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Counteroffer for CSH

By Iain Scott, ITWeb group consulting editor
Johannesburg, 17 May 2004

CS Holdings (CSH), which is already being courted by Reunert, has now attracted the attention of another suitor in Enterprise Outsourcing Holdings (EOH), with the potential of a bidding war looming.

EOH published a cautionary notice this morning saying that it had informed the CSH board "of its intention to make an offer to acquire the shares or business of CSH".

"EOH believes that it can add substantial value to all stakeholders through the merger of the two organisations," it says.

By late morning the CSH share price had increased by 5c or 15.63% to 37c on the news.

Although a firm offer has yet to be put on the table, Reunert, which owns 31.7% of CSH, is already in talks with the CSH board relating to its intention to offer CSH shareholders 35c a share and to delist the group.

An analyst regards EOH`s move as a brave one, particularly given the fact that it is taking Reunert on and because of recent allegations regarding CSH`s accounting practices.

"It`s very difficult to make a call on CSH right now, but I`m a bit wary of it. Once the cockroaches start crawling out of the closet I get a bit nervous.

"EOH has been a steady performer for some time, but the one thing that worries me is that its operating margin has been falling, although that`s because it`s growing and taking on larger contracts. But buying CSH could add to its risk profile."

The fact that EOH has a market capitalisation of about R141 million while CSH`s market capitalisation is about R86 million means that the acquisition would not be a small one.

However, he says that assuming all is well at CSH, he believes the company will fit better in EOH than in Reunert. He says EOH would be likely to integrate it with the rest of its business, whereas Reunert would probably keep it separate and let it continue as it is.

Related stories:
CSH shareholders `could get less`
CSH share steady at offer price
Offer for CS 'too low`
Reunert open to buying more of CS Holdings

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