Date Posted: 9/21/2005
Geac must buy to grow; but also open to sale-CEO
Tue Sep 13, 2005 04:45 PM ET
By Jeffrey Hodgson
TORONTO, Sept 13 (Reuters) - If Geac Computer Corp. (GAC.TO: Quote, Profile, Research) (GEAC.O: Quote, Profile, Research) is not sold, it must turn around and buy other companies to ensure growth as revenues from its existing operations wane, its chief executive said on Tuesday.
Geac, a provider of computer software and services, said in August it had hired Bear, Stearns & Co. to explore a "strategic alternatives". This included discussions with third parties interested in acquiring Geac.
"There is a deliberate process. There are people who have expressed an interest in the company and we have no idea what at the end of the day their interest will be," Chief Executive Charles Jones told reporters after the company's annual meeting in Toronto.
But if a sale does not materialize, Geac must start acquiring, he told investors earlier in the meeting.
"We're not changing our view that without acquisitions, the size of this business is more likely than not to decline. Acquisitions, if we're going to grow the business, must be in our future."
Jones told investors that Geac faces an acquisitions "conundrum" because, in the current heated market, its shares do not trade high enough compared with those of likely acquisition targets.
He said this makes it difficult to do deals that aren't dilutive to existing investors.
Markham, Ontario-based Geac's growth strategy has come under fire from activist shareholder Crescendo Partners, a New York-based hedge fund that worries Geac could make a large acquisition that could "destroy shareholder value".
Crescendo, which owns about 5 percent of Geac, agreed late on Thursday to drop an attempt to replace two of Geac's eight existing directors after the company publicly committed not to overpay for acquisitions.
Geac also said it would consider adding Crescendo's Eric Rosenfeld to its board, and will evaluate his candidacy by Nov. 30.
The board was reelected without incident at the meeting on Tuesday.
Rosenfeld, who attended the meeting, told reporters he thinks the company should explore all options, including a sale, "and then follow the path that leads to the greatest shareholder value".
"In a high-price acquisition environment, it's more difficult to make attractively priced acquisitions," he said.
Geac shares closed down 3 Canadian cents at C$10.87 in Toronto on Tuesday on volume of more than 898,000. On Nasdaq, the stock fell 1 cent to $9.19.
($1=$1.18 Canadian)
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