| Tue 22 Apr 2003, 9:11 | | Softline directors take a hard line |
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Softline directors take a hard line
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Information Technology Editor
INVESTORS hoping that Softline directors will raise their buyout offer of 130c a share look set to be disappointed, with the directors saying the price was fixed after consultations with major shareholders.
Directors of the accounting software specialist plan to buy out its assets and liquidate the group, paying 130c to minority shareholders. And, to stifle any mutterings that the offer is too low, investor relations director Lara Jawitz said shares would not have traded at under 100c for much of the past two years if shareholders believed they were worth more than 130c.
The offer was a 25% premium on Softline's net asset value of 104c, and a 38% premium to the 94c it was trading at when an initial cautionary was issued in February, she said. Details of the offer pushed the share up 7c to 124c on Thursday.
The buyout is being led by CEO Ivan Epstein, along with "certain" senior managers and nonexecutive directors. Epstein said that should not be interpreted as a sign that some managers and directors opposed the move, although he refused to say how many of the 392-million shares the buyout consortium holds.
Investec Bank is involved in the buyout, which means the consortium is almost sure to gain sufficient funds for the deal, as Investec and Rand Merchant Bank have been approached for loans.
The banks will carry out due diligence on Softline and affiliated companies, while KPMG will investigate whether the offer is fair and reasonable for the minorities.
Softline has issued disappointing results in recent years, marred by an ill-considered investment in SVI, a cashdraining US firm. Damage was finally ring-fenced in a complex deal that saw Softline convert its SVI shares into dividendpaying preference shares. But Softline's net asset value was slashed from 140c to 104c by impairing R155m for the SVI investment.
The directors have long been adamant that investors should not focus on the SVI losses, but should recognise that Softline's core accounting business is solid and profitable. Now, however, they are capitalising on its low rating to stage the buyout.
One source said much of Softline's growth had been achieved through acquisitions, but its failure to retain some top managers in those companies had eroded skills in its divisions. Managers were under pressure to show good profits to shore up the share price, but that had come at the expense of reinvesting in the business, he claimed.
Delisting would take Softline out of the awkward spotlight, and might do some good if the board obtained new blood and ideas, he said.
Epstein said the delisting was a good opportunity for shareholders to exit at an attractive price. "We have a good business but we are under- valued. There has been very little liquidity in the stock and our offer reflects a hefty premium. We did consider a lower price, but after feedback from significant shareholders we raised it to 130c."
Softline's annual report does not specify shareholders, but cites Madryn Enterprise, Goldman Sachs Asset Management and the Ohio State Teachers Retirement System as holding more than 5% each.
Softline's accounting programs for small and mediumsized businesses dominate the SA and Australian markets, and are popular in the US and Canada. Potential threats include Microsoft muscling into the accounting market and the consolidation of rival players, but Epstein said the managers were convinced they could run the business successfully.
The move must be approved by shareholders and bodies including the Reserve Bank, the Financial Services Board and the Securities Regulation Panel.
Apr 22 2003 06:51:00:000AM Lesley Stones Business Day 1st Edition
