Mustek buy out called off

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rpm

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Mustek deal called off

The consortium bidding to buy out computer distributor Mustek has called off its plans to purchase the company, as the suspension of Section 45 Intragroup Relief in the Income Tax Act may result in an uncertain impact on the transaction.
 
The question(s) I have is how many other business deals will also be impacted negatively & what does this act mean for our economy
 
Nice. Learned a lot by googling this. :cool:

In short, Mustek management wanted to do an MBO which relied on a sneaky trick involving s45. SARS is pissed about s45 being abused for take-over purposes so it killed it via the 2011 Taxation Laws Amendment Bill (2 June). The result is that the MBO is dead for now.

s45 is intended to allow companies within a group to move assets between themselves without triggering CGT. The way its used in take-overs though: You buy the shares of the target via SPE_A and create another SPE_B. SPE_A sells the assets to SPE_B, which funds it via LT debt. No CGT thanks to s45. Unlike the share purchase, the LT debt is deductible providing an incentive to gear SPE_B sky-high. Without s45 this structure doesn't make sense anymore & the whole thing needs to be re-designed from scratch.

Code: 
MST - Mustek Limited - Withdrawal of cautionary announcement                    
MUSTEK LIMITED                                                                  
(Incorporated in the Republic of South Africa)                                  
(Registration number 1987/070161/06)                                            
Share Code:  MST                                                                
ISIN Code:    ZAE000012373                                                      
("Mustek" or "the company")                                                     
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT                                           
Further to the announcements dated Wednesday, 15 December 2010, renewed on      
Friday, 28 January 2011, Friday, 25 February 2011, Tuesday, 12 April 2011 and on
Monday, 30 May 2011 regarding the expression of interest to effect the buy-out  
and delisting of Mustek by a consortium led by the company`s chief executive    
officer, David Kan and the Trinitas Private Equity Fund, shareholders are       
advised that the cautionary announcement is withdrawn.                          
Accordingly shareholders no longer need to exercise caution in dealing in the   
company`s securities.                                                           
Midrand                                                                         
7 June 2011
 
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