TIDMESG
RNS Number : 0247N
eServGlobal Limited
03 June 2010
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the contents of this document or as to what action you should
take, you should seek your own personal advice immediately from your legal,
financial or other professional adviser.
If you have sold or otherwise transferred all of your Shares, please forward
this document together with the accompanying Proxy Form immediately to the
purchaser or transferee or to the stockholder, bank or other agent through whom
the sale or transfer was effected for onward delivery to the purchaser or
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independent financial adviser. The London Stock Exchange has not itself
examined or approved the contents of this document.
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| Circular to Shareholders and Notice of General Meeting |
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Proposed Sale of USP Business
eServGlobal Limited ACN 052 947 743
Wednesday, 30 June 2010
at 10.00am AEST
Blackwattle Room 1
Crowne Plaza Darling Harbour
150 Day Street
SYDNEY NSW 2000
AUSTRALIA
This document includes forward-looking statements. The words "believe",
"anticipate", "expect", "intend", "aim", "plan", "predict", "continue",
"assume", "positioned", "may", "will", "should", "shall", "risk" and any other
similar expressions that are predictions of or indicate future events and future
trends identify forward-looking statements. These forward-looking statements
include all matters that are not historical facts. Shareholders should not
place undue reliance on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors that are in may cases beyond
the Company's control. By their nature, forward-looking statements involve
risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Forward-looking
statements are not guarantees of future performance, and the Company's actual
results of operations, financial condition and liquidity, and the development of
the industry in which it operates may differ materially from that made in or
suggested by the forward-looking statements contained in this document. The
cautionary statements set forth above should be considered in connection with
any subsequent written or oral forward-looking statements that the Company, or
persons acting on its behalf, may issue. These forward-looking statements are
made as of the date of this document and are not intended to give any assurances
as to future results. Save as required by law or regulation the Company
undertakes no obligation to update these forward-looking statements, and will
not publicly release any revisions it may make to these forward-looking
statements that may result from events or circumstances arising after the date
of this document.
Circular to Shareholders and Notice of General Meeting
eServGlobal Limited ACN 052 947 743
Notice is given that the General Meeting of eServGlobal Limited (Company) will
be held at:
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| Location | Blackwattle Room 1 |
| | Crowne Plaza Darling Harbour |
| | 150 Day Street |
| | SYDNEY NSW 2000 |
| | AUSTRALIA |
+--------------+------------------------------------------------------+
| Date | 30 June 2010 |
+--------------+------------------------------------------------------+
| Time | 10.00am Australian Eastern Standard time |
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Special Business
Proposed sale of USP Business
To consider and if in favour pass the following resolution as an ordinary
resolution:
'For the purposes of AIM Rule 15 and for all other purposes, to approve the
disposal of the assets and undertakings of the USP Business operated by
eServGlobal Limited and certain of its subsidiaries to Oracle Corporation
Australia Pty Limited in accordance with the terms and subject to the conditions
of the asset purchase agreement dated 26 May 2010, the principal terms of which
are set out in the attached Explanatory Memorandum and that the Directors of the
Company be authorised to take all such steps as any of them may consider
necessary or desirable to implement and give full effect to the intentions of
the parties under the asset purchase agreement (including agreeing any
amendments or waiver or variation of the terms and conditions of the asset
purchase agreement as they may, in their sole discretion, deem fit, appropriate
or necessary).'
Dated 26 May 2010
By order of the Board
Jason Lilienstein
Company Secretary
Notes
Determination of entitlement to attend and vote at the Meeting
The Company has determined, in accordance with the Corporations Act, that for
the Meeting or any adjourned Meeting, Shares will be taken to be held by those
persons recorded in the Company's register of members as at 10.00am AEST on 28
June 2010.
Depository Interest Holders (UK only) wishing to attend the meeting are required
to request the appropriate authority from the depositary interest trustee, and
registered shareholder, ComputerShare Clearing Pty Ltd. A request can be made
by returning the form at the bottom of the Form of Instruction being sent to DI
Holders. Please note that DI Holders will not be permitted to vote in person at
the Meeting.
