| Thu 29 May 2003, 18:41 | | Softline - Disposal, Distribution Of Advance Liqui |
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Softline Limited
(Incorporated in the Republic of South Africa)
(Registration number 1977/002304/06)
Share code: SFT ISIN: ZAE000012316
("Softline" or "the company")
DISPOSAL, DISTRIBUTION OF ADVANCE LIQUIDATION DIVIDEND, DELISTING AND VOLUNTARY
WINDING-UP ("THE PROPOSED TRANSACTIONS")
and further cautionary announcement
1. DISPOSAL
1.1 Introduction
Brait Advisory Services, a division of Brait South Africa Limited ("Brait")
refers to:
* the detailed cautionary announcement published in the press on
16 April 2003;
* the notice regarding dematerialisation and auxiliary cautionary
announcement published in the press on 13 May 2003; and
* the confirmation by Rand Merchant Bank (or its nominee), a division of
FirstRand Bank Limited ("RMB") and Investec Bank Limited ("Investec") that they
are satisfied with the outcome of the necessary due diligence investigations.
Brait is now authorised to announce that Softline intends to conclude,
subject to the fulfilment of certain suspensive conditions (see 4 below),
disposal agreements ("disposal agreements") where Softline will dispose, in
terms of section 228 of the Companies Act, Act 61 of 1973, as amended ("the
Act"), of the entire undertaking of Softline, as follows:
* all the shares in, and claims, if any, against Softline Holdings (Pty)
Limited ("Softline Holdings (SA)") held by Softline, to RMB (see 1.4 below);
* other than the Softline Software Limited ("SSL") claims referred to below,
all the shares and claims held by Softline in its other subsidiary and associate
companies (collectively referred to as "affiliated companies") to Fluxrab
Investments No. 57 (Pty) Limited ("Fluxrab 57"), the shareholders of which
comprise Investec and a consortium consisting of Messrs Ivan Michael Epstein,
Steven Mark Cohen, Alan Anthony Osrin, Robert Patrick Wilkie, Ellerine Bros
(Pty) Limited, Gerald Bertrand Rubenstein and a consortium comprising the South
African Clothing and Textile Workers Union, Jonathan Anthony Copelyn and Marcel
Anthony Golding, (collectively, "the Consortium");
* all liabilities Softline may have are to be assumed by Fluxrab 57; and
* all liabilities that Softline Holdings (SA) may have are to be assumed by
Fluxrab Investments No. 52 (Pty) Limited ("Fluxrab 52"), a wholly-owned
subsidiary of Fluxrab 57 (see 1.4 below),
(collectively referred to as "the disposal"). The disposal is effective from
1 April 2003.
The disposal agreements are conditional upon the conclusion of further
agreements. These include agreements in terms of which, inter alia:
* all the underlying businesses of Softline Holdings (SA), excluding all
intellectual property and certain cash, will be sold to Fluxrab 52; and
* certain loan claims held by Softline against SSL will be acquired by Fluxrab
52.
Taken together the effect of the above agreements is that Fluxrab 57 will
become the holding company of the entire undertaking currently owned by Softline
("the Softline group"). Its subsidiary Fluxrab 52 will own all the South African
businesses of the Softline group and all its South African assets save for the
intellectual property currently owned by Softline Holdings (SA). This
intellectual property will be retained under the indirect control of RMB. The
use thereof will be licensed to Fluxrab 52 in terms of the asset-backed
financing arrangement referred to in 1.4 below.
1.2 Purchase price
The total aggregate purchase price for the disposal is R607 million.
Softline will use R228 million of the proceeds to immediately repay an existing
loan owing by Softline to Softline Holdings (SA). The remaining net disposal
proceeds and existing cash on hand of R131 million in Softline, equating to
R510 million, will be distributed to shareholders by way of an advance
liquidation dividend (see 2 below).
