Merger with Provenco a capital idea - Cadmus

Listed payment technology company Cadmus would welcome merger discussions with rival firm Provenco, chairman Keith Phillips said yesterday as the company announced it had raised new capital for acquisitions.

Cadmus yesterday said it had raised $6.2 million through the placement at 20c each of 31 million shares with six million options at 22c to major investment funds and individuals.

Phillips said the company would continue a growth strategy including acquisition and amalgamation.

"The capital raised in the Cadmus placement as well as the options will be used to boost the company's ability to take advantage of opportunities as they arise, such as strategic acquisitions and joint ventures in both New Zealand and our key international markets."

An amalgamation with retail technology provider Provenco would make sense and would have a lot of support, although there had been no discussions yet. "I think perhaps the market sees the sense in something like that happening and certainly I would support discussions if they were imminent on that sort of front," Phillips said.

"I think if the timing is right and the shareholders support that as having value, and of course Provenco themselves are willing, I think we would entertain such discussions."

An amalgamation of the two companies could be achieved by a merger or a takeover of one party by the other.

"Whatever works, you've got to focus on the end game in terms of building a great New Zealand industry and a great New Zealand company."

In July, Cadmus proposed merging with Australian-listed Intellect Holdings, which has a European focus with a growing South American interest.

Both parties were working through the details of the deal, with some of the $6.2 million of new capital likely to go towards integration costs. Meanwhile, Cadmus had an ongoing programme of looking at available acquisitions.

"I think New Zealand's got to get its best players together to take on the international market - that's my big- picture view," Phillips said.

"You've got to put your own parochialism in your pocket and get on with taking on the world."

Provenco chief executive David Ritchie said there had been no discussion with Cadmus about a merger but he did not rule out future talks.

"As in business, we will look at any opportunity that we think adds value for our shareholders," Ritchie said.

ABN Amro Craigs research analyst Mark Lister said it would be a fairly compelling story if the companies merged. "There probably would be a lot of synergies there and a lot of benefits to something like that occurring."

The firms only competed in the Eftpos technology segment, which was about 20 per cent of Provenco's business, limiting the amount of cannibalisation from a merger.

Revenue in the last financial year at Cadmus was $25.7 million, compared with $153.9 million at Provenco.

Cadmus' share price was unchanged at 22c yesterday, while Provenco's was also unchanged at 98c.

Notable investors in both firms included Navman founder Peter Maire, who is a director of Cadmus and a shareholder in Provenco, and The Warehouse founder Stephen Tindall, who owns a stake in Provenco.

"When you see Peter Maire on the register of this one and on the board of that one, obviously there is already a couple of linkages there and both companies are looking to grow and become a New Zealand based, export-driven business," Lister said.