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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
(Amendment No. 2)
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
WIZTEC SOLUTIONS LTD.
(Name of Issuer)
CONVERGYS ISRAEL INVESTMENTS LTD.
CONVERGYS CORPORATION
(Name of Persons Filing Statement)
Ordinary Shares, New Israeli Shekel 1 Par Value
(Title of Class of Securities)
M98105-105
(CUSIP Number of Class of Securities)
William D. Baskett III
General Counsel and Secretary
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 723-2444
(Name, Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of Persons Filing Statement)
COPY TO:
Neil Ganulin
Frost & Jacobs LLP
2500 PNC Center
Cincinnati, Ohio 45202
(513) 651-6800
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
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INTRODUCTION
Convergys Corporation, an Ohio corporation ("Parent"), and Convergys
Israel Investments Ltd., a company limited by shares duly registered under the
laws of the State of Israel and a wholly owned subsidiary of Parent ("Sub"),
hereby amend and supplement their Transaction Statement on Schedule 13E-3
originally filed on April 1, 1999, as amended, with respect to the offer to
purchase all of the outstanding Ordinary Shares, New Israeli Shekel 1 Par Value
(the "Shares"), of Wiztec Solutions Ltd., a company limited by shares duly
registered under the laws of the State of Israel (the "Company"), not already
owned by Parent and Convergys Information Management Group Inc., a wholly owned
subsidiary of Parent.
ITEM 4. TERMS OF THE TRANSACTION.
Item 4(a) of the Schedule 13E-3 is amended and supplemented by adding
the following:
All conditions to the Offer must be satisfied or waived prior to the
Expiration Date. The Offer is conditioned upon the approval of the
Israel Investment Center, which approval was issued on April 26, 1999,
and the approval of the Chief Scientist of the Ministry of Trade and
Industry, which approval was issued on April 12, 1999.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 of the Schedule 13E-3 is amended and supplemented by adding the
following:
(b)(1) Support material for Broadview Opinion, dated March 25, 1999.
SIGNATURES
After due inquiry and to the best of my knowledge and belief, each of
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: April 28, 1999 Convergys Israel Investments Ltd.
By: William D. Baskett III
---------------------------------
William D. Baskett III
Vice President
Convergys Corporation
By: William D. Baskett III
---------------------------------
William D. Baskett III
General Counsel and Secretary
-3-
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EXHIBIT INDEX
Exhibits
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(b)(1) Support material for Broadview Opinion, dated March 25, 1999.
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CONVERGYS CORPORATION
FAIRNESS OPINION DOCUMENTATION
MARCH 25, 1999
BROADVIEW INT'L LLC
Tokyo Silicon Valley New York Boston London
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CONFIDENTIAL
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CONVERGYS CORPORATION
FAIRNESS OPINION DOCUMENTATION
Table of Contents
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TAB
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Fairness Opinion Letter 1
Valuation Considerations 2
Summary Explanation of Valuation Methodology 3
Valuation Analysis 4
BROADVIEW INT'L LLC
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CONVERGYS CORPORATION FAIRNESS OPINION
VALUATION CONSIDERATIONS
In reviewing the business of Wiztec Solutions Ltd. ("Wiztec" or the "Company")
and the proposed transaction with Convergys Corporation ("Convergys"), along
with the current activity within the information technology, communications and
media industries, we have identified the following factors, which, among others,
may have a material impact on valuation.
FACTORS POSITIVELY AFFECTING THE VALUE OF WIZTEC
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GROWTH AND SIZE OF THE CABLE MARKET - According to the Yankee Group and other
sources obtained by Convergys, the worldwide multi-channel subscription
television or cable market is projected to grow from 210 million subscribers in
1996 to 277 million subscribers in 2000. This represents a compounded annual
growth rate (CAGR) of 7.2%. The market outside North America is projected to
grow slightly faster, from 135 million subscribers in 1996 to 200 million
subscribers in 2000. This represents a CAGR of 10.3%. This market includes
traditional wireline cable operators, terrestrial-based wireless cable
providers, and digital direct broadcast satellite operators. Taken alone, this
market data may underestimate the potential market for Wiztec's products.
End-users of these different broadcast infrastructures are benefiting from
advanced technologies that enable both more channels of content and more
advanced features for those channels such as premium service and pay-per-view.
As advances in technology and increases in consumer demands continue to
complicate billing requirements, cable service operators are more likely to
purchase sophisticated software solutions from third parties such as Wiztec.
ESTABLISHED REVENUE GROWTH RATE AND PROFITABILITY - For the trailing twelve
months ended December 31, 1998, Wiztec generated $20.3 million in revenue,
resulting in net profit of $5.6 million. Compared to the prior twelve-month
period ended December 31, 1997, this represents a growth in revenue and net
profit of 69.2% and 163.8%, respectively. The management team of Wiztec expects
to continue to capitalize on the growing market for the Company's software. In
addition, Wiztec maintains a healthy balance sheet with approximately $16.4
million in cash, $18.6 million in working capital, and shareholder's equity of
$24.3 million.
