CS Holdings (CSH) and Reunert are in talks that could result in CSH shareholders being bought out and the share delisted.
The groups said at the weekend that they were in talks about a "potential offer for the shares in or the underlying assets and liabilities of CS Holdings for an effective cash consideration of 35c per CS Holdings share".
That is 1c less than the closing price of 36c on the JSE on Friday. This morning the share was trading at 37c.
Reunert owns a 31.7% stake in CS Holdings after buying 40 million CS Holdings shares from Getronics and 37.7 million shares from Electra Share Ventures last year at 55c a share.
Electra`s stake was managed by Gensec`s private equity arm.
At the time of that deal, Reunert CEO Boel Pretorius said that Reunert would be interested in buying more of CSH "if we like what we see".
Reunert was criticised in several quarters for not undertaking a due diligence investigation before buying the stake. The criticism was raised again after allegations were made about the restatement of CSH`s 2002 interim results.
Fight
However, an internal investigation, in which Reunert participated, cleared the CSH management of any wrongdoing. That notwithstanding, CSH`s CEO, Annette van der Laan, resigned in late February, citing negative publicity and the interests of the company as the reasons for her move.
Institutional shareholders representing 33.8% of CSH shares held by all shareholders other than Reunert have provided irrevocable undertakings, subject to certain conditions, to support the proposal.
However, an analyst says Reunert may "have a fight on its hands" and have to raise the offer price as the current 35c is unlikely to please minority shareholders, particularly given the move in the share price since the talks were announced.
He says it is difficult for him to place a fair value on the company without seeing how its books look at present, but he believes 35c a share is far too low.
What Reunert will do with CSH after acquiring it is uncertain, he says, although it has been known that Pretorius had been looking to acquire an IT company for some time.
"But I don`t know if they are going to make that a primary part of their business, to go into IT as opposed to electronics."
He says it was probably not Reunert`s intention to buy all of CSH from the beginning, but given the circumstances and the low share price, Reunert is obviously taking advantage of an opportunity.
Something in it
"When they bought the first stake, they didn`t do a proper due diligence. You have to assume, given the fact that they have been involved with them for a few months now, they would have done a proper due diligence, or at least looked at it in more detail.
"If they`re prepared to take the stake, there must be something in it."
His views were echoed by a former director who did not want to be named.
Pretorius was in a meeting this morning and could not be reached for comment by time of publication.
At the time Reunert made the initial acquisition, he said IT was a subset of electronics Pretorius says IT is a subset of electronics, which was why many electronics engineers entered the IT industry.
"We are probably one of the bigger employers of electronics engineers in the country. It`s not foreign to us," he said. "But we`ve never exploited it except for our own use. All our IT efforts to date have basically been internally focused. We have always thought it might make sense to spread our wings a bit wider."
CS Holdings, which says it will issue a trading update on or around 28 April, has advised its shareholders to exercise caution in dealing in their shares until a further announcement is made.
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