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Empowerment Transaction Relating to the Disposal of the Majority of Sebata’s Shareholding in UMS
Sebata Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1998/003821/06)
Share code: SEB ISIN: ZAE000260493
(“Sebata” or “the Company”)
EMPOWERMENT TRANSACTION RELATING TO THE DISPOSAL OF THE MAJORITY OF SEBATA’S
SHAREHOLDING IN UMS
1. INTRODUCTION
The Board of directors of Sebata (“the Board”) is pleased to inform shareholders that the Company has
entered into a Sale of Shares Agreement and a Loan Agreement with USC Metering Proprietary Limited
(“USC”), for the disposal of 100% of the total issued share capital in IPES Utility Management Services
Proprietary Limited (“UMS”) to USC for a purchase consideration of R43 million- as more fully set out in
paragraph 2.3.1 below (the “Transaction”). Sebata will retain an indirect shareholding in UMS through
its 40% shareholding in USC.
The remaining 60% shareholding in USC is held by Inzalo Capital Holdings Proprietary Limited (“Inzalo”)
pursuant to the empowerment transaction announced on SENS on 20 August 2019, that was disclosed
in the circular to shareholders dated 20 December 2019 and was approved by shareholders at the
general meeting on 22 January 2020,. The shareholders of Inzalo are Sihle Lloyd Ndlovu and Sbonelo
Trinity Mazibuko.
The effective date of the Transaction will be 1 February 2020 (“Effective Date”).
2. THE TRANSACTION
2.1 Nature of the business of UMS
UMS was founded in 1996 to assist municipalities and utilities with the management of their
revenue enhancement and revenue protection needs. UMS developed its own range of bespoke
software applications and management solutions- most notably: credit control, indigent register
management, data cleansing, and meter installation and maintenance. UMS focuses on assisting
the municipal sector to achieve measurable financial well-being and growth by equipping them to
be financially viable. This is done whilst transferring related skills through personnel development
and mentorship programs. UMS has its head office in Pretoria and has several regional offices
throughout South Africa.
2.2 Rationale for the Transaction
UMS presently has extreme difficulty in securing new business and retaining long-standing clients
due to the increased focus on empowerment and UMS’s clear shortcoming in this area. This has
resulted in a much poorer present economic performance even when compared to the most
recently concluded financial year (2019). The recently implemented empowerment transaction for
USC created an opportunity for this Transaction by repositioning the UMS business to be a direct
subsidiary of USC. UMS will not only significantly improve its empowerment standing but will also
benefit from the significant synergies between the two businesses. The acquisition of the UMS
business will allow USC to control the value chain from the production of smart water meters
through to installation of the meters. In addition, UMS business will assist USC to provide value
added services to the local authorities by offering credit control and debt collection functions. On
conclusion of the Transaction, UMS should immediately return to full profitability levels and the
Transaction has been priced and structured to be conditional on that.
2.3 The Transaction
2.3.1 Purchase Consideration
The consideration of R43 million (“Capital Amount”) is payable:
2.3.1.1 on achievement by UMS of a significantly improved net profit after tax target of
R10 million for the first 12-month period ending 31 January 2021, based on the
finalised management accounts of UMS for the period in question;
2.3.1.2 in the form of 36 equal monthly payments in respect of the Capital Amount and
accrued interest thereon at the prime interest rate compounded monthly from the
Effective Date, over the 36-month period beginning 1 July 2021 and ending
30 June 2024.
Achievement of the profit target set out in paragraph 2.3.1.1 above and full settlement of
the repayment obligations set out in paragraph 2.3.1.2 above will constitute settlement of
the purchase consideration.
In the event that the profit target referred to in paragraph 2.3.1.1 above is not achieved, the
documents of title in respect of UMS will be returned to Sebata and the Transaction will be
terminated with neither party having any claim against the other.
USC will have the right at any time to make accelerated payments in full or in part of the
Capital and interest amounts.
All dividends received by USC, through its ownership of 100% of the issued share capital
of UMS, will first be apportioned to the settlement of the Capital Amount and accrued
interest thereon.
2.3.2 Suspensive conditions to the Transaction
There are no outstanding conditions precedent in respect of the Transaction.
2.4 Application of the sale proceeds
It is intended that the majority of the net proceeds of the Transaction will be distributed to
shareholders with the remainder being used to grow the businesses within the Sebata Group.
3. FINANCIAL INFORMATION
The audited value of the net assets of UMS as at 31 March 2019 is R15.3 million. The audited profit after
tax for UMS for the year ended 31 March 2019 is R6.6 million.
The financial statements were prepared in accordance with International Financial Reporting Standards
and the Companies Act, 2008 (Act 71 of 2008), as amended.
4. CLASSIFICATION OF THE TRANSACTION
The Transaction is categorised as a category 2 transaction in terms of the Listings Requirements of JSE
Limited.
Johannesburg
31 January 2020
Sponsor
Merchantec Capital
Date: 31-01-2020 03:20:00
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