MGX offers to buy CCH

By Iain Scott for MGX Holdings

Johannesburg, 13 Nov 2000

The CCH board is considering an offer by MGX to buy the whole company, excluding Infracom, by means of a share swap, ending months of speculation.

In terms of the offer MGX will issue 24.5 shares for every 100 shares in issue. The MGX shares will be unbundled to CCH shareholders.

MGX`s share was trading 50c up at 1000c by late morning, which values the CCH share at 245c. The CCH share was trading 10c down at 295c.

CCH is to remain a listed entity with Infracom, its infrastructure services business, as its sole asset.

The enlarged MGX will consist of two divisions: enterprise solutions and services (technology solutions, hosted services and content management); and business solutions (consulting and systems integration, software and professional services and software development).

MGX CEO Chris Hills will remain at the helm of the group. The enterprise solutions and services division will be headed by MGX chief operating officer Dan McMahon while CCH CEO Aletha Ling will be appointed to the MGX board to head the business solutions division.

CCH`s chief operating officer Andrew Sims will be appointed operations director for both divisions and MGX financial director Rory Shirley will retain his position. A Brait representative will also be appointed to the board.

Hills says the deal will allow MGX to achieve critical mass ahead of competitors in the information management industry.

"While this will entrench MGX`s market leadership in information management, particularly digital storage, it accelerates our move into the value added application service provision arena with particular focus on building a substantial hosted services infrastructure," he says.

"In addition, it gives us a substantial software development capability to meaningfully extend our intellectual property."

He adds that MGX confirmed in its due diligence investigation that the "critical success factors always sought by MGX when evaluating an acquisition were present".

He lists these as a depth of people with talent and expertise, an entrepreneurial culture and a common strategic goals with MGX.

Ling says combining the companies would create an IT company with the necessary scale and scope to be a significant player locally and globally.

She adds that the CCH board is considering the alternatives available to Infracom.

"We have consistently stated to shareholders that Infracom is not core to our IT strategy," she says. "However, it is a good business and we are managing a careful process to ensure that we derive the best possible strategic future for Infracom.

"There is no reason to rush this and we will make a detailed announcement concerning this in due course."