Softline offer should be higher, says Old Mutual a
Softline offer should be higher, says Old Mutual analyst
April 22, 2003
By Nicky Smith
Johannesburg - The proposed management buyout and delisting of accounting software firm Softline is not necessarily in the best interests of shareholders, according to Steve Minnaar, an analyst at Old Mutual Asset Managers.
Minnaar noted that, having survived the worst of the dotcom fallout, the company was solid and generated solid profit.
Last week Softline corporate adviser Brait announced that a consortium including Softline management and Investec Bank was looking to buy the company at the cost of a liquidation dividend of R1.30 a share, valuing the firm at about R510 million.
Old Mutual Life holds almost 7 percent of Softline. Minaar thought the R1.30 opening bid was "a little on the light side".
"You don't give your best price at the beginning," he said, adding that he "certainly hoped" the offer would be increased.
"Softline is not one of those companies which was left with a market cap of about R1 million or R2 million where a listing doesn't make sense anymore," he said. "There is no logical or even operational reason for it to delist."
Ivan Epstein, the chief executive and founder of Softline, valued the firm at R530 million. He thought the offer was reasonable.
The consortium had consulted with some of its larger shareholders over the past couple of weeks and had come up with the offer following these consultations, he said
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Epstein was at pains to point out that the offer was at a 38 percent premium to the price the share had been trading at when the company published its first cautionary announcement on February 5.
The company said tangible net asset value - which excluded intangible assets - was 59c a share, so the R1.30 offer was a 120 percent premium.
However, in Softline's last published set of results for the six months to September, net asset value was given as R1.043.
The offer represents a 24 percent premium to these latest published figures.
Epstein said Softline management was having a tough time convincing the market about the value of the company and believed enough in the firm to take the risk of buying it.
Asked whether management was trying to buy the company at the bottom of the cycle, Epstein said some analysts were still predicting a lot of downside to the market.
One of the benefits of delisting the company would be the savings made by no longer paying listing fees to the JSE Securities Exchange, he said.
He would not say how much it cost Softline to remain listed, except that "it is a lot of money".
The share gained 6 percent to close at R1.24 on Thursday, just 6c shy of the offer price.
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