UCS eyes possible deal

By Nicola Mawson, Contributing journalist

Johannesburg, 08 Oct 2009

Software solutions and manufacturing company UCS says it has entered discussions that may affect its share price.

As a result, it says, shareholders should be cautious about dealing in the company's securities.

While UCS did not indicate what the possible deal may involve, it has recently been disposing non-core divisions. In the past four months, it has sold off three units as it seeks to concentrate on the retail sector.

The company's most recent announcement was the sale of its 60% stake in Tactical Software Systems (TSS) Managed Services. UCS said it was selling the shareholding because it wants to focus on its core competence of providing software, solutions and services to the retail value chain.

The TSS Managed Services business unit focuses on providing IT services specifically into the public sector, and is the largest unit within the UCS portfolio without a retail focus. The entire deal is worth a maximum of R125 million, assuming TSS Managed Services meets certain targets.

Sale reversal

UCS has also sold DiverseIT back to management, as the division is non-core. The group of companies that make up DiverseIT was intended to be a one-stop shop for the company's clients in the pharmaceutical retail sector.

However, DiverseIT was not a strategic fit and the reversal of the initial deal will put UCS in the position it was before the purchase, including a reversal of R300 000 in headline earnings.

UCS will get back 4.8 million shares from the management team and will receive R5 million for the 51% stake. It will also receive back 241 897 Argility shares, at R1.50 each, that were received by DiverseIT's management after Argility was unbundled two years ago.

In addition, UCS has sold its enterprise solutions business division to UK-based SAP specialist Axon, for a maximum amount of R125.26 million.

UCS will receive R57.1 million upfront and, based on revenue targets, will receive a maximum of R125.26 million. The revenue UCS earns from the sale will be used partially to meet its current and future obligations, and may also be used for acquisitive and organic growth, the company says.