Softline has acquired Australian payroll software company Micropay for R55.5 million in a deal that will be funded by a combination of cash and debt.
Micropay is a Sydney-based payroll software development company which currently has around 5 500 clients mostly in the small to medium enterprise market.
Softline acquired 100% of the company from the Commonwealth Bank for A$9.89 million (around R55.5 million).
The payment will be made partly in cash from Softline`s existing offshore cash resources, with the remainder in debt, to be serviced by Micropay`s cash flow.
Softline says utilising Micropay`s cash flow to service the debt of the sale will afford it some hedge against the Australian currency.
The acquisition has extended Softline`s existing offshore footprint, which at the interim period accounted for 42% of revenue and 50% of Softline`s operating profit.
"Micropay provided an excellent opportunity for Softline to enter the Australian payroll software market," says Ivan Epstein, CEO of Softline.
"Micropay has an estimated 30% share of the Australian payroll market, providing Softline with rapid entry into this market segment. In addition, Micropay is a direct fit with Softline`s core business, sharing strong similarities with Softline`s existing payroll software businesses. This provides real opportunities for the sharing of knowledge, expertise and maximising efficiencies in the group," he says.
Softline management foresees cross-selling opportunities between Micropay and Softline`s existing companies in Australia - Sybiz and Handisoft - as the three companies begin to work in a "co-operative manner".
Epstein says Micropay will see immediate strong benefits of being part of the Softline group.
"We are able to replicate our successful business methodology, which has been tried and tested in other markets, to ensure that Micropay is optimising its infrastructure and gaining maximum benefits from the technology advancements that are being developed across the group.
"While our first priority will be to ensure the business is well integrated into the Softline group, we predict it will make a favourable contribution to our Australian revenue and earnings stream going forward."
After a buoyant opening at 93c this morning, the Softline share was trading down at 88c shortly before noon.
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