Horizon pays cash for sake of Clarity

Tweaking terms

Horizon Technology is to pay cash for an additional stake in its Clarity Technology subsidiary, instead of issuing new shares.

Irish-based Horizon, which owns almost 92 per cent of Clarity, is exercising its option to pay cash for an 8.3 per cent stake in the company that it purchased in July 2003. Horizon has also already agreed to purchase another 8.3 per cent of Clarity in July 2004.

Under the terms of the latest acquisition, Horizon had the choice to either issue 210,126 ordinary shares and make a cash payment of €1.3 million, or to issue 4.4 million ordinary shares. The company had initially decided to opt for the all-share deal but later switched to the cash-and-shares option.

"I'd say that it was Horizon who wanted to renegotiate, rather than Clarity," said Barry Dixon, technology analyst with Davy Stockbrokers. "It would suit Horizon to give Clarity cash rather than shares."

Although the cash deal will reduce Horizon's net cash balances by &euro1.3 million, its earnings per share will increase by 6 per cent, since the company will maintain a smaller share base. The fact that Horizon's management chose to pay cash instead of issuing shares may also indicate that they see a potential upswing in the company's share price.

"I don't think that investors will take this badly, I think there's a positive spin on the deal," said Dixon. "Traditionally, equity was considered a more expensive option than cash, so the cost to the business of paying cash is less."

Horizon announced its results for the first half of the year in early September. The company posted lower revenues for the first six months of the year, although cost-cutting boosted profitability. A year ago, the company's revenue was €193 million, about 33 per cent higher than in the most recent reporting period.

Horizon has left the Web consultancy, IT training and application service provision sectors over the past 12 months and now focuses on selling IT equipment and providing IT services through its applications consulting business.

© ENN