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OTHER PREDATORS WAITING IN THE WINGS AS WORDPLEX REJECTS APRICOT MERGER TERMS

The battle for control of Wordplex Information Systems Plc hotted up last night when Wordplex rejected Apricot Computers Plc’s share exchange offer out of hand. In the morning, Apricot had made an offer that at Friday’s closing prices valued the text processing outfit at UKP14.7m. The offer found immediate favour from Chase Manhattan Securities’ electronics analyst Mike Whittaker who has been leading the opposition to the Wordplex board’s own proposals for the company. He says the Apricot deal is far preferable to the board’s proposals, due to be discussed at an Extraordinary General Meeting next Monday, June 15, which, amongst other things, seek to give a Close Brothers-led consortium a 25% stake in Wordplex at a knock-down 50p a share and to bring in Octagon Industries Ltd in the form of Dr Geoff Bristow and former DEC All-In-One manager Jeremy Thomas to manage the business. At a lunchtime press conference, Apricot chief executive Roger Foster said that the bid had a rationale missing from the Close-Octagon plans. Apricot would acquire a direct sales force, a high quality customer base which would provide an outlet for Apricot’s multi-user and desktop publishing systems, and, coincidentally, premises in the M4 corridor into which it can move the newly-acquired about-to-be-homeless Wokingham-based Digital Microsystems business. Wordplex would to boot gain access to the state of the art technology referred to in the board’s proposals which, without the takeover, would have to be bought in from outside. And, together they would form possibly the largest maintenance operation in the UK outside the mainframe world, with a turnover of UKP20m and profits of UKP7m, and be a serious alternative to ICL as a seller of multi-user systems. By contrast, Foster said, the Close-Octagon plan would dilute existing shareholders interests by a massive 64% unless they subscribe a further 55p for every share they now own, and even then by 25%. It would also leave Wordplex with fewer financial resources than under Apricot’s plans, and require reliance upon the services of the Octagon team which is as yet unproven in the context of Wordplex. Wordplex, according to Foster, offers Apricot the chance to further its strategy of reducing its reliance on stand-alone Personal Computers.

Massive improvement

The company’s results for the year to March 31, released yesterday, show that single micros now account for 50% of turnover compared with 80% 12 months ago. Foster believes that even without Wordplex that figure will be down to 30% by the end of the current financial year. In all, Apricot made UKP4m pre-tax, mainly from maintenance and financial services, on turnover down 21% at UKP71.2m. This represented a massive improvement on 1986 when Apricot reported losses of UKP15.3m and, says Foster, gives Apricot the confidence to make a bid for a company it has been eyeing for almost a year. Orders for the 80386-based products picked up sharply in the fourth quarter, but Foster does admit to some supply problems due to shortages of both the 80386 chips, caused by Intel’s quality control difficulties, and of the associated memory chips, delivery of which was delayed by the US-Japan trade war. He expects, however, to report sharply increased earnings per share this time next year even if the Wordplex deal, which involves a one-for-7.696 share issue but provides something of a tax holiday, goes ahead. The deal is far from being a certainty. Apricot and its financial backers, Barclays de Zoete Wedd and Singer and Friedlander, can only definitely count on the 0.63% they own in the event of a competitive auction developing and Mike Whittaker of Chase is only committed to supporting it in the absence of a higher offer. Other bidders cannot be ruled out: among the names being mentioned in the City are Micro Business Systems Plc and UEI Group Plc, whose newly acquired Miles 33 subsidiary is believed to have approached Wordplex about the possibility of a merger last year. Furthermore, Xerox, Wang and Olivetti, all linked with Wordplex over the years

cannot be ruled out. Rank Xerox’s pension fund currently holds a 6.57% stake which will be a major asset if its master should enter the bidding as the shares are very widely held. Another name linked to Wordplex in the past, CPT Corp, can, however, be ruled out as, despite having discussed taking a stake in 1986, it is now trying to tie up the purchase of Wordplex’s one-time other half, AES Corp.

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CBR Staff Writer

CBR Online legacy content.