DWS : Proposed Acquisition of SMS Management & Technology via Scheme of Arrangement

DWS Limited

Proposed Acquisition of SMS Management & Technology via Scheme of Arrangement

27 February 2017

• DWS Limited (DWS) has executed an agreement to acquire SMS Management & Technology (SMS) via Scheme of Arrangement (Scheme)

• Offer of $1.00 in cash (Cash Component) and 0.39 DWS shares (Scrip Component) for each SMS share (Scheme Consideration) agreed to as part of the Scheme

  • Implied value of the Scheme Consideration is $1.661

• In addition, SMS has declared an interim dividend of $0.015 (fully franked) without reduction to the Scheme Consideration, providing

  additional value to SMS shareholders

• SMS has retained the discretion to declare a fully franked special dividend of up to 10.2 cents per SMS share, to enable franking benefits of approximately 4.4 cents per share to be distributed to SMS shareholders

  • Any special dividend paid will reduce the Cash Component of the Scheme Consideration on a dollar-for-dollar basis

• The Scheme Consideration offers attractive value to SMS shareholders, and represents:

  • a premium of 30% to SMS‟ undisturbed closing share price on 22 February 2017 ($1.28);

  • a premium of 26% to SMS‟ undisturbed one month volume weighted average price2 calculated at 22 February 2017;

  • an implied LTM EV / EBITDA multiple of 11.9x3 for the year ended 31 December 2016

• The mix of cash and scrip in the Scheme Consideration provides SMS shareholders with immediate cash proceeds and the opportunity to participate in the ongoing performance of SMS, and the combined entity, going forward

• This Transaction will be transformational for DWS giving rise to significant benefits including material cost synergies, operational efficiencies and broader service offering for clients

  • Anticipated to deliver strong shareholder value through material earnings accretion from FY18 and significant growth opportunities

• The SMS Board believes the Transaction is in the best interests of SMS shareholders and unanimously recommends that SMS shareholders vote in favour of the Transaction (in the absence of a superior proposal emerging prior to the scheme meeting and subject to an Independent Expert concluding the Transaction is in the best interests of SMS shareholders)

Note: (1) Based on DWS‟ 5 day volume weighted average price to 24 February 2017 of $1.70 (2) 31 calendar days to 22 February 2017 ($1 .32) (3) Implied Scheme Consideration of $1.66 per SMS share (total issued shares of 68.5 million),

SMS net debt of $10.3 million as at 31 December 2016, and SMS EBITDA prior to significant items of $5.4 million in 2H FY16 and $5.0 million in 1H FY17

The transaction will be transformational for DWS and SMS

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The combined entity will be a leading provider of integrated IT solutions across Australia, with additional scale in workforce, knowledge and client base

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SMS shareholders will continue to have exposure to the upside in the combined businesses going forward through the Scrip Component

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Material cost synergies are expected in the near-term, with additional efficiency and cross selling benefits expected over the medium-term

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"Best of breed" approach will be adopted to integrating the two organisations to fully leverage the combined capabilities of the merged group

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Attractive value provided to SMS shareholders under Scheme Consideration

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Immediate cash proceeds with ability to participate in future value upside of combined businesses

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Continued exposure to combined businesses, with substantial scale in workforce, knowledge and enlarged "blue-chip‟ client base

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Exposure to material synergy and operational benefits of the combined businesses

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DWS‟ experienced management team to lead the combined businesses to deliver improved profitability

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