STRONG INTERNATIONAL CUSTOMER RELATIONSHIPS - As the leading provider of
software for direct broadcast cable bill processing, Wiztec has established
strong, long-term relationships with its customers. Many large cable operators
from diverse locations around the world including Europe, the Middle East,
Australia, Southeast Asia, and North America currently use Company's products.
Specific customers include Bell Atlantic (United States), Deutsche Telekom
(Germany), Golden Channels (Israel), Hong Kong Cable Television, Kablesignal
(Austria), Mediakabel (Netherlands), ONDigital (England), Singapore Cablevision,
Southwestern Bell (United States), Telstra
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(Australia), UBC (Thailand), and Wizja (Poland). These customer relationships
are extremely valuable and difficult to build. Broadcast cable operators often
become reliant upon Wiztec's software and it is highly disruptive for them to
change billing software providers. For this reason, a significant proportion of
Wiztec's short-term future license fees and long-term maintenance revenue are
highly stable and predictable.
UNIQUE PRODUCT OFFERING AND PROVEN TECHNOLOGY - Wiztec, and its early
predecessor Digital Israel, have spent over eight years developing an advanced
platform for broadcast cable billing. The Company's main product, WIZARD, offers
cable systems operators a sophisticated billing, subscriber management,
inventory control, and integrated sales and marketing solution. Modular and
table driven, WIZARD can be easily configured and customized for different
languages or for individual customer requirements. The product is scalable to
hundreds of concurrent users processing multiple transactions for millions of
subscribers. The Company's products have been successfully installed in well
over 100 locations to date, worldwide.
PROVEN MANAGEMENT AND DEVELOPMENT TEAMS - Wiztec has a capable team of managers
and developers with significant experience in the cable, wireless, and satellite
TV industries, primarily in the billing and customer care sector. Wiztec's
executive team members average approximately 15 years of management experience.
The company has a recruiting process in which it handpicks the highest quality
developers and programmers, from students through to highly experienced
engineering professionals. The depth and quality of Wiztec's managers and
developers enhance the Company's ability to react quickly to changes in the
cable, wireless, and satellite TV industries and to understand better the needs
of its customers.
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FACTORS NEGATIVELY AFFECTING THE VALUE OF WIZTEC
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SMALLER SIZE OF THE COMPANY RELATIVE TO COMPETITORS AND THE MARKET OPPORTUNITY -
The market for cable billing systems is both highly competitive and highly
dependent on the condition of the cable industry itself The growth of the cable
industry worldwide is partially a direct result of deregulation in both the
cable and telecommunications industries. This macro trend has stimulated
competition from larger existing information systems and outsourcing providers
to newly founded market entrants. In addition, Wiztec already competes with
several much larger companies with deeper financial resources and development
capabilities including CSG Systems International and USCS, a subsidiary of DST
Systems.
HIGHLY CONCENTRATED CUSTOMER BASE - The Company's financial performance is
highly dependent on a limited number of customers and contracts in any given
year, although this dependence is decreasing substantially with the growth in
Wiztec's customer base year after year. For the fiscal year ended December 31,
1998, the top 2 customers, Deutsche Telecom and Bell Atlantic, represented 8%
and 6% of total revenue, respectively. Furthermore, while all of Wiztec's
existing customers continue to pay on-going maintenance fees, there is no
assurance this will continue after Wiztec's typical five-year contractual
period. Current customers are under no obligation to purchase additional
products in the future.
LENGTH OF SALES CYCLE - Billing systems for cable service providers are complex,
mission-critical applications that can involve significant outlays of capital
and extended implementation periods. Service providers rely on these systems to
ensure timely bills are generated without error. This results in shorter
collection periods and higher customer satisfaction. For these reasons, the
purchase of a billing system involves coordinated decision making from multiple
organizations within a service provider. The time from initial sales call
through proposal, purchase order, installation and final acceptance can be six
to twelve months or more. Long sales cycles can make revenue forecasting more
difficult and result in more volatile quarterly results.
UNIQUE ECONOMIC, POLITICAL, AND MILITARY RISKS IN ISRAEL - While currency risk
can be mitigated by using hedges and/or denominating contracts in US dollars,
exchange rate fluctuation can impact financial performance. Furthermore,
Wiztec's largest development center and the Company's headquarters are located
within the state of Israel. The Company is affected directly by any major
hostilities or political turmoil involving Israel. For instance, the
interruption or curtailment of trade between Israel and any of its trading
partners could have a material adverse effect on the Company.
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CONVERGYS CORPORATION FAIRNESS OPINION
SUMMARY EXPLANATION OF
VALUATION METHODOLOGY
The following is a summary explanation of the various sources of information and
valuation methodologies employed by Broadview Int'l LLC ("Broadview") in valuing
Wiztec Solutions Ltd. ("Wiztec" or the "Company") in conjunction with rendering
its fairness opinion regarding the proposed transaction with Convergys
Corporation ("Convergys"). Broadview employed analyses based on: (1) stock price
performance, (2) public company comparables, (3) transaction comparables, (4)
transaction premiums paid, (5) present value of projected share price and (6)
discounted cash flows, to determine the fairness of the transaction.