The Securities Regulation Panel ("SRP") has received confirmation from
Fluxmans Inc., Investec and RMB that Fluxrab 57, Fluxrab 52, Investec and RMB
have sufficient resources to satisfy the total aggregate purchase price.
1.3 Rationale
* In recent years, Softline has produced real growth in operational earnings
and cash flow. However, Softline"s share price performance has been
characterised by a relatively low rating and low levels of liquidity, making it
difficult for shareholders to realise value and to trade in their Softline
shares;
* Furthermore, sentiment towards small and medium market capitalisation
companies, such as Softline, has been unfavourable for some time and is unlikely
to improve in the short to medium term;
* Softline"s target software application markets have been characterised by
increased consolidation, driven by multi-national groups such as Microsoft
Corporation and others. These groups have considerable capital resources
available to further drive a consolidation process, integrate products over
vertical markets and increase existing research and development spending.
Accordingly, the increasingly competitive global software environment dictates
that Softline must invest additional resources and funds in research and
development and marketing and sales, in order to have the ability to maintain
and grow market share. In particular:
- This global software environment has been cited as a concern and as a risk
factor in the business by some shareholders and analysts, and in turn this has
affected Softline"s rating due to the perceived risk in the future performance
of the business; and
- The nature of the competitive environment requires Softline to consolidate its
position by investing cash resources in the business. This business decision
does not always align with the demands of many investors.
* Having considered the continued negative sentiment and uncertainties in the
information technology market, it has become increasingly difficult and more
costly for Softline to raise funding in a listed environment for furthering
market penetration and brand building in global markets.
* The disposal presents Softline shareholders with an opportunity to exit at
an attractive premium to the market price at which the ordinary shares have
traded on the JSE Securities Exchange South Africa ("JSE") (the average closing
price for the period September 2001 to January 2003, prior to the issue of the
first cautionary announcement on 5 February 2003, was between R0,80 and R0,93)
and to Softline"s net asset value of 104,3 cents per ordinary share and tangible
net asset value of 44,9 cents per ordinary share as at 30 September 2002.
1.4 Asset-backed financing arrangement
As set out above, RMB shall, pursuant to the disposal agreements being
concluded, acquire all the shares in Softline Holdings (SA) (see 1.1 above). In
order for RMB to secure and recover its investment arising on the acquisition of
Softline Holdings (SA):
* Softline Holdings (SA) will, in terms of the further sale agreement referred
to in 1.1 above, sell all its underlying businesses and assets (excluding
intellectual property and certain cash) to Fluxrab 52;
* in terms of a license agreement to be concluded between Softline Holdings
(SA) and Fluxrab 52, Fluxrab 52 will be entitled to the use of the Softline
Holdings (SA) intellectual property and will be obliged to pay royalty amounts
to Softline Holdings (SA); and
* on the expiry of a five-year period, Fluxrab 52 will acquire all the shares
in and claims against Softline Holdings (SA) held by RMB at that time.
2. DISTRIBUTION TO SOFTLINE SHAREHOLDERS
2.1 Subject to the disposal agreements becoming unconditional, the board of
directors of Softline will distribute the remaining net disposal proceeds and
existing cash on hand of R131 million in Softline, equating to R510 million, to
shareholders by way of an advance liquidation dividend in anticipation of the
voluntary winding-up (see 7 below).
2.2 The advance liquidation dividend will be 130 cents per Softline ordinary
share. A final liquidation dividend, if any, but which is not anticipated, will
be distributed to qualifying shareholders once the voluntary winding-up of
Softline has been completed to the satisfaction of the Master of the High Court
which is anticipated to be completed within six months from the registration of
the voluntary winding-up resolution.