Voting by proxy
A Shareholder who is entitled to attend and vote at the Meeting may appoint a
proxy to attend and vote at the Meeting on behalf of that Shareholder. A proxy
need not be a Shareholder of the Company. If a Shareholder is entitled to cast
two or more votes at the Meeting, the Shareholder may appoint two proxies and
may specify the proportion or number of votes each proxy is appointed to
exercise. If the appointment does not specify the proportion or the number of
the Shareholder's votes that each proxy may exercise, each proxy may exercise
half of the Shareholder's votes on a poll.
A corporation may elect to appoint a representative in accordance with the
Corporations Act in which case the Company will require written proof of the
representative's appointment which must be lodged with or presented to the
Company before the meeting.
Proxies may be lodged with the Company's share registry Computershare Investor
Services Pty Ltd:
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| Australia (Proxy Forms) | United Kingdom (Form of |
| | Instruction) |
+--------------------------------------+--------------------------------------+
| By | GPO Box 242 | By | Computershare Investor |
| mail: | MELBOURNE VIC 3001 | mail: | Services PLC |
| | AUSTRALIA | | The Pavilions, |
| | | | Bridgwater Road |
| | | | BRISTOL BS99 6ZY |
| | | | UNITED KINGDOM |
+------------+-------------------------+------------+-------------------------+
| By | 1800 783 447 (inside | By | 0870 704 6116 |
| facsimile: | Australia) | facsimile: | |
+------------+-------------------------+------------+-------------------------+
| | +61 3 9473 2555 | | |
| | (outside Australia) | | |
+------------+-------------------------+------------+-------------------------+
To be effective, the Company must receive the completed proxy form and, if the
form is signed by the Shareholder's attorney or authorised representative, the
authority under which the proxy form is signed (or a certified copy of the
authority) by no later than 10.00am AEST on 28 June 2010.
A DI Holder may only vote by giving its instructions on Form of Instruction to
the registered Shareholder of their Shares, ComputerShare Clearing Pty Ltd.
This Form of Instruction is required to be received by ComputerShare Clearing
Pty Ltd no later than four days before the General Meeting. DI Holders will
not be entitled to vote in person at the meeting.
Glossary of terms
In the attached Notice of Meeting and Explanatory Memorandum the following words
and expressions have the following meanings:
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| Term | Definition |
+----------------------+----------------------------------------------+
| Agreement | means the agreement titled 'Asset Purchase |
| | Agreement' for the sale of the USP Business |
| | including the USP Products, (subject to the |
| | satisfaction of certain Conditions) between |
| | eServGlobal as seller and Oracle as Buyer |
| | and dated 26 May 2010. |
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| AIM | means AIM, a market of the London Stock |
| | Exchange. |
+----------------------+----------------------------------------------+
| AIM Rules | means together the AIM Rules for Companies |
| | and the AIM Rules for Nominated Advisers |
| | governing admission to and the operation of |
| | AIM. |
+----------------------+----------------------------------------------+
| AIM Rules for | means the AIM Rules for Companies published |
| Companies | by the London Stock Exchange. |
+----------------------+----------------------------------------------+
| AIM Rules for | means the AIM Rules for Nominated Advisers |
| Nominated Advisers | published by the London Stock Exchange. |
+----------------------+----------------------------------------------+
| ASIC | means the Australian Securities and |
| | Investments Commission. |
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| ASX | means ASX Limited ACN 008 624 691. |
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| ASX Listing Rules | means the official listing rules of ASX. |
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| Board | means the board of directors of the Company. |
+----------------------+----------------------------------------------+
| Conditions | means the conditions precedent to the |
| | completion of the Proposed Transaction. |
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| Company or | means eServGlobal Limited and certain of its |
| eServGlobal | affiliates. |
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| Chairman | means the Chairman of the Company as |
| | approved from time to time and includes an |
| | acting Chairman. |
+----------------------+----------------------------------------------+
| DI Holders | means holders of depositary interests in the |
| | Company. |
+----------------------+----------------------------------------------+
| Directors | means the directors of the Company from time |
| | to time. |
+----------------------+----------------------------------------------+
| Explanatory | means the Explanatory Memorandum |
| Memorandum | accompanying this Notice. |
