Altron : Disposal of Altron Document Solutions

ALTRON LIMITED

(Registration number 1947/024583/06) (Incorporated in the Republic of South Africa) Share Code: AEL ISIN: ZAE000191342 ("Altron" or "Altron Group" or the "Company")

CATEGORY 2 TRANSACTION - DISPOSAL OF ALTRON DOCUMENT SOLUTIONS

1. INTRODUCTION AND RATIONALE
2. 1. On 16 March 2022, agreements were concluded whereby the Altron Group, via its major subsidiaries, Altron TMT Proprietary Limited ("ATMT") and Altron TMT SA Group Proprietary Limited ("ATMTSA") would dispose of all its business interest in Altron Document Solutions ("ADS") and its associated subsidiary in the Eastern Cape, Genbiz Trading 1001 Proprietary
      Limited ("Genbiz"), to a third party purchaser, Xerotech Proprietary Limited ("Xerotech"), a subsidiary of Bi-Africa Investment Holdings Proprietary Limited ("Bi-Africa"). In terms of the disposal, Altron, ATMT, ATMTSA, Xerotech and BiAfrica (collectively "the Parties") have concluded a sale of business agreement and a sale of shares agreement to record the salient terms of the disposal therein ("the Transactions") ("the Agreements"). The disposal of the ADS operating division is aligned to the Group's 2.0 strategy and the decision to dispose of the ADS business will result in a greater focus on Altron's core ICT businesses which still remain in the portfolio of companies.
3. NATURE OF BUSINESS
4. 1. The ADS business provides office printer technology solutions and services in South Africa and Sub-Saharan Africa. ADS has been the strategic partner for Xerox Limited ("Xerox") in these markets, distributing and servicing Xerox office automation and high-volume production products and solutions for more than 20 years. Additionally, ADS distributes Duplo finishing equipment and Fujifilm inkjet production machines in the local market. This high invested-capital business is no longer core to Altron's operating model.
5. SALIENT TERMS OF THE TRANSACTIONS
6. 1. The outstanding conditions precedent for the Transactions to be effective by 31 May 2022 (the Effective Date, unless otherwise extended) are:
   2. 1. The necessary consents (as required) to cede and assign customer and supplier contracts and/or arrangements related thereto;
      2. The conclusion of a Framework Agreement between the Parties to regulate the standard operating protocol of ADS relating to the unwind of the working capital as set out below;
      3. The conclusion of a Transitional Services Agreement between the parties relating to IT services;
      4. The conclusion of a distribution agreement between Xerotech and Xerox to the satisfaction of both parties whereby Xerotech is to be appointed as Xerox's distribution agent in South Africa and Sub-Saharan Africa;
      5. In regard to Genbiz, the waiver of minority pre-emptive rights, certain changes to the shareholders agreement and/or MOI, and the regularisation of loans from and to shareholders; and
      6. regulatory approvals (as required).
   3. The Agreements contain the relevant and applicable warranties and disclosures related thereto as mutually agreed upon between the Parties.
   4. Bi-Africahas guaranteed the performance of Xerotech under the Agreements.
   5. Altron has guaranteed the collectability of debtors ceded on a "back-to-back" basis by ADS and Genbiz with the Technologies Acceptances Receivables Proprietary Limited ("TAR") securitisation vehicle.
   6. The disposal of ADS and Genbiz is to be concluded as one indivisible transaction between the Parties.

1. DISPOSAL CONSIDERATION
2. 1. The disposal consideration for the sale of the ADS business is as follows:
   2. 1. for the sale of the ADS business as a going concern, the purchase consideration for the goodwill, customer base, "back-to-back" rentals with TAR, leased motor vehicles and ERP system is R20.1 million which shall be payable by Xerotech to ATMT on the Closing Date (being the first business day following the Effective Date);
      2. debtors accounts as at the Effective Date will be paid to ATMT as collected by Xerotech in terms of the Framework Agreement subsequent to the Effective Date (as at 31 August 2021, being the date of Altron's most recently-audited interim financial statements, the debtors carrying value was R346 million);
      3. in regard to inventory (which had a carrying value of R316 million as at 31 August 2021):
      1. inventory that is not slow moving as defined in the Agreement will be paid in 3 (three) equal monthly instalments to ATMT, the first instalment due and payable at the end of the month in which the Effective Date occurs and the remaining two instalments at the end of each consecutive month thereafter (as at 31 January 2022, 49% of inventory was in this category);
      2. inventory that is slow moving as defined in the Agreement will be paid to ATMT as realised subsequent to the Effective Date at the lower of cost or 90% of net realisable value as at the Effective Date;
      1. the book values of laptops and IT equipment, training equipment and motor vehicles, prepayments and deposits, net of assumed staff-related liabilities, will be payable to ATMT as soon as Effective Date Accounts have been finalised; and
      2. ATMT will settle the balance of the liabilities of the business in terms of their customary terms of payment after the Effective Date (as at 31 August 2021, these payables amounted to R191 million).
      3. The Disposal consideration for the interest in Genbiz is as follows:
      1. R14.6 million to ATMTSA for the 57.7% equity interest payable on the Closing Date based on a net asset value peg for the company on the Effective Date of R18.75 million;
      2. R9.9 million for the loan claim ATMT has in Genbiz payable in four equal monthly instalments commencing from the close of the Transactions.
      3. The total consideration in terms of the Transactions being the disposal consideration inclusive of the amounts to be settled by ATMT as stated under 4.1.5 has been capped at R715 million.
3. FINANCIAL INFORMATION
4. 1. The net book value of the balance sheet items related to the Transactions as at 31 August 2021 amounted to R538 million (inclusive of payables to be settled by Altron as part of this transaction).
   2. For the six months ended 31 August 2021, ADS (inclusive of Genbiz) generated revenue of R500.1 million, EBITDA of R5.2 million, operating profit of R0.4m and an attributable loss after tax of R11.2 million.
5. APPLICATION OF SALE PROCEEDS
6. 1. The net proceeds received from the Transactions will be applied to reduce the debt of the Altron Group.

7. CATEGORISATION OF THE TRANSACTIONS

7.1. The Transactions have been categorised as a Category 2 transaction in terms of the JSE Listings Requirements.

Johannesburg

17 March 2022

Transaction Advisor

Marsden Advisory Pty Ltd

Sponsor

Investec Bank Limited