| Thu 7 Mar 2002, 0:00 | | ("SVI") and repayment of Softline's loan to SVI |
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SOFTLINE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1977/002304/06)
("Softline")
Share code : SFT
ISIN Code : ZAE000012316
Reduction of Softline's interest in SVI Solutions Inc ("SVI") and repayment
of Softline's loan to SVI
Introduction
Softline advises its shareholders that, subsequent to the announcement
regarding the restructuring of its interest in SVI, dated 7 September 2001
and following fulfilment of the conditions precedent, Softline and SVI have
revised the terms of the agreement ("the revised terms of agreement").
The restructuring and reduction of Softline's interest in SVI is in line
with the group's continued focus on its core business. Management is further
concentrating efforts in its accounting and payroll operations, with a focus
on continued growth of market share in South Africa, Australia, the USA and
Canada.
Rationale and background to the agreement
Softline currently holds 19,028,715 SVI common shares in SVI, representing
approximately 48.7% of SVI's voting rights, and holds a loan, which,
including accrued interest, constitutes a claim against SVI in the amount of
$12.3 million (the "loan").
Softline has stated its intention to exit from its investment in SVI.
Consequently, Softline intends to exchange 10,7 million common shares into
$8.8 million cumulative, convertible preferred shares ("preferred shares").
It is anticipated that the exchange of common shares into preferred shares
will assist SVI in its efforts to raise new capital, provide Softline with
cumulative preferential rights to dividends and elevate Softline's status to
a preferred shareholder while reaffirming the ring-fenced nature of
Softline's interest in SVI.
SVI is currently unable to repay the loan in cash and Softline has therefore
agreed that SVI repay the loan in specie with an issue of preferred shares
in SVI and the transfer of an asset being an effective holding of shares in
Integrity Software, Inc ("Integrity"). The repayment of the loan in this
manner will strengthen SVI's balance sheet by significantly reducing its
primary debt level and assist SVI in raising new capital.
Salient details of the revised terms of agreement
1. The loan will be repaid in specie by the receipt of SVI's interest in
Integrity having a book value of $7 million and the issue of $5,3 million
preferred shares to Softline. SVI's interest in Integrity is held in the
form of a convertible note issued by Kielduff Investments Limited, which is
exchangeable into 1,536,000 shares of Integrity representing an interest of
approximately 11% in Integrity.
2. SVI will issue a further $8.8 million preferred shares to Softline in
exchange for 10 700 000 SVI common shares currently held by Softline. As a
result, Softline's holding in SVI will be reduced from 48.7% to 21.3%.
3. The terms of the $14.1 million preferred shares are inter alia:
- the preferred shares will be issued for a five-year term;
- they will carry a 7% cumulative dividend accruing on a semi-annual basis
from the date of issue;
- the preferred shares include an option exercisable by Softline to convert
at any time during the five year period, into SVI common shares, at a price
of $0.80 per share. The conversion price will escalate at 3.5% per annum
from the date of issue to the date of conversion (the "conversion option")
and will initially convert at the election of Softline into 17 625 000 SVI
common shares; and
- unless previously converted, the preferred shares, including all accrued
and unpaid dividends, will convert at maturity into SVI common shares at a
5% discount to the 10-day average closing price immediately prior to the
date of maturity.
4. Subject to SEC approval, there are no lock up restrictions placed by SVI
on Softline on the disposal of the preferred shares and the remaining SVI
common shares.
Following the implementation of the revised terms of agreement, Softline's
interest in SVI will comprise 8.3 million SVI common shares, representing
21.3% of the voting rights, and $14.1 million preferred shares. In addition,
Softline's effective interest in Integrity will increase from a current 4%
to approximately 15%.
Background on Integrity
The business of Integrity is comparable and synergistic to that of Softline,
being the development and implementation of accounting and payroll software
to small and medium sized organisations. Integrity is listed Over The
Counter on Nasdaq and has international operations.
Conditions precedent
The conditions precedent contained in the announcement have been fulfilled,
other than renewal of the approval required from the Reserve Bank.
Resultantly, the effective date of the revised terms of agreement is 1
January 2002.
Financial effects
In the annual financial statements for the prior period ending 31 March
2001, Softline consolidated the results of SVI for the period up to 15
October 2000 and thereafter accounted for SVI as an investment. The revised
pro forma effects on Softline's results in the year ended 31 March 2001,
assuming the agreement had been implemented on 1 April 2000, are as follows:
Per financial statements Pro-Forma % change
Sustainable earnings per share 28.3 28.3 0
Basic earnings per share (fully diluted) 5.9 5.9 0
Net assets value per share 119.4 122.7 2.8
- the pro forma impact on earnings removes SVI's results which were included
for the period to 15 October 2000, and includes the pro forma dividend
earned on the preferred shares from 10 July 2000 being the date that such
claim arose (at an average exchange rate of R7.45 per $);
- sustainable earnings per share already exclude the results of SVI; and
- the pro forma figures have not taken into account Integrity's earnings.
Further information
The terms and effects of the revised terms of agreement will be reflected in
the annual financial statements of Softline for the period ending 31 March
2002 which shall be released to shareholders after the year end date.
Sandton
7 March 2001
Sponsor
Cazenove
Attorneys
Fluxman Rabinowitz Raphaely Weiner
Date: 07/03/2002 05:15:00 PM Produced by the JSE SENS Department
