Notice of shareholder circular and general meeting
07/10/2022 17:04
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RNS Number : 2393C Softline Holding PLC 07 October 2022
This announcement contains inside information
Softline Holding plc
("Softline" or the "Company")
Softline announces separation of the Russian business from the Softline Group
and issuance of Bonus SLH Securities by way of a Bonus Issuance
London, 7 October 2022 - Softline (LSE: SFTL), the Cyprus-registered global
digital transformation and cyber security solutions and services provider
today announces its intention to proceed with a separation of its Russian
business ("SLR") (the "Separation") and issuance of ordinary shares or GDRs
representing ordinary shares in the Company ("Bonus SLH Securities") for nil
consideration (the "Bonus Issuance" and together with the Separation, the
"Transaction").
The separation will be effected by way of sale of SLR to the original founder
Mr Igor Borovikov (the "Founder") (or an entity controlled by the Founder),
for a consideration of USD1 and a dilution of the aggregate shareholding of
the Founder and SGI Limited (an entity controlled by the Founder and which is
the Company's largest shareholder) in the Company. The dilution of the
aggregate shareholding of the Founder and SGI Limited is to be effected by a
waiver of their entitlements to the Bonus SLH Securities, which are being
issued to the other Softline securityholders to compensate them for the loss
of value in their securities arising from the sale of SLR for USD1.
The Founder's shareholding (and the shareholding of SGI Limited) in the
Company will therefore be diluted as a result of the Transaction, and is
expected to fall to 44% following completion of the Transaction. The
Transaction reflects a relative valuation ratio of 1:3 as between the Softline
Group's Russian and non-Russian businesses.
The Bonus Issuance requires approval from Softline securityholders ("Softline
Securityholders"). The Company has today published a shareholder circular and
convened a general meeting to allow Softline Securityholders to vote on the
Bonus Issuance (the "General Meeting"). The Transaction is also conditional
upon Russian regulatory approval.
The Board considers that the Transaction and the passing of the resolutions
set out in the shareholder circular are in the best interests of the Company
and Softline Securityholders taken as a whole. Accordingly, the Board
unanimously recommends voting in favour of the Resolutions to be proposed at
the General Meeting. The Founder, in his capacity as a Director, did not
participate in and abstained from voting in the relevant meetings of the Board
to consider and approve the Transaction.
Further details on the rationale for the Transaction and the Transaction
structure is set out below and in the shareholder circular. Softline
Securityholders should read the shareholder circular which contains full
details on the Transaction, details of the resolutions and the General
Meeting, as well as information on how to vote and action to be taken in
respect of the Transaction. Full details and the notices are published in the
Investor Relations section of Softline.com
https://softline.com/investor-relations
(https://softline.com/investor-relations) .
Rationale for the transaction:
The announcement of the Transaction follows a review initiated by Softline in
May 2022 to adjust the Softline Group's assets and ownership structure in
order to optimise value for all of its stakeholders. The review was initiated
on the basis that the Softline Group's Russian and non-Russian businesses
increasingly differ in their operations, priorities, and go-to-market
strategies. Recent geopolitical events have led to major changes in the
Russian technology market. International vendors have abruptly stopped their
local operations, effectively changing the landscape of available
technologies. Operational issues, including difficulties executing
international payments and newly introduced regulations, also mean that
Softline in Russia is facing a very different business climate.
From a shareholder's perspective, the recent events have also led to, amongst
other things, a disconnect between the LSE and MoEX which has made trading
GDRs more difficult. This has resulted in a collapse in liquidity of the GDRs
and given that there are no trading volumes, it is not possible for investors
to accurately determine the current value of the Softline Group. This has also
impacted the Softline Group's employees as the Company has been unable to
implement the Long-Term Employee Partnership Programme.
The Directors believe that the differences between the Russian technology
market and the international technology market, outside Russia, will remain
for the foreseeable future. The lack of liquidity in the GDRs is also likely
to remain for the foreseeable future.
As a result of the strategic review, the Board has resolved to separate
Softline's Russian businesses (the "Softline Russia Group") from the Softline
Group. The Board believes this will allow Softline Global to better serve its
customers, and to capitalise on its distinct growth strategy and to optimise
value.
In connection with the Transaction, the business outside Russia will become
"Softline Global", although the Board expects this name to change as Softline
Global rebrands following the completion of the Transaction. Softline Global
intends to retain the Company's LSE listing.
