To view the PDF file, sign up for a MySharenet subscription.

INVICTA HOLDINGS LIMITED - Acquisition of a majority interest in the Dartcom Group of companies and withdrawal of cautionary announcement

Release Date: 07/10/2021 12:30
Code(s): IVT IVTP     PDF:  
Wrap Text
Acquisition of a majority interest in the Dartcom Group of companies and withdrawal of cautionary announcement

Invicta Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1966/002182/06)
Ordinary Share code: IVT Ordinary Share ISIN ZAE000029773
Preference Share code: IVTP Preference Share ISIN: ZAE000173399
(“Invicta” or the “Company”)



   Further to the cautionary announcement released on the Stock Exchange News Service of the JSE Limited and
   the A2X News Service on 13 September 2021 (the “13 September Announcement”), Invicta is pleased to
   advise that it has entered into a heads of agreement (“HOA”) with Tuludi Capital Proprietary Limited (“Tuludi”),
   an investment vehicle managed by New GX Capital Group (“New GX”), and Kgalauwane Properties Holdings
   (“Kgalauwane”) (collectively, the “Sellers") to purchase a majority shareholding in Dartcom SA Proprietary
   Limited (“DSA” or the “Dartcom Group”). In terms of the HOA, Invicta will acquire, whether directly or indirectly:

   1.1.   Tuludi’s 78.03% shareholding in the Dartcom Group (the “Dartcom Shareholding”);
   1.2.   all of the shares in and claims against Kgalauwane 2 Proprietary Limited which holds two properties key
          to the Dartcom Group’s operations via Kgalauwane (the “Kgalauwane Properties”); and
   1.3.   the relevant individual ECNS and ECS Independent Communications Authority of South Africa (“ICASA”)
          licenses held by Tuludi (“ICASA Licenses”),

   collectively the “Transaction”.


   The Dartcom Group is one of the foremost distributors of communication and renewable energy technology
   equipment and solutions both in South Africa and across the African continent. The Dartcom Group has an
   experienced workforce that operates the business’ accredited manufacturing and distribution facilities. The
   business has aligned itself with leading global telecommunication and power solutions brands and is thus able
   to provide its customers with the best of breed products and services across the continent. To this end the
   Dartcom Group offers a wide range of solutions across the following ranges:

   2.1    Radio frequency technology;
   2.2    Fibre connectivity and fibre management solutions;
   2.3    Fibre network products and solutions;
   2.5    Active equipment such as site monitoring and maintenance; and
   2.5    Power and renewable energy solutions;

   Dartcom Fibre Solutions Proprietary Limited (“DFS”) is a wholly owned subsidiary of DSA, and is a South African
   based manufacturer of world class fibre optic cables. The fibre optic cables are produced under license from
   OFS Fitel LLC (“OFS”) (a global distributor of optical fibre), a wholly owned subsidiary of Furukawa Electric
   Company (Japan) (“Furukawa”), which has been a pioneer in optical fibre and power cables since 1974. DFS’s
   relationship with the OFS and Furukawa companies ensures that DSA fully complies with global quality
   standards, has reliable access to stock at competitive pricing and is at the forefront of cutting-edge
   developments in technology.
   The Dartcom Group recently established Gbitel Proprietary Limited, as a wholly owned subsidiary. Gbitel
   operates as a marketplace specialising in the design, build and transfer of fibre networks, as well as tower and
   power infrastructure projects through a model that benefits Small, Medium and Micro Enterprises (“SMMEs”).
   Gbitel’s service delivery marketplace framework is diverse and includes various bespoke funding, training,
   incubation and operating models to ensure that projects are delivered timeously and to specification whilst
   developing SMMEs.


