Softline surges on R2 offer

By Iain Scott, ITWeb group consulting editor

Johannesburg, 04 Aug 2003

The Softline share rose by almost 5.5% to 194c on the JSE this morning after news that UK-based Sage Group has made a firm offer to buy the company at R2 a share.

Sage`s initial indication was that it would offer Softline shareholders R1.80 a share, but the higher offer comes after the completion of a due diligence investigation.

Sage is a FTSE 100 accounting and business management company, not to be confused with the JSE-listed financial services group of the same name.

The offer values Softline at R783.83 million, whereas the other offer on the table, made by Softline management in April, is worth R510.14 million.

The R1.30 a share offered by management has been widely criticised by analysts and institutional investors, who have said that it does not represent Softline`s true value.

Another consortium, comprising Ivan Ferrer and Dutch company Exact Holding, is still conducting its own due diligence exercise and has yet to table a firm offer. The consortium indicated in June that it was considering making an offer of 145c a share.

Ferrer is the founder of Pastel Software, which Softline acquired in February 1999 for R200 million.

Sage has told the Softline board that neither it nor any party acting in concert with it holds any shares in Softline.

This is despite that fact that the Softline share had been trading higher than the 180c originally proposed by the group.

Recommendation

Softline says its independent process committee will review Sage`s offer and make a recommendation to the Softline board, after which the board will make a recommendation to shareholders.

"In light of the firm offer by Sage, the independent process committee will continue in its efforts to procure promptly a competitive formal offer by the Dutch consortium," it says.

While Softline has so far declined to comment on the bidding process, analysts say the group`s latest statement indicates that it is unlikely the management consortium will increase its offer.

Sage says that Softline will be entitled, but not obliged, to withdraw any acceptance of the firm offer or any resulting agreement without penalty in the event that it receives a higher offer.

For the year to 31 March 2003 Softline achieved an after-tax profit of R9.08 million on revenue of R636.28 million. Its net asset value stood at 133.9c a share at the year-end.

Softline CEO Ivan Epstein said at the release of the figures that operating margins were negatively affected by an increase in research and development spending, from R37 million to R60 million.