Ironwood Investment Management, LLC Issues Open Letter to Danka Shareholders

BOSTON, June 11 /PRNewswire/ -- The following is a letter from Warren J. Isabelle of Ironwood Investment Management, LLC to the shareholders of Danka Office Imaging Corporation.

Fellow Danka Shareholders:

As you should by now be aware, the company's management and board of directors has entered into a transaction that will sell the U.S. subsidiary Danka Office Imaging Corporation (DOIC) to Konica-Minolta Corporation (K-M), a substantial Japanese entity with interests in office equipment and consumer electronics, for approximately 240 million dollars. To consummate this transaction you are being asked: 1) to ratify the sale of the U.S. subsidiary to K-M; and 2) to place the holding company into liquidation. Management has stated that this course of action represents the best deal for shareholders and recommends that you vote for these transactions.

Before doing so, consider where the $240 million in gross proceeds (subject to adjustment) will end up:

  1) General Electric Credit will be paid approximately $148 million;
  2) Convertible Preferred Shareholders will receive at least $67 million;
  3) Legal, Investment Banking and other Professional Fees (transaction
     expenses) will total $14.2 million;
  4) Management will receive in excess of $10 million (approximately $5
     million of which will be paid by K-M)

Last, and in this case least, ordinary shareholders will receive, in total, just $6.5 million, or $.10 per American Depository Share (ADS) (equivalent to $.025 per ordinary share).

We find it inequitable that the convertible preferred shareholders, who in fact have no preference over ordinary shareholders except in liquidation, stand to receive nearly three-quarters of the residual proceeds, despite the fact that they represent, on an as-converted basis, less than 30% of all of the outstanding voting rights. Further, it appears the bankers and lawyers with their collective transaction expenses will receive twice that of the ordinary shareholders while management walks away with $3.5 million more than the total equity value offered the ordinary shareholders.

Is this deal so complicated that it takes $14.2 million in fees to effect? Has management been so valuable during its tenure to warrant $10 million in compensation? Here we note that when the current CEO took control, the price of one ADS was about $1.50. At $0.10, the current offer represents a decline in value of 93%.

As fiduciaries to clients representing 10,960,354 ADS or 16.91% of the ordinary shares outstanding, or approximately 11.54% of the as converted voting rights, Ironwood will be voting against the proposed voluntary liquidation. Quite simply we believe that management has not acted in the ordinary shareholders' best interests and that the liquidation process will not result in maximizing the value of those shares.

We urge you to conduct your own review and cast your vote, recognizing that U.S. holders of the ADS shares, which each represent a claim on four ordinary shares, must contact their broker or custodian with specific instructions to be submitted to the Bank of New York.

The final outcome should be mandated by the will of the shareholders, to whom management and the board of directors must be accountable.

  Respectfully submitted,

  Warren J. Isabelle
  Ironwood Investment Management, LLC

CONTACT: David Eaton of Ironwood Investment Management, LLC, +1-617-757-7600

Web site: http://www.ironwoodinvestmentmanagement.com/

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