EOH Holdings has sold 70% of subsidiary Construction Computer Software (CCS) for R444.4-million.
Wholly owned subsidiary EOH Mthombo entered into a share purchase agreement with RIB, a subsidiary of German listed RIB Software, in terms of which EOH will sell the stake in CCS.
The deal was struck at 8.5 times earnings before interest, tax, depreciation and amortisation, or Ebitda, and the companies have entered into a reciprocal “put/call option” for the disposal of the remaining 30% at the same multiple applied to 31 December 2022’s adjusted Ebitda.
Ninety percent of the purchase consideration is payable in cash on closing, following fulfilment or waiving of all conditions precedent, EOH said in a statement on Tuesday. The remaining 10% will be held back by RIB as security for any shortfall in warranted financial results or claims against EOH Mthombo.
The balance due will be payable to EOH Mthombo in cash by 31 July 2021.
CCS provides enterprise software solutions for the construction and engineering industries. RIB offers digitisation services to the construction industry, with its software technology combined with a cloud platform approach to software services. RIB is operational in about 30 countries, has more than half a million licensees and is focused on growing that number to two million over the next two years.
“CCS’s access to RIB’s broad development network, international business analysts and development teams will greatly enhance CCS’s growth strategy,” the group said. “Through EOH’s remaining 30% holding of CCS, EOH will participate in the company’s growth trajectory.”
The put/call arrangement provides an “effective exit” for EOH after December 2022, it said. “Potential also exists to grow the RIB relationship to a broader partnership with EOH ICT in cloud and development services.”
EOH described the deal as a “significant milestone in its strategy to align with key partners which enable the scaling up of unique software businesses identified within the group’s fold”.
“It is also a crucial step forward for EOH’s IP division and RIB is the right partner to unlock CCS’s full potential, enabling both growth and internationalisation.”
It said the deal is in line with its strategy to reorganise the group into an investment holding company and strength its capital structure.
“EOH management, at the interim results, stated that it would unlock R1-billion in cash through strategic partnerships and targeted disposals in order to reduce the group’s debt. The proceeds of this transaction will go a long way to creating a more appropriate capital structure and will be applied mainly to a reduction of the EOH’s debt and, to a lesser extent, for working capital requirements.” — © 2019 NewsCentral Media