Johannesburg, 05 Sep 2002
MGX says it will retain Software Futures for the foreseeable future after its sale to Paracon fell through. But an analyst says this is unlikely.
MGX and Paracon said yesterday that talks broke down after the parties failed to reach agreement on the price of Software Futures.
Paracon says while there is nothing wrong with the Software Futures business, it felt MGX`s valuation of the company was too high.
Although both parties adjusted their prices several times during negotiations, talks reached the point where neither party was prepared to move any further.
Aletha Ling, CEO of business development and strategy at MGX, says Software Futures will continue to trade as part of MGX.
"Software Futures has been a profitable cash-generating business in the MGX stable and will continue to add value as a subsidiary of MGX with its management team remaining intact," she says.
Software Futures MD Derek Hughes says the company will concentrate its attention on core business operations to continue its track record of profitability as an autonomous unit within MGX. "We have no other corporate activities planned for the near future."
However, an analyst says it is likely that the group will still seek a buyer. "Software Futures doesn`t really fit in with the rest of MGX, which is why it`s run autonomously. MGX is basically a services business, and that`s where it`s putting its eggs. Software Futures is a software company that`s run on a different revenue model from the rest of the group.
"I really don`t see MGX holding onto Software Futures indefinitely. The fact that the talks broke down only on price means that a sale makes sense to the group. It just has to find a buyer at a price that suits it.
"The cash won`t hurt MGX either," he says.
Ling founded Software Futures in 1995. It was later acquired by CCH, which was in turn acquired by MGX.
Hughes says the process was a positive one for MGX and Paracon, despite the failure to reach an agreement. "Having gained knowledge about each other`s business to the extent that we have, we found strong synergies and have identified several opportunities that we will be exploring jointly."
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