ESec shareholders will lose around 43 percent from the market value of their shares in the deal, which may be the only way for them to recover any of their money from the company.
It's an ominous sign for the specialist IT security industry in Australia--one of eSec's rival's, Citadel Securix, was last year bought out by management and de-listed following the disastrous and dramatic erosion of its share value since its float. It was then snapped up by eGlobal, a Australian Stock Exchange (ASX) listed company, for AU$2.73 million. Original Citadel shareholders lost an absolute bundle in the company, which had a market capitalisation of AU$40 million dollars at its peak.
The eSec story is somewhat similar. The company raised AU$6 million in a successful initial public offer in 1999, 15,000,000 shares at 40c each, before listing on the ASX in early 2000. From there on it what followed was the gradual loss of AU$18 million of shareholder's money.
The eSec shares are currently trading at 1.6c, a far cry from their all time high of AU$1.25 in 2000.
Under a proposal put together by ASG, which is 18.9 percent owned by HP through Compaq Cayman islands, eSec will take over the Perth outsourcer, providing them with an easy way onto the stock market and a glimmer of hope for eSec shareholders. It will also give ASG a strengthened IT security offering--the takeover is actually being called a merger.
The offer does, however, value eSec shares at around 0.9c, a good 43 percent below the current quote on the ASX. However considering the amounts of money that has already disappeared down the tubes, it's doubtful they'll be kicking up much of a stink about the final insult--eSec had a negative net equity of AU$680,000 as of December last year.
Indeed all documentation the company has filed with the stock exchange indicates the offer will be accepted at its shareholders meeting next Thursday.
This was evident when the company responded to a query by the ASX, which had asked eSec how it could continue to operate if the reverse takeover fell through.
"Having held discussions with its major shareholders and thereby identified broad support for the proposed transaction the Company expects that shareholders will approve the acquisition of ASG at the general meeting," the eSec response said.
The ASX also send a thinly veiled caution to eSec, via a request for confirmation of compliance with disclosure rules, in particular listing rule 3.1, which deals with timely disclosure.
Ex eSec staffer and prominent security consultant Neal Wise, who was with the company for around two years, is saddened by the developments, but strongly believes the specialist industry has a future.
"I always felt like eSec happened a little too early. [But] I do think there's room for specialist providers," he told ZDNet Australia.
Wise, who now works for Dimension Data, said eSec was a great place to work and he has happy memories of his time with the company.
"I had a really good time there... we were doing some great stuff. It's something that I am sorry to see go," he said.
ASG did not return repeated phone calls requesting comment, eSec refused to comment based on advice from its solicitors. The ASX would not discuss its queries of eSec.
