An analyst has welcomed the proposed acquisition by MGX of CCH, saying the match is a good one.
He says that it is difficult to put a value on infrastructure services business Infracom, which is the only part of CCH not being bought and will be the sole asset of CCH as it remains a listed entity.
As a result, he could not assess whether the shareholders of the two groups were benefiting from the deal, in terms of which MGX will issue 24.5 shares for every 100 CCH shares.
"Looking at the ratio, MGX will have to issue about 25 million shares, which for them is a lot, because they only have about 47 million in issue. So in the short term it will dilute eps [earnings per share]."
However, he says the idea of merging e-business with information management and data storage is a good one in theory. "I like what they`re doing," he adds.
He comments that CCH`s last results were "pretty pathetic", and says the last six months were probably also loss-making.
"MGX is running at a profit, so I don`t know what kind of eps CCH is going to bring in."
The dispute over the buy-out of EC-Hold minorities will also have an impact on MGX.
"No one knows where that is going, but it will affect MGX regardless of CCH. If they have to pay minorities R4 a share it will affect them. They have the cash, but it will still have an impact."
CCH was founded by Mario Pinheiro, who grew what was to become Computer Configurations Holdings from a one-man operation to a company which at one stage was the darling of the JSE, reaching R47.80 a share in August 1998, less than a year after its October 1997 listing.
However, allegations relating to price movements dogged the share, resulting in Pinheiro`s resignation as executive chairman in May this year.
Merchant bank Brait bought a significant part of his shareholding and is to appoint a representative to the MGX board.
Current CEO Aletha Ling, who will head one of MGX`s divisions, joined CCH in 1998 when the group bought Software Futures, the software and services company Ling launched in 1995.
That deal carried a price tag of R60 million.
She was appointed CEO of CCH in an executive management restructure in October the following year, and in the same month she became the first woman to be named the Computer Society of SA`s IT Personality of the Year.
The share price has continued to be hammered by persistent rumours as well as poor results for the year to June. It closed at 275c today, 30c or 9.84% lower than Friday`s close.
The analyst comments that although it is often difficult to implement a merger of this nature it can succeed if Ling and MGX can work well together.
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