UCS Group concludes 25.1% BEE deal at UCS Solutions

Leading listed software, solutions and services provider UCS Group Ltd (‘UCS’) today announced the acquisition of 100% of Quadrant Consulting Group (Pty) Ltd and 60% of TSS Managed Services (‘TSS MS’) (Pty) Ltd from black empowerment company Tactical Software Systems (‘TSS’) (Pty) Ltd for some R58 million, subject to conditions precedent.

TSS will receive 3.4 million ordinary shares in UCS Solutions Holdings (Pty) Ltd or 25.1% of the shares in issue. TSS will retain a direct interest of 40% in TSS MS. The transaction has been concluded at commercial values and there is no discount or debt funding behind the structure. The diagram below sets out the shareholding structure following the implementation of the transaction.  

The headline earnings per share of UCS is expected to increase by 15.5% after the transaction and the net asset value per share by 15% according to the illustrative unaudited pro forma financial effects of the transaction calculated as if the transaction had taken effect on 1 October 2004. 

The parties have agreed to enter into a three year management agreement which requires TSS to continue to manage the TSS MS business. This management control together with the effective 55% shareholding of TSS in TSS MS (i.e. 40% direct holding and 25.1% of 60% indirect holding) means that TSS MS remains a black owned entity as defined in the DTI Codes of Good BEE practice. The remaining UCS Solutions subsidiaries including UCS Solutions (Pty) Limited and CEB Maintenance Africa (Pty) Limited (‘CEB’), become black empowered entities with an indirect 25.1% black shareholding.

TSS are warranting the cumulative net profit before tax of TSS MS at no less than R62.9 million over three years from the effective date, 1 July 2006 as well as adequate working capital for six months after the effective date.

Quartet and TSS Business Services will be integrated with the Business Solutions division of UCS Solutions shortly after implementation of the transaction.

TSS has undertaken to subscribe for UCS ordinary shares worth R 5 million at a price of 179 cents being the 30 day weighted average traded price prior to the date of signature of the sale of shares agreement, less a 10% discount. 

TSS and UCS have entered into a shareholders’ agreement that allows TSS  to convert its 25.1% shareholding of UCS Solutions Holdings to a UCS shareholding after five years from the effective date at the discretion of TSS, or at any stage after the effective date at the discretion of UCS.

John Bright, CEO of UCS Group commented: “Our stated BEE strategy is to implement BEE equity deals at operating subsidiary level with a particular focus on acquisitions and or mergers that we expect will deliver synergies and mutual value-add. Our strategy is designed to address all aspects of BEE, not just equity. We thus welcome TSS as a partner to UCS. We look forward to growing the strength of our combined businesses for the value of all stakeholders.”

Richard Newton, CEO of UCS Solutions commented: “By combining UCS Solutions with Quartet and TSS Business Services we are creating a strong IT services market participant with significant SAP capabilities. TSS MS broadens our base of infrastructure services and introduces new markets. This positions the combined entity to become a dominant market player in the medium term.”

Danny Mackay, CEO and Chairman of TSS Group, commented: “We are delighted to invest in UCS Solutions and look forward to support UCS’s  business growth and black empowerment drive.  UCS’s market positioning and client base create significant synergy and business opportunity for TSS MS, TSS Business Services and Quartet. These are exciting growth prospects indeed.”

UCS Group - 011 712 1249

John Bright, CEO        

UCS Solutions - 021 680 4002

Richard Newton, CEO                                      

TSS Group  - 011 461 7300

Danny Mackay, Chairman and CEO              

College Hill  - 011 447 3030

Johannes van Niekerk  - 082 921 9110