UXC Completes A$61m Sale of Field Solutions Group To Utility Services Group

8th Sept 2011. IT services company UXC Limited (ASX:UXC) has completed the divestment of its Field Solutions Group to Utility Services Group Limited for $61 million on a debt free, agreed cash basis.

Simultaneously, UXC has announced FY11 results for its ongoing IT Services business; with IT revenue growing by 11% to $522 million, and underlying EBITDA up by 7% to $33 million.

The purchasing entity for the Field Solutions Group is Utility Services Group, which will be owned by Cashel House, Service Stream (ASX:SSM) founding CEO Patrick Flannigan, and other investors including members of the acquired business’ management team. Financial support to USG is provided principally by Westpac Banking Corporation.

Patrick Flannigan who more recently had been the Head of Construction for the National Broadband Network Company, had been hired by UXC in April 2011 to advise on a sale process for the field services group.

The agreement is the long-awaited result of a strategic review the company conducted in February 2010 in an attempt to gain greater shareholder value for the company, from which it announced it would pursue a possible demerger.

The acquisition includes all assets of Utility Asset Management, Skilltech Consulting Services, Infrastructure Constructions, UXC and Fieldforce Services.

The sales price was $61 million, which includes $5m of consideration deferred for a period of one year from completion and payable upon the attainment of future earnings targets in two of the acquired businesses. Some $52.5 million of net cash proceeds were realized at completion of the transaction, after disbursements and agreed working capital adjustments, and moves UXC from a net debt to a net cash position.

It is expected that the transaction will move the company from a net debt to a net cash position in the ordinary course of business.

Mr Cris Nicolli, Managing Director of UXC, said “Though the final stages of completion have taken longer than expected, we have achieved our divestment goal in a short time frame given the complexities of such a transaction.”

“We are excited to be able to announce our success in transforming UXC into a pure Information Technology business. We have a strong executive team now fully focused on growing the business; we can now also strengthen our shareholder returns through the proposed return of capital. It is important to note that this distribution will be payable from the proceeds of sale of the Field Solutions Group. We expect to pay ordinary franked dividends that are referrable to UXC’s reported earnings going forward, in line with underlying performance. We have also strengthened our balance sheet through debt reduction, and though we expect to maintain a level of debt, and use some funds for select strategic acquisitions as well as the return of capital, we will get borrowing cost benefits from completion of the sale.”

In June UXC merged three of its infrastructure businesses, Integ Group, XSI Data Solutions and UXC Connect to operate under the UXC Connect name with former Integ boss, Ian Poole, heading up the new unit.

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