| Thu 29 Aug 2002, 0:00 | | The disposal of the European operations of Compare |
|
CPX
COMPAREX - Disposal of European operations and further cautionary
Comparex Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/002506/06)
("Comparex" or "the company")
Share code: CPX
ISIN: ZAE000016812
The disposal of the European operations of Comparex and further
cautionary announcement
1. Introduction
Comparex shareholders are referred to the trading update announcement dated 3
June 2002 and the subsequent announcements dated 13 June 2002, 19 June 2002, 20
June 2002, 24 June 2002 and 25 June 2002.
On 24 June 2002, 5 non-executive directors resigned from the board of Comparex
("the board") and 5 new non-executive directors were co-opted onto the board.
The newly constituted board then resolved to undertake a review of the current
status of and the strategic alternatives available to the company in relation to
the European operations of Comparex ("Comparex Europe") and Comparex Africa
Group (Pty) Limited ("Comparex Africa").
2. Comparex Europe
2.1 Description and background
The business of Comparex Europe is carried out within three companies (or groups
of companies) all held as wholly owned subsidiaries by Comparex International
(Pty) Limited ("CI"), itself a wholly owned subsidiary of Comparex. These are
Comparex International Holding Company Limited ("Comparex UK"), the European
support services head office, PQICC SA ("PQICC"), the European treasury
operations and Comparex Nederland BV ("CNBV") the Dutch operating company and
holding company of the various regional operating companies.
The trading operations of Comparex Europe held under CNBV have three areas of
focus:
* the value-added resale of IT hardware;
* systems integration which is being developed to sell and deliver complex,
value adding infrastructure-related solutions to customers; and
* the maintenance and rental of installed IT hardware.
At the date of this announcement there is approximately Euro 70 million in cash
in Comparex Europe, principally held within PQICC. The bulk of this cash is
required to fund the working capital of Comparex Europe, current and forecast
trading losses and actual and contingent liabilities.
In the announcement of 3 June 2002, Comparex shareholders were informed that the
board had decided to retain Comparex's cash resources to build Comparex's
European operations organically, supplemented where appropriate, by prudent
complementary acquisitions.
2.2 Current status
Over the past two years the IT sector has undergone a significant structural
change globally and in particular, in Europe, as spend on hardware and software
has reduced due in part to a sharp decline in unit prices. As a result of this
and in order to secure its position in the European market Comparex Europe has
sought to re-structure its cost base and re-position itself as an expert
integrator of cost efficient IT solutions ("the re-positioning strategy").
Although broad-based IT consulting has attractive growth rates and margins it is
a highly competitive sector and Comparex Europe has taken longer than expected
to restructure it's business model.
Comparex Europe will therefore report a substantial trading loss for the year
ended 31 May 2002 and its return to profitability is dependent upon a recovery
in IT spending and the successful completion of its re-positioning strategy.
The effects of this re-positioning strategy are only expected to bear fruit in
the medium term.
In light of the above, the board has resolved that it would be in the best
interests of Comparex shareholders to reduce the risk inherent in the continued
investment in Comparex Europe and safeguard the current reserves of cash in the
company.
After an in-depth investigation and consideration of the various alternatives
available to the board, in pursuit of this objective and, to the extent
possible, to protect the interests of Comparex stakeholders, the board has
resolved to dispose of Comparex Europe and invited management to propose a
management buy-out of Comparex Europe. A proposal has now been received and
accepted by the board ("the proposed MBO") and an agreement has been entered
into between Montefiore Limited ("Montefiore") (a company incorporated for the
purpose of the proposed MBO) and Comparex. The proposed MBO includes the
acquisition of the European support services head office in the United Kingdom
and the assumption of the obligations in respect of all European staff contracts
including those of Messrs WA du Plessis, JR Cohen, K Evans and S Carlin ("the
European executive directors").
3. The Terms of the proposed MBO
Subject to the fulfilment of the conditions precedent set out in paragraph 3.3
below ("the conditions precedent"), Comparex will dispose of its shares in and
shareholders' claims against Comparex UK, CNBV and PQICC to Montefiore, on the
effective date, which date shall be three days after the fulfilment of the
conditions precedent ("the effective date").
