| Wed 19 May 2004, 9:22 | | Reunert drops out of CS Holdings race |
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Reunert drops out of CS Holdings race
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By Lesley Stones
The prospect of a bidding war for troubled technology group CS Holdings evaporated when major shareholder Reunert announced it no longer intended to make a bid.
Reunert holds 31,7% of CS Holdings, and was assessing the wisdom of buying out minority stakeholders to pull it out of the public spotlight and fold it into its own operations.
Yesterday that plan was scrapped, leaving another technology group, Enterprise Outsourcing Holdings (EOH), as the sole suitor.
Reunert's move is disappointing for shareholders, as EOH will be under no pressure to come up with a particularly high offer now that there is no rival bidder.
Since investors holding 33% of CS Holdings had already told Reunert they would accept a proposal of 35c, EOH may well be able to buy the business at that price. The bid if it materialises after due diligence may even carry a lower value, as Reunert has already warned that significant adjustments and write-downs of the CS Holdings accounts are needed.
Its accounts have already been restated after the aborted sale of a subsidiary, raising questions about its accounting policies and leading to the resignation of its CEO, Annette van der Laan.
Reunert CEO Gerrit Pretorius said his company planned to retain its stake "for the time being", but the effort of trying to absorb CS Holdings completely had not been worthwhile.
"It had become too difficult to do it and it was beginning to take too long," he said. "We had to get too many parties on board and it seemed impossible."
Pretorius said he did not know what the chance of EOH making a successful bid for CS Holdings was, but said: "Good luck to them, and I hope they do."
Pretorius and fellow Reunert director Pat Gallagher resigned as non-executive directors from CS Holding yesterday. That left Reunert free to take any action appropriate as a shareholder that it might not be able to do if it retained a boardroom presence, he said.
CS Holdings acting CEO David Vink said Reunert had made it clear that it wanted to take complete control of his company and de-list it, but it had been unable to get all the parties to agree.
Vink could not say where the difficulties arose, but said the managers had seen value in Reunert's plans and had been co-operating. "Having a minority stake doesn't suit Reunert's business model, but every indication is that they still believe we are a good company. So they may hang on to their shares and wait for another opportunity."
On the positive side, CS Holdings may face a brighter future within EOH than within Reunert, since EOH is regarded as a successful company offering similar services. A merger would boost their critical mass and create new cross-selling opportunities.
EOH has yet to conduct due diligence, leaving CEO Asher Bohbot unable to say how much it may offer. It has R44,3m in cash reserves, while CS Holdings has a market capitalisation of about R80m.
Bohbot said various options would be assessed, and it was too early to say whether EOH would want to buy the shares held by Reunert, or invite it to remain invested.
Business Day