+----------------------+----------------------------------------------+
| General Meeting or | means the general meeting of the Company to |
| Meeting | approve the Proposed Transaction. |
+----------------------+----------------------------------------------+
| Non-USP Business | means the licence, support and development |
| | of a large suite of other software products |
| | and solutions including PromoMax, HomeSend, |
| | UIP, VOMS, MailiS, MSP and M-POS to be |
| | retained by the Company. |
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| Notice and Notice of | means the Notice of Meeting included in this |
| Meeting | document. |
+----------------------+----------------------------------------------+
| Oracle | Oracle Corporation Australia Pty Ltd and |
| | certain of its affiliates. |
+----------------------+----------------------------------------------+
| Proposed Transaction | means the proposed sale of the USP Business |
| | to Oracle in accordance with the terms and |
| | conditions of the Agreement. |
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| Proxy Form | means the proxy form enclosed with this |
| | document. |
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| Record Date | means 10.00am AEST on 28 June 2010. |
+----------------------+----------------------------------------------+
| Resolution | the resolution to approve the Proposed |
| | Transaction set out in the Notice of |
| | Meeting. |
+----------------------+----------------------------------------------+
| Share | means a share in the capital of the Company, |
| | the terms of which are contained in the |
| | constitution of the Company. |
+----------------------+----------------------------------------------+
| Shareholders | means the holders of the Shares in the |
| | Company from time to time. |
+----------------------+----------------------------------------------+
| UK Listing Authority | means the Financial Services Authority |
| | acting in its capacity as the competent |
| | authority for the purposes of Part VI of the |
| | UK Financial Services and Markets Acts 2000 |
| | (as amended). |
+----------------------+----------------------------------------------+
| USP Business | means the business operated by eServGlobal |
| | that provides software, support and |
| | associated consulting and development |
| | services to various telecommunications |
| | customers of eServGlobal in respect of the |
| | USP Products proposed to be sold to Oracle. |
+----------------------+----------------------------------------------+
| USP Platform | means the Company's proprietary technology |
| | platform known as the Universal Service |
| | Platform or USP. |
+----------------------+----------------------------------------------+
| USP Products | means the USP Platform ChargingMax, |
| | NumberMax, MessageMax, uVoms, SRM and UMS |
| | software products proposed to be sold to |
| | Oracle. |
+----------------------+----------------------------------------------+
Explanatory memorandum
eServGlobal Limited ACN 052 947 743
Proposed sale of USP Business
Introduction
1 eServGlobal Limited announced on 26 May 2010 that it has entered into
the Agreement to sell the assets and undertakings of its USP Business, including
the USP Products, to Oracle for a cash consideration of up to USD$93,750,000
(AUD$113.4 million, GBP65 million) subject to certain deductions. The material
terms of the Agreement and the purchase price deductions are described below.
2 The revenue attributable to the USP Business in the financial year
ended 30 June 2009 was AUD$61,560,000 (GBP36 million) (42% of the total revenue
for eServGlobal in that year). The profits attributable to the USP Products and
other associated assets cannot be calculated, as they are not currently
accounted for separately from the Non-USP Products and assets as the Company
does not account for or report contribution by product. This is due to many of
the customers of the Company utilising both USP and Non-USP Products and is
further due to the fact that the cost accounting and reporting undertaken by the
Company is by expense category not product category.
3 eServGlobal will retain its Non-USP Business and intends to continue
to operate and grow that business after the disposal of the USP Business.
4 The proposed sale of the USP Business requires the approval of
Shareholders under Rule 15 of the AIM Rules. Accordingly, completion of the
Proposed Transaction is conditional, amongst other things, on the approval of
Shareholders of the Company at the General Meeting.
5 The purpose of this document is to provide Shareholders with
information on, amongst other things, the Proposed Transaction and to explain
why the Board considers the Proposed Transaction to be in the best interests of
the Company and the Shareholders as a whole and to recommend to Shareholders to
vote in favour of the Resolution to be Proposed at the General Meeting.
Transaction rationale
6 The USP platform on which the USP Products are based is a leading
pre-paid billing platform which was built, implemented and developed by the
Company.
