Connection Group has sold its 83,7% holding in Ultimate Connection to UCS Group for a gross amount of R18,3-million.
The disposal consideration comprises R1,57-million in cash as well as the assumption by UCS of Ultimate Connection`s overdraft amounting to R16,7-million. In addition, should Ultimate Connection`s performance over the next 12 months exceed forecast, Connection Group will be paid an additional amount of up to R4-million.
The divestment means Connection Group has eliminated all debt and will be in a positive net cash position. Three years ago, the Group encountered serious difficulties and was burdened with debt of over R100-million. Today it is highly profitable and cash generative, with a strong balance sheet.
Had the transaction been in place in the six months to November 2001, it would have marginally reduced pro-forma headline earnings from 2,79 cents per share to 2,59 cents per share. But the deal would have significantly increased tangible net asset value from 12,4 cents to 18,0 cents.
Connection Group chief executive Pierre Joubert said Ultimate was an exceptional company but it fitted better into UCS, which, like Ultimate Connection, specialises in software.
"We sold it to focus on retail, to improve our cash position and strengthen our balance sheet."
Incredible Connection has 26 stores offering a wide variety of IT products, strategically located in all the main centres. It commands 45% of the retail market and its buying power gives it a price advantage over its competitors. Incredible Connection intends to open four more stores in the current financial year and another five in 2004.
John Bright, managing director of UCS Group, said the acquisition of Ultimate Connection enhances the world-class retail software available from the Group. It also exposed UCS to a new customer base and broadened its software offering.
Joubert and Bright said the transaction would benefit both companies. Ultimate Connection has won two international awards for its groundbreaking work in software.
Joubert said he was delighted with Connection`s three-year experience in Ultimate Connection.
"We bought it at the worst time of our history, when we were really struggling, because we saw its potential. Today`s deal vindicates a decision made at a difficult time. I wish the Ultimate team a great future in the hands of UCS."
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