Softline remains committed to protecting the interests of all its
stakeholders, including shareholders, employees, customers and vendors, and
believes the Transaction is in the best interests of Softline Securityholders
taken as a whole. Ongoing geopolitical events have had a disproportionate
impact on Softline's market value, and the separation of its Russian and
international businesses is designed to support a path to a more rational
valuation for Softline Global that reflects the strong profitable growth,
portfolio, capabilities, and fundamental value.
This change will also enable employees to benefit from the market-leading
Long-Term Employee Partnership Programmes in each of the companies, therefore
allowing the two separate groups to attract and retain talented professionals,
and further supporting the owner-operator culture of both groups.
Softline recently announced strong results for Q1 FY2022 ending June 30, 2022,
with strong gross profit growth of 25% overall, and constant currency turnover
growth of 44% in its international business, which now represents more than
50% of Softline overall. The company has a very strong balance sheet and cash
position.
Process in relation to Transaction structure:
The Company has undertaken an extensive process, committed significant time
and resources, and incurred significant cost over the last few months to
design and implement a transaction structure to effect the separation of
Softline Group's Russian business in a very challenging and evolving
regulatory and business environment. The objective of the process was to find
a solution that equitably protects all Softline Securityholders, while also
being able to effect the separation in a timely manner. Amongst other matters,
the Company and its advisers sought to implement a structure that provided
Softline Securityholders with the option of receiving shares in the Russian
business if they wished to do so.
However despite the Company's best efforts, given complex sanctions
environment, it was not possible to find a structure to provide that option to
Softline Securityholders. In particular, EU asset freezing sanctions on the
NSD, which has effectively blocked the operations between Euroclear and NSD,
made it impossible to effect any distribution of Russian shares to Softline
Securityholders who hold their securities through the clearing systems.
Consequentially the only option practically available is a straight forward
distribution of SLH Securities to Softline Securityholders to compensate them
for the value dilution caused by the sale of the Russian business.
Accordingly, the Board has determined the Transaction structure is the only
viable transaction structure practically available to it, given the vital
importance and urgency in needing to separate the two businesses, while
protecting the interests of Softline Securityholders. Softline Russia will
continue to explore options to enable Softline Securityholders in Russia to
participate in SLR following completion of the Transaction (if they wish to do
so).
Structure of the Transaction:
As noted above, the Separation will be effected through a sale of 100 per
cent. of the share capital of JSC Softline Trade (being the holding company of
SLR) to the Founder (or an entity controlled by the Founder), for a
consideration of USD1 and a dilution of the aggregate shareholding of the
Founder and of SGI Limited (an entity controlled by the Founder and the
largest shareholder in the Company) in the Company.
To compensate Softline Securityholders for the value dilution caused by the
sale of the Russian business, the Company proposes to proceed with the Bonus
Issuance to all Softline Securityholders (other than the Founder and SGI
Limited). Softline Securityholders who participate in the Bonus Issuance will
do so in the following ratio:
Participating Softline Securityholders will receive 0.6066 Bonus SLH
Securities for each SLH Security that they hold at the Bonus Issuance Record
Time
The Founder's shareholding (and the shareholding of SGI Limited) in the
Company is therefore expected to fall from approximately 53 per cent. to
approximately 44 per cent. following completion of the Transaction. The
payment of USD1 ensures that the Company directly receives some consideration
for the sale by it of SLR, given that the dilution of the Founder's interest
in the Company benefits the other Softline Securityholders and not the Company
directly.
The Bonus Issuance is conditional upon the passing of the resolutions by
Softline Securityholders at the General Meeting. The Separation is conditional
upon Russian regulatory approval.
While it is the intention of the Company to proceed with the Separation and
the Bonus Issuance at the same time, the Separation is not conditional upon
the Bonus Issuance may therefore proceed independently of (or without) the
Bonus Issuance if the Board determines it to be in the best interests of the
Company and Softline Securityholders as a whole. This may be the case if the
Russian regulatory approval to effect the Separation is obtained prior to the
General Meeting (or if the Resolutions are not approved at the General
Meeting) and the urgency of the Separation is such that the Board determines
to proceed with the Separation independently of the Bonus Issuance.
