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July 29, 1987

MICRO BUSINESS SYSTEMS SET UP FOR SUBSTANTIAL RERATING ON ACQUISITION OF COMBRO

By CBR Staff Writer

Acquisition of its arch-rival in the IBM and Olivetti personal computer distribution business Combro Group Ltd of Salford, Manchester at what appears to be a bargain basement UKP7.88m, should lead to a substantial rerating for the recently troubled Micro Business Systems Plc. The company at a stroke adds UKP40m to its turnover – effectively a 50% increase, takes a major competitor out of the market, and opens up thousands of Combro customers to the higher-margin value-added services offered by MBS. There is an immediate UKP300,000 saving to be made on closure of Combro warehouses, all of which encourages the calculator-wielders at Chase Manhattan Securities to forecast pre-tax profits of UKP15m for the year to December 1988, up from just UKP900,000 last year and a forecast UKP5.5m this. Terms of the agreement call for MBS to issue 5.4m new shares, 2m of which will be placed on behalf of the vendors by Chase Investment Bank. MBS will also raise UKP1.2m through issue of another 857,143 new shares to pay off Combro’s debts and cover the cost of integrating it into the group. Combro did just UKP18.4m in the year to June 1986, but acquisition of the substantial left-overs of Entre’s exit from the UK market (CI No 531) meant that in the first half alone it did UKP19.7m. MBS shares, not surprisingly, liked the news, and closed 12 pence up at 158p last night.

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