WIZTEC STOCK PERFORMANCE ANALYSIS - For comparative purposes, Broadview examined
the following:
1) Wiztec Common Stock weekly historical volume and trading prices from
March 24, 1998 to March 24, 1999;
2) Daily relative closing prices for an index of public company
comparables vs. Wiztec and the S&P500 from March 24, 1998 to March 24,
1999;
PUBLIC COMPANY COMPARABLES ANALYSIS - Ratios of a Company's Common Stock Share
Price and Equity Market Capitalization, adjusted for cash and debt when
appropriate, to selected historical and projected operating metrics indicate the
value public equity markets place on companies in a particular market segment. A
number of companies are comparable to Wiztec based on market focus, business
model and financial performance. Broadview reviewed six public company
comparables in the software segment of the Information Technology ("IT") market
providing billing and customer care software and services, from a financial
point of view including each company's: Trailing Twelve Month ("TTM") Revenue;
TTM Revenue Growth; TTM EBIT Margin; TTM Net Margin, Equity Market
Capitalization; TTM TMC/R ratio; TTM TMC/EBIT ratio; TTM P/E ratio;
TMC/Projected Calendar 1999 Revenue ratio ("Projected 1999 TMC/R"); and
Price/Projected Calendar 1999 Earnings ratio ("Projected 1999 P/E"). The public
company comparables were selected from the Broadview Barometer, a proprietary
database of publicly-traded IT ("IT"), Communications and Media companies
maintained by Broadview and broken down by industry segment.
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In order of descending TTM TMC/R, the public company comparables consist of:
1) LHS Group, Inc.;
2) CSG Systems International, Inc.;
3) Saville Systems plc
4) Billing Concepts Corp.;
5) International Telecommunications Data Systems, Inc.; and
6) SCC Communications Corp.
These comparables exhibit the following medians and ranges for the applicable
multiples:
Median Multiple Range of Multiples
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TTM TMC/R 1.85 0.59 - 10.61
TTM TMC/EBIT 7.79 5.35 - 45.53
TTM P/E 14.66 12.31 - 73.67
Projected 1999 TMC/R 1.48 0.52 - 7.69
Projected 1999 P/E 11.32 9.79 - 48.36
These comparables imply the following medians and ranges for per share value:
Median Implied Range of Implied Values
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Value
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TTM TMC/R $7.40 $3.90 - $31.81
TTM TMC/EBIT $8.50 $6.54 - $38.74
TTM P/E $11.31 $9.50 - $56.86
Projected 1999 TMC/R $7.96 $4.26 - $31.84
(Wiztec management estimate)
Projected 1999 TMC/R $8.20 $4.34 - $33.10
(analyst estimate)
Projected 1999 P/E (Wiztec $10.65 $9.21 - $45.48
management estimate)
Projected 1999 P/E $12.14 $10.49 - $51.84
TRANSACTION COMPARABLES ANALYSIS - Ratios of Equity Purchase Price, adjusted for
the seller's cash and debt when appropriate, to selected historical operating
metrics indicate the value strategic and financial acquirers have been willing
to pay for companies in a particular market segment. A number of companies
involved in recent transactions are comparable to Wiztec based on market focus,
business model, and financial performance. Broadview reviewed ten comparable
public and private company merger and acquisition ("M&A") transactions from
January 1, 1997 through the present involving sellers sharing many
characteristics with Wiztec, from a financial point of view including each
transaction's: Adjusted Price (Equity Price plus debt minus cash); Seller TTM
Revenue; and Adjusted Price/TTM Revenue ("P/R") ratio. Transactions were
selected from
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Broadview's proprietary database of published and confidential M&A transactions
in the IT, Communications and Media industries. These transactions represent ten
sellers in the software segment of the IT market providing billing and customer
care services, with TTM revenue less than $100 million.
In order of descending P/R multiple, the ten public and private company
transactions used are the acquisition of:
1) Architel Systems Corp. by Amdocs Ltd.;
2) Confidential by Confidential;
3) Confidential by Confidential;
4) Transaction Billing Resources Inc. by Card Clear plc;
5) Computer Resources Management, Inc. by Billing Concepts Corp.;
6) Communications Software Consultants, Inc. by Billing Concepts Corp.;
7) European Technology Partner AS by LCC International Inc.;
8) Coral Systems Inc. by Lightbridge Inc.;
9) Aldiscon Ltd. by Logica plc; and
10) Confidential by Confidential
These comparables exhibit the following median and range for the applicable
multiple:
Median Multiple Range of Multiples
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P/R 2.60 1.36 - 8.93
These comparables imply the following median and range for per share value:
Median Implied Range of Implied Values
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Value
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P/R $9.49 $6.04 - $27.12
TRANSACTION PREMIUMS PAID ANALYSIS - Premiums paid above the seller's equity
market capitalization indicate the additional value, when compared to public
shareholders, strategic and financial acquirers are willing to pay for companies
in a particular market segment. In this analysis, the value of consideration
paid in transactions involving stock is computed using the buyer's last reported
closing price (on the appropriate exchange) prior to announcement. -The seller's
equity market capitalization one trading day prior to announcement is calculated
using the seller's last reported closing price (on the appropriate exchange)
prior to announcement. The seller's equity market capitalization twenty trading
days prior to announcement is calculated using the seller's closing price (on
the appropriate exchange) on the first day of that period which: (I) consists of
twenty consecutive days during which the appropriate exchange conducts trading
activity, and (2) ends on the day of the last reported closing price prior to
announcement. Broadview reviewed 42 comparable M&A transactions involving
selected software companies from January 1, 1997 to the present with equity
consideration between $50 million and $250 million. Transactions were selected
from Broadview's proprietary database of published and confidential M&A
transactions in
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the IT, Communications and Media industries. In order of descending premium paid
based on the seller's stock price 20 trading days prior to announcement, the
selected software transactions used were the acquisition of:
1) FullTime Software, Inc. by Legato Systems, Inc. (pending);
2) Sulcus Hospitality Technologies Corp. by Eltrax Systems, Inc.
