Microgen to acquire AFA Systems for £7.2m

Microgen to acquire AFA Systems for £7.2m

UK IT services firm Microgen has made a recommended cash and share bid, valued at £7.2m, for loss-making financial services software company, AFA Systems.

The Microgen offer comprises 4.51 pence in cash and 0.18168 Microgen shares for each AFA Systems share. Microgen has also agreed to acquire £1.5m in AFA loan notes for the same amount, comprising £441,580 in cash and £1.06m in Microgen shares. Microgen is also placing 4.3 million new shares at 57 pence each.

The announcement comes as AIM-listed AFA Systems reports a "disappointing" performance for the first half ending 30 June 2004.

Although the firm has reported a rise in group revenues to £4.1m, compared to £2.9m a year ago, its asset management technology businss Sams, which it acquired in December last year, contributed £1.5m to the total. The revenues of the underlying AFA business actually fell to £2.6m, which the vendor says reflects a lack of new sales.

Operating loss before goodwill amortisation was unchanged to last year at £1.2m, but loss before tax increased to £1.9m from £1.7m a year ago. The group currently has a cash position of just £700k compared to the £2.4m it had in December 2003.

In a statement, Mike Hart, chairman and chief executive, admits that the first half results are disappointing and says the anticipated recovery in the market has not been reflected in a pick up in new sales.

Commenting on the offer from Microgen, Hart says: "Microgen operates in areas that are complementary to AFA Systems, and the AFA Systems Board believes that the greater strength of its balance sheet will provide greater sales opportunities."

Martyn Ratcliffe, executive chairman, Microgen, adds: "The acquisition of AFA Systems strengthens Microgen's presence and offerings in the financial services market."

Microgen recently lost out to Morse in a bid for IT services firm Diagonal.

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