ASX-listed software developer and services firm, Whittle Technology has agreed to sell its software subsidiary, Whittle Programming, to Canadian mining software company, Gemcom Software in a transaction worth $2.6 million.
The deal, which is subject to shareholder approval, will comprise of $1.6 million in cash, 1.44 million Gemcom shares valued at $0.417 each and sales royalties estimated to return a further $400,000 by July 2004.
The Australian developer plans to retain the consulting element of the business, transferring it from Whittle Programming before October when the sale is finalised.
Whittle's chairman, Miles Kennedy said the deal will increase the company's cash reserves to over $3.5 million and substantially reduce overhead costs. "[In addition] Whittle retains its core business of Whittle Consulting where big advances are occurring in the field of blending and scheduling with some major contracts expected shortly. Through royalty payments Whittle will be a beneficiary in the anticipated uplift in sales expected through Gemcom's worldwide sales network," he said.
Gemcom's president and CEO, Peter Franklin said Whittle's outstanding brand has been hampered by the expense of cracking new markets. "Gemcom has a more developed sales infrastructure [while] our products have that broader appeal necessary to address a wider client base. Yet, we lack the optimisation component that Whittle has made its hallmark," he said.
Whittle will now concentrate efforts on reinforcing its technology and research agenda through its consulting core, according to company CEO, Wayne Rudland. This will see the developer boost its consulting expertise beyond the mining sector and add focus to its optimisation technologies.
"We will keep at least $2 million in reserve with the remainder being available for technology enhancements and to step-up the Whittle Consulting business," said Rudland. "Now that sales have started to pick up from consulting we are confident the overall performance of the company will improve in terms of profit performance."