Flying in the face of perceived wisdom, Amsterdam, Netherlands-based Getronics decided to make its second debt-for-equity split in the space of 12 months, which will flood the market with up to 133% more Getronics shares. The move will affectively dilute its share value to junk status, and Getronics has already lost 98% of its value since March 2000 when the company was valued at $11.3bn. It is now worth approximately $260m, or 15 times less than its full year 2001 revenue of 4.15bn ($4.15bn).
Through the offering, Getronics will give its bondholders a premium of 83.4% on bonds due in 2004, and a 102% premium on those due in 2005 for exchange into shares, which it hopes will cut its net debt to just 100m euros ($100m). The new split requires at least 57.5% approval from bondholders, among which it has already received 11% approval. And according to reports, Getronics will then have cut its debt to 350m euros ($350m) of credit, and new convertible debt. Following the deal, shareholders will own approximately 43% of the company.
CFO Jan Docter said: The invitation to tender is the final phase of the improvement of the financial position. We will then have re-established a financial platform for the further development of our business that we expect to benefit from when there is an upturn in the market.
If Getronics manages to finally reduce its debt position through the latest debt-for-equity split, it is likely to appear a much more attractive takeover target. And with a sale now the only way shareholders are going to generate any real returns on their investment, pressure is likely to come to bear on the management to sell. Firms like Dell and Unisys are keen to build up their IT services businesses, and with Getronics’ emphasis on managed, network services and outsourcing, it could soon become the next target in the rapidly consolidating IT services market.
Source: Computerwire
