Sahara, Simeka BSG stop merger

Johannesburg, 03 Sept 2007

AltX-listed Simeka BSG has announced its proposed merger with privately-owned Sahara Holdings is off.

Friday's notice to shareholders came only four days after announcing it had concluded an agreement that would result in the merger.

The deal was to take place through Simeka BSG's R867 million acquisition of Sahara's operational subsidiaries in SA, Mozambique and India.

In return, Simeka BSG would issue up to 510 million shares at R1.70 each to Sahara's vendors. These include the Gupta family and Sahara's black empowerment partners Tokyo Sexwale's Mvelaphanda Holdings, Lazarus Zim's AfriPalm consortium and Sahara's Employee Trust.

Simeka BSG CEO Mohammed Varachia says the company's decision to walk away from the deal is "prudent".

"We need to act in the best interests of our shareholders. In real terms, we had some material items which emerged last week, which we believe would have been fundamental and material to our shareholders," he explains.

Conditional

Simeka BSG's original announcement noted several conditions on which the conclusion of the deal would depend.

These included generic requirements for shareholder, regulatory, bourse and competition approval.

The conditions also stipulated that both parties would complete a detailed due diligence on each other. The due diligence would also have to confirm the net realisable asset value assumed on acquisition would exceed R134.7 million.

Finally, the conditions stipulated that major and material contracts in Sahara and Simeka BSG be "valid, binding and in force" for at least 12 months from the effective date.

Future friends

Varachia declines to reveal the material items that led to the company withdrawing from the deal.

"We expect to continue working on a partnership basis with Sahara, so I wouldn't like to say anything more on the matter. However, I am glad these issues emerged earlier rather than later."

On Friday, Simeka BSG closed at R1.48, down 2c on its previous day's close.