Investor Duncan Saville's Ingot Entities has agreed to buy embattled ticketing company ERG Ltd which today posted a net loss of $103 million for the 2008 financial year.
Investor Duncan Saville's Ingot Entities has agreed to buy embattled ticketing company ERG Ltd which today posted a net loss of $103 million for the 2008 financial year.
Today ERG said Ingot, subject to shareholder approval, will acquire ERG's global business operations and certain non-strategic assets for $125 million, confirming plans announced earlier this year.
ERG, which will be renamed Videlli, will retain subsidiary Integrated Transit Systems business, which is currently involved in a legal battle with the New South Wales government.
Under the proposed transaction, the global business will be sold for $115 million to Vix Technology Pty Ltd, a company associated with Ingot, and be renamed Vix ERG Pty Ltd where ERG will have a 50 per cent residual interest but no board representation.
ERG said the money generated from the sale will be used to repay a $115 million debt to Ingot.
The non-strategic assets will be sold to Ingot entity Utilico Ltd for $9.5 million.
ERG chairman Colin Henson said the acquisition proposal is essential to address the adverse impact caused to the business by the loss of the company's Sydney Tcard contract.
ERG claims the contract was wrongfully terminated by the Public Transport Ticketing Corporation of NSW.
"The ERG Board considers the proposal preserves the best opportunity for ERG's shareholders to generate a return on their investment," Mr Henson said.
"ERG will be able to continue to pursue the litigation in relation to the Tcard contract whilst repositioning the remaining businesses into a structure that all stakeholders should be confident provides the financial stability and capital base essential for them to be successful in the future."
ERG today reported a net loss after tax and outside interests of $103.3 million which it said was driven by the $89 million asset writedowns and associated expenses related to the loss of the Tcard contract.
The result compares with the previous year's result of $14.8 million.
Revenue over fiscal 2008 was down from $154.5 million to $149.3 million.
Below is a copy of the announcement:
ERG Limited ("ERG") today announced it has signed a Memorandum of Understanding with Vix Technology Pty Ltd - a company associated with its major shareholding group and major lender, the Ingot Entities - for the sale, subject to requisite shareholder approval, of its ongoing global business operations and certain non strategic assets for approximately $125 million.
Confirming plans originally announced in April 2008, ERG Chairman Mr Colin Henson said ERG planned to hold an Extraordinary General Meeting of shareholders in October 2008 to vote on the sale. Shareholders can expect to receive a Notice of Meeting in September together with an Independent Experts Report on the proposal.
Under the proposed transactions ERG will sell its ongoing global business operations for approximately $115 million to Vix ERG Pty Ltd ("Vix ERG"). In addition ERG will complete the previously announced proposed sale of certain non strategic assets to Utilico Ltd - one of the Ingot Entities - for $9.5 million.
Vix ERG will be controlled by Vix Technology Pty Ltd with ERG having a 50% residual interest in Vix ERG. ERG will use the proceeds of the sale to repay its borrowings from the Ingot Entities which at 30 June 2008 stood at approximately $115 million.
ERG's Chairman Mr Colin Henson said "the proposal is essential to address the adverse impact caused to ERG's business by the loss of the Group's Sydney Tcard contract which ERG alleges was wrongfully terminated by the Public Transport Ticketing Corporation of New South Wales ("PTTC") in January 2008 and which is now the subject of litigation in the Supreme Court of New South Wales."
"The ERG Board considers the proposal preserves the best opportunity for ERG's shareholders to generate a return on their investment. ERG will be able to continue to pursue the litigation in relation to the Tcard contract whilst repositioning the remaining businesses into a structure that all stakeholders should be confident provides the financial stability and capital base essential for them to be successful in the future."
ERG today also announced a Net Loss After Tax and Outside Equity Interests for the 12 months ended 30 June 2008 of $103.3 million. This represented a Net Profit After Tax of $1.4 million in the second half of the financial year.
