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Gold/Mining/Energy : GEAC.....Canadian best kept secret -- Ignore unavailable to you. Want to Upgrade?

To: Serge Collins who wrote (845)	7/30/1999 11:44:00 PM
From: micromike	Respond to of 1571

1. Why go to Europe to make an acquisition? This will only complicate integration. What company could Geac takeover in North America and the analyst say it's a perfect fit. Don't forget the shares took of to 33 bucks before those two large JBL shareholders got greedy on us. 2. This stock could have been purchased for 42p earlier this year, so why did Geac pay such a big premium? Ignore the revenues, there are many companies out there trading at .02, .03, .04 x sales. Big revenues don't make it a good deal. If they are making money then you are going to pay a really big premium to take them out. Don't forget you need 90% of the shareholders to agree. IMHO the price does seem fair and also you want a friendly take over considering you need the people to work for you not against you. I know you follow NN and as Mathews said you can do a hostile take over but I will raid all the good employees and open up shop up across the street the next day. 3. How profitable is this company? How many profitable quarters have they had in the last eight quarters? Will their business model be a drain on Geac's bottom line? There is no sense pumping up the top line if the bottom line goes negative. It's profit margin that counts, not revenues. They haven't been profitable or else they would have been paying a bigger price. If Geac can do that synergies thing then they will turn it around. Also Geac is going for customer base for their maintenance programs. If you read last Q they make big money on maintenance contracts. 4. How much Goodwill does Geac have to assume if they buy them out at the announced price? How much affect will that have on profitability? Good will is a fact of life when you purchase companies unless they are bankrupt. 5. What shape is JBA's balance sheet in? How much debt/liabilities is Geac taking on? The reason the two major shareholder want more is that they say JBA is debt free. The question I'm wonder is what state are their customers in regarding Y2K ready. 7. Why does this company insist on growing through acquisitions when investors are looking more and more for companies that grow internally? Don't they realize that investors will pay more for a company that can create its own growth rather than one that tries to buy it? (If someone tells me that it is difficult to grow in this software niche without acquisitions, my answer will be -- ah, therefore, it's a mature sector and growth multiples should be ratcheted downward.) Geac is well know for their acquisitions and history has spoken so I would think most investors who invest in Geac expect this to continue. And last but not least it looks like $27.50 could be the bottom but time will tell. I did check JBL and their share price is 253p which means the market is expecting a higher bid to come in. If Geac can pull off another 60 cents this quarter then they should have another 36 Mil in cash to put towards the higher offer they will have to make to take them out. JMHO Mike

To: Serge Collins who wrote (845)	8/2/1999 6:33:00 PM
From: PlayTheKing	Read Replies (1) \| Respond to of 1571

Serge, Excellent questions. In addition to what Mike has already added, I have the following comments: <<Ignore the revenues, there are many companies out there trading at .02, .03, .04 x sales. Big revenues don't make it a good deal.>> I don't agree. Revenues are what drives a company. If the revenues are not growing at a decent rate there are no profits. GAC has always been known for its ability to turn companies around who show potential to grow. Revenues and cash flow are much more important than EPS because of management's ability to "massage" the EPS. Take a look at GAC's 1999 fiscal year end: Net loss...but $9 M in the bank!! I would take cash anyday. <<How much Goodwill does Geac have to assume if they buy them out at the announced price? How much affect will that have on profitability?>> Goodwill is an accounting number that is meaningless once it is on the books. I traditionally like companies that are more conservative who write-off the goodwill over a shorter period of time (e.g. no more than 10 years). After the first year of acquisition goodwill is a sunk cost. <<What shape is JBA's balance sheet in? How much debt/liabilities is Geac taking on?>> Zero debt. <<Will this acquisition mean writedowns in future quarters?>> Most definitely. GAC will want to clean up the books and take as much of a write-off as the auditor's will let them. Integration costs and reserves will have to be estimated for such things as redundancies, premises (i.e. relocations and other contingencies such as taxes, wrongful dismal suits, etc. Most companies want to start fresh and are likely to be overly conservative in their reserve estimates. That way, if things come in under, they will report a smaller loss. <<Why does this company insist on growing through acquisitions when investors are looking more and more for companies that grow internally?>> In their telephone conference 2 weeks ago GAC stated that they are expecting to maintain their 20% ROI before taxes. That, in my opinion, is their stamp that they are growing at a good rate. They're in the business of turning companies around and it was for that reason that the share price reached such levels in 1996/97. Their ability to turn the Dun & Bradstreet into a profitable segment was greeted favourably by the street. Growing through acquisitions is their forte. The street expects that. The lack of acquisitions over the past 2 years has contributed greatly to the decrease in the share price. The tides are turning... JMHO PlayTheKing