Staff at Glasgow-based software specialist Eclectic are set to transfer to Renfrewshire following the sale of the business by Glen Group to IT solutions provider Maxima Holdings.
The deal will see Maxima pay up to £3m cash for Eclectic, and continues Maxima's strategy of consolidation within the fragmented IT services sector. The business, with its head office at Hillington in Renfrewshire, floated on the Alternative Investment Market in November 2004 with the aim of acquiring firms in this sector.
For AIM-listed Glen Group, headed by former Atlantic Telecom chief executive Graham Duncan, the deal marks a withdrawal from IT consulting and training. Having recently relocated from Dalkeith to Loanhead, Midlothian, Glen Group will now focus on its remaining Pinnacle operation, which employs fewer than 10 people and provides telecommunications packages to small and medium-sized businesses.
Maxima will pay an initial £2.25m upon completion of the deal, which is expected by the end of next month if Glen Group shareholders give their approval at an extraordinary meeting on January 4. A further payment of not more than £750,000 will be made on March 17, with the sum subject to adjustments for deferred income, pre-payments and other costs.
Eclectic employs about 60 people, roughly 45 of whom are based in Glasgow. They will transfer to Maxima's head office at Hillington, although a training suite in Glasgow's West Regent Street will be retained.
During the six months to March 31, Eclectic made an operating profit of £190,000 on sales of £2.5m. The operation supplies business intelligence and performance management software to corporate and middle-market clients, some of whom include ScottishPower, Costa Coffee and First Milk.
Linda Andrews, finance director at Maxima, said Eclectic was a "great addition" to the group's portfolio. Eclectic will be the 11th successful acquisition for Maxima, which now employs about 400 people across the UK.
Glen Group acquired Eclectic for £2.2m in shares and cash in February 2006. It added to the operation with the purchase of inGroup in August 2007, taking the adjusted consideration paid for the combined business to £3.4m.
Duncan said proceeds from the sale would be used to eliminate Glen Group's "modest" bank debt, with the remainder used to bolster working capital. While acquisitions remain a possibility, Duncan indicated that such deals were unlikely for the next several months.
"I think we will be really cautious when it comes to consuming cash," he said, adding that 2008 looked as though it "could be a difficult year economically".
Duncan said Maxima was a natural home for Eclectic.
Although the business has moved into operating profitability under Glen Group's ownership, Duncan said that further growth in Eclectic's specialised field would have required more acquisitions that would have likely been a "bridge too far" for the parent group.
Shares in Maxima closed up 1.5p yesterday at 241p. Glen Group gained nearly 30% to finish at 0.175p, but remained below the 0.272p per share value of Eclectic's £3m sale price.
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