Commander flogs Nexon back to prior owners
Commander has taken the next step in its turnaround plan by selling a recent acquisition, telecommunications reseller and network service provider Nexon, back to its previous owners.
Commander originally bought Nexon from Charles and Barry Assaf on 1 March 2007, although it employed them to manage its new subsidiary after the date. There was an AU$3 million payment made at the time of the deal, a Commander spokesperson said, and the Assafs also received 3,800,000 convertible notes valued at AU$2 each and were entitled to a deferred payment of AU$1.5 million.
The Assafs were due to redeem the convertible notes and receive the deferred payment on 30 April. By returning Nexon to its prior owners, Commander has avoided a AU$9.1 million payout, according to the company.
"The biggest impact [of the deal] is on the cash flow," a Commander spokesperson said.
However, Commander will not see its AU$3 million again, it will forgive Nexon AU$1.9 million in inter-company payments — such as rent owed — and will pay AU$700,000 in tax liabilities for Nexon.
The sale was a logical move, the spokesperson said: "We considered Nexon as part of the non-core assets and therefore it made sense to sell it off as soon as possible.
"The services [Nexon] offers and puts into the market are different to Commander's product. For that reason they were not integrated into the group," the spokesperson said.
Ovum senior analyst Claudio Castelli said it will be a very easy sale for the company because it consists mainly of debt forgiveness. "There is almost no money involved," he said.
Nexon's business is not high value-added, he said, which makes it natural for Commander to sell under its turnaround plan, which focuses on core businesses whose margins are high.
When Commander first bought Nexon, he said, it most likely wanted to achieve better penetration in the market. However, due to the company's lack of money and integration with the subsidiary, it was not in a position to take advantage of the benefits the company could provide, he said.
Staff of Nexon are likely to see no change, the Commander spokesperson said: "They all were part of Nexon already."
Other sales in Commander's turnaround plan included selling its Western Australian enterprise ICT business, as well as wholesale networking arm Unitel.