2.3 The advance liquidation dividend of 130 cents per Softline ordinary share
represents the following premia to the respective prices at which Softline
shares traded on the JSE on the following dates:
Closing Softline
share price
on the JSE Premium
* Wednesday, 5 February 2003 - First
cautionary announcement published in the press 93 40%
* Wednesday, 16 April 2003 - Detailed
cautionary announcement published in the press 117 11%
* Tuesday, 13 May 2003 - Notice
of dematerialisation and auxillary
cautionary announcement published in the press 124 5%
3. FINANCIAL EFFECTS
3.1 The following table has been prepared for illustrative purposes only and
sets out the pro forma financial effects of the disposal and the advance
liquidation dividend based on the published interim report of Softline for the
six months ended 30 September 2002.
3.2 The circular to shareholders (see 9 below) will contain the audited annual
financial statements of the company and the Softline group for the year ended
31 March 2003 ("2003 numbers") and the pro forma financial effects in that
circular will be based on the 2003 numbers, in order to provide shareholders
with the most up to date information available. The 2003 numbers will be
published in the press on or about Friday, 20 June 2003.
3.3 The pro forma financial effects are based on a total of 392 414 573 ordinary
shares in issue and are set out in the table below:
Column A Column B Column C Column D
After the
Before the disposal, but After the
disposal before disposal and
and the of the
the distribution distribution distribution
of the the of the
advance advance advance
liquidation liquidation liquidation Increase/
dividend dividend(3) dividend(4) (decrease)
(cents) (cents) (cents) (percentage)
Net asset value(1) 104,3 130,0 0,0 24,6
Net tangible asset value(1) 44,9 130,0 0,0 189,5
Headline earnings(2) 12,1 4,5 0,0 (62,8)
Earnings(2) (32,4) 4,5 0,0 >100,0
Notes:
1. The pro forma net asset value per ordinary share and the pro forma net
tangible asset value per ordinary share in "Column A" are based on the unaudited
published interim financial results of Softline for six months ended 30
September 2002. The net intangible asset value as at 30 September 2002 was
59,40 cents per share.
2. The headline earnings per ordinary share and the earnings per ordinary share
in "Column A" are based on the unaudited published interim financial results of
Softline for six months ended 30 September 2002.
3. "Column B" illustrates the impact of the disposal prior to the distribution
of the advance liquidation dividend and was based on the assumptions that the
total aggregate purchase price of R607 million and existing cash on hand of R131
million in Softline was paid on 1 April 2002, that Softline immediately repaid
its loan of R228 million to Softline Holdings (SA) and that Softline invested
the remaining R510 million at an after tax rate of 7% per annum from
1 April 2002 until 30 September 2002.
4. "Column C" illustrates the impact of the advance liquidation dividend. It was
assumed that the total aggregate purchase price of R607 million and the existing
cash on hand of R131 million in Softline was paid on 1 April 2002, that Softline
immediately repaid its loan of R228 million to Softline Holdings (SA), but that
Softline, on 1 April 2002, distributed the advance liquidation dividend of 130
cents per ordinary share, representing a total amount of R510 million, to
shareholders.
4. SUSPENSIVE CONDITIONS
The proposed transactions are subject to and conditional upon the fulfilment
or waiver of the following outstanding suspensive conditions:
* the passing and, where applicable, registration of all ordinary and special
resolutions required to approve and implement the proposed transactions in
accordance with the requirements of the Act;
* the holders of shares, other than Softline, in certain of the affiliated
companies waiving such pre-emptive rights as may arise in respect of the
disposal by Softline to Fluxrab 57 of all the shares held by Softline in the
affiliated companies;
* the consent of all relevant third parties to the transfer of all material
contracts and licences to Fluxrab 57;
* the proposed transactions being unconditionally approved by the JSE and the
SRP;
* to the extent necessary, the approval of the proposed transactions by all
relevant foreign regulatory authorities, either unconditionally or subject to
such conditions as are accepted by Softline, RMB, Investec and Fluxrab 57;
* the issuance by the relevant authorities established pursuant to sections
19, 26 and 36 of the Competitions Act, Act No. 89 of 1998, as amended, of an
unconditional clearance certificate or a conditional clearance certificate which
conditions are accepted by Softline, RMB, Investec and Fluxrab 57 in respect of
the disposal;
* the receipt of opinion of foreign counsel, to the satisfaction of Softline,
RMB, Investec and Fluxrab 57, regarding the enforceability and transfer of title
in the shares to the affiliated companies;
* the board of directors of Softline issuing an instruction to the trustees in
terms of the trust deed accelerating the benefits under the share incentive
scheme of Softline;
* the approval of and consent by the Registrar of Banks in terms of the Banks
Act, Act No. 94 of 1990, as amended, and/or the approval by the Financial
Services Board of the acquisition by RMB of all the shares in Softline Holdings
(SA);
* the necessary approvals required in terms of the Exchange Control
Regulations of the Exchange Control Division of the South African Reserve Bank;
* the completion of the necessary disposal agreements to give effect to the
disposal;
* the completion of such other agreements to give effect to the asset-backed
financing arrangement (see 1.4 above); and
* the conclusion and execution of formal funding agreements and related
security agreements.
