Redstone snaps up Fujin

VAR buys Ethernet and datacentre specialist for a total of £2.9m, pending financial targets being hit

Sealing the deal: Redstone will pay £2.9m for Fujin if it hits its profit targets

Redstone has splashed the cash to acquire datacentre consolidation specialist Fujin.

An initial £400,000 will be paid upfront for the Brocade partner, with a further £2.5m payable after 31 October 2011 subject to the achievement of certain performance criteria.

Redstone has been involved in a flurry of activity recently, including the sale of its Irish subsidiary last week and the offloading of its Marcom installation and maintenance arm to Maintel.

Fujin’s latest financials show a turnover of £1.4m in the nine months ended 30 September 2010, with a gross profit of £311,000 and a loss before tax of £57,000.

The VAR was incorporated in 2009 by ex-Calyx employees Clive Atkins and Paul Toms. Redstone chief executive Tony Weaver and chairman Ian Smith already own a 21 per cent stake in the company, causing it to be termed a "related party transaction" under AIM rules.

Tony Weaver, chief executive of Redstone, said: "Ian and I have worked with the management of Fujin previously. They have an outstanding track record which was the reason we personally helped to finance the business last year. The addition of significant new technology partnerships that they bring complements Redstone's existing offering and will promote good cross-selling opportunities.

"The acquisition is an initial and important strategic step in adding to Redstone's market proposition as we reposition the business as a leading network-based provider of end-to-end managed services."

Peter Hallett, chief financial officer at Redstone, added: "We are delighted to have been able to acquire Fujin. The process was led by the non-executive directors and myself and we have agreed a deal structure which aligns the consideration payable by Redstone to the earnings to be delivered by Fujin in the year to 31 October 2011, and which also incentivises the management of Fujin to continue to build upon their already impressive sales growth and market position."

Should Fujin not achieve the targeted pre-tax profit of £560,000 for the year to 31 October 2011, the amount payable will be adjusted to provide for a reduction of approximately £10 for every £1 of shortfall in profit.