(pending);
3) US Servis, Inc. by HBO & Company;
4) Consilium, Inc. by Applied Materials;
5) Cybermedia, Inc. by Network Associates;
6) Interlink Computer Sciences by Sterling Software, Inc. (pending);
7) Oshap Technologies Ltd. by SunGard Data Systems Inc.;
8) TeleBackup Systems, Inc. by VERITAS Software Corp. (pending);
9) National Health Enhancement Systems, Inc. by HBO & Company;
10) Visigenic, Inc. by Borland International, Inc.;
11) C*ATS Software, Inc. by Misys plc;
12) Technology Modeling Associates, Inc. by Avant! Corp.;
13) Interactive Group by Dataworks Corp.;
14) FDP Corp. by SunGard Data Systems Inc. (pending);
15) Logic Works, Inc. by PLATINUM technology, inc.;
16) Award Software International, Inc. by Phoenix Technologies Ltd.;
17) Kurzweil Applied Intelligence, Inc. by Lernout & Hauspie Speech
Products NV;
18) Software Artistry, Inc. by IBM Corp.;
19) Walsh International, Inc. by Cognizant Corp.;
20) The ForeFront Group by CBT Group plc.;
21) Amisys Managed Care Systems, Inc. by HBO & Company;
22) Globalink, Inc. by Lernout and Hauspie Speech Products NV;
23) Maxis, Inc. by Electronic Arts, Inc.;
24) Learmonth & Burchett Management Systems, Inc. by PLATINUM technology,
inc.;
25) Oacis Healthcare Holdings Corp. by Science Applications International
Corp. (pending);
26) Equitrac Corporation by Investor Group (pending);
27) PC DOCS Group International Inc. by Hummingbird Communications Ltd.
(pending);
28) PHAMIS, Inc. by IDX Systems Corp.;
29) IQ Software Corp. by Information Advantage Software, Inc.;
30) State Of The Art, Inc. by Sage Group plc;
31) Innovative Technologies Systems, Inc. by Peregrine Systems, Inc.;
32) Interlinq Software Corp. by W.R. Hambrecht & Co. (pending);
33) Andyne Computing Ltd. by Hummingbird Communications Ltd.;
34) Unison Software, Inc. by IBM Corp.;
35) Premenos Corp. by Harbinger Corp;
36) DataWorks Corp. by Platinum Software Corp.;
37) Simulations Sciences, Inc. by Siebe plc;
38) Enterprise Systems, Inc. by HBO & Company;
39) XcelleNet, Inc. by Sterling Commerce, Inc.;
40) Fractal Design Corp. by MetaTools, Inc.;
41) Orcad, Inc. by Summit Design; and
42) FTP Software, Inc. by NetManage, Inc.
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These comparables exhibit the following medians and ranges for the applicable
premiums (discounts):
Median Premium Range of Premiums
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Premium Paid to Seller's 41.6% (26.5%) - 326.7%
EMC 20 Trading Days Prior
to Announcement
Premium Paid to Seller's 24.7% (2.0%) - 186.7%
EMC 1 Trading Day Prior to
Announcement
These comparables imply the following medians and ranges for per share value:
Median Implied Range of Implied Values
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Value
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Premium Paid to Seller's $22.74 $11.81 - $68.54
EMC 20 Trading Days Prior
to Announcement
Premium Paid to Seller's $20.82 $16.35 - $47.84
EMC 1 Trading Day Prior to
Announcement
In addition, Broadview reviewed nineteen comparable M&A transactions from
January 1, 1998 to the present in which the buyer had a controlling interest of
greater than 50% in the seller and subsequently acquired the remainder.
