Intellect Holdings and Cadmus Technology Announce Proposed Merger
Wednesday 5 July 2006: Intellect Holdings Limited ("Intellect") (ASX Code: IHG) and Cadmus Technology Limited
("Cadmus") (NZX Code: CTL) today announced a conditional agreement to merge their businesses and create a new force in
the payment industry.
The proposed new merged group will have a strong presence in the Asia Pacific Region and Europe and will be well placed
to capitalise on the growing adoption of new EMV (Europay, MasterCard and Visa) payment infrastructure globally.
Board Support
The Boards of Intellect and Cadmus unanimously recommend that their shareholders, noteholders and optionholders
("Stakeholders") support and accept the merger proposal in the absence of a superior proposal.
The proposed merger is conditional on appropriate Stakeholder and Australian Court approval, the capital raising
referred to below and certain other conditions normal for a transaction of this type.
The Merger Proposal
The proposed merger will result in a wholly owned subsidiary of Cadmus acquiring all of the shares, options and
convertible notes in Intellect. In consideration:
* Intellect shareholders will receive 3.33 Cadmus shares for every one Intellect share held.
* Intellect convertible noteholders will receive 3.33 Cadmus shares for every one Intellect share to which they are
otherwise entitled. The other terms and conditions will remain unchanged except that the conversion price will be NZ22
cents per Cadmus share.
* Intellect optionholders will receive 3.33 options in Cadmus (on the same terms and conditions as the current Intellect
options however the exercise price will be NZ28-269 cents) for every one Intellect option held.
The proposed merger is to be effected by an Australian Court approved scheme of arrangement. The proposal values IHG
ordinary shares at AUS60 cents based on a Cadmus price of NZ21 cents. Intellect's closing price on Tuesday 4 July was
AUS47 cents and Cadmus' NZ22 cents.
Following the merger, Cadmus will have 433,359,365 shares on issue, of which 192,574,110 will be held by Intellect
shareholders.
Rationale for the Merger
Both companies have committed to investing significant sums into what would have been overlapping technology and were
seeking to expand into markets that also overlapped.
The combined businesses will bring Cadmus' strong presence in New Zealand, Singapore and South-East Asia (through an
alliance with Singapore Technologies Electronics); and in mainland Europe Intellect's strength in Belgium, the
Netherlands, Austria and Germany, and a growing presence in South America.
Cadmus has also expanded its rental division and the combined group will continue to build on this industry segment by
offering rental proposals to a broader international customer base.
Intellect holds a 26% equity stake in value added services company TAFMO Limited, which has contracts with major banking
organisations in Australia (Commonwealth Bank, National Australia Bank and St George), and which recently broke into the
Austrian market utilising Intellect terminals.
The Chairman of Intellect, Mr Warren McLeland, welcomed the merger proposal and said: "Over the past 18 months we have
implemented a major restructuring and overhaul of the Intellect business to position it for growth".
"We have built a solid order book with good margins. Part of our strategy has been to work with, acquire or merge with
like-minded companies. The opportunity to bring Intellect and Cadmus together is very exciting.
"The businesses complement each other well and provide a platform on which we can build a payment industry participant
that will rank in the top 10 globally. The proposed merger is supported by the Intellect Board and should benefit both
companies and shareholders", he said.
Mr Keith Phillips, Chairman of Cadmus, said: "The proposed merger of Cadmus and Intellect is a strategic merger that
will meet our goal of rapidly building scale. In the past few years Cadmus has achieved excellent organic growth and
built its rental business through strategic acquisition. We are now in a strong position to accelerate this growth
internationally."
"Intellect has a reputation for producing excellent products and has maintained a strong customer base, particularly in
Europe. Our combined Boards and management have the skills and commitment to deliver on our objective of building a
global payment industry participant", he said.
Key Outcomes of the Merger
Intellect will become a subsidiary of a wholly owned subsidiary of Cadmus. Cadmus will be owned (on a fully diluted
basis) as to approximately 50% by former Intellect Stakeholders and approximately 50% by existing Cadmus shareholders.
Governance
It is proposed that a new Board of Cadmus will be established on completion of the merger that will consist of three
Cadmus Directors and three Intellect Directors. An independent Chairman will be appointed.
Funding
In conjunction with the merger, Cadmus will seek shareholder approval to an issue of new shares to raise NZ$15
million-NZ$20 million to fund working capital and retire debt, and for expansion of the business. The issue is likely to
be made to major institutions and sophisticated investors at a minimum price of NZ20 cents per share.
Merger Implementation Agreement and Timing
Intellect and Cadmus have entered into an Implementation Agreement pursuant to which they have agreed to proceed with
the merger by way of an Australian Court approved scheme of arrangement between Intellect and its shareholders.
Implementation of the merger is conditional upon certain conditions precedent and is scheduled for completion in October
2006.
A copy of the Implementation Agreement will be released to ASX following this release.
ENDS