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EDB to close ErgoGroup merger

30 September 2010  |  1779 views  |  0 Source: EDB Business Partner

EDB Business Partner ASA and ErgoGroup AS will carry out the closing of the merger between the companies with accounting effect from 30 September 2010.

In addition, EDB is writing down the balance sheet value of software, and announces weaker earnings for the third quarter of 2010.

Merger

The closing of the merger between EDB and ErgoGroup AS will be carried out with accounting effect from 30 September 2010. The merger will be completed on 14 October 2010 once the remaining formalities have been completed.

A prospectus in respect of the shares to be issued as consideration to Norway Post ('Posten') will be issued in mid-October.

Public Sector solutions area
As communicated earlier, EDB has experienced cost overruns and delays with its project to develop new solutions for the municipality sector. Development and implementation costs incurred in Q3 and subsequent periods will not be treated as satisfying the criteria for capitalisation, and will therefore have a negative impact on EBITA, but will not cause any change to cash flow.

The Board of Directors of EDB has resolved to write down the balance sheet value of software developed in-house by NOK 176 million in the third quarter of 2010. The remaining balance sheet value is NOK 9 million.

The change in accounting treatment is expected to give rise to an EBITA loss in the order of NOK 40 million for the third quarter of 2010 in the Public Sector solutions area. The development project is expected to be completed over the course of the first six months of 2011.

Third quarter results
In connection with the presentations of the second quarter interim reports, EDB and ErgoGroup announced separate programs of cost-saving measures.

EDB has previously indicated that non-recurring costs totalling NOK 120 million would be recognised in the third quarter 2010 accounts in respect of its costs program, which is due to be completed in the fourth quarter of 2010 and was expected to have an annual effect on costs of NOK 200 million from 1. quarter 2011. A revieww has shown that these costs are now expected to be in the order of NOK 80 million. The annual effect is now expected to be in the order of NOK 180 million from 1. quarter 2011 onwards.

EDB continues to experience weaker demand in the Industry segment. Taken together with the impact on earnings of the Public Sector solutions area, this means that EDB anticipates EBITA before restructuring costs in the order of NOK 65 million for the third quarter of 2010. ErgoGroup anticipates EBITA in the order of NOK 85 million for the same period.

EDB ErgoGroup will present consolidated figures for the combined company at the presentation of the third quarter interim accounts.

In connection with the merger, EDB and ErgoGroup have carried out impairment testing as part of the process of establishing the opening balance sheet. This has not identified any need for additional write-downs.

EDB ErgoGroup will hold a presentation of the third quarter interim report at 08:00 on 19 October 2010 at Vika Atrium in Oslo. The company will also provide a webcast of the presentation.

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