SciSys plc (“SciSys” or “the Company”), the supplier of bespoke IT services and solutions to blue chip clients primarily in the Space, Defence and Public sectors, has announced the acquisition of VCS AG (“VCS”) for Euro 16.7million.
VCS is a supplier of bespoke IT solutions to the Broadcast and Space sectors. The Broadcast division provides integrated IT systems for the production and playout process of radio, TV and new media for both German domestic and international professional broadcasters. Solutions are built around VCS’s family of niche software products which provide ongoing support and maintenance income. The Space sector supplies framework-based ICT system solutions and components/applications for satellite meteorology to European and German space agencies. Established in 1986, VCS employs 140 staff from its base in Bochum, Germany.
The consideration for the acquisition of Euro 16.7 million is being satisfied by the issue of 2,822,366 new ordinary SciSys shares (valued at Euro 2.4 million based on the average closing middle market price of a SciSys ordinary share over the 5 business days preceding 11 September 2007) and Euro 14.3 million in cash. The cash consideration is being funded from existing resources, supplemented by extended overdraft facilities of £2.0 million and a bank loan of £3.7 million. In December 2007 the Company will receive a loan repayment from the SciSys employee share trust of £2.2 million which will be applied to reduce the bank loan.
The shareholders in VCS are Prof Dr K G Meng and WestLB, who hold 65.7% and 29.7% respectively. The balance of 4.6% is held as own shares by VCS. The consideration for the shares held by Prof Dr K G Meng, VCS’s founder and majority shareholder, will be satisfied by the issue of 2,822,366 new ordinary shares, subject to their admission to trading on AIM, with the remainder of Euro 9.1 million being satisfied in cash. He will continue to work part time in the business to facilitate a smooth integration and is not permitted to sell his SciSys shares before the second anniversary of the acquisition date. The consideration for the shares held by WestLB (Euro 5.2 million) will be satisfied completely with cash.
In the twelve months to 31 December 2006, (under US GAAP) VCS achieved revenue of Euro 16.0 million (2005: Euro 12.6 million) and profit before tax of Euro 2.5 million (2005: Euro 2.2 million). It had gross assets of Euro 12.2 million as at 31 December 2006, including net cash expected to be in excess of Euro 2 million at the time of completion. SciSys expects the acquisition will be immediately earnings enhancing for the SciSys group.
The acquisition is in line with SciSys’ stated strategy of using its cash assets to enhance earnings per share through organic growth and strategic acquisition; to broaden access to markets both geographically and vertically and to enhance margins by developing and leveraging its IP assets and the reuse of software.
In relation to the issuance of shares above, application has been made to the London Stock Exchange for the 2,822,366 new ordinary shares to be admitted to AIM and it is expected that admission will take place on 20 September 2007. The new ordinary shares will rank pari passu with the existing shares of the Company. Following the issue of new shares in relation to this acquisition, the total issued share capital of the Company has increased to 28,480,275 ordinary shares.
Commenting, Mark Hampson, Chief Executive of SciSys, said,
“I am delighted to welcome VCS to the SciSys Group.
There is a strong cultural and technological compatibility between the two businesses. Both are projects-based companies with a well established blue chip client base with substantial elements of repeat business.
We have known VCS for many years and have been working closely together for the last year. By integrating the two businesses, SciSys will enjoy greater access to the Broadcast sector, a stronger presence in mainland Europe and improving margins in our activities.”