   Details of the Kgalauwane Properties which are key to the Dartcom Group’s operations are:

   Property 1:
   Address:                     6 Padstone Street, Twenty-One Industrial Park, Sterkfontein, Ekurhuleni
   Gross lettable area:         10,025m²
   Permitted use:               Industrial

   Property 2:
   Address:                     33 Bearing Crescent, Silverton, Pretoria
   Gross lettable area:         6,087m²
   Permitted use:               Industrial


   As part of our strategy to diversify from its industrial base in South Africa, Invicta wants to establish a diversified
   telecommunications, renewable energy and related battery storage technologies solutions provider, which has
   growth potential in South Africa as well as the rest of the African continent. Invicta’s objective is to emulate and
   leverage off of the existing engineering services and product distribution platform that it has built over the past

   Moreover, the introduction of New GX as an Invicta shareholder will significantly enhance the Broad-Based
   Black Economic Empowerment (“B-BBEE”) ownership and the empowerment credentials of the Company.


   The total purchase consideration for the Transaction is an amount of R565,652,928 (the “Purchase
   Consideration”) to be discharged as follows:

   5.1.   A payment of R50,000,000.00 in cash.

   5.2.   By the issue to Tuludi of 16,524,022 Invicta shares (with a value attributed to those Invicta shares of
          R27.28 per share) in terms of an asset-for-share transaction valued at R450,775,320;

          The issue of the full 16,524,022 Invicta shares ("Consideration Shares"), is conditional upon Invicta
          being able to repurchase 5,200,000 shares from third party shareholders (“Repurchase Shares”) by
          way of share repurchases. Should Invicta not be able to acquire all of the Repurchase Shares in the
          market, the value of any such shares not acquired in the market (the “Shortfall Shares”), will be settled
          in cash, based on the R27.28 assumed value per share (“Top-up Cash Amount”). The Top-up Cash
          Amount will thus be calculated by multiplying the number of Shortfall Shares by R27.28 per share. Invicta
          has at the date of this announcement already acquired 897,687 of the Repurchase Shares in the open
          market by way of general authority granted by Invicta shareholders. Following the 13 September
          Announcement, Invicta has concluded agreements to repurchase a further 3,900,000 shares by way of
          a specific repurchase (the “Specific Repurchase”), subject to Invicta shareholder approval. The terms
          of the Specific Repurchase are set out in the 13 September Announcement and in due course, a circular
          will be distributed to shareholders, incorporating a notice of general meeting.

   5.3.   A payment of a net R64,000,000 in cash for the Kgalauwane Properties which is based on a market
          value of R177,570,000 being attributed to such properties, as reduced by the value of the outstanding
          mortgage bond at the date of signature of the HOA (the cash consideration to be adjusted by the
          outstanding mortgage bond value at closing).

   5.4.   A payment for the ICASA Licenses in an amount of R877,608 to be discharged in cash.


   The Transaction will be implemented on the first business day of the month following the month in which the
   last of the conditions precedent set out in paragraph 7 below have been fulfilled (the “Effective Date”).


   The Transaction is subject to the fulfilment of the following conditions precedent which are normal for a
   transaction of this nature:

   7.1.   Invicta board approval of the Transaction;
   7.2.   the shareholders of Invicta approving the Specific Repurchase;
   7.3.   Tuludi, New GX, Kgalauwane and Dartcom Group board and shareholder approvals;
   7.4.   the conclusion of a management agreement between New GX and the Dartcom Group in terms of which
          New GX will manage the Dartcom Group for the three-year period following the Effective Date;
   7.5.   the agreement between Tuludi, New GX, Kgalauwane and Invicta becoming unconditional; and
   7.6.   the approval of relevant competition authorities, and any other regulatory approvals, if any, that may be

   In addition, the “change in control” filing with ICASA for the ICASA Licenses will be completed post the


   The value of the net assets and the profits attributable to the net assets that are the subject of the Transaction
   are as follows:

   8.1.   Dartcom Shareholding

          A consolidated net profit of R14,2 million for the period 1 April 2020 to 31 March 2021 is attributable to
          the Dartcom Shareholding which amount included a loss from foreign exchange of R33 million. It should
          be noted that the said profit after tax was negatively impacted by the muted trading conditions in the
          markets in which the Dartcom Group operates, as such markets were severely impacted by the COVID-
          19 pandemic. As a significant increase in the profits of the Dartcom Group is expected, the parties have
          agreed a profit warranty as described in paragraph 9 below.

