It Giant Bids For Mits
Wednesday July 26, 2000
Shares in Utilities Services Corporation rocketed yesterday after a British information technology giant offered up to $142 million, nearly 50 per cent more than the entire company was worth, for one of its businesses.
USC announced yesterday it had been offered $102 million for MITS, the global technology division that once belonged to Melbourne Water.
The offer from British-based global IT group Logica also includes a 60-day option on MITS intellectual property for another $40million.
Investors scrambled for scrip after the announcement, sending the share price up as much as 28per cent, before settling at $1.15, up 15 cents.
USC designs and supplies computer information systems for the communications industry and for electricity, gas, water and other privatised utilities.
It was formed in 1998 out of the merger of high-tech companies TechComm and MITS, Melbourne Water's technological spin-off. It was then worth $7 million. Yesterday, its market capitalisation was more than $97 million.
Although USC has signed a memorandum of understanding with Logica for the transaction, which is still subject to due diligence, it is believed the deal is not exclusive, leaving the door open for other offers.
With annual revenues in excess of $1.7 billion, Logica has a strong presence in Europe and the United States but has targeted MITS to beef up its lacklustre operations in South-East Asia.
The offer excludes E-mits, the MITS joint venture in the US and its IT consulting arm. USC also holds on to the source code for the MITS MOSAIC data base and the right to develop it further. Logica has the option to acquire these for another $40 million.
USC executive chairman Geoff Lord said proceeds from the deal would be channelled into expanding USC into new technological areas.
The company will take tax advice spelling out the net benefit for shareholders from the proposed offer. The transaction still requires shareholder approval.
``It's a good deal for shareholders, who have had a tenfold increase in the value of their investment," Mr Lord said.
``We have a potential capital-gain problem but, more importantly, we'll use the proceeds to build other areas. It will go back into the business for expanding into niche technological areas."
The Logica offer includes the assets of MITS' Systems Integration, Facilities Management, Real Time, Technology Support, Dataflow and e-commerce businesses.
These operations have helped generate unaudited revenues for MITS of about $65 million for the year to June 2000.
MITS key customers include Eastern Energy, Yarra Valley Water, Energy Australia, V/Line Passenger, the Reserve Bank and Colonial State Bank.
USC, which has sales revenues in excess of $100 million, will keep its infrastructure and business services.
Those infrastructure businesses include building and servicing overhead powerlines, designing and managing water mains and providing telecommunication services such as managing billing and technologies for call-diversion switching and payphone fraud detection.
USC business services include meter reading and maintenance and U-tel, the Vodafone channel manager.
USC made a pre-tax profit of $3million in 1999 after securing more than $80 million worth of new contracts.