Mergers, Acquisitions and Financial Results

Shareholders in tarnished technology group CS Holdings are to be offered a cash payment of 5c less than last week's trading price in a take-it-or-leave-it offer from Bytes Technologies.

Bytes is playing hardball on the deal, saying it will walk away if shareholders do not agree to its takeover bid, or try to lobby for a higher price.

The offer will disappoint investors who were once tempted with a potential 30c bid from Reunert, a major shareholder in CS Holdings, and who then saw two other potential suitors contemplate an offer before deciding not to bid.

Bytes will issue one of its own shares for every 37 CS Holdings shares. Based on their closing prices on August 12, that values CS Holdings shares at just 15,68c. They were trading at 20c yesterday, until the news knocked them down to 16c.

Investors who want to bale out completely can sell their shares for cash at 15c each.

Bytes wants to absorb the CS Holdings operations to complement its own offerings and give it a new presence in technology training. But it is not anxious to take it over at any price.

"We have spent two months evaluating the business and this is what it is worth to us," said Bytes CEO David Redshaw.

"If its shareholders don't agree there is nothing we can do about that." Redshaw said that even an offer of 15c a share was only justified because of the synergies that Bytes could extract from the target company's business.

"There are some very good elements in CS Holdings, and I have been enthusiastic about it from day one, but there are an awful lot of issues to deal with, and we have done the most careful due diligence anybody could do," he said.

Although Redshaw will not comment on the likely future for CS Holdings should the offer be rejected, he said the company had to be struggling to win deals given the uncertainty surrounding the business.

Its problems all stem from an accounting scandal involving the sale of a subsidiary that was later reversed. The sale was reflected in its results, turning what should have been a loss into a profit.

CEO Annette van der Laan resigned in the wake of an investigation by Reunert, triggering a 50% drop in its share price.

That instability meant its future would be far more certain, and its shareholders would stand to benefit if it went on to join the well-established Bytes group, itself part of the Altron group, Redshaw said.

"What we are doing is guaranteeing that CS Holdings will not only be there in three months, but in 10 years' time," he said.

CS Holdings' managers and executive directors have already agreed to support the offer. The board has appointed Bridge Capital as an independent advisor. If the offer goes ahead, Bytes will delist CS Holdings.

Bytes shares were trading 10c up at 590c yesterday before the announcement was made.

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