7 In recent years, more and more telecommunications operators are
looking for suppliers to provide convergent billing solutions which contain both
pre-paid and post-paid billing in a single offer. In view of the fact that the
Company does not have a post-paid billing solution, the Company cannot
independently provide convergent billing in a single offer. To that end, the
Company is dependent upon post-paid billing partners when providing solutions to
tier one telecommunications operators. As these partners introduce their own
pre-paid platforms, the value of the USP platform to the Company reduces.
8 The Directors and management consider that the purchase price
reflects an attractive and fair valuation for the USP Business and includes a
sufficient premium to reflect the strategic value to Oracle of the Company's
leading USP Products. Oracle is a natural acquirer of this segment of the
Company's business as it does not currently itself operate a pre-paid billing
platform and the Company's USP Platform is built on Oracle tools, database and
runs on Oracle hardware.
9 Furthermore, the Directors of the Company believe that the business
of the Company will benefit from the separation of the USP Business from the
Non-USP Business. Following completion of the Proposed Transaction, the focus
of the Company will be on the development, support and customisation of the high
growth areas of mobile money services and value add services. eServGlobal also
plans to expand its "software as a service" delivery and licensing models to
create greater flexibility, agility and scalability. The Non-USP Business is
independent of the USP Business and assets and the directors are of the view
that the transaction will not diminish the Company's ability to engage with
telecommunications operators for the sale of the Non-USP Products.
Terms of the Agreement
10 The Company has entered into the Agreement to sell the assets and
undertakings of its USP Business to Oracle for cash consideration of up to
USD$93,750,000 (AUD$113.4 million, GBP65 million) to be paid in Australian
dollars at completion. The conversion of the amount due will be based on the
exchange rate current on the Reuters Currencies website 9 business days before
completion. Implementation of the transaction will also result in the
assumption of certain liabilities by Oracle, including in relation to some
employees and other obligations. The consideration is to be adjusted at
completion so that accounts receivable (which are being retained by eServGlobal)
and some accrued employee entitlements are deducted from the purchase price. An
amount of USD$20,750,000 (AUD$25.1 million, GBP14.4 million) (converted into
Australian dollars using the currency conversion method described above) will be
retained by Oracle in escrow. The rationale for the escrow amount is described
below.
11 In broad terms, the assets and undertakings of the USP Business
include the USP Products, approximately 200 employees in various jurisdictions,
agreements with over 20 customers to provide the USP Products, together with
services (including consulting and development services) in respect of the USP
Products, various fixed assets and the leases for three premises.
12 The Conditions precedent to completion of the Agreement and the
Proposed Transaction are numerous and include:
(a) approval by Shareholders of the Company to the Proposed Transaction
for the purposes of Rule 15 of the AIM Rules and for any other purpose;
(b) obtaining the consent of relevant third parties (including customers)
to the transfer of rights and obligations of eServGlobal under their agreements
with eServGlobal to Oracle;
(c) the execution of non-competition agreements by various key employees
of eServGlobal ; and
(d) the execution and delivery of numerous ancillary documents including:
(i) intellectual property assignment and licence documents in respect of
the intellectual property rights relevant to the USP Business;
(ii) transitional services agreements (under which eServGlobal agrees to
provide various services to Oracle for varying periods), to assist with the
transition of the USP Business from eServGlobal to Oracle;
(iii) a subcontract agreement under which Oracle agrees to provide some
services in respect of the USP Products as eServGlobal's subcontractor for some
customer contracts that are not going to be taken over by Oracle; and
(iv) an intellectual property licence agreement under which eServGlobal
obtains a licence back of some specific intellectual property rights relevant to
the USP Business so that eServGlobal can continue to provide support services to
some customers.
13 The Conditions must be satisfied or waived by 6 September 2010. In
the event that not all the Conditions are satisfied (or waived by Oracle) prior
to this date, Oracle or eServGlobal will have the right to terminate the
Agreement and discontinue the Proposed Transaction.
14 eServGlobal will be subject to a requirement to conduct the USP
Business in the usual and ordinary course during the period between the signing
of the Agreement and the implementation of the Proposed Transaction, as well as
a number of more specific restrictions in respect of the USP Business during
that period, unless Oracle provides its consent.
