After Faritec's shock announcement to the market last week, that it was liquidating its biggest unit, the company has not added any clarity to its situation.
On Tuesday last week, Faritec told the market that all its efforts to raise rescue funding and swap shares for cash to raise R60 million had failed.
As a result, Faritec applied for liquidation of Faritec Enterprise Solutions, a wholly owned operating subsidiary. The company said at the time: “Shareholders will be advised of further developments as they arise.”
However, despite repeated efforts to get comment, management has not shed any more light on the situation. CEO Fanie van Rensburg this morning indicated that he would be able to talk after a meeting, but did not answer his cellphone at the appointed time.
The news of the liquidation came shortly after Faritec suspended its shares at the end of last month, after ITWeb revealed that it was in talks to sell off an asset to former director Peter Winn. This would have been a related-party transaction, and would have required shareholder approval.
However, Faritec said it was seeking approval from the JSE to sell the unit, without shareholders voting on the deal.
By this stage, the company's shares were at 3c, giving it a market capitalisation of R56.7 million, which would have also made it material, as the deal would have been worth more than 5% of the company's market cap.
What's left?
Enterprise Solutions accounted for R678 million of Faritec's R731 million turnover during the last financial year to June.
The company's talks to sell non-core operating entities also come to a grinding halt, after it put Enterprise Solutions into liquidation.
Former services director Peter Winn had put in an offer to buy out managed services for R3 million. However, the deal has now fallen through, because the unit was part of the Enterprise Solutions division, he says.
Another party that met with Faritec to buy managed services is Integr8. CEO Rob Sussman says he met with Van Rensburg a short while ago and the two companies agreed it made sense for Integr8 to buy out managed services.
However, says Sussman, that was the last he heard from Van Rensburg until the announcement by the company that it was folding Enterprise Solutions.
It is also not clear what will happen with Shoden Data System's cash injection of R20 million, which was a loan it swapped for a majority stake in the company. The company's MD, Marc Trevenen, was not available for comment this morning.
Tell us more
On Friday afternoon, the Faritec head office number was rerouted to a looping voice mail. The message said: “Welcome to Faritec services support centre. If you want to leave a message, press one. If you would like to continue holding, press two.”
It sounds like they are rearranging the pictures on the Titanic.
Chris Gilmour, analyst, Absa Investments
Chris Gilmour, an analyst with Absa Investments, says the company should be giving more information to the market about what is happening at the operating level. He calls the latest communication “a bit bald”.
Among the questions investors would like answered include whether Faritec will cease to exist as an entity at all, says Gilmour. He says talk in the industry of staff not returning to work, and the message left on the company's head office number has an “awfully familiar ring”.
“It sounds like they are rearranging the pictures on the Titanic,” says Gilmour of concerns that the entire company is dead.
Gilmour adds that the company has a fiduciary duty to give more information to shareholders than is currently available.
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