CS Holdings Pty. Ltd. began dominating news headlines earlier this year when its CEO resigned. In February, allegations arose that the company had mishandled the disposal and subsequent cancellation of the sale of one of its businesses, EDD, and that there had been a lack of accounting transparency.
Bytes Technology Group (BTG) came into the picture after Reunert, which owned 31,7 percent of CSH, walked away from an attempt to buy the company out. In June CSH indicated that BTG was its preferred bidder, and BTG made an offer to buy CSH shares.
CSH was said to have boosted its profits by announcing the sale of EDD for Rand 18 million (US$3.1 million), after acquiring it for only R2.5 million, and then reversing the sale after its financial results were published. Its management, although cleared of corruption, was tainted with negative publicity, which apparently led to the resignation of its CEO, Annette van der Laan, late in February.
The company had also been investigated by the GAAP Monitoring Panel, as well as the South African Institute of Chattered Accountants, both of which said the company had provided deficient financial statements for the 2002 interim period, as well as for its 2003 annual and interim results.
This affected CSH"s share price, and had a negative affect on the company and its ability to do business. At this point the company"s acting CEO, Dave Vink, said it needed BTG to save it.
BTG"s offer was initially meant to close in October, but was extended twice, as some of the conditions had not been fulfilled. One remaining condition involved the acceptance of the offer by CSH shareholders owning in aggregate at least 90 percent of the company"s issued share capital. This was meant to allow BTG to invoke section 440k of the Companies Act, which would entitle it to compulsorily acquire the shares of the shareholders which did not accept the offer.
BTG therefore offered to acquire all the issued shares, and urged CSH shareholders who wanted to accept the offer to do so in order to allow the process to be concluded.
Last month BTG"s offer was accepted by more than 90 percent of the shareholders, allowing BTG to proceed to invoke section 440k. Although this should provide relief for CSH, which was trading in an insolvent manner at the announcement of its last interim results, it remains uncertain how the matter will unfold.