15 eServGlobal has agreed not to solicit an offer from any third party or
participate in any discussions or negotiations with any third party in relation
to a broad range of competing transactions, however it is permitted to respond
to an unsolicited proposal where the fiduciary duties of eServGlobal's board
requires it to do so.
16 Pursuant to the Agreement, the Company has given numerous warranties
and indemnities including in relation to a broad range of aspects of the USP
Business, the USP Products and the underlying intellectual property rights to
Oracle. The Company's maximum liability under these warranties and indemnities
is equal to the purchase price except in the case of fraud and in relation to
the excluded assets and liabilities, in which case the Company's liability is
unlimited. Claims for breach of warranties must be made prior to the expiry of
four and a half years from the completion date (in some cases the expiry of the
claims period is two years from the completion date). An amount of
USD$20,750,000 (AUD$25.1 million, GBP14.4 million) (converted into Australian
dollars using the currency conversion method described above) will be retained
by Oracle in escrow as a source of indemnification for Oracle for two years
following completion. After the expiry of one year (assuming funds are
available and no claims are outstanding), half of that amount will be released
to eServGlobal and the remainder will be retained in escrow for a further year.
If there are no claims under the Agreement, the remaining amount will be
released to eServGlobal on the second anniversary of the completion date.
17 The Company has agreed to pay Oracle a break fee of USD$937,500
(AUD$1.1 million, GBP650,000) (converted into Australian dollars in the manner
set out above) in the event that the Proposed Transaction does not proceed
because:
(a) the Resolution under this Notice of Meeting is not passed by an
ordinary majority of Shareholders; or
(b) it is determined by the Directors of the Company that the Proposed
Transaction is not in the best interests of the Shareholders, based on the
receipt of a superior proposal and the Resolution under this Notice of Meeting
is not passed by an ordinary majority of Shareholders.
18 The Company's major shareholder, Guinness Peat Group (holding
approximately 19% of the issued share capital of eServGlobal) has entered into
an agreement with Oracle under which it agrees to vote its shares in favour of
the transaction. In addition, MHB Holdings Pty Ltd (a company associated with
Richard Mathews), Wallaby Hill Pty Ltd (a company associated with Ian Buddery)
and Craig Halliday (representing approximately 20% of the Company's issued share
capital in aggregate) are supportive of the transaction and have confirmed in
writing to the Company that in the absence of a superior proposal from a third
party, they intend to vote their shares in favour of the Resolution.
19 The Agreement contains a non-compete clause under which the Company
agrees that it and each of its affiliates will not:
(a) carry on a business that is the same as or substantially similar to
or competitive with the USP Business or the USP Products for a period of 3 years
after completion, except with respect to certain limited exceptions relating to
the Non-USP Business;
(b) directly or indirectly solicit for employment any key or continuing
employees of the USP Business for a period of 3 years after completion;
(c) directly or indirectly solicit the business of any person who is a
customer, supplier, licensee, licensor, franchisee, consultant or other business
relation or induce any of those persons to cease doing business with Oracle for
a period of 3 years after completion.
The Company's operations following the sale of the USP Business
20 Following completion of the Proposed Transaction, the Company will
focus on growing and operating its Non-USP Business utilising the Non-USP
Products. The Director's believe that new eServGlobal will remain a strong
value proposition, specialising in software and associated consulting, support
and development services for its suite of software products and solutions, which
are described below.
21 The Non-USP Business has agreements with, and provides services to
more than 60+ customers. Further, 315 out of 540 staff currently employed with
eServGlobal will remain employed by eServGlobal and will continue to work in the
Non-USP Business.
22 The Company will continue to operate the Non-USP Business which
comprises:
(a) its entire recharge business which consists of software and
associated consulting, support and development services for its software
products and solutions, including:
(i) PromoMax - a carrier grade solution for telecommunications operators
to build targeted, personalised, diversified and timely promotions and loyalty
programs in the new generation environment;
(ii) Mailis - a flexible, modular and scalable solution enabling service
providers to deliver voice mail, unified mail and video mail to both retail and
business customers;
(iii) UIP - the Company's highly scalable and multi-lingual interactive
voice response solution; and
(b) its international mobile remittance business, Homesend, which is a
global hubbing service that offers cross border person-to-person transfers of
money, air time and roaming recharge.
