The board of directors of ADvTECH is pleased to announce that it has concluded comprehensive agreements for the acquisition of Centurus Colleges. In terms of the agreements ADvTECH's wholly owned subsidiary, The Independent Institute of Education (Pty) Ltd. ("the Acquiror"), will acquire 100% of the shares in Nanospan Investments (Pty) Ltd. ("Nanospan") and Innospan Investments (Pty) Ltd. ("Innospan") (collectively "Centurus Colleges"), respectively the property owning and operating companies of Centurus Colleges, from the shareholders of Centurus Colleges ("the Vendors").

Description of the business of Centurus Colleges
Centurus Colleges owns and operates three independent premium co-educational schools, namely Pecanwood College, Southdowns College and Tyger Valley College (collectively "Centurus Schools"). Each school includes pre-preparatory, preparatory and high school phases and boarding is offered at Pecanwood College and Southdowns College. The spacious campuses, 41 hectares in extent, are comprehensively resourced with teaching, extramural and sporting infrastructure. The Southdowns campus also includes significant tertiary education infrastructure.

Pecanwood College was established in 2005 and is situated in the Broederstroom area adjoining the Pecanwood Golf Estate and Country Club on the Hartebeespoort Dam. Southdowns College was established in 2006 and adjoins the Southdowns Estate in Irene, Centurion. Tyger Valley College was established in 2006 and is situated in the east of Pretoria on Lynwood Road extension.

Centurus Schools' present enrolment is 3,080 students from grades 000 to 12 and student enrolments have grown in each of the last 3 years by an average of 13%. The Centurus Schools are now in a rapid growth phase and plans are for continued enrolment growth to approximately 4,200 students in 2018. Existing capacity together with committed capex of R31 million is expected to cater for approximately 5,000 students, representing an additional 30% capacity within the ADvTECH Schools division.

Rationale for the Acquisition
ADvTECH is pursuing an active investment and growth strategy evidenced by the investment of R1 billion over the past 6 years. This has resulted in significant growth in student capacity and numbers, especially in the Schools division. ADvTECH seeks to acquire businesses that complement the company's core operations and enable growth in the markets within which it operates.

Centurus Colleges represents an established platform for further growth and expansion of the ADvTECH Schools division by injecting three new schools which will increase current enrolments by some 20%. The Centurus Schools are recognised as leading independent schools and are located in growing nodes in or near Gauteng, South Africa's most populous and economically vibrant province. The Centurus Schools share a broad common ethos, but each retains a unique individual character. Together they have sufficient students to become a separate brand within the ADvTECH Schools division and ADvTECH will consider the option of building on the existing ethos to open additional schools, and thus grow the brand beyond present planning.

The acquisition diversifies the existing schools portfolio and provides ADvTECH with a meaningful presence in the areas in which the Centurus Schools are located. ADvTECH has conducted a detailed due diligence investigation, and the Centurus Schools are expected to contribute to the academic and educational reputation of ADvTECH as well as to enhance earnings and cash flow as unutilised capacity is filled.

Strategic Implications
ADvTECH has previously reported on progress with its board approved R3 billion capital investment programme. While the present acquisition falls within the same strategy it is not part of the investment programme referred to above. Accordingly, shareholders are advised that the R3 billion plan remains in place at the same level as previously reported.

ADvTECH is considering its balance sheet and capital financing requirements and further announcements will be made in this regard.

Regulatory reporting requirements
Classification of the transaction
The Acquisition is classified as a Category 2 transaction in terms of the Listings Requirements of the JSE Ltd. ("Listings Requirements").

Vendors
Investec Bank Ltd., the Aljo Trust, the Hennops Valley Trust, the Inverkloof Trust (collectively holding 66.20%) and certain individuals.

Effective date
While the Acquisition is subject to a number of conditions precedent as set out below, the effective date of the Acquisition is recorded in the transaction agreements as 1 January 2015.

Purchase consideration
The aggregate consideration payable for the acquisition of Centurus Colleges is R712 000 000, payable in cash.

Conditions precedent
The Acquisition is subject, inter alia, to the following outstanding conditions precedent:
  • the loan funding agreements with Absa Bank Ltd. being executed and becoming unconditional;
  • the receipt of the consent for the Acquisition by the Gauteng Department of Education, to the extent required;
  • the receipt of the unconditional approval of the Acquisition by the competition authorities; and
  • confirmation prior to the closing date that no material adverse changes have occurred.

Pro forma financial effects
Unaudited interim results before the Acquisition and Unaudited pro forma after the Acquisition
  • Operating profit (million) -- 117.4; 141.7
  • Earnings per share (cents) -- 20.1; 17.1
  • Headline earnings per share (cents) -- 20.1; 17.1
  • Net asset value per share (cents) -- 216.3; 213.3
  • Tangible net asset value per share (cents) -- 185.2; 120.4
  • Number of shares in issue (million) -- 421.3; 421.3
  • Weighted average number of shares in issue (million) -- 404.1; 404.1

Withdrawal of cautionary announcement
Following the release of this announcement, the cautionary announcement published by ADvTECH on 8 September 2014 is hereby withdrawn and caution is no longer required to be exercised by ADvTECH shareholders when dealing in ADvTECH shares.

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