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TMS purchase of Ferntree part of worldwide expansion

TMS purchase of Ferntree part of worldwide expansion

It would be hard to find a better fit in a corporate takeover than that which exists between Ferntree Computer Corporation and its new full owner, Technical Management Services (TMS).

A subsidiary of US-based giant General Electric's Capital division, TMS has also recently made purchases in Canada of companies similar in nature to Ferntree - part of a worldwide push to extend the company beyond its present bounds.

TMS currently works in many of Ferntree's areas, including distribution, systems integration and support and solution provision. While TMS is certainly the dominant parent (sales of $1.95 billion and 3,600 employees compared to $190 million and 700 employees), Ferntree represents a great launching point for TMS, as Ferntree has:an established customer base that includes Westpac, Challenge and ANZ banks, as well as others such as Shell and Comalco;won various state government contracts, including WA Health Department, the Tasmanian Department of Premier and Cabinet, and the Victorian Board of Studies;offices in Melbourne, Adelaide, Brisbane, Canberra, Perth, Sydney and Auckland;partnership programs with a host of companies including Microsoft, IBM, Novell, Telstra, CITRI, SAP, Compaq and Lotus;received Endorsed Supplier status with the Federal Government;received ISO 9001 accreditation around the country.

But what of Ferntree? The good news is that all indications are that the company will be maintained in its current form, with assurances that there are no foreseeable redundancies. Details of the sale have not been disclosed, but industry estimates place the price below $70 million.

Change is expected with regard to Ferntree's range of services and the products it supports, as there are some areas in which TMS is strong that Ferntree has yet to make a push (see table). These areas include renting and leasing of hardware, asset tracking and remarketing. On the other hand, TMS has yet to make a push into the area of training.

But while the company itself may remain intact, the signs are not quite so good for an Australian IT industry still reeling from the loss of Osborne. For a long time a bastion of the ever-diminishing Australian-owned systems integration industry, Ferntree has been known to be on the selling blocks for at least a year, after its proposed public float fell through several years ago.

According to Ferntree CEO Norman McCann, the institutional shareholders made their intention to sell the company known as far back as seven years ago. This group includes Citicorp (39 per cent), Westpac Banking Group (19.5 per cent), Superannuation Board (19.5 per cent), H-G Ventures Ltd (9 per cent) and management and others (13 per cent).

While some industry analysts have been critical of Ferntree's performance, the company managed to generate a profit of $4.9 million for 1994/95 and a return to shareholders of 7c per share. However, it would seem these returns have not been sufficient for the shareholders to consider Ferntree worth holding a stake in.

What has irked industry observers such as former senator and technology minister John Button is that it took an overseas company to step in and realise that desire. Ferntree has joined a long list of Australian-owned companies whose ownership has left our shores, including First State Computing, CSA (now CSC) and Paxus. According to Button it is the poor performance and narrow focus of Australia's own investors, such as the superannuation funds, that drives companies like Ferntree overseas in search of capital.


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