Tekgraf to Sell Channels Business Unit; Will Change Name to Centiv
Press release from the issuing company
VERNON HILLS, Ill., Oct. 29 - Tekgraf announced today that is has signed a definitive agreement to sell the company's Channels Business Unit to SCB Acquisitions, LLC of Greenville, S.C. for $7,905,000 in cash, subject to certain post closing adjustments plus the assumption of certain liabilities of the Channels Business Unit. SCB Acquisitions includes a number of senior managers of the Tekgraf Channels business unit including Scott C. Barker, Vice President of Sales. In connection with the sale, Tekgraf will change its corporate name to Centiv, Inc. The sale is expected to be completed by November 30, 2001, and is contingent upon lender and Tekgraf shareholder approval as well as the ability of SCB Acquisitions to obtain financing on reasonably satisfactory terms and conditions.
The purchase price will be payable, subject to post closing adjustments based upon changes in Tekgraf's working capital and net asset value prior to the closing of the transaction, in cash. The net proceeds of the sale will be used by Tekgraf to reduce its total outstanding indebtedness. SCB Acquisitions will also assume the accounts payable and accrued expenses incurred in the ordinary course of the Channels Business Unit existing as of the date of the closing of the transaction subject to certain agreed upon exceptions. In connection with the sale of the Channels Business Unit, Tekgraf will make certain loans to the management team of SCB Acquisitions secured by Tekgraf common stock owned by them. The aggregate amount of these loans shall be $250,000. In addition, in connection with the sale, the stock options of certain key employees of the Channels Business will vest immediately upon the closing.
"Selling our Channels Business Unit will allow us to focus our efforts and resources more directly on Centiv, our Internet-based point-of-purchase business, while significantly reducing our debt,'' said William Rychel, President and CEO of Tekgraf, Inc. Centiv has been successful in establishing an on-demand point-of-purchase technology solutions business. Recent contracts with a number of consumer brand and retail customers have established Centiv as a leader in this exciting new business. The Channels Business Unit is a wholesale distributor of advanced technology graphics products used in the digital pre-press, display graphics, and engineering document management markets.
"Our acquisition of the Channels Business will allow the company to focus on value added distribution of technology products. Our company will be devoted to increasing the value that we provide for our vendor partners and our reseller partners. The new company represents management expertise, technical sales expertise, professional services, and operating expertise that will be 100% dedicated to the distribution of technology products in existing and emerging channels. Our vendors, management partners, and our employees are very excited about this new venture,'' said Scott Barker, President and CEO of SCB Acquisitions, LLC.
As part of the sale transaction, the buyer will assume the name 'Tekgraf' and other trademarks specific to the Channels business. Tekgraf, Inc. will be changing it's corporate name to 'Centiv, Inc.' and will apply to NASDAQ for a change in the company's ticker symbol. "The Tekgraf Channels Business Unit has always represented our strong commitment to the reseller channel. In order to maximize the value of both Centiv and the Channels Unit, it now makes sense to split these companies as they now have different business models,'' said Rychel. "We believe that this divestiture represents a win-win for all of the parties involved with Tekgraf -- our customers, our suppliers, our Channels Unit employees and our shareholders. We anticipate a smooth and rapid transition,'' said Rychel.
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