share            30.3         30.7         +1.1%       
Diluted Earnings per Share                16.8         17.1         +1.9%       
NAV per Share                             394          386          -2.0%       
NTAV per Share                            153          145          -5.2%       
    *excluding goodwill and intangibles impairment, amortisation of acquired    
    intangible fixed assets, profit or loss on sale of assets and businesses,   
fair value movements on acquisition-related financial instruments and       
    unrealised foreign exchange movements.                                      
    The pro-forma earnings per share, headline earnings per share, underlying   
    earnings per share, NAV and NTAV have been prepared on the following        
assumptions:                                                                
    -    figures before the Transaction are the audited results of Datatec for  
         the year ended 28 February 2010;                                       
    -    182.3 million Datatec shares in issue at 28 February 2010;             
-    interest rate of 4% p.a. on loan note payable;                         
    -    effective tax rate of 34%;and                                          
    -    the NAV and NTAV pro-forma assumes the Transaction was concluded       
         effective 28 February 2010.                                            
2.4  Conditions precedent                                                   
         The implementation of the Transaction is not subject to any conditions 
         precedent and is accordingly immediately effective.                    
3.   Small related party transaction                                            
The owner of Routine Capital is a director of Westcon and is therefore a    
    related party to Datatec. The Listings Requirements of the JSE Limited      
    ("JSE") require written confirmation from an independent professional       
    expert confirming that the Transaction is fair to Datatec`s shareholders.   
BDO Corporate Finance (Pty) Ltd, as the independent professional expert     
    acceptable to the JSE, has confirmed that the Transaction is fair and their 
    fairness opinion is available for inspection at Datatec`s registered office 
    until 5 November 2010.                                                      
Sandton                                                                         
7 October 2010                                                                  
Merchant bank and sponsor                                                       
RAND MERCHANT BANK (A division of FirstRand Bank Limited)                       
Date: 07/10/2010 08:00:01 Produced by the JSE SENS Department.                  
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