LONDON (Alliance News) - Redstone PLC saw it shares jump Tuesday after it sold its IT infrastructure, data centre and smart building technology business Comunica Holdings Ltd to Coms PLC for a total of GBP9.5 million in cash, and said it would change its name as its smaller business focuses on softaware support and consultancy.
The deal will give Coms greater scale, access to European markets, and boost its profits.
In separate statements, the companies said Coms will pay GBP7.65 million initially and then a further GBP1.85 million in a year. Coms will pay in cash, with GBP2.5 million coming from a new overdraft facility secured against the Redstone order book.
The business Coms is buying had revenues of GBP30.8 million in the year to end-March and earnings before interest, tax, depreciation and amortization of GBP2.5 million. Clients include Cisco, IBM and HP. It has bought the Redstone name and will continue to use it, with the business operating as a subsidiary.
"This acquisition is earnings enhancing and provides us with the scale we need to further build the Coms group of companies. It provides us with a significant increase in income generation to fund the enlarged business and also establishes a sound infrastructure, which allows the Coms group to provide an integrated service for our customers from "telecoms connectivity through to telecoms solutions"," Coms Chief Executive Dave Breith said in a statement.
Coms said it has already identified "significant" commercial synergies and cost savings it can make.
Because the deal will fundamentally change Redstone, it needs to be approved by the company's shareholders. It already has support from shareholders holding 46.5% of its share capital, it said.
Redstone plans to change its name to Castleton Technology PLC once the sale completes, made up of the Maxima Information Group software business and the QAD software consultancy business. It will be left with cash of GBP3 million after it gets the proceeds and no debt bar certain liabilities on an interest rate swap derivative that it estimates to be GBP1.1 million.
"The disposal marks the end of a restructuring phase that begun on my appointment in 2010. We believe that the Disposal offers a fair price for our shareholders while offering Coms an opportunity to build upon the restructuring work completed under our management," Redstone Chief Executive Ian Smith said.
Redstone shares were up 2.9% at 0.9 pence early Tuesday, while Coms was up 1.1% at 3.54 pence.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
Copyright 2013 Alliance News Limited. All Rights Reserved.