          The value of the net assets of the Dartcom Shareholding is R226,8 million at 31 March 2021.
          The financial information has been extracted from the audited consolidated annual financial statements
          of the Dartcom Group for the year ended 31 March 2021, which were prepared in terms of International
          Financial Reporting Standards.

   8.2.   Kgalauwane Properties

          A net profit of R1,8 million for the period 1 April 2020 to 31 March 2021 attributable to the Kgalauwane

          The value of the net assets of Kgalauwane Properties is R46,2 million at 31 March 2021.

          The financial information has been extracted from the unaudited trial balance of Kgalauwane Properties
          for the year ended 31 March 2021, which was prepared in terms of International Financial Reporting
          Standards for SMMEs.


   9.1 The Sellers shall guarantee that the Dartcom Group will deliver cumulative consolidated net profit after
       tax of at least R349 million (“Base Profit”) over the 3-year period (“Performance Period”) commencing
       on the Effective Date.

   9.2 In terms of a performance agreement with the Sellers, should the actual performance earnings over the
       Performance Period exceed the Base Profit of the Dartcom Group, then the Sellers will be entitled to share
       in the excess earnings on a sliding scale, provided the actual performance earnings exceed the Base
       Profit by greater than 5% (“Performance Incentive”). The Performance Incentive shall be subject to a
       maximum payment of R72 million.

   9.3 Should the actual performance earnings be less than the Base Profit, Invicta will be entitled to claw back
       shares that were issued to the Sellers for no consideration, calculated by dividing the cumulative actual
       performance earnings shortfall by R27.28 to arrive at the number of shares to be clawed back. The
       aforesaid is conditional on the actual performance earnings are at least 5% lower than the Base Profit.
       The claw back mechanism is limited to a maximum of 40% of the Purchase Consideration.

   9.4 The Sellers have agreed that 10,000,000 Consideration Shares (“Lock-In Shares”) shall be subject to a
       lock-in and shall not be disposed of by the Sellers provided that:

          9.4.1 after the end of the third year after the Effective Date, the Sellers shall be permitted to dispose of
                no more than 3,333,333 Lock-In Shares;
          9.4.2 after the end of the fourth year after the Effective Date, the Sellers shall be permitted to dispose of
                an additional 3,333,333 Lock-In Shares; and
          9.4.3 after the end of the fifth year after the Effective Date, the Sellers shall be permitted to dispose of all
                the Lock-In Shares.

          The above lock-in provisions shall cease to be binding on the Sellers should there be significant
          deterioration in market conditions affecting the market price of the Company’s securities as well as the
          earnings attributable to Invicta ordinary shareholders.

   9.5 The cumulative dividend in respect of the Consideration Shares held by the Sellers is guaranteed by
       Invicta over the Performance Period. Should the cumulative dividend per Consideration Share be less
       than R5.15, Invicta will be required to make a once-off payment to the Sellers to meet the shortfall based
       on the number of shares owned by the Sellers at the end of the Performance Period. The maximum once-
       off payment would be R85,098,713, based on the full 16,524,022 Consideration Shares being held by the
       Sellers at the conclusion of the Performance Period and no dividend having been paid by Invicta for the
       duration of the Performance Period.


    The Transaction constitutes a category 2 transaction in terms of the JSE Limited Listings Requirements.


    Following the release of this announcement, shareholders are advised that caution is no longer required to be
    exercised when dealing in the Company’s shares.


    The board of Invicta accepts responsibility for the information contained in this announcement insofar as such
    information relates to the Transaction and, to the best of its knowledge and belief, such information is true and
    this announcement does not omit anything likely to affect the importance of such information included.

07 October 2021

Acting Company Secretary:
R Cloete, on behalf of Acorim

Transaction Sponsor:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Date: 07-10-2021 12:30:00
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.

Share This Story