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Second acquisition boosts Advantage’s e-commerce

Second acquisition boosts Advantage’s e-commerce momentum to next level

Advantage Group Limited (NZSE: ADV) today announced it has strengthened its position as a leader in e-commerce development with an agreement to purchase Internet development company WebMasters Ltd. The 45-strong company has operations in Auckland, Hamilton and Wellington.

The conditional agreement, subject to due diligence and finalised contractual arrangements, will see Advantage pay a total of $3 million in cash and $5 million in shares over a two-year period for WebMasters Ltd.

WebMasters is a multidisciplinary web development company with expertise in web site design, development, hosting and maintenance. It has strong Microsoft development skills coupled with extensive experience in the UNIX and Java arenas. WebMasters has delivered Internet solutions to an enviable client list including award-winning sites for Access New Zealand, CLEAR Net and the Telecom Yellow and White Pages.

“This acquisition will make Advantage one of the largest Internet development companies in the Asia Pacific region, with over 100 experienced developers,” says Advantage CEO, Greg Cross. “It represents another major step on the path that we outlined for Advantage twelve months ago. We’re bringing together a strong and experienced team of Internet professionals to offer the full range of e-commerce services; this will significantly strengthen what is a core e-commerce competency for Advantage. E-commerce now represents over 60% of Advantage’s revenues and will be the foundation for the company’s future growth.”

“Some time ago we identified the need to align with another company to ensure a market leadership position,” said Frank van der Velden, WebMasters Managing Director. “We spent considerable time looking into the available options, including offshore investors, before arriving at Advantage. The value for us and for our customers is that they are focused simply on developing a best of breed e-commerce division. The recent Glazier acquisition tipped the balance: they are a perfect complementary fit with our services. The decision was simple. Advantage have the long-term vision, management talent and financial backing necessary to be ideally placed to take a significant lead in this sector.”

“In e-commerce, achieving market share, speed to market, and size are critical says Nevin Grieve, Advantage’s General Manager, E-Commerce. “This acquisition will also fulfil a major part of our plan to take the lead in delivering integrated end-to-end e-commerce solutions, from development through to transaction processing.”

“Our aim is to make Advantage the technology partner of choice for businesses operating in New Zealand, Australia and Asia Pacific,” adds Grieve.
Growth Strategy

“Advantage’s strategy is to enter markets early, add value through acquisitions, and grow it through investments in separate but complementary ventures. This position is enhanced by our strategic relationships such as our agreement with Microsoft,” says Cross.

“Business-to-business e-commerce is hot: Analysts, business editors and multinational corporations now recognise it as the most promising sector of the new economy. That’s because it delivers efficiencies, streamlines processes and automates the entire enterprise in ways that traditional information technology solutions have struggled to achieve.

“The results can be seen in the performance on NASDAQ of companies like Appnet, Ariba, Scient, VerticalNet and Viant. They achieve valuations which, while astronomical by comparison with traditional industries, relate squarely to their ability to address huge markets with compelling business propositions and understandable business models.

“They command such high multiples because business-to-business e-commerce represents a fundamental shift in the way businesses can integrate supply chains, back-end systems and e-commerce applications as every sector of the economy joins the stampede to become Internet-enabled.

“The business-to-business model offers software, hosting services, Internet consulting and service packages, equipment and solutions to business customers. These services are in high demand and will become increasingly important as e-commerce matures. With our POS equipment, software solutions and business-to-business e-commerce divisions, we’re already in the territory, rapidly extending our operations and geographical reach. And we’ll work on becoming the e-commerce partner of choice for companies in our region.”

International Burgeoning Business-To-Business

“This announcement comes as Goldman Sachs reports that business-to-business e-commerce is set for exponential growth. Companies such as Advantage involved in building e-commerce infrastructure are best positioned to benefit from this growth,” says Cross. “They anticipate business-to-business e-commerce will reach $US 1.5 trillion by 2004. Forrester Research predicts that the global Internet professional services market will grow from $US 2.4 billion in 1997 to $32.8 billion in 2002, a compound growth rate of 68.7 per cent each year.
“This sector is clearly poised for rapid growth and the market for these services in our region is substantial. Advantage has the capabilities, the experience and the delivery track record to meet it. We believe we have strategic advantages in being based in New Zealand: low cost of infrastructure and talented people who are by nature early technology adapters. New Zealand is the most networked country in the world, with close to 5,000 net-connected computers for every 100,000 people. Building on this, New Zealanders are beginning to appreciate that e-commerce improves their ability to do business because of its immense impact on speed, time and distance.”

The $8 million agreement will see Advantage pay cash and shares over a two-year period, with $2 million in cash and $3 million in shares to be issued at $2.58 per share to be paid at settlement date. Twelve months from settlement Advantage will pay $1 million cash and issue a further $2 million in shares at the prevailing market price. Advantage does not anticipate needing to seek shareholder approval for this transaction.

Background

Advantage Group Limited, an NZSE listed company, is a leading supplier of e-commerce and transaction processing solutions in New Zealand, Australia and throughout the Southern Hemisphere. The company has three business units: business-to-business e-commerce, retail solutions and point-of-sale equipment. It provides web development capabilities, software development, transaction processing and funds transfer capabilities to enable end-to-end e-commerce solutions.
ENDS

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