Mergers, Acquisitions and Financial Results

KPMG Services, the independent advisor to Softline minority shareholders, says Softline’s delisting offer may be unfair to long-term investors, writes Iain Scott of ItWeb.

Softline has issued a detailed notice about the terms of its intention to delist and offer shareholders an advance liquidation dividend of 130c a share.

The accounting, payroll and tax software group is being bought by a consortium made up of Investec Bank, members of Softline’s senior management and non-executive directors, Ellerine Bros, Gerald Rubenstein and a consortium comprising the South African Clothing & Textile Workers’ Union, Jonathan Copelyn and Marcel Golding.

KPMG Services says 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".

However, it says the deal "may not be fair to a long-term investor as the consideration does not reflect the fundamental value of Softline" based on KPMG’s independent valuation of the company.

An independent committee of Softline directors says it agrees with KPMG’s conclusion but says that, taking into consideration that the offer is reasonable, recommends that shareholders "seriously consider voting in favour of the proposed transactions".

The total aggregate purchase price for Softline has been set at R607 million. Softline says it will use R228 million to repay an existing loan from Softline Holdings. The remaining proceeds and existing cash on hand, totalling R510 million, will be distributed to shareholders by way of an advance liquidation dividend.

Institutional investors Old Mutual Asset Management and Metropolitan Asset Management have already rejected the offer as being too low. Several brokerages are understood to be advising their clients not to accept the offer.