The company which arguably best encapsulated the excesses of the Australian
dotcom boom, Solution 6, is being taken over by rival software company MYOB in
a friendly merger that sees Ron Brierley’s GPG and Kerry Packer get out with a
slight profit.

Check out today’s ASX announcements of all the detail here.

Solution 6 was founded in 1981 but it was convicted Texan drug man Chris
“two bags” Tyler who really set the place alight in the late 1990s
with a string of acquisitions as he rode the bubble and tried to create
Australia’s first software company with annual revenues of more than $1
billion.

When things started going off the rails they tried the desperate
Telstra-backed merger with Sausage Software but that failed and then the
various clowns running both companies were given the flick as their share
prices tanked by more than 80 per cent.

After three years of busy Solution 6 restructuring under Neil Gamble, the
former CEO of failed pay-TV outfit Australis Media and Star City Casino, the
decision has been taken to sell the former high-flying company for about $220
million to a conservative outfit run from a modest headquarters in Melbourne’s
eastern suburbs. Gamble will leave in three months, MYOB CEO Craig Winkler will
run the whole business and Solution 6 will get just two non-executive directors
on an expanded 6-person MYOB board.

Gamble is expected to receive a package worth about $1.1 million when he leaves, including a $750,000 redundancy payment.

After the merger, MYOB will become the most valuable Australian-owned
software company with annual revenues of $180 million and a market
capitalisation of $435 million.

That compares with the other “majors” as follows:

Kaz Computing: annual revenues about $400 million but market cap only $281
million.

Infomedia: $70 million in annual revenue and a market cap of $303 million.

SMS: the old Sausage is down to just $80 million a year in revenues and a
market cap of $80 million.

Citect: annual revenues of $69 million and a market cap of $70 million.

This really is pathetic that Australia has failed so miserably in the global
software game. Then again, it’s hats off to MYOB CEO Craig Winkler who will own
40 per cent of the combined business worth about $100 million.

GPG owns 19.9 per cent of Solution 6, an investment that it admitted was
“pure opportunism” at the time. Given that the stock is up 9c to 79c
today and has recovered well from its lows, we can chalk this one up as another
profitable venture for Sir Ron Brierley’s boys.

The Fin Review reports that GPG has posted a $14.2 million paper
profit on its 47.2 million Solution 6 shares bought at an average entry
price of 52 cents, while the Packer’s Challenger Financial Services,
which holds 19.7 million shares, will also come out on top.

Solution 6 shares have doubled over the past 12 months
but they remain well off their record high of about $17 at the peak of the
dotcom boom. Dick Pratt is the only true winner from the wild Solution 6 ride
as he sold out near the top making a profit of more than $100 million.

Peter Fray

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