Transactions were selected from Securities Data Company's proprietary database
of published M&A transactions across all industries. In order of descending
premium paid based on the seller's stock price 20 trading days prior to
announcement, the selected transactions used were the acquisition of:
1) Group 1 Software Inc. by COMNET;
2) BT Office Products Intl. By Buhmann NV;
3) Newmont Gold Corp. by Newmont Mining Corp.;
4) Intelligent Electronics (XL Connect Solutions) by Xerox Corp.;
5) Knoll Inc. by Investor Group;
6) BRC Holdings Inc. by Affiliated Computer Services;
7) BET Holdings by Investor Group;
8) J&L Specialty Steel Inc. by Usinor SA;
9) Mycogen Corp. by Dow Chemical Corp.;
10) TCI Ventures Group by Liberty Media Group;
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11) Rayonier Timberlands by Rayonier Inc.;
12) International Franchise Systems by Investor Group;
13) Citizens Corp. by Allmerica Financial Corp.;
14) Forum Retirement Partners L.P. by Host Marriott Corp.;
15) Capital Factors Holding, Inc. by Union Planters Bank, National
Association;
16) IP Timberlands Ltd. by IP Forest Resources Company;
17) Hondo Oil & Gas Company by Lonrho plc;
18) Pan African Resources Corp. by Golden Star Resources Ltd.; and
19) Ryerson Tull, Inc. by Inland Steel Industries, Inc.
These comparables exhibit the following medians and ranges for the applicable
premiums (discounts):
Median Premium Range of Premiums
-------------- -----------------
Premium Paid to Seller's 9.9% (44.1%) - 83.0%
EMC 20 Trading Days Prior
to Announcement
Premium Paid to Seller's 11.2% (28.8%) - 80.4%
EMC 1 Trading Day Prior to
Announcement
These comparables imply the following medians and ranges for per share value:
Median Implied Range of Implied Values
-------------- -----------------------
Value
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Premium Paid to Seller's $17.65 $8.98 - $29.40
EMC 20 Trading Days Prior
to Announcement
Premium Paid to Seller's $18.56 $11.89 - $30.10
EMC 1 Trading Day Prior to
Announcement
CONSIDERATION OF PRO FORMA COMBINATION ANALYSES - A pro forma merger analysis
calculates the EPS accretion or dilution of the pro forma combined entity taking
into consideration various financial effects which will result from a
consummation of the merger. While pro forma combination analyses are commonly
performed, Broadview did not employ such an analysis for the purposes of this
opinion. As the Convergys already owns a controlling stake in Wiztec, Broadview
considered a pro forma analysis inappropriate for this opinion.
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PRESENT VALUE OF PROJECTED SHARE PRICE ANALYSIS - Broadview calculated the
present value of the potential future price of shares of Wiztec Common Stock on
a standalone basis using projections from Wiztec and Convergys management and
Broadview estimates for the twelve months ending December 31, 2000 discounted to
March 24, 1999 at discount rates ranging from 7.86% to 25.00% and including the
discount rate calculated using the equity cost of capital of 12.65% of the
Company. The potential future share price is calculated based on earnings
estimates for the twelve months ending December 31, 2000 and assumes a TTM P/E
multiple of 14.66, the median TTM P/E multiple for Wiztec's public company
comparable set.
Based on this analysis and the median TTM P/E multiple of Wiztec's public
company comparable set of 14.66, the per share valuation range implied by the
present value of the future share prices is $11.92 to $15.68 using the range of
discount rates specified above and is $14.47 as calculated using the cost of
equity implied by the Wiztec set of public company comparables.
DISCOUNTED CASH FLOWS VALUATION METHODOLOGY - Broadview valued Wiztec based upon
free cash flow estimates over a period from the date of valuation through
December 31, 2003. The Company's terminal value was calculated based on terminal
growth rates of 4.0%, 5.0% and 6.0% as well as terminal multiples of earnings of
14.0, 16.0 and 18.0. A discount rate of 12.65% was applied after careful
weighting of all factors both positively and negatively affecting the riskiness
of Wiztec's cash flows. Using the 12.65% discount rate and the assumed terminal
growth rates, the per share equity values for Wiztec are $25.43, $27.81 and
$30.92, respectively. Using the 12.65% discount rate and the assumed terminal
multiples of earnings, the per share equity values for Wiztec are $27.04, $29.67
and $32.31, respectively.
SUMMARY OF VALUATION ANALYSES - Taken together, the information and analyses
employed by Broadview lead to Broadview's overall opinion that the Offer Price
to be paid in the Offer is fair, from a financial point of view, to Wiztec
shareholders (other than affiliates of Parent).
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NEW YORK
SILICON VALLEY FAIRNESS OPINION
VALUATION ANALYSIS
BOSTON
LONDON
TOKYO
Prepared For
Convergys Corporation
March 25, 1999
BROADVIEW INT'L LLC
MEMBER NASD
MEMBER SIPC BROADVIEW
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TABLE OF CONTENTS
A. Transaction Description and Consideration Value
B. Offer Analysis & Valuation Analysis
C. Wiztec Solutions Ltd. Stock Price Performance
D. Wiztec Solutions Ltd. Public Company Comparables
E. Wiztec Solutions Ltd. M&A Transaction Comparables
F. Wiztec Solutions Ltd. Premium Paid Analysis
G. Present Value of Projected Wiztec Solutions Ltd. Share Price
Analysis
H. Wiztec Solutions Ltd. Discounted Cash Flow Analysis
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TRANSACTION DESCRIPTION AND CONSIDERATION VALUE
- --------------------------------------------------------------------------------
TRANSACTION DESCRIPTION
- --------------------------------------------------------------------------------
We understand that Convergys Israeli Ventures Ltd. ("Sub"), a wholly owned
subsidiary of Convergys Corporation ("Convergys" or the "Parent"), proposes to
make a tender offer (the "Offer") to purchase all the Ordinary Shares (the
"Shares") of Wiztec Solutions Ltd. ("Wiztec" or the "Company") for $18.00 per
share (the "Offer Price"). The terms and conditions of the Offer are more fully
detailed in the Offer to Purchase. We also understand that an affiliate of
Parent currently owns approximately 70% of the issued and outstanding Shares,
which it intends to tender in the Offer.
