Danka Business Systems responds to DCML, still believes liquidation is best for shareholders

By Lisa Kerner

Charlotte, N.C., June 11 - Danka Business Systems plc told shareholder DCML LLC that the sale of Danka Office Imagining Co., the company's remaining operating businesses, to Konica Minolta Corp. leaves the company with no reason to exist.

The comments were made in Danka's June 11 letter to DCML included in a form 8-K filing with the Securities and Exchange Commission.

In making the decision to enter into the members voluntary liquidation on April 8, Danka said its board considered "the significant costs associated with trying to remain an independent player in an extremely competitive industry, the level of our indebtedness, our liquidity requirements, and the likelihood that the continued accretion in the value of our 6.50% convertible participating shares would outpace the increase in the value of the company, increasing the possibility of no return to the holders of ordinary shares and American Depositary Shares," according to the filing.

Danka's board said it believes the net cash remaining in the company should be returned Danka's shareholders and that the proposed transactions are in the best interest of its shareholders.

If the sale is not completed by June 30, the board believes that Danka will have limited financial options, the filing stated.

In addition, if the proceeds of the sale are not received before July 1, Danka's board does not believe the company will be able to finance the forecast debt repayment obligations resulting in the withdrawal of its General Electric Credit facilities.

DCML said the planned liquidation of Danka following the sale of its U.S. imaging business is "grossly unfair" to shareholders and that it would not support the voluntary liquidation of the company at the annual meeting in August.

In a June 9 letter to Danka's board of directors, DCML said the proposed liquidation will leave ordinary shareholders with a "pittance" of $6.5 million ($0.025 per ordinary share or $0.10 per American Depository Share) while holders of participating shares would receive "substantially in excess of $100 million."

The investor wants Danka to consider alternative options for executing the sale of Danka Office Imaging while ensuring the value of a sale is "shared more equitably among all of the company's shareholders."

Danka Business Services, based in St. Petersburg, Fla., provides office imaging equipment, software, support, and related services and supplies in the United States.

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