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Lynx wants Tetra – why?

Tetra shares up, Lynx shares down

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Lynx Group PLC has been smoked out as the suitor for Tetra, the veteran accountancy software vendor. The ambitious computer services conglomerate says it is "in continuing discussions" with Tetra, concerning a possible all share offer for the company. Lynx already knows the Tetra well. In 1997, the company stumped up £10 million for Apex, the UK's biggest reseller for Tetra and SAP software. Richard Holway, the leading software industry analyst, said the two companies "seem an excellent fit". The Financial Times quotes unnamed analysts who say the deal would offer "considerable synergies between the two companies". But synergies for whom? Lynx's current business activities don't look particularly synergistic: they include relatively low margin computer training and distribution of Unix hardware and software, as well as line of business applications in the financial, commercial, automotive and communications sectors. A deal with Tetra would make more sense if Lynx reversed its business systems business into Tetra and injected some more capital into the company. That way, punters could get to reap the benefits of Tetra C3, through a pure play software company. Great things are predicted for C3, Tetra's new flagship client-server product. Tetra is also profitable, after declaring a small loss last time out. But money is tight, with restrictions placed on head count, and disappointing levels of investment in getting C3 out to market, according to resellers. Backed by strong paper, Lynx would have little trouble in digesting Tetra -- financially speaking. Tetra is relatively big compared with recent Lynx acquisitions, but it is still only a sixth of the size of Lynx, a £180 million t/o company. Tetra announced the takeover approach from an unnamed company on 1 February. The shares jumped 56p on the day to 243.5p. Shares were off one pence at 278.5p yesterday, valuing the company at £69.8 million when Lynx's name was revealed as its suitor. Lynx shares fell 6p on the day to 209p, giving it a market cap of £223 million. ®

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