Price may be unfair to long-term investors'
Information Technology Editor
DIRECTORS of accounting software specialist Softline have held firm to their plans to delist by offering 130c a share, despite a warning by financial advisers KPMG that the price may be shortchanging long-term investors.
KPMG said it accepted that the offer was "reasonable" as it was a premium to Softline's recent trading price, but warned that the transaction might not be fair to long-term investors as it "does not reflect the fundamental value of Softline". Shareholders would be able to read KMPG's full justification for that verdict in a circular to be issued on June 20.
The buyout proposal from SA's dominant accounting and payroll software developer has irked institutions, including Metropolitan Asset Managers, which held 2,6% and believed that 200c would be a fairer offer.
African Harvest held 7% and has yet to decide how to vote. "We are not delighted with the offer nor surprised that KPMG's findings support our view," said investment manager Anthony Sedgewick. Old Mutual Asset Managers' Steve Minnaar has described 130c as opportunistic, and said it did not appear to be either fair value nor in the best interests of shareholders.
An independent committee formed by the board to advise shareholders how to vote said the valuation of the businesses was thorough, and supported KPMG's belief that the offer was reasonable. But it has not commented on KPMG's warning that long-term investors may suffer.
The committee recommended that shareholders "seriously consider voting in favour of the transactions".
If the move went ahead, the business would be sold to the Fluxrab consortium. That included Investec, Softline CEO Ivan Epstein, directors Steven Cohen, Robert Wilkie, Gerald Rubenstein and Alan Osrin, Ellerine Bros and Marcel Golding and Jonathan Copelyn of Hosken Consolidated Investments, both nonexecutive directors of Softline.
Fluxrab would pay R607m, of which R228m will be used to repay a loan owed by Softline's SA operations to the holding company. The remaining R510m, included cash of R131m, would be distributed to shareholders as the 130c dividend.
Softline has 392-million shares in issue, of which the consortium holds 15,36%. But it will not be allowed to vote on the disposal proposal at a shareholders' meeting on July 21.
The directors said that delisting was the best way to resolve several issues plaguing Softline. Although it has produced real earnings growth, its shares suffered a low rating and low liquidity, making it difficult for shareholders to realise value. Delisting would let them exit at a 40% premium to its trading price in February when the first cautionary notice was issued, and an 11% premium to its 117c in April when a more detailed announcement was made.
Jun 02 2003 07:23:56:000AM Lesley Stones Business Day 1st Edition
Monday
02 June 2003
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