23 Following completion of the Proposed Transaction, the Company will
focus the Non-USP Business on two key areas:
(a) mobile money services which comprise of full 'end-to-end' and 'any
account to any account' mobile financial services and international money
transfers. These services will allow mobile users to make bill payments by
mobile phone, send credits to another mobile phone subscriber to enable them to
recharge their phone, and transfer money internationally to another mobile phone
subscriber, even across a different network; and
(b) value added services which enable telecommunications operators to
engage with their subscribers in a personalised and dynamic manner.
As part of that focus, the Company will continue to develop, support and provide
its customers with the personalised solutions that they need, while accelerating
their time to market with agile solutions built for fast deployment, flexibility
and adaptability.
24 Given the increasing rate of access to mobile phones around the world
(including by over 1 billion that may not even have access to traditional bank
accounts), and that mobile users are increasingly using those phones for
purposes other than simply making and receiving calls, the market opportunity
for the new eServGlobal business is exciting and the directors believe mobile
money and e-payment services is a fast growing area. For example, by 2015 it is
anticipated that 3-15% of the international money transfers currently handled by
various formal or informal agent networks will be carried out using a mobile
handset, generating US$1.2 - 6.2 billion in service revenues.
25 To this end the Company will:
(a) provide 'software as a service' alternatives, in addition to the
current licensing models to increase speed to market and also build a more
predictable revenue stream;
(b) consolidate functionality across each of its platforms and provide a
common user interface to allow easier cross sell;
(c) continue to reinvigorate the indirect sales channels; and
(d) continue to invest in the HomeSend platform.
26 In the financial year ended 30 June 2009 the Non-USP Business
generated approximately AUD$85,600,000 (GBP48.9 million) in revenue (58% of
total revenue generated by eServGlobal in that year).
27 The balance sheet set out at Annexure A sets out the asset, liability
and equity position for each of the USP Business and Non-USP Business for the
half year ended 31 December 2009.
Advantages and disadvantages of the Proposed Transaction
28 The advantages of the Proposed Transaction (should it proceed) for the
Company and the Shareholders include the following:
(a) the Board considers that the cash purchase price represents an
attractive valuation for the USP Business;
(b) all Shareholders will retain their current percentage ownership
interest in the capital of the Company;
(c) the Company will not be subject to any ongoing risk due to the
competitive pressures associated with the USP Business;
(d) the Company will be able to focus all of its attention following
completion of the Proposed Transaction upon the development of the Non-USP
Products and Non-USP Business; and
(e) the Company will, through the realisation of a major business
component, be in a strong liquidity position in a period of worldwide liquidity
tightness.
29 A disadvantage for the Company and the Shareholders in respect of the
Proposed Transaction is that the Company and the Shareholders will no longer
have an ownership interest in the USP Business or the USP Products (and other
assets) and the revenue generated by those assets and will be prevented from
carrying on a business which competes with the USP Business for three years
following completion.
Guidance Update
30 Given the Board's proposal to sell the USP Business and assets to
Oracle, the Board is issuing updated guidance to the market as follows.
31 Given the timing of the Proposed Transaction, key USP customers will
likely defer traditional end of financial year orders to coincide with the
transition of the USP Business and assets to Oracle. Given the month of June is
historically the largest month in the financial year for license sales, the
impact of the Proposed Transaction on FY2010 revenue and earnings on the
eServGlobal business going forward is expected to be material. The Company's
revenue and earnings are highly seasonal with a disproportionately large amount
of the Company's revenue earned in the last few months (particularly June) of
the financial year.
32 The Board believes the purchase price reflects an adequate premium to
reflect the intrinsic valuation of the USP Business and assets which takes into
account any benefit that Oracle might receive from the deferment of orders into
the period following completion of the Proposed Transaction.
