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Legend Acquires Integrated Electronic Solutions

  • 21 November, 2006 12:35

<p>Adelaide, November 21, 2006 - Legend Corporation Limited (“Legend”) is pleased to announce that it has reached agreement to acquire 100% of IES Investments Pty Ltd and its wholly owned subsidiary Integrated Electronic Solutions Pty Ltd (“IES”). The Board of Legend considers that the acquisition of IES is a strategic acquisition that significantly enhances Legend’s value chain with electronics engineering and design expertise and a global client base across a wide range of industries including medical, automotive, consumer electrical, telecommunications and lighting.</p>
<p>Summary of Acquisition</p>
<p>•IES was established as a result of a 1997 management buy out of the Philips microelectronics operation by the current IES management and has its base in Adelaide
•IES specialises in the design and manufacture of unique integrated circuits, thick film hybrids and printed circuit board module assemblies
•In the year ending 30 June 2006 IES had an EBIT of $5.8 million (audited)
•Legend will acquire IES at a price representing a multiple of 4.5 times an average of three years (2005, 2006 and 2007) EBIT (estimated average EBIT of $6.4 million)
•The consideration for the acquisition is structured as an initial $23 million made up of $10 million cash and the issue of $13 million in LGD shares (at a deemed issue price of $0.6931 per share) and a deferred cash payment for the balance following the finalisation of the 30 June 2007 financial results
• The key IES executives have entered into employment contracts and will be retained to grow the IES business and work within the broader Legend group
•IES provides Legend with significantly increased electronics engineering and design capabilities
•Legend anticipates levering sales of existing IES component products by utilising Legend’s sales and distribution infrastructure
•Legend will add new product lines based on IES components to its existing sales and distribution lines in many countries
•The acquisition is earnings per share and cash flow positive to Legend</p>
<p>Acquisition of IES</p>
<p>Legend has entered into an agreement to acquire all of the issued shares of Adelaide based IES, an organisation that has significant expertise in the engineering design and manufacture of specialised electronics applications including integrated circuits. The settlement date is expected to be 23 November 2006.</p>
<p>Legend will acquire IES at a price representing a multiple of 4.5 times the average of three years EBIT, from 2005, 2006 and 2007. The acquisition will be funded through existing debt facilities, working capital, and the issue of new shares to the vendors of IES.</p>
<p>Legend is also undertaking a placement of 15,000,000 new shares at an issue price of $0.68 per share to raise $10,200,000. The placement of shares is to institutional clients of Hartleys Limited.</p>
<p>The initial $23 million in consideration consists of $10 million cash and the issue of $13 million in LGD shares at a deemed issue price of $0.6931 and a deferred cash payment for the balance following the finalisation of the 30 June 2007 financial results. In the year ended 30 June 2006 IES had an EBIT of $5.8 million.</p>
<p>It is expected that the acquisition will be earnings per share positive, operating cash flow positive and contribute to Legend’s overall profit levels.</p>
<p>IES’s client base includes international companies such as Resmed, Thomson, Robert Bosch, Philips, Intermatic, Dickson, British Aerospace, Email (Electrolux) and services a wide range of industries including medical, automotive, consumer electrical, telecommunications and general industrial applications. IES works to produce a unique electronic solution to suit a specific application based on the integration of control circuits into a silicon chip. The wafer is manufactured in specialist overseas facilities with quality control managed from Adelaide, South Australia.</p>
<p>Integrated circuit’s designed and manufactured by IES are incorporated into a wide range of products including medical respiratory aids, car alternators, garden solar lights, telephones, refrigerators, and heat control applications such as kettles, hair dryers, electric grills, fry pans and electric blankets.</p>
<p>The key IES executives have entered into employment contracts and will be retained to grow the business.</p>
<p>The Legend shares issued as consideration shall be subject to voluntary escrow with 1/3 released from escrow 90 days from date of settlement, 1/3 released from escrow 180 days from settlement and the remaining 1/3 released from escrow twelve months from date of settlement.</p>
<p>Legend and IES Commentary</p>
<p>Legend’s CEO Mr. Bradley Dowe said “IES brings our group key intellectual property that will allow Legend to exploit growth in the Chinese domestic market by supplying key components to manufacturers and to supply consumer electrical goods from those manufacturers into Cabac’s electrical markets in Australia, New Zealand and South Africa”.</p>
<p>Brenton Scott, the Managing Director of IES said “The IES management team is looking forward to merging operations with Legend and utilising Legend’s strong sales and marketing resources. We have an experienced management team that has worked to build competitive and innovative solutions that service international clients, across the globe. With Legend’s experience and resources we expect to realise significant growth.”</p>
<p>Mr Dowe said “Legend Corp has now set the groundwork for significant global growth in the electrical and electronics arenas, IES will be a key contributor to improved quality of earnings in the New Year”.</p>
<p>MORE ABOUT LEGEND CORPORATION
Legend Corporation Limited is a leading technology company that specialises in the sales and distribution of electrical and IT components. The Legend division manufactures memory based products and consumer electronics products. The Cabac division services the electrical industry focusing on electrical components that are applied in building, infrastructure and industrial applications.</p>
<p>Legend was established in 1989 and today operations extend throughout Australia, New Zealand, South Africa, Singapore, Hong Kong (China) and into Europe. The Cabac operations are presently focused on the Australian and New Zealand markets. Both Legend and Cabac have manufacturing operations with valuable intellectual property that complement the distribution operations.</p>
<p>The Company has a broad range of clients including leading IT companies such as Acer, Sony, Xerox, NEC and Dell, through to major Australian based computer systems integrators such as Volante, ASI and Optima. Legend branded products are supported by most major merchandising chains including Dick Smith Electronics, Kmart, Myer, Target and Harvey Norman. Wholesale distribution is supported by clients such as Ingram, Centnaj, Gemcell, Rexel, MM, John R Turk, P&amp;R Electrical and Hagemeyer. Corporate clients include United Group Rail, Country Energy, Aurora Energy and Energex (Qld).</p>
<p>The Company has electronics (surface mount robot production) manufacture operations in Adelaide and Singapore with specialised electrical products manufactured in Sydney (CNC lathes). Legend also has an interest and equity in a plastics manufacturing and technology company.</p>

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