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High-Tech Medium-size tech firms outdo big tech on profit return



ZiaSun Technologies Announces Merger With Houston-Based Company

Peregrine Systems, the San Diego-based software provider, chalked up another large acquisition last week, announcing a $1 billion planned cash and stock deal for Remedy Corp., a software provider based in Mountain View.

The deal, expected to be completed by September, was spun by the two software companies as one that has more complementary advantages than overlaps of existing customers.

When regulatory and shareholder approvals are completed, the combined companies should have revenues in excess of $1 billion, said Peregrine CFO Matt Gless.

The actual purchase price or enterprise value paid for Remedy was $875 million based on the subtracted $215 million in cash that Remedy has on its balance sheet. The estimated price was also based on the value of Peregrine stock as of June 8.

Peregrine agreed to pay 0.9065 share of its stock and $9 in cash for each share of Remedy. Peregrine said it would issue $27.9 million in common stock for the acquisition.

Following the announcement, the market drove up the price of Remedy by more than $12 to $30.52 on June 11. Peregrine dropped more than $3 to $25.51. The following day, Peregrine regained some of that loss to close at $27.19, while Remedy gained about $2 to close at $32.27.

Some analysts said Peregrine paid too high a price, echoing sentiments that were heard when the company acquired Harbinger Inc. last June for an estimated $920 million.

Gless said the price, about 3.5 times Remedy’s sales, was “extremely reasonable if you look at the price-to-sale ratios” of other deals in the same industry.

Although the two businesses do have an overlap of customers, Peregrine concentrates on larger companies that do average deals in the $300,000 to $350,000 range. Remedy’s customers are usually smaller to medium-sized companies that make purchases between $40,000 to $50,000.

Both firms make software that allow companies to manage their assets and customers.

Remedy has about 1,350 employees, while Peregrine has some 3,000 employees in 80 offices worldwide, including 771 at its headquarters office in Carmel Valley.

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ZiaSun Merges:

ZiaSun Technologies, a holding company of Internet firms based in Solana Beach, announced last month it is merging with Houston-based Telescan, Inc.

The firm said last week the SEC is still reviewing the proposed merger and has no news on the merger, or whether it will maintain its local headquarters.

ZiaSun has but two people at its Solana Beach office. The bulk of its operations are in Provo, Utah, where its main subsidiary, Online Investor Toolbox, is located. That company has about 150 employees, three-quarters of whom work in Provo. Its business is conducting online investor education through seminars and workshops.

Telescan, traded on Nasdaq, is in the same line of business, and operates two Web sites, Investools.com and WallStreetCity.com. It has three offices: Houston, Menlo Park and New York. According to the merger announcement, the combination of the companies would result in more than $90 million in pro forma revenues and an aggregate customer base of about 1 million.

For the quarter ended March 31, ZiaSun reported a net loss of $1.2 million on revenues of $14.2 million, compared to a net profit of $1.98 million on revenues of $12.9 million.

For fiscal 2000, ZiaSun reported a net loss of $77.2 million due mainly from write down of goodwill and discontinued operations.

The stock rose steadily upon the news of the merger last month to about $1.40, but fell soon after.


Excelsus Is Purchased:

Excelsus Technologies, Inc., a Carlsbad firm that manufactures microfilters used by digital subscriber line (DSL) providers, signed a definitive agreement to be acquired by Technitrol Inc., a Philadelphia-based manufacturer, for $87.5 million in cash.

Privately held Excelsus said it had $40 million in revenues last year. Once the transaction is completed in July, the company will be part of Pulse within Technitrol’s Electronic Component segment.

Excelsus, founded by Frank Kiko in 1998, will join Pulse as chief technical officer for Pulse’s end-user DSL product family.

The company declined to reveal what Kiko’s ownership stake is, nor his share of the purchase price.

Technitrol, a global producer of electronic components for makers of networking, Internet, telecommunications and computer equipment, reported a net profit of $99.3 million on revenues of $664 million last year compared to a net profit of $44.3 million on revenues of $530.4 million. It had more than 30,000 employees at the end of last year.

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Remec Loses $9 Million:

Remec Inc., a San Diego-based manufacturer of subsystems used in the transmission of voice, video and data over wireless networks and in the defense industry, reported a net loss of $9.2 million on $58.9 million in revenues for its first quarter ended April 30, compared to a net profit of $1.4 million on revenues of $56.6 million for the like period in the previous fiscal year.

The company blamed the loss and the 21 percent decline in revenues from its previous quarter on the global downturn in the commercial telecom sector.

Remec said it gained $7.6 million on the sale of its Humphrey Inc. subsidiary, which took place in February, but had to record a $9.4 million charge resulting from the write down of its Allgon AB common stock in the previous quarter.

Remec terminated a planned acquisition of Sweden-based Allgon in January.

Remec also said it purchased Multipoint Radio, Inc. for an undisclosed price. The Sacramento firm designs low-cost, millimeter wave radio products and has seven full-time staffers.

Remec closed at $9.74 June 12 in Nasdaq trading. Its 52-week range was between $7.43 and $36.


DirectPlacement Arranges Offering:

DirectPlacement, a 2-year-old investment bank and information services firm based in San Diego, said it arranged $17.75 million in secondary private equity for SatCon Technology Corp., a Nasdaq-traded firm in Boston.

“This is the first major transaction of this type that we’ve done, but we have more in the pipeline,” said President Brian Overstreet.

In the June 6 deal, DP Securities, the wholly owned subsidiary of DirectPlacement, sold about 1.4 million shares of SatCon at $12.125, a 12 percent discount from its trading price June 5. The transaction differed from a traditional private offering since investors received no warrants or synthetic price protection features.

Using the mini-secondary program, DirectPlacement was able to maximize the investment and minimize the financing costs to SatCon, Overstreet said.

DirectPlacement was formed two years ago and has 16 people working at its Nobel Drive office.

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Scientific Atlanta Takes Equity Stake:

Carlsbad-based NTN Communications Inc. said Scientific Atlanta Inc. invested $1 million in Buzztime Entertainment, a subsidiary of NTN, in exchange for a 6 percent equity ownership of the unit and warrants to purchase another 1.5 percent.

Buzztime and Scientific Atlanta agreed to co-develop an application to run Buzztime’s interactive trivia game show channel on SA’s digital interactive set-top network.

Buzztime owns a library of interactive content developed by NTN over the last 15 years and played by patrons of some 3,500 bars and restaurants.


HNC Buys Insurance Product Line:

HNC Software Inc., which makes customer insight software, among other things, acquired the workers’ compensation compliance reporting products of ecDataFlow.com Inc. of Huntsville, Ala.

This is HNC’s third purchase of insurance EDI, or electronic data interchange, in the last 14 months. The purchase price for the latest and earlier acquisitions of Celerity Technologies of Ohio and ClaimPort Inc. of Kansas were not revealed.

HNC customers include seven of the nation’s largest insurance carriers, including the Travelers Group and the Fireman’s Fund.

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AU-System Opens Office:

Stockholm-based AU-System, a consulting firm that created the world’s first e-stock exchange, as well as Sweden’s first Internet bank, officially opened a San Diego office this week in Sorrento Mesa at 12348 High Bluff Drive.

The company actually was launched in November with three people, and now has 14 employees, said CFO Todd Gore, who added that may grow by the end of the year.

The worldwide employment for AU-Systems is about 1,100, Gore said.

E-mail tech-related finance items to mallen@sdbj.com.

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