3.1 The purchaser
Montefiore is a company specifically incorporated to house the interests of the
management of Comparex Europe who are participating in the proposed MBO. This
management team will be led by Messrs WA du Plessis and J R Cohen, currently
executive directors of Comparex together with R Krieger and K Elsbacher, chief
executive officers of the German and Central European operations of Comparex
Europe, respectively. Messrs du Plessis and Cohen have therefore recused
themselves from voting on any board resolutions in regard to the proposed MBO.
In addition, (and although this is not a regulatory requirement) Comparex and
Montefiore have agreed that the proposed MBO will be conditional upon the
approval of Comparex shareholders in general meeting as set out in paragraph 3.3
below. All parties with a direct or indirect interest in the proposed MBO
(including Messrs du Plessis and Cohen) will abstain from voting at such general
meeting.
3.2 The purchase consideration
The purchase consideration is an amount of Euro 8,5 million and will be settled
in cash within 60 days of the effective date.
3.3 Conditions precedent
The proposed MBO is subject to the fulfilment or waiver, on or before 31 October
2002, of, inter alia, the following conditions precedent:
* the approval of the proposed MBO by Comparex shareholders in general meeting;
* the approval of the proposed MBO by the Exchange Control Division of the South
African Reserve Bank, to the extent required; and
* the approval of the JSE Securities Exchange South Africa ("JSE") and any other
regulatory approvals that may be required.
3.4 Warranties
As the purchasers includes senior executives and management of Comparex Europe,
Comparex has given no material warranties, representations, undertakings or
guarantees to Montefiore in relation to the proposed MBO.
Furthermore, the European executive directors have warranted that to the best of
their knowledge and belief they have disclosed to Comparex all facts and
circumstances material to the proposed MBO.
3.5 Board restructure
The European executive directors will resign from the board with effect from the
effective date.
3.6 Co-operation agreement
An agreement has been reached whereby Comparex Africa and Comparex Europe will
be preferred implementation partners for a period of at least two years after
the effective date.
Opinion
The board has considered the terms of the proposed MBO and is of the opinion
that the terms are fair and reasonable to Comparex shareholders and offer the
best outcome to Comparex shareholders of the alternatives available, given the
continuing difficult trading conditions. Moreover, the board is of the opinion
that Comparex Europe will be in a better position as a privately run stand-alone
entity under the proposed MBO, to succeed in its re-positioning strategy and to
deliver the forecast budgets and cash flows.
4. Results for the year ended 31 May 2002 and financial effects of the
proposed MBO
The proposed MBO will have a material effect upon the results of Comparex for
the year ended 31 May 2002, principally in regard to the realisation of a loss
in regard to the proposed MBO and the impairment of the investment in Comparex
UK, CNBV and PQICC. As a result of this, further work is presently being
undertaken to finalise the results of Comparex for the year ended 31 May 2002.
These results will be published, together with the financial effects of the
proposed MBO as soon as this work has been satisfactorily completed.
5. Comparex Africa
It was announced on 3 June 2002, that the board had resolved in principle to
unbundle Comparex Africa and to introduce appropriate empowerment into Comparex
Africa at or before such unbundling. The board continues to support this
strategy and has initiated steps to implement this. Whilst the board remains
committed to the introduction of appropriate empowerment in Comparex Africa, the
implementation of the proposed MBO (with the result that Comparex's only
operating business retained will be Comparex Africa) may require a re-evaluation
of the necessity for the unbundling of Comparex Africa. An announcement
regarding this will be made as soon as is practicable.
6. Further announcement, documentation and further cautionary
An announcement of the results of Comparex for the year ended 31 May 2002 and
the financial effects of the proposed MBO will be published shortly.
The relevant documentation setting out the full details of the proposed MBO and
a notice convening a general meeting of ordinary shareholders will, subject to
the approval of the JSE, be posted in due course.
In the interim, Comparex shareholders are advised to continue to exercise
caution in trading their shares on the JSE.
Midrand
29 August 2002
Merchant bank and transactional sponsor: Investec bank
Legal advisor: Cliffe Dekker
Sponsor: RMB
Date: 29/08/2002 12:00:00 PM Produced by the JSE SENS Department