You have requested our opinion as to whether the Offer Price is fair, from a
financial point of view, to Wiztec shareholders (other than affiliates of
Parent).
CONSIDERATION VALUE
- --------------------------------------------------------------------------------
($THOUSANDS EXCEPT PER SHARE DATA)
WIZTEC ORDINARY SHARES OUTSTANDING 6,672
WIZTEC COMMON SHARE EQUIVALENTS 614
- ----------------------------------------------- --------
TOTAL DILUTED SHARES OUTSTANDING 7,285
WIZTEC SHARES TO BE ACQUIRED (THOUSANDS) 2,535
OFFER PRICE PER SHARE $ 18.00
CONSIDERATION TO BE PAID TO WIZTEC SHAREHOLDERS $ 45,631
- -------------------------------------------------------------------------
IMPLIED EQUITY VALUE OF WIZTEC $131,135
BALANCE SHEET ADJUSTMENT (1) $ 16,433
IMPLIED ENTITY VALUE $114,702
- -------------------------------------------------------------------------
Notes:
- ------
(1) As of 12/31/98, the Company had $16.43MM in cash and $0.00MM in debt,
yielding a net balance sheet adjustment of $16.43MM.
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WIZTEC SOLUTIONS LTD. VALUATION
- ---------------------------------------------------------------------------------------------------------------------------------
Offer Analysis
($Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
Implied Entity value $114,702
Balance sheet Adjustment $ 16,433
Implied Equity value $131,135
Implied Equity value Per share (1) $18.00
- --------------------------------------------------------------------------------
<CAPTION>
Applicable Wiztec Multiple or Median
Solutions Balance Sheet Premium Implied Range of Multiple or
Methodology Ltd. Figure Adjustment (2) By Offer Multiples or Premiums Premiums
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<S> <C> <C> <C> <C> <C>
PUBLIC COMPANY COMPARABLES
Multiple of Trailing
Twelve Months Revenue $20,297 $16,433 5.65x 0.59 x - 10.61 x 1.85 x
Multiple of Trailing
Twelve Months EBIT $ 5,838 $16,433 19.65x 5.35 x - 45.53 x 7.79 x
Multiple of Trailing
Twelve Months EPS $ 5,623 $ 0 23.3x 12.31 x - 73.67 x 14.66 x
Multiple of Projected
12/31/99 Revenue $28,007 (3) $16,433 4.10x 0.52 x - 7.69 x 1.48 x
Multiple of Projected
12/31/99 Revenue $29,206 (4) $16,433 3.93x 0.52 x - 7.69 x 1.48 x
Multiple of Projected
12/31/99 Net income $ 6,851 (3) $ 0 19.1x 9.79 x - 48.36 x 11.32 x
Multiple of Projected
12/31/99 Net Income $ 7,810 (4) $ 0 16.8x 9.79 x - 48.36 x 11.32 x
TRANSACTION COMPARABLES
Multiple of Revenue for
Comparable Public and
Private Companies $20,297 $16,433 5.65x 1.36 x - 8.93 x 2.60 x
Premium to Market Value
1 Day Prior to
Announcement $ 16.69 8% (20%) - 186.7% 24.7%
Premium to Market Value
20 Days Prior to
Announcement $ 16.06 12% (26.5%) - 326.7% 41.6%
Premium to Market Value
1 Day Prior to
Announcement (5) $ 16.69 8% (28.8%) - 80.4% 11.2%
Premium to Market Value
20 Days Prior to
Announcement (5) $ 16.06 12% (44.1%) - 83.0% 9.9%
</TABLE>
<TABLE>
<CAPTION>
Current Wiztec Solutions
Ltd. Share Price
------------------------
<S> <C>
FUTURE POTENTIAL SHARE PRICE ANALYSIS
Applying the median TTM P/E of Wiztec's Public Company Comparable Set $16.69
</TABLE>
<TABLE>
<CAPTION>
Share Price
Range of Share Prices Implied By Implied By
Share Price Implied By Range of P/Es and Discount Median P/E of
Offer Factors (6) Comparables (7)
- -----------------------------------------------------------------------------------
<S> <C> <C>
$18.00 $11.92 - $15.68 $14.47
</TABLE>
NOTES:
- ------
(1) Per share calculatiOns assume 7.3MM diluted Wiztec Solutions Ltd. shares
outstanding.
