Redstone moves for Maxima leftovers

£13.8m share-based deal designed to expand VAR's cloud and managed services business

VAR Redstone is set to buy what is left of ailing rival and fellow AIM-listed firm Maxima, in a £13.8m deal designed to boost its cloud computing clout.

After hawking a range of non-core units between December and May, Maxima's management is now backing the sale of what remains - basically its core managed services, infrastructure and applications (MSIA) business - to Redstone.

Redstone's share-based offer values Maxima's ordinary share capital at about £9.9m and has an enterprise value of about £13.8m (which includes Maxima's remaining debts).

The Cisco Gold partner indicated that multiple parties expressed an interest in acquiring the MSIA division, which has revenue of about £24m, after Maxima put it on the market at the end of last year.

Maxima made a loss of £6.3m from continuing operations in its most recent financial year, to May, and Redstone hinted that it will aggressively strip out costs when it brings the two businesses together. If the bid comes off, Redstone will look to raise about £3m through a share placing to fund "the implementation of the synergies between the businesses of Redstone and Maxima".

This will also help it meet the costs associated with the acquisition and provide general working capital.

Michael Brooke, senior non-executive director of Maxima, urged shareholders to vote in favour of the bid.

"Having fully explored potential disposal options for Maxima's core MSIA division, the independent Maxima directors believe that the proposed terms of the acquisition would result in a better financial return for Maxima shareholders and which fairly reflects the potential benefits of combining the two businesses," he said.

Redstone said the enlarged group will be better placed to exploit growth in the cloud computing and managed IT services market. Maxima's Indian operations will also help it deliver cost benefits to the enlarged group, it added.

Richard Ramsay, non-executive chairman of Redstone, said: "We are excited by the opportunities for the enlarged group to capitalise on its position as a leading independent UK managed services provider and to deliver healthy profit margins."

Maxima's sale will complete a divestment process set in motion 16 months ago when the VAR kicked off a strategic review in response to spiralling losses and debts.

Between December 2011 and May 2012 it sold off several sub-divisions in a process helmed by new executive chairman Ian Smith, who is also a director at Redstone. This included its Integrated Business Systems unit to K3 for £1.6m and Document Management Services, Intellect and Microsoft sub-divisions to M-Hance Group for £6.8m. It also sold its Irish division.