33 As the Proposed Transaction is by way of an asset sale, the Company
accounts will reflect the profit on sale of the USP Business and assets. The
profit (based on current exchange rates and after potential purchase price
adjustments and transaction fees) arising from the Proposed Transaction is in
excess of AUD$103 million (GBP60.7 million).
34 The Australian dollar has strengthened considerably against the Euro
during the year, which has additionally impacted revenues, and over the full
year has had a negative impact of approximately AUD$12 - 14 million (GBP6.9 -
8.1 million) based on our budgeted rate of $0.542 AUD per Euro.
35 As a result of the above factors the Board now believes that FY2010
revenue will be in the range of AUD$77 million to AUD$82 million (GBP43.4 - 46.2
million) (FY2009: AUD$147.2 million, GBP85.1 million) and overall FY2010 EBITDA
(before non recurring restructuring and foreign exchange losses) will be in the
range of AUD$92 million to AUD$97 million (GBP52 - 54 million) (FY2009: AUD$2.4
million) (GBP1.4 million) having regard to both FY2010 operating activities and
the sale of the USP Business and assets.
36 As a consequence of the transaction, FY2011 will be a year of
transition in which eServGlobal's management and organisational structure will
be focused on growing the remaining non-USP businesses. Both the HomeSend
platform and the Value-Added Services platform represent exciting growth
opportunities, albeit they are at varying stages of development and revenue
generating potential. Management expects to grow both revenue and earnings
progressively over the medium to long term. While FY2011 will be a year of
transition, the Board believes it can achieve revenue in the range of AUD$38
million to AUD$45 million (GBP22 - 26 million) and generate positive EBITDA
(before non-recurring restructuring charges) of up to AUD$5 million (GBP2.9
million).
Consideration and use of proceeds
37 The USP Business is being sold for a cash consideration of
USD$93,750,000 (AUD$113.4 million, GBP65 million) of which USD$20,750,000
(AUD$25.1 million, GBP14.4 million) will be retained by Oracle for up to 2 years
following completion. The escrow amount is being retained in support of the
warranties and indemnities provided by eServGlobal to Oracle. Release of the
escrow amount to the Company is not conditional on the performance of the USP
Business once it is acquired by Oracle.
38 Following completion of the Proposed Transaction, the Board will
conduct a capital management and strategic review to consider, amongst other
things, the extent to which the net cash proceeds in relation to the sale of the
USP Business exceeds the Company's requirements going forward having regard to:
(a) the business plan associated with the retained Non-USP Business over
the medium term, including its working capital needs, and its capital investment
and restructuring requirements;
(b) the desirability of paying down in part the Company's existing credit
facilities;
(c) the amount of tax payable by the Company in connection with the
Proposed Transaction; and
(d) the Company's current and possible future obligations to Oracle with
respect to the Agreement, having regard to the fact that a portion of the sale
proceeds will remain in escrow for two years following completion of the
Proposed Transaction.
39 If and to the extent the Board considers that a portion of the sale
proceeds are in excess of the Company's requirements, it will investigate the
most efficient form of distribution of that excess to Shareholders, which may
itself require Shareholder approval. Shareholders should note that no
determination in this regard has been made by the Board at this time. The Board
expects to update Shareholders in relation to its capital management and
strategic review during the second half of 2010.
Recommendation
40 The Directors consider the Proposed Transaction to be in the best
interests of the Company and the Shareholders as a whole. Accordingly, the
Directors unanimously recommend Shareholders to vote in favour of the Resolution
to be proposed at the General Meeting.
41 The Company's major shareholder, Guinness Peat Group (holding
approximately 19% of the issued share capital of eServGlobal) has entered into
an agreement with Oracle under which it agrees to vote its shares in favour of
the transaction. In addition, MHB Holdings Pty Ltd (a company associated with
Richard Mathews), Wallaby Hill Pty Ltd (a company associated with Ian Buddery)
and Craig Halliday (representing approximately 20% of the Company's issued share
capital in aggregate) are supportive of the transaction and have confirmed in
writing to the Company that in the absence of a superior proposal from a third
party, they intend to vote their shares in favour of the Resolution.
