Paracon Holdings has disposed of its stake in Professional Consulting Network (PCN) and increased its holding in Mercury Technologies in deals worth a total R43.5 million.
The deal effectively ends the joint venture relationship between Paracon and LogicalOptions (formerly Cardinalis Investments) as well as the uncertainty surrounding the relationship between the two companies.
The seeds of the deal were sown earlier this year when the original LogicalOptions (subsequently renamed LogOpt), which holds a 41.3% stake in Paracon, sold all its assets and liabilities, excluding its Paracon stake, to Cardinalis Investments, which was renamed LogicalOptions.
LogOpt, 33.5% of which is owned by LogicalOptions (Cardinalis) and its nominees, announced in June that it planned to unbundle its shareholding in Paracon.
Paracon says the latest deals clarify the 14.04% stake that LogicalOptions will own in Paracon after the LogOpt unbundling, and the offshore joint venture relationship between Paracon and LogicalOptions.
Paracon and LogicalOptions own 100% of San Francisco IT resources supplier PCN and 61% of New York IT services and solutions company Mercury.
Paracon will buy LogicalOptions` stake in Mercury, increasing its own stake to 61%. It will sell its 50% shareholding in PCN to LogicalOptions and buy LogicalOptions` 14.04% stake in Paracon which it will own after the unbundling.
Paracon and LogicalOptions have also agreed that Paracon will no longer provide IT outsourcing services to LogicalOptions, although it will give LogicalOptions access in perpetuity to the source code of its proprietary staffing software for internal use.
"This transaction is a positive move to address the uncertainty surrounding LogicalOptions` intentions regarding its shareholding in Paracon and our JV relationship with them offshore, which may no longer be appropriate due to potential conflicting strategies between Paracon and LogicalOptions," says Paracon CEO Mark Jurgens.
Jurgens adds that while Mercury and PCN are both solid businesses that have performed well in the past, PCN has been severely affected by tough market conditions in the US.
Mercury, while also struggling in the difficult economy, remains profitable and is diversified in the sense that it provides both IT services and Internet-based solutions, he says.
"We believe that the disposal of our shareholding in PCN and the acquisition of a further stake in Mercury is an effective solution that gives Paracon full control of a profitable company that will benefit from any upswing in the global IT markets."
The Paracon share was unchanged at 60c on the JSE this morning.
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