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JASCO ELECTRONICS HOLDINGS LIMITED - Acquisition of Ramm Technologies Proprietary Limited

Release Date: 23/02/2018 09:00
Code(s): JSC     PDF:  
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Acquisition of Ramm Technologies 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 RAMM TECHNOLOGIES PROPRIETARY LIMITED

1 INTRODUCTION

Shareholders are advised that Jasco has entered into a sale of shares agreement (“Transaction
Agreement”) with Sudant Investments CC, Mr. Lindsay Welham and Mr. Quinton Ramsay (“the
Vendors”) and Ramm Technologies Proprietary Limited (“Ramm”). In terms of the Transaction
Agreement, Jasco will acquire 51% of Ramm for a maximum aggregate purchase price of R30,6 million
(“the Transaction”).

2 BACKGROUND TO RAMM

Ramm was established in 1998 by Mr. Lindsay Welham in Johannesburg and initially specialised in the
development of asset tracking systems based on GSM networks and geographic information systems
(“GIS”) platforms. More recently, Ramm has upgraded its commercial model for “Internet of Things”
(“IOT”) services, which allows for data analytics from several thousand devices deployed at customer
premises. Ramm operates its own National Operations Centre (“NOC”), from where it monitors its
customers’ assets and productivity. This service offering has resulted in Ramm’s revenue consisting of
more than 80% annuity revenue.


Ramm’s operations cover Gauteng and the Western Cape with offices in both provinces. Its customer
base is predominantly the major municipalities, which it has serviced for more than ten years. Ramm
assists these municipal customers by ensuring that all services that are rendered are being billed
correctly. Ramm’s customers’ payment records have been consistently good and in line with contracted
payment terms. Client contracts are generally long-term and range from three years and longer.


Ramm has had a solid track record of double-digit revenue growth since 2015, with consistent operating
margins above 15%.

3 BACKGROUND AND RATIONALE FOR THE ACQUISITION

The Jasco 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 service offerings that serve its
blue-chip customer base in niche markets.
The Ramm acquisition will ensure an entry for Jasco into the asset tracking market through IOT, as well
as further growth into the public sector. The acquisition creates the opportunity to cross-sell the Jasco
product and service offering to Ramm customers and Ramm’s technology solutions to Jasco’s blue-
chip corporate customer base. These would include Jasco’s customers with significant investments in
assets or human resources who require data analytics to improve their operating efficiencies. 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 Ramm will provide the following benefits:
            –   Entry into the asset tracking market through IOT platforms with the ability to offer real-
                time asset monitoring and management;
            –   Workforce tracking and productivity analysis;
            –   Access to Ramm’s NOC, which will enable Jasco to offer proactive monitoring services
                to its existing customer base;
            –   Cross-selling to the Ramm customer base; and
            –   Access to an experienced and capable management team within the information
                technology 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 Ramm 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 three years.



   5.2 The Purchase Consideration

        The purchase price of the Vendors’ 51% shareholding in Ramm is calculated as R30,600,000
        (“the Purchase Consideration”).
        The Purchase Consideration will be settled in cash in the following tranches:
        -       an initial payment of R15,300,000;
        -       a second payment of R15,300,000, following the completion of the audited 15-month
                period ending 31 May 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 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 Ramm; 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 March 2018. All the suspensive conditions must be
met by no later than 30 April 2018. Failing this, the Transaction Agreement will be of no force and
effect.



7 PROFIT AND NET ASSET VALUE ATTRIBUTABLE TO RAMM

The net assets of Ramm, as per the audited financial statements for the 12 months ended 28 February
2017, were R4,1 million. The Transaction Agreement warrants a Net Asset Value (NAV) of R4,2 million
on the Effective Date of 1 March 2018. The audited revenue of Ramm for the 12 months ended 28
February 2017 was R47,1 million, with compound annual revenue growth of 45% over five years, at an
operating profit in excess of 15%.



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
23 February 2018


Sponsor
Grindrod Bank Limited


Legal Advisor to Jasco
Rashaad Sujee Legal


Corporate Advisor to Jasco
SamuelKennedy Investments (Proprietary) Limited

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