5. RELATED PARTY TRANSACTIONS
The disposal represents a "related party" transaction in terms of the
Listings Requirements of the JSE as certain members of the Consortium are either
major shareholders of Softline and/or directors of Softline. Those parties are
also classified as concert parties in terms of the Securities Regulation Code of
the SRP. Accordingly, all Consortium members and their associates or parties
acting in concert with them will be precluded from voting in respect of the
ordinary and special resolutions relating to the disposal, but they are eligible
to vote on all other resolutions to be proposed at the general meeting. In
aggregate, the Consortium members hold 60 278 244 ordinary shares, representing
15,36% of the total issued ordinary shares. In addition, at the date of this
announcement, Softline held no interest in the Consortium or Investec.
6. OPINIONS
Given that the majority of the board members of Softline form part of the
Consortium and in accordance with best practice, an independent committee of the
board of directors of Softline ("Independent Committee") has been formed to
review the disposal and make a recommendation to shareholders as to how they
should vote.
KPMG Services (Pty) Limited ("KPMG"), in its capacity as independent advisor
to the minority shareholders, has advised the Independent Committee that it has
considered the terms of the disposal and is of the opinion that the proposed
terms are reasonable, as a material premium to the average traded share price
prior to the issue of the cautionary on Wednesday 5 February 2003, has been
offered to shareholders. KPMG is also of the opinion that the proposed
transaction may, however, not be fair to a long-term investor as the
consideration does not reflect the fundamental value of Softline based on their
independent valuation of the company. Full details of their opinion will be set
out in the circular to be posted to shareholders (see 9 below).
The Independent Committee is satisfied that the valuation of the businesses
of Softline has been thoroughly and independently conducted. The Independent
Committee is in agreement with the conclusion of KPMG as set out in the
preceding paragraph. Taking into consideration that the offer is reasonable,
being a material premium to market price, and with due regard to current market
conditions, the Independent Committee recommends that shareholders seriously
consider voting in favour of the proposed transactions. The Independent
Committee advises shareholders that are uncertain as to how to vote, to take
council from their financial advisors. The members of the Independent
Committee confirm they have no interest in the ordinary shares.
7. DELISTING AND VOLUNTARY WINDING-UP
7.1 Subject to the fulfilment or waiver of the suspensive conditions, it is
proposed that Softline be delisted from the JSE and that Softline be wound-up by
way of a voluntary winding-up.
7.2 The voluntary winding-up is proposed in terms of sections 349 and 350 of the
Act. Save for the advance liquidation dividend and, although not anticipated, a
final liquidation dividend, no other dividend will be distributed to Softline
shareholders.
