Softline (now Noventiq) plans to proceed with a demerger of its Russian and non-Russian operations
London, 19 July 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 demerger of its Russian and non-Russian operations, subject to all necessary approvals, including shareholder approval. The announcement follows a review initiated in May 2022 to adjust the group’s assets and ownership structure in order to optimise value for all of its stakeholders.
Softline Holding plc began trading under the brand name Noventiq after divesting part of its business in October 2022.
The review was initiated on the basis that its Russian and non-Russian businesses increasingly differ in operations, priorities, and go-to-market strategies. The dynamics in the two different markets have now evolved to such an extent that following the review of alternative options, the board has decided to create two independent companies. This will allow the companies to better serve customers, capitalise on different growth strategies, and optimize value.
As part of the demerger, the business in the Russian Federation will become “Softline Russia”, and the business outside Russia will become “Softline Global”, although in the future these names will change. Softline Global intends to retain the company’s LSE listing. Following the demerger, the Softline Russia board and executive team will consider how best to provide Softline Russia shareholders with liquidity in their shares. The board believes the two companies will continue to drive digital transformation and cyber security solutions and services, with deeply experienced leadership teams and very strong offerings in their respective markets.
Softline remains committed to protecting the interests of all its stakeholders, including shareholders, employees, customers and vendors:
- Softline believes this course of action is in the best interests of its shareholders. Ongoing geopolitical events have had a disproportionate impact on Softline’s market value, and the separation of companies is designed to support a path to a more rational valuation of both companies that reflects their strong profitable growth and fundamental value.
- The demerger will allow both companies to continue to provide digital transformation and cyber security solutions and services to existing and new customers in the geographies where Softline currently operates. There is significant market opportunity, and the two independent companies will be better placed to accelerate their growth strategies based on the respective market dynamics.
- This change will enable employees to benefit from the market-leading Long-Term Employee Partnership Programmes in both companies, therefore allowing Softline’s newly formed independent entities to attract and retain talented professionals, and further supporting the owner-operator culture of both companies.
- The two new independent companies will be in a better position to execute their go-to-market strategies with all their regional and global vendor-partners.
The company has embarked on executing the process for demerger and has appointed a number of third-party advisors. The process is subject to a number of uncertainties and will likely take some time to execute, but what is important is that Softline does not believe that the demerger will have an impact on the core values of the group and on its commitment to customers and vendor-partners. The company will make further announcements as appropriate in order to keep all stakeholders duly informed.
In conjunction with the demerger, Softline announces the following leadership changes which will take effect from 1st August 2022:
- Current Chief Operating Officer, Sergey Chernovolenko, will become Chief Executive Officer of Softline Holdings Plc and will lead the demerger transition.
- Following the completion of the earlier announced review of strategic options, Roy Harding, will step down from the role of Chief Executive Officer of Softline Holdings plc. He will continue to serve on the board of directors as an executive director, as well as in an operational role responsible for the integration of strategic acquisitions within Softline Global.
For the two independent companies, the following leadership changes will apply once separation is completed:
- Sergey will become Chief Executive Officer of the newly formed Softline Global. Sergey will serve as a member of its board of directors. Current Chief Executive Officer of Softline International, Hervé Tessler will take up the new position of President of the newly formed Softline Global. Current Chief Financial Officer of Softline International, Burak Ozer will become the Chief Financial Officer of the newly formed Softline Global. Softline is a leader in the global emerging markets in which it operates, and the demerger will enable the company to accelerate the execution of its three-dimensional strategy. Sergey, Hervé and Burak are all resident in the UK, where the HQ for Softline Global will be located.
- Current Chief Executive Officer of Russia, Vladimir Lavrov will become the Chief Executive Officer of the newly formed Softline Russia. Current Chief Financial Officer of Softline Holdings plc, Artem Tarakanov will become the Chief Financial Officer of the newly formed Softline Russia. Softline is a leader in the Russian market, and the demerger will enable the company to continue expanding its market leading position. Both Vladimir and Artem are based in Moscow where HQ for Softline Russia will be located.
Softline recently announced excellent annual results for FY2021 ending March 31, 2022, with very strong profitable growth including 26% constant currency turnover growth, and 39% gross profit growth. The company has a very strong balance sheet and cash position. These results demonstrate that the individual companies will embark on their independent journeys with a strong foundation, and with proven execution capabilities of both leadership teams.
Jacques Guers, Chairman of the Board of Directors of Softline Group noted:
“The changes we announced today will create two leading players in their respective markets, resulting in optimised growth strategies, operations and shareholder value for both independent companies. Based on the review of options for amending the group assets and ownership structure, we believe the proposed demerger is in the best interests of the current company and our stakeholders, including our shareholders, customers, employees and vendors.”
“I would like to thank Roy for successfully leading the company through unprecedented change in our global market. He has overseen the process of getting to the right decision for the business to ensure its future success, and I am thrilled that we will continue to benefit from Roy’s deep international experience in both an operational role and on the board.”
“Looking ahead, Sergey and Hervé for Softline Global, and Vladimir for Softline Russia, with their vast depth of experience, are the right people to lead each company. Artem and Burak have extensive experience in financial operations of both the Russian and global businesses which provides a strong consistent foundation for the future. The changes announced today positions us very well as we continue to partner with our customers, driving digital transformation and cyber security solutions and services globally, and will benefit all stakeholders of both companies.”
Roy Harding, Strategic Acquisition Integration, and board member said:
“I am honoured to have been able to successfully lead the company through this period of complexity and uncertainty, and to have found the right option to optimise value for our stakeholders. Both companies are very well positioned for continued success, and I am very pleased that I will continue to play an active role in Softline Global. I am genuinely excited about the future for both companies, under the talented leadership teams that will be in place.”
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