Cadmus looks beyond merger with Intellect

NZX-listed payment technology company Cadmus is looking at further merger opportunities beyond that with Australian-listed Intellect Holdings, says director Peter Maire.

Maire said although there were no firm plans beyond the proposed Intellect merger, there were a number of businesses that would make a good fit.

"I'd say in the near term there's definitely opportunities we're looking at that would expand both technology and product," he said.

"That's what we need to do, we need to keep scaling."

The merger with Intellect would give the combined business the necessary size to compete for larger contracts, including in the emerging markets of India and South America.

"It's about bringing the cost of the terminal down and about making it wireless ... and the thing to achieve that goal you need scale," Maire said.

"So you need global marketing footprints so when you spend the R&D dollars we need to spend you've got market penetration quickly."

Intellect is European-focused with a growing South American interest, while Cadmus has a strong presence in New Zealand, Singapore and Southeast Asia.

Cellular technology would force a revolutionary step change in the payment sector, Maire said.

"We have now 6500 taxis in Singapore with Cadmus terminals in them and that's because the man in the street wants to pay everything with a credit card."

Many emerging markets in South America and India didn't have a landline wired payment infrastructure.

"My real interest in that is how we transition from being a wired payments technology platform to a wireless technology platform."

Maire was in Shanghai yesterday scouting opportunities for Cadmus.

"We all look at this and drool over the size of the opportunity in China," he said.

ABN Amro Craigs research analyst Mark Lister said Maire's investment last month in rival NZX-listed electronic payment company Provenco Group raised a few eyebrows.

"I think we all get the feeling that he's got a vision," Lister said.

"I suspect this Intellect deal he had a lot to do with it."

Maire had a track record especially with home-grown technology companies looking for offshore growth, Lister said.

Maire founded navigation technology company Navman - which he sold to US marine and leisure products giant Brunswick for $108 million in 2004 - and he and his investment partners took a 20 per cent stake holding in global positioning technology company Rakon last November.

"People that adopt a sort of follow-the-smart-money approach would see him moving into Provenco and think, 'Okay, if Peter thinks there's something good there then there probably is'," Lister said.

Maire does not see any conflict of interest as only 20 per cent of Provenco's business overlaps with Cadmus and he is merely a shareholder in Provenco.

In his role as a Cadmus director Maire will organise a new share issue, to be held in conjunction with the merger, of between $15 million and $20 million.

The exact timing of the capital raising is yet to be determined but it would need approval of both Cadmus and Intellect shareholders.

The merger will see shareholders in Intellect receive 3.33 Cadmus shares or options for each share, option or note they hold in Intellect.

Cadmus has a far greater capitalisation than Intellect - $53 million compared with A$28.9 million ($35.5 million) - but as at the 2005 annual reports Intellect's turnover was more than three times higher - A$50.8 million compared with $19.7 million.

The merger will leave current stakeholders in Intellect and Cadmus owning about half each of the company.

ABN Amro's Mark Lister said although current market capitalisation was important so too was the potential each party offered to the merged group.

"At the end of the day both boards are recommending it ... so if they are doing their jobs then shareholders should hopefully take some comfort from that."

Maire hoped Cadmus shareholders would support the deal at a meeting probably to be held in September.

"It would be a big disappointment for us if there wasn't support for it," he said.