Labat Africa is selling Acme Stores, a non-core retail business that accounts for 58% of the entire group`s debt.
Acme Stores was a subsidiary of Acrem Holdings, which acquired Labat`s management consulting business in a reverse takeover in 1999. Acrem was then renamed Labat and transferred to the JSE`s venture capital sector.
Since then Labat has evolved into an information and communications technology (ICT) company.
"The retail business requires ongoing funding in order to sustain its growth model, resulting in onerous funding obligations for Labat," the group says in a notice issued at the weekend.
"Currently, the retail business is funded by overdraft facilities, in the region of R38 million as of 31 January 2005, representing approximately 58% of Labat`s entire group debt. This is severely limiting the stability and growth of Labat`s core ICT business operations."
The buyer is Fluxrab Investments No 111, which was established for the purpose of the disposal. The shareholders are Mervyn Stewart and management (47%), BVR Investments (47%) and the employee share trust (6%).
The sole shareholders of BVR Investments are Hymie Pedro and Brian van Rooyen. As Van Rooyen is a director of Labat and major shareholder, the deal has been classified a related party transaction.
Fluxrab will pay a maximum of R10 million plus a rand. It will pay only once it has collected Acme debtors` receipts of more than R38 million. The purchase price will then be paid from further debtors` receipts acquired.
The deal is subject to regulatory and shareholder approval.
Labat says it is still trading under a cautionary notice as it is involved in additional talks unrelated to this deal but which could further improve the group`s debt position and focus.
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