(2) As of 12/31/98. the Company had $16.43MM in cash and $0.00MM in debt,
yielding a net balance sheet adjustment of $16 43MM balance sheet
adjustment is applied to revenue and EBIT based analyses.
(3) 1999 projections projections based on Wiztec management estimates.
(4) 1999 projections based on CIBC Oppenheimer's 2/17/99 analyst report.
(5) Transactions since 1/1/98 where the buyer previously held greater than 50%
ownership and subsequently acquired 100% ownership.
(6) Applying discount rates ranging from 7.9% to 25.0%.
(7) Using a discount rate of 12.7% (using CAPM and the median capital structure
adjusted betas of the public company comparables)
Page 2 BROADVIEW INT'L LLC
<PAGE> 17
<TABLE>
CONFIDENTIAL
------------
WIZTEC SOLUTIONS LTD. VALUATION
- ---------------------------------------------------------------------------------------------------------------------------------
Valuation Summary
($Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
Implied Entity Value $114,702
Balance Sheet Adjustment $ 16,433
Implied Equity Value $131,135
Implied Equity value Per share (1) $18.00
- --------------------------------------------------------------------------------
<CAPTION>
Implied Implied Per
Implied Value Per Share Share Value
Equity From Value Range From Median
Median Multiple Applicable Wiztec Balance Sheet Median From Multiples Multiples or
Methodology or Premium Solutions Ltd. Figure Adjustment(2) Multiples or Premiums(1) Premiums(1)
- ----------------------------------------------------------------------------------------------------------------------------------
A B D (AxB)+D
<S> <C> <C> <C> <C> <C> <C> <C>
PUBLIC COMPANY COMPARABLES
---------
Multiple of Trailing
Twelve Months Revenue 1.85x $20,297 $16,433 $53,910 $3.90 - $31.81 $7.40
Multiple of Trailing
Twelve Months EBIT 7.79x $ 5,838 $16,433 $61,893 $6.54 - $38.74 $8.50
Multiple of Trailing
Twelve Months EPS 14.86x $ 5,623 $0 $82,425 $9.50 - $56.86 $11.31
Multiple of Projected
12/31/99 Revenue 1.48x $20,007 (3) $16,433 $57,959 $4.28 - $31.84 $7.96
Multiple of Projected
12/31/99 Revenue 1.48x $29,206 (4) $16,433 $59,737 $4.34 - $33.10 $8.20
Multiple of Projected
12/31/99 EPS 11.32x $6,851 (3) $0 $77,582 $9.21 - $45.48 $10.65
Multiple of Projected
12/31/99 EPS 11.32x $7,810 (4) $0 $88,417 $10.49 - $51.84 $12.14
TRANSACTION COMPARABLES
Multiple of Revenue for
Comparable Public and
Private Companies 2.60x $20,297 $16,433 $69,153 $6.04 - $27.12 $9.49
Premium to Market Value
1 Day Prior to
Announcement 24.7% $16.69 $151,660 $16.35 - $47.84 $20.82
Premium to Market Value
20 Days Prior to
Announcement 41.6% $16.06 $165,659 $11.81 - $68.54 $22.74
Premium to Market Value
1 Day Prior to
Announcement (5) 11.2% $16.69 $135,220 $11.89 - $30.10 $18.56
Premium to Market Value
20 Days Prior to
Announcement (5) 9.9% $16.06 $128,610 $8.98 - $29.40 $17.65
FUTURE POTENTIAL SHARE PRICE ANALYSIS
Applying the median TTM P/E
of Wiztec's Public Company Comparable Set(6) $105,392 $3.25 - $25.88 $14.47
DISCOUNTED CASH FLOW ANALYSIS
Applying a 12.76% discount rate(7) $209,409 $25.43 - $32.31 $28.74
---------
</TABLE>
NOTES:
- ------
(1) Per share calculations assume 7.3MM diluted Wiztec Solutions Ltd. shares
outstanding.
(2) As of 12/31/98, the Company had $16.43MM in cash and $0.00MM in debt,
yielding a net balance sheet adjustment of $16. 43MM
Balance sheet adjustment is applied to revenue and EBIT based analyses.
(3) 1999 projections projections based on Wiztec management estimates.
(4) 1999 projections based on CIBC Oppenheimer's 2/17/99 analyst report.
(5) Transactions since 1/1/98 where the buyer previously held greater than 50%
ownership and subsequently acquired 100% ownership.
(6) Range of implied values calculated using discount rates ranging from
7.9% to 25.0%.
(7) Median implied value calculated using a discount rate of 12.7%
(calculated using CAPM and the median capital structure
adjusted betas of the public company comparables).