Annexure
Balance Sheet
+-------------+--------------+-----------+-----------+
| | Consolidated | Estimated | Estimated |
| | | USP | Non-USP |
+-------------+--------------+-----------+-----------+
| | 31-Dec | 31-Dec | 31-Dec |
+ +--------------+-----------+-----------+
| | 2009 | 2009 | 2009 |
+ +--------------+-----------+-----------+
| | $'000 | $'000 | $'000 |
+-------------+--------------+-----------+-----------+
| Current | | | |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| Cash | 3,420 | | 3,420 |
| and | | | |
| cash | | | |
| equivalents | | | |
+-------------+--------------+-----------+-----------+
| Trade | 40,914 | 17,015 | 23,899 |
| and | | | |
| other | | | |
| receivables | | | |
+-------------+--------------+-----------+-----------+
| Inventories | 337 | | 337 |
+-------------+--------------+-----------+-----------+
| Current | 6,681 | | 6,681 |
| tax | | | |
| assets | | | |
+-------------+--------------+-----------+-----------+
| Total | 51,352 | 17,015 | 34,337 |
| Current | | | |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Non-Current | | | |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| Property, | 4,937 | 871 | 4,066 |
| plant and | | | |
| equipment | | | |
+-------------+--------------+-----------+-----------+
| Deferred | 4,819 | | 4,819 |
| tax | | | |
| assets | | | |
+-------------+--------------+-----------+-----------+
| Goodwill | 34,649 | 24,862 | 9,787 |
+-------------+--------------+-----------+-----------+
| Other | 16,710 | | 16,710 |
| intangible | | | |
| assets | | | |
+-------------+--------------+-----------+-----------+
| Total | 61,115 | 25,733 | 35,382 |
| Non-Current | | | |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Total | 112,467 | 42,748 | 69,719 |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Current | | | |
| Liabilities | | | |
+-------------+--------------+-----------+-----------+
| Trade | 17,191 | 2,933 | 14,258 |
| and | | | |
| other | | | |
| payables | | | |
+-------------+--------------+-----------+-----------+
| Current | 20 | | 20 |
| tax | | | |
| payables | | | |
+-------------+--------------+-----------+-----------+
| Provisions | 3,667 | | 3,667 |
+-------------+--------------+-----------+-----------+
| Other | 4,265 | 3,068 | 1,197 |
+-------------+--------------+-----------+-----------+
| Total | 25,143 | 6,001 | 19,142 |
| Current | | | |
| Liabilities | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Non-Current | | | |
| Liabilities | | | |
+-------------+--------------+-----------+-----------+
| Deferred | 5,263 | | 5,263 |
| tax | | | |
| liabilities | | | |
+-------------+--------------+-----------+-----------+
| Provisions | 512 | | 512 |
+-------------+--------------+-----------+-----------+
| Total | 5,775 | 0 | 5,775 |
| Non-Current | | | |
| Liabilities | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Total | 30,918 | 6,001 | 24,917 |
| Liabilities | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Net | 81,549 | 36,747 | 44,802 |
| Assets | | | |
+-------------+--------------+-----------+-----------+
| | | | |
+-------------+--------------+-----------+-----------+
| Equity | | | |
+-------------+--------------+-----------+-----------+
| Issued | 123,946 | | 123,946 |
| capital | | | |
+-------------+--------------+-----------+-----------+
| Reserves | 2,746 | | 2,746 |
+-------------+--------------+-----------+-----------+
| Accumulated | -45,264 | 36,747 | -82,011 |
| Losses | | | |
+-------------+--------------+-----------+-----------+
| Parent | 81,428 | 36,747 | 44,681 |
| entity | | | |
| interest | | | |
+-------------+--------------+-----------+-----------+
| Non | 121 | | 121 |
| controlling | | | |
| interest | | | |
+-------------+--------------+-----------+-----------+
| Total | 81,549 | 36,747 | 44,802 |
| Equity | | | |
+-------------+--------------+-----------+-----------+
The above unaudited pro forma statement of net assets of the Company has been
prepared for illustrative purposes only to show the split of assets and
liabilities for the USP Business and the non-USP business at an overview level
and has not been audited. The figures presented are based on management's
estimates in some cases, using assumptions which apply their financial and
operational knowledge of the business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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