MultiView, which develops and provides networking and connectivity solutions for the UNIX market, has been at the forefront of the terminal emulation market since it was established in the early 1980s. In recent years, MultiView has become a stable business which tactically contributed funds that enabled the initial development of SurfControl’s Internet filtering products. Given the dramatic growth and success of SurfControl’s Internet filtering business, the Board has concluded that the MultiView division is no longer core to the Company. In the quarter ended 30 November 2000, MultiView contributed only approximately 10% of revenues with the rest being derived from the Company’s Internet filtering products. The relative contribution from MultiView has been predicted to rapidly decline still further as the Company’s filtering business continues to grow.
FutureSoft, Inc. and MultiView have an established development partnership. FutureSoft’s focus on connectivity and security for e-commerce solutions will provide MultiView with an excellent environment for future success and growth.
Under the terms of the agreed sale, SurfControl will receive consideration over the next three years based on a percentage of the revenues generated from the current MultiView product set, as well as from revenues generated from the sale of FutureSoft products to the existing global top twenty MultiView customers. The exact percentage of revenues to be received will be performance based and will fall within the range of 16% to 40% with the consideration being capped at $5 million. The Company will retain net working capital and accrued revenues as at February 1, 2001, and certain key development engineers who will be transferred to the Company’s Internet filtering business. The transaction is expected to complete before 28 February 2001.
The minimum consideration percentage is slightly greater than market expectations of the operating profit contribution of the MultiView division for the current financial year and will also allow SurfControl to benefit from future sales of MultiView products over the next three years without bearing the associated costs.
For the year ended 31 May 2000, the MultiView division contributed $1.1 million in operating profit and as at 31 May 2000 had net assets of $0.4 million. The transaction means that 2001 forecast revenue is expected to decrease by approximately $900,000 (based on current market forecasts), but the inclusion of the expected consideration above the EBITDA line together with the cost reductions arising from the transaction should not result in any adverse change to either EBITDA expectations or cash flow.
The existing positive commercial relationship between the two organisations and their employees, FutureSoft’s market focus on connectivity, and the deferred purchase consideration structure, together greatly enhance the future opportunities for MultiView and hence the overall value of the transaction to both parties.
Steve Purdham, CEO, SurfControl, commented, This strategic move will enable SurfControl to fully exploit the key competencies of our Company, and will assist further in taking full advantage of the dynamic growth in the filtering market worldwide. Our entire management team is now 100% focused on the rapidly growing worldwide filtering market.
The structure of the deal means that we free-up a highly-skilled software development team which is of significant and immediate value to the Company.
Rick Mansell, CEO, FutureSoft, added, As a provider of connectivity, security and e-commerce solutions, the acquisition of MultiView is an exciting new development for our Company and is part of the strategic development of our business. It will further enhance our position in the market and provide us with additional capabilities in this area.
