Paradigm Interactive Media has sold its communication and IT interests, INTeLLA Holdings, to a subsidiary of black empowerment company Cape Empowerment Trust for R147 million in cash.
The price is based on warranted profit after tax of R20 million for the year to 30 June and is capped at R222 million if INTeLLA exceeds its profit warranty.
The disposal to H Investments No 194 "is a further step in the transformation of Paradigm towards a specialised financial services group", the company says. "After the sale of the INTeLLA business, the Paradigm operations will continue to show the strong growth that it has in the past.
"Market perception of the financial services industry is that this particular market is overtraded. The directors are confident that they have been able to identify specific market segments in which, through intellectual skills and early identification of these segments, Paradigm is able to assume a dominant position."
The company is in talks regarding the sale of non-core operations and says announcements will be made in due course.
The board of directors will also be restructured "to reflect the further growth in Paradigm`s financial services operations".
The company said earlier this year that it intended to unbundle its communications and technology interests, and it was envisaged that the division would be listed separately. INTeLLA was created as the holding company for these businesses.
However, the Cape Empowerment Trust approached the group to acquire INTeLLA with a view to expand its own IT interests. Paradigm agreed to the disposal rather than a separate listing.
"The board is investigating several possible avenues arising from the disposals," says Paradigm. "Possibilities include the declaration of a special dividend, a share buyback scheme and/or the reinvestment of the cash to further grow the company`s financial services operations."
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