While the Separation is not conditional on the Bonus Issuance occurring, the
Bonus Issuance is conditional on the Separation occurring. Accordingly, if the
Separation does not proceed for any reason, the Bonus Issuance will not
proceed.
The Board believes that the Transaction structure to be the only viable
transaction structure available to it, given the vital importance and urgency
in needing to separate the two businesses, while protecting the interests of
Softline Securityholders.
Indicative timetable of key dates:
It is expected that, subject to the successful passing of the resolutions, and
obtaining Russian regulatory approval, the Transaction will be completed in
early to mid-November 2022.
Set out below is an indicative timetable of key dates (which are subject to
change).
Event Time (Cypriot) and/or Date((1)(2))
Announcement of the Transaction 7 October 2022
Publication of this document 7 October 2022
Latest time and date for receipt of Form of Proxy or voting instructions for 11:30 a.m. on 23 October 2022
the General Meeting
Voting Record Time for determining entitlement to attend and vote at the 11:30 a.m. on 23 October 2022
General Meeting
General Meeting 11:30 a.m. on 25 October 2022
Announcement of results of General Meeting 6 p.m. on 25 October 2022
Bonus Issuance Record Time for determining entitlement to the Bonus Issuance 11 a.m. on 26 October 2022
Bonus SLH Securities issued to Participating Softline Securityholders Early to mid November 2022
(expected)
Completion of the Separation Early to mid November 2022
Jacques Guers, Chairman of the Board of Directors of Softline Group noted:
"Softline remains committed to protecting the interests of all its
stakeholders, including shareholders, employees, customers and vendors. We
have undertaken an extensive process over the last few months to design and
implement a transaction structure in the context of a very challenging and
evolving regulatory and business environment. The Board has determined that
this is the only viable way forward given the vital importance and urgency in
needing to separate the two businesses. The Board considers that the
transaction announced today, and the passing of the Resolutions are in the
best interests of the Company and Softline Securityholders. The changes we
have outlined will enable both companies to better serve customers, and will
allow employees to benefit from the market-leading Long-Term Employee
Partnership Programmes. Looking ahead, we have the right leadership team in
place, who bring a vast depth of experience, and we have a very strong
foundation for success. The changes will position us very well as we continue
to partner with our customers in driving digital transformation and cyber
security solutions and services globally, and therefore benefiting
stakeholders of both companies."
Sergey Chernovolenko, Chief Executive Officer said:
"I am very proud to lead a company driven by a talented team who do incredible
work for our customers in over 60 countries around the world. Softline Group's
success depends fully on our people, their capabilities, motivation and
constant development. Together, we have built a great company, with a very
strong track record for growth, and this provides a solid foundation for the
next chapter for both independent organisations that will be leaders in their
markets, Softline Russia and Softline Global. During this time of
unprecedented change in our history, we have demonstrated an unwavering focus
on delivering tangible value for our customers, while driving strong business
results in line with our commitment to shareholders. It is an honour for me to
lead Softline during this extremely important business period
in our history, and I am confident that both companies will continue their
progress with investments, growth and strategic initiatives to strengthen
their leadership."
Media Contact Investor Relations Contact
Steven Salter
Eve Frayling
Softline@pagefield.co.uk Global Investor Relations VP
IR@softline.com
Rocio Herraiz Alexandra Melnikova
Global Head of Communications Investor Relations Director
Rocio.herraiz@softline.com (mailto:Rocio.herraiz@softline.com) IR@softline.com
About Softline
Softline today is a leading global solutions and services provider in digital
transformation and cyber security, with its headquarters in London. The
company enables, facilitates and accelerates the digital transformation of its
customers' businesses, connecting over 150,000 organizations from all
industries with over 6,000 best-in-class IT vendors, and delivering its own
services and solutions. Foundation of Softline's growth is so-called
three-dimensional strategy, which includes geographic, portfolio and sales
channel expansion. This strategy is supported by energetic M&A activity,
so Softline is benefiting from the on-going consolidation of the industry.
Thanks to this strategy, Softline is currently one of the fastest growing
companies in the sector. Softline delivered turnover of US$2.2 billion in
fiscal year 2021. In October 2021, the company conducted a primary listing on
the London stock exchange.
Softline's 8,400 employees work in almost 60 countries throughout Asia, Latin
America, Eastern Europe, Middle East and Africa - markets with significant
growth potential.
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