8. IMPORTANT DATES AND TIMES
2003
Circular posted to shareholders on Friday, 20 June
2003 numbers published in the press on Friday, 20 June
Last day for receipt of forms of proxy from
ordinary shareholders for the general meeting by not
later than 10:00 on Thursday, 17 July
General meeting to be held at 10:00 on Monday, 21 July
*Announcement in respect of fulfilment or waiver of
the suspensive conditions and results of
general meeting published in the press on Tuesday, 22 July
*Last day to trade in ordinary shares to be recorded
in the shareholders register of Softline as a
shareholder on the record date Friday, 25 July
*Suspension of the listing of ordinary shares on
the JSE from commencement of trading on Monday, 28 July
*Record date for purposes of the advance
liquidation dividend Friday, 1 August
*Electronic transfer of funds or cheques posted by
ordinary mail on (see note 1) Monday, 11 August
*Dematerialised shareholders" accounts held at their
Central Securities Depository Participant ("CSDP")
or broker credited on (see note 2) Monday, 11 August
*Termination of the listing of ordinary shares on the JSE from commencement of
trading on Tuesday, 12 August
*These dates are dependent on the required Softline shareholder approval being
obtained and the fulfilment or waiver of the suspensive conditions, including
the issuing of the required clearance certificate in respect of the disposal by
the relevant Competition Authorities.
Notes:
1. Refers to shareholders who have not dematerialised their share certificates
in terms of Share Transactions Totally Electronic ("STRATE").
2. Refers to shareholders who have dematerialised their shares with a CSDP or
broker, who will receive payment from the CSDP or broker concerned in terms of
the custody agreement entered into between them.
3. The JSE has introduced STRATE for all share transactions concluded on the
JSE. STRATE, which, inter alia, involves dematerialisation, has already been
implemented by Softline. Accordingly, Softline share certificates need to first
be dematerialised before shareholders will be able to trade in the shares
concerned. Shareholders are advised to contact a CSDP or broker to make the
necessary practical arrangements for dematerialisation. It is anticipated that
the dematerialisation of shares may take up to ten days to be finalised once a
shareholder has made the necessary arrangements with the CSDP.
4. No share certificates may be dematerialised or rematerialised after Friday,
25 July 2003.
5. It is anticipated that the final winding-up of Softline will take
approximately six months to complete. In the unlikely event of any further
distribution to shareholders, a final liquidation dividend will be paid to
ordinary shareholders only once the winding-up has been finalised to the
satisfaction of the Master of the High Court.
6. The above dates and times are subject to amendment. Any amendment to the
dates and times will be announced on SENS and published in the press.
9. GENERAL MEETING AND CIRCULAR TO SHAREHOLDERS
A general meeting of Softline shareholders will be held on Monday, 21 July
2003 at which shareholders will consider and, if deemed fit, pass the ordinary
and special resolutions necessary to approve the disposal, the distribution of
the advance liquidation dividend, the delisting of Softline from the JSE and the
voluntary winding-up of Softline. Full details of the proposed transactions will
be set out in a circular to be posted to Softline shareholders on or about
Friday, 20 June 2003 in accordance with the Rules and Regulations of the JSE and
SRP.
10. FURTHER CAUTIONARY ANNOUNCEMENT
Softline shareholders are advised to continue to exercise caution when
dealing in their Softline shares on the JSE until a further announcement is
made.
Johannesburg
30 May 2003
Corporate advisor
BRAIT
Legal advisor to Softline
Rabin, van den Berg & Pelkowitz
Incorporated
Legal advisor to the Consortium
Fluxmans Attorneys
Website: www.fluxmans.com
Fluxmans Inc. Registration No: 2000/024775/21
Auditors and reporting accountants
Charles Orbach & Company
Chartered Accountants (SA) Registered Accountants & Auditors
Sponsor
Brait Sponsors (Proprietary) Limited
(Registration number 2000/031069/07)
Independent advisor to minorities
KPMG
Lender
Investec Bank Limited
(Registration number 1969/004763/06)
Lender
Rand Merchant Bank
A Division of FirstRand Bank Limited
Attorneys to the lenders
Deneys Reitz Attorneys Inc.
Reg. No. 1984/003385/21
Date: 29/05/2003 05:30:16 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
