Ann: ASSET: TTK: Conditional Acquisition Of The F

• Release Date: 02/11/12 13:06
• Summary: ASSET: TTK: Conditional Acquisition Of The Farmside Group By TeamTalk
• Price Sensitive: No
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TTK
02/11/2012 11:06
ASSET

REL: 1106 HRS TeamTalk Limited

ASSET: TTK: Conditional Acquisition Of The Farmside Group By TeamTalk

TeamTalk Limited has today entered into a conditional Share Sale Agreement
with all of the shareholders of BayCity Communications Limited for the
acquisition by TeamTalk of all of the shares in BayCity (referred to as "the
Farmside Group Shares").
BayCity is the parent company of the entities collectively known as the
"Farmside Group" which is comprised of BayCity and its five wholly-owned
subsidiaries.

About the Farmside Group
The Farmside Group has two trading divisions.
The Farmside ISP Division is New Zealand's leading dedicated rural
telecommunications provider and connectivity specialist.  The Farmside ISP
Division currently provides broadband, calling and associated
telecommunications services to over 15,000 predominantly retail customers.
This division employs around 80 staff mainly at its head office in Timaru.
The Technology Division ("BCT"), based in Christchurch, provides on-farm
technology focusing on intelligent data management and monitoring solutions.
BCT's integrated hardware and software solutions deliver productivity,
environmental and compliance data for management of on-farm activities.

The Purchase Price
The purchase price is made up of an initial $31.0 million payable on
settlement and an earn-out amount of up to $11.05 million ("the Earn-Out
Consideration") which is payable only if certain earnings thresholds are met.
 The gross purchase price payable for the Farmside Group Shares is a maximum
of $42.05 million.

Initial Purchase Price
The initial purchase price of $31.0 million is payable on settlement.  This
will comprise:
(a) The issue of approximately 4.55 million TeamTalk ordinary shares to the
Vendors having a value of $12.0 million (issued at $2.64, being the
volume-weighted average TeamTalk share price in the 20 Business Days prior to
2 November 2012) and comprising 16.2% of the total post issue capital of
TeamTalk.  The TeamTalk shares to be issued to the Vendors will rank equally
in all respects with all other ordinary shares in the capital of TeamTalk;
and
(b) A cash payment of $19.0 million less an amount equal to the Farmside
Group's Borrowed Money Indebtedness and Transaction Costs.  Together these
are expected to be close to $7.0 million.
The Farmside Group's Borrowed Money Indebtedness is intended to be repaid on
settlement and replaced with borrowings from TeamTalk's own increased banking
facilities.

Earn-Out Consideration
The Earn-Out Consideration is only payable if certain EBITDA thresholds are
achieved by the Farmside Group in respect of the 12 month periods ending on
31 March 2013 and 31 March 2014.
In respect of the 12 month period ending on 31 March 2013, TeamTalk will pay
Earn-Out Consideration in cash of $8.75 for each dollar of Farmside Group
EBITDA above $6.60 million.  The payment is limited to a maximum of $7.0
million.
In respect of the 12 month period ending on 31 March 2014, if the Farmside
Group achieves EBITDA of $13.0 million then:
(a) TeamTalk will first pay Earn-Out Consideration consisting of a cash
amount equal to $7.0 million less such amount (if any) as was paid in respect
of the 2013 Earn-Out; and
(b) Up to a further $4.050 million will be payable depending on the amount of
EBITDA achieved, such payment (if any) will be made by the issue of ordinary
shares in the capital of TeamTalk.
The issue price for these TeamTalk shares will be the volume-weighted average
price of shares in TeamTalk Limited on the 20 Business Days prior to 31 March
2014.  Any TeamTalk shares to be issued to the Vendors will rank equally in
all respects with all other ordinary shares in the capital of TeamTalk.  If
the maximum Earn-Out Consideration becomes payable and if there is no
increase or reduction in the total number of TeamTalk shares on issue before
31 March 2014 then, based on the volume-weighted average price of TeamTalk's
shares in the 20 Business Days prior to 2 November 2012 of $2.64, the maximum
number of shares which would be issued to the Vendors would be 1.53 million
shares and the Vendors would collectively hold a total of 20.6% of the total
2014 post issue capital of TeamTalk.

There are provisions in the Agreement limiting the number of TeamTalk shares
to be issued to any of the Vendors if the issue would result in those Vendors
and any "associated persons" acquiring more than 19.99% of TeamTalk's shares
in breach of the Takeovers Code.

Settlement and Conditions
Settlement is anticipated to occur on 14 December 2012.
Certain conditions must be satisfied and if they are not then the transaction
will not go forward.  The conditions are:
That by 11 December 2012:
(a) TeamTalk must obtain the approval by special resolution of its
shareholders to the acquisition of the Farmside Group and to the additional
finance facilities from its bank as a major transaction pursuant to section
129 of the Companies Act 1993;

(b) TeamTalk must obtain the approval by ordinary resolution of its
shareholders to the issue of the TeamTalk Shares to be issued to the Vendors
at Settlement and the TeamTalk Shares which may be issued to the Vendors as
part of the Earn-Out Consideration pursuant to rule 7.3.1 of the NZSX Rules;

(c) TeamTalk must obtain a waiver from NZX of the need to comply with rule
7.3.2(b) of the NZSX Rules in respect of the TeamTalk Shares which may be
issued to the Vendors more than 12 months after the date of shareholder
approval as part of the Earn-Out Consideration;

(d) TeamTalk arranges the requisite finance from its bankers, Westpac New
Zealand;

(It is anticipated that a Special Meeting of TeamTalk's shareholders will be
held on 11 December 2012 and that the notice of meeting will be sent mid to
late November 2012).

That by 12 December 2012 the Vendors must obtain:

(a) All necessary approvals for the change of control of the Farmside Group
to the Purchaser from the lessors of property leased by the Farmside Group;

(b) All necessary consents to the change of control of the Farmside Group to
the Purchaser from the counterparties of certain key contracts; and

(c) The agreement of certain persons to continue employment with, or to
provide services to, the Farmside Group after Settlement.

If a matter arises between the date the Agreement is signed and the
anticipated Settlement date that would or could give rise to a breach of any
of the Vendors' warranties, or that could have a material adverse effect on
the Farmside Group, the Vendors must notify TeamTalk, and in certain
circumstances TeamTalk will have the right to cancel the Agreement.
At Settlement the TeamTalk Board will appoint a person nominated by the
Vendors as a director of TeamTalk.  In accordance with TeamTalk's
constitution their term will end at the next TeamTalk AGM but he or she will
be eligible for re-election.

TeamTalk Shares - Embargo Period
The TeamTalk shares issued to the Vendors at Settlement are embargoed for 12
months and the TeamTalk shares issued in 2014 (if any) are embargoed until 31
December 2014. There are certain limited exceptions to the embargo - for
example, for transfers to family trusts.

Non-Compete
The Agreement provides that the Vendors will not compete with the Farmside
Group's business before 31 December 2014.

Vendors' Warranties
The Vendors have given warranties in relation to the Farmside Group's
business which include tax warranties and an indemnity against any taxation
or taxation claims.

Additional Information
Further information is included in the presentation attached.
Northington Partners managed the transaction and provided investment banking
advice to TeamTalk.
TeamTalk obtained legal advice from Crengle, Shreves & Ratner and tax and
financial due diligence advice from KPMG.
End CA:00229262 For:TTK    Type:ASSET      Time:2012-11-02 11:06:27