Win - Lose or draw? They made a major move. SSF and Diker watching over the shoulders should ensure this is a smart move. Due your DD - this one is an interesting play.
Disclosure - I'm LONG UNFY
Sacramento Bee Article
Local software maker drops merger plans
Unify decides to grow on its own, buying Redwood City firm.
By Clint Swett - Bee Staff Writer
Published 12:00 am PDT Friday, September 15, 2006
Story appeared in BUSINESS section, Page D1
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Calling off a merger it had announced last March, Sacramento software maker Unify Corp. said Thursday it will remain independent and instead buy a piece of its erstwhile merger partner.
Rather than be acquired by Connecticut-based HALO Technology Holdings, Unify Chief Executive Todd Wille said his company will buy Gupta Technologies LLC from HALO in a deal worth $13.5 million.
Gupta, based in Redwood City, makes database software that would complement Unify's existing business of making databases and associated software for corporate customers, Wille said.
Adding the 45-employee Gupta unit will double Unify's work force and revenue, which totaled $11.2 million in its 2006 fiscal year, which ended April 30, Wille said. The Gupta employees are expected to remain in the Bay Area.
As part of the deal, Unify will sell its business that develops insurance risk-management software to HALO, which already has an insurance software unit based in San Francisco. That unit employs 15 workers, who will likely continue to work out of Unify's headquarters in Sacramento, Wille said.
Divesting its insurance unit will allow Unify to focus more on its database business, Wille said.
The deal also could help struggling Unify pull itself out of the red. The company lost $628,000 in fiscal 2006, and on Thursday reported a fiscal 2007 first-quarter loss of $754,000, compared with a loss of $113,000 a year earlier.
Revenue totaled $2.1 million, down from $2.7 million a year earlier.
Wille called Gupta a very good fit. "We have similar technologies, customers and operating models," he said. "The synergies between our Unify business and the Gupta business are almost eerie."
Wille said no particular incident scuttled the merger, which was announced March 14. Instead, he said, it made more sense to acquire Gupta and keep Unify independent.
But HALO's chief executive, Ron Bienvenu, said delays in getting regulatory approval stymied closing the deal.
"I never imagined it would take more than six months," he said. Because the two companies' fiscal years closed three months apart, the Securities and Exchange Commission required additional audits to be sure the numbers were up to date, he said. Investor uncertainty over the delays "crushed" HALO's stock price, he said, sending it down from about $1.60 a share to the 50-cent range. That meant the company would have to pay Unify shareholders with more stock, diluting HALO's stockholders' investments.
"Our shareholders weren't happy with that," Bienvenu said.
Instead, he said both companies worked out a deal to terminate the merger while each acquired some assets of the other's company.
To complete the deal, however, Unify will have to pay HALO $5 million, money it hopes to raise from new investors or long-term borrowing, Wille said. HALO also gets 5 million Unify shares, giving it a 15 percent stake in the Sacramento company.
Oleg Kaganovich, chief executive of the Sacramento Area Regional Technology Alliance, said Unify's decision to focus more on its database business was probably a smart move. "It really increases the probability that they will grow and become a stronger company," he said.
Roger Akers, a Sacramento venture capitalist familiar with Unify, praised the decision. "If they were not going to be acquired, they needed to become the acquirer and move the company forward," Akers said. "This could be a very positive thing," possibly better than merging with HALO, he said.
Wall Street was less impressed, pushing Unify shares to a 52-week low of 20 cents, down 6 cents or 23 percent, on the OTC Bulletin Board.
HALO stock climbed 7.5 cents, or 15 percent, to close at 57.5 cents on the OTC Bulletin Board.
About the writer:
The Bee's Clint Swett can be reached at (916) 321-1976 or cswett@sacbee.com. |
