By GILES PARKINSON
Sydney view
Last December, after watching the share price of Solution 6 Holdings slump from more than $A18 to a low of $A7, managing director Chris Tyler said he would swear off acquisitions for a while.
It was an appropriate thing to say at the time. The market had watched him consume some 15 companies in the previous 12 months and had begun to wonder how and if Solution 6 could digest these purchases.
The shares had begun to weaken on the basis of these concerns and news that two of its latest proposed purchases in Britan and the United States had run into difficulty with feisty rivals and regulators.
It was a reaction that was threatening to play havoc with Mr Tyler's prediction that Solution 6 shares would reach $100 by the end of calendar 2000.
Mr Tyler, a Texan with attitude, managed to sit still for around two months before he began dreaming of pulling off his biggest purchase to date.
That was unveiled last Monday, when Solution 6 announced a share offer for the equally acquisitive and rejuvenated Sausage Software. The deal will see Telstra spill some of its internet business-to-business assets in return for shares that will take its stake in the combined entity to around 40 per cent.
The announcement was significant for several reasons. It creates Australia's premier new technology or new economy stock and answers one of Telstra biggest dilemmas to date - creating a vehicle that allows it to leverage off the internet boom.
Solution 6 and Sausage figured the combined entity would be worth around $A3.5 billion, but the market decided to throw in an extra billion or two and marked up its value to nearly $A5.5 billion when all the share options are taken into account.
The extra $A2 billion from the morning's announcement will perpetuate itself, because it is enough to thrust the entity into the ranks of the top 20 on the Australian Stock Exchange and make it a "must" buy for most fund managers. Not bad for two stocks that less than two years ago were worth just a little bit more than the paper their share certificates were printed on.
It almost doesn't matter that many analysts despair when they consider the task of merging nearly 25 businesses gobbled up by Solution 6 and Sausage over the past 12 months into a properly functioning company.
"We're not challenged as a result of our aggressive activity," Mr Tyler said last week. "We're not going to take our foot off the accelerator ... I absolutely intend to build a massive business in North America and in Europe."
The task of binding the disparate businesses under one roof is to fall to former Telstra executive Lindsay Yelland, who has been installed as chief operating officer while Mr Tyler busies himself around the globe looking for new opportunities.
What distinguishes Solution 6 and Sausage from most other net stocks and dot.com concerns is its specialisation in the rapidly expanding business-to-business electronic commerce market, where investors are figuring the most money is to be made.
Not that anyone is suggesting that these two companies will be making a profit any time soon, although the formal takeover documents should make interesting reading.
* * *
It used to be that stocks would need to operate for several years before they could consider a listing on the stock exchange. Now all they need is a bright idea.
This week, a company simply called worldschool announced it was going to market with a concept that should have been blindingly obvious to anyone who has been exposed to the myriad opportunities of the new economy - teaching over the net.
Worldschool has not actually taught anyone over the net yet (its revenues for 1999 were zero), but it has thought a lot about it.
It has invented new terminology that makes the glossary in its prospectus more interesting than most.
Trademark names such as empoweredlearning, personalteacher, personaleyes, resourcebank and worldtheatre are all designed to give it a certain cachet, along with approving comments from various educational experts (two words).
So what is the company worth? Based on hypothetical assumptions about how many people will actually use the resource, the directors figure the company is worth about $A90 million.
That would deliver the founding shareholders and their venture capital partners, who have invested around $A6.6 million, interest in stock worth some $A60 million, plus options.
Not bad work if you can get it.
* Giles Parkinson is deputy editor of the Australian Financial Review.
Solution 6 boss gets a taste for buying Sausage
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