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Expansion of product offering in growth markets
Jasco Electronics Holdings Ltd (Jasco) today announced the acquisition of a 51% stake in LeBLANC CIH Lighting Structures (LS) for R7 million. LS has been in existence for over 20 years and designs, manufactures and installs lighting, broadcasting and telecommunications steel structures in Sub-Saharan Africa.
The remaining 49% equity interest in LS is owned by LeBLANC Communications South Africa, a subsidiary of LeBLANC International (LBI). LBI is also Jasco’s equal shareholder in WebbLeBLANC Communications (WLB).
“We are extremely pleased with this acquisition, as it is another step in our strategy to continue building our exposure to high-growth markets in South Africa and Africa. As with our Maringo telecommunications acquisition earlier this year, this is another small bolt-on acquisition that expands our product offering and breaks us into new markets. LS offers us a further telecommunications product in monopoles, as well as penetration into infrastructure build markets such as lighting structures and street poles.
“The investment in LS brings new customers as well as offering us further efficiency extraction opportunities within the Jasco stable. Furthermore, as our partner is LeBLANC International, we are confident that we can create another growth vehicle with them, such as we have already successfully done with WebbLeBLANC,” said Jasco CEO Martin Lotz.
LS will be revenue and earnings enhancing to Jasco over the next few years as it exposes the group further to the fast-growing infrastructure and communications markets in South Africa and the rest of Africa. LS has a substantial forward order book exceeding R60 million over the next 12 months and has recently secured a contract for the supply of products to the Ghana warehouse for Alcatel/Lucent.
 
The acquisition also offers various other opportunities, including:

• LS is an approved supplier of lattice towers to Telkom and has received orders from Telkom that they cannot execute. These orders can now be executed by WLB, Jasco’s 50%-held joint venture with international player LBI
• Jasco’s wholly-owned division Webb Industries can assist in providing kitting that is used in the deployment of the various lighting structures offered by LS
• LS could supply monopoles and masts to Jasco’s Security division and Maringo Communications
• The management and administrative functions of WLB and LS can be consolidated into one operational site to extract efficiencies
• Savings in raw material costs such as steel and galvanizing can be achieved due to increased economies of scale
• Savings in labour costs can be reached through sharing a common labour pool

The purchase consideration will be settled in cash as follows:

• Payment of R4 million in four equal monthly installments of R1 million each to the Seller, Community Investment Holdings (CIH), commencing on 18 December 2009
• Repaying a R3 million vendor loan granted to CIH when CIH acquired its 51% equity share in LS in 2006

The acquired shareholder loan amounts to R4 million and bears interest at the same rate as the vendor loan.

The acquisition will be effective 1 September 2009 and all conditions precedent has been met.