Page 3 BROADVIEW INT'L LLC
<PAGE> 18
CONFIDENTIAL
------------
WIZTEC SOLUTIONS LTD. VALUATION
- --------------------------------------------------------------------------------
Summary Analysis
[GRAPH]
<TABLE>
<CAPTION>
Minimum 25 Perc Median 75 Perc Maximum
<S> <C> <C> <C> <C> <C>
Applying a 12.7% discount rate $25.43 $27.23 $28.74 $30.61 $32.31
Present Value of Future Potential Share Prices $ 3 $ 9 $14.47 $20 $26
Premium to Market Value 20 Days Prior to Announcement (1) $ 9 $16 $18 $20 $29
Premium to Market Value 1 Day Prior to Announcement (1) $12 $17 $19 $22 $30
Premium to Market Value 20 Days Prior to Announcement $12 $21 $23 $30 $69
Premium to Market Value 1 Day Prior to Announcement $16 $19 $21 $25 $48
Multiple of Revenue for Comparable Public and Private Companies $ 6 $ 8 $ 9 $13 $27
Multiple of Projected 12/31/99 EPS - CIBC Projections $10 $12 $12 $34 $52
Multiple of Projected 12/31/99 EPS - Wiztec Projections $ 9 $10 $11 $30 $45
Multiple of Projected 12/31/99 Revenue - CIBC Projections $ 4 $ 6 $ 8 $21 $33
Multiple of Projected 12/31/99 Revenue - Wiztec Projections $ 4 $ 6 $ 8 $20 $32
Multiple of Trailing Twelve Months EPS $ 9 $10 $11 $38 $57
Multiple of Trailing Twelve Months EBIT $ 7 $ 7 $ 8 $24 $39
Multiple of Trailing Twelve Months Revenue $ 4 $ 6 $ 7 $19.58 $32
<CAPTION>
Min Point 25 Point Median Point 75 Point Max Point
<S> <C> <C> <C> <C> <C>
Applying a 12.7% discount rate $25 $ 2 $ 2 $ 2 $ 2
Present Value of Future Potential Share Prices $ 3 $ 6 $ 6 $ 6 $ 6
Premium to Market Value 20 Days Prior to Announcement (1) $ 9 $ 8 $ 1 $ 2 $ 9
Premium to Market Value 1 Day Prior to Announcement (1) $12 $ 5 $ 2 $ 4 $ 8
Premium to Market Value 20 Days Prior to Announcement $12 $ 9 $ 2 $ 8 $38
Premium to Market Value 1 Day Prior to Announcement $16 $ 2 $ 2 $ 4 $23
Multiple of Revenue for Comparable Public and Private Companies $ 6 $ 2 $ 2 $ 4 $14
Multiple of Projected 12/31/99 EPS - CIBC Projections $10 $ 1 $ 0 $22 $18
Multiple of Projected 12/31/99 EPS - Wiztec Projections $ 9 $ 1 $ 0 $19 $16
Multiple of Projected 12/31/99 Revenue - CIBC Projections $ 4 $ 2 $ 2 $13 $12
Multiple of Projected 12/31/99 Revenue - Wiztec Projections $ 4 $ 2 $ 2 $12 $12
Multiple of Trailing Twelve Months EPS $ 9 $ 1 $ 1 $27 $19
Multiple of Trailing Twelve Months EBIT $ 7 $ 0 $ 2 $16 $15
Multiple of Trailing Twelve Months Revenue $ 4 $ 2 $ 2 $12 $12
</TABLE>
Page 4 BROADVIEW INT'L LLC
<PAGE> 19
CONFIDENTIAL
------------
WIZTEC SOLUTIONS, LTD. HISTORICAL 1 YEAR SHARE PRICE AND VOLUME PERFORMANCE
From 3/24/98 - 3/24/99
[GRAPH]
<TABLE>
<CAPTION>
Date Trading Volume Share Price
---- -------------- -----------
<S> <C> <C>
3/24/98 40,300 10.75
4/6/98 15,000 11.375
4/20/98 13,200 11.625
5/1/98 49,100 12.125
5/14/98 37,300 11.5
5/28/98 17,700 10.625
6/10/98 20,300 10.4375
6/23/98 14,800 9.75
7/7/98 147,100 13.25
7/20/98 52,600 13.375
7/31/98 12,100 12.25
8/13/98 6,200 11.875
8/26/98 8,800 10.625
9/9/98 15,200 9.75
9/22/98 16,300 10.125
10/5/98 15,600 9.125
10/16/98 2,400 10
10/29/98 5,400 12.25
11/11/98 16,700 13.5
11/24/98 27,900 12.75
12/8/98 4,500 12.75
12/21/98 31,100 11.625
1/5/99 32,400 13.375
1/19/99 3,4700 13.625
2/1/99 18,200 13.5
2/12/99 17,100 17
2/26/99 3,400 16
3/11/99 50,200 17.375
3/24/99 24,000 16.6875
</TABLE>
Page 5 BROADVIEW INT'L LLC
<PAGE> 20
CONFIDENTIAL
------------
BILLING AND CUSTOMER CARE COMPANY-WEIGHTED INDEX VERSUS
WIZTEC SOLUTIONS, LTD. AND THE S&P 500
From 3/24/98 To 3/24/99
[GRAPH]
<TABLE>
<CAPTION>
Billing and Customer Normalized Wiztec
Date Care Index Normalized S&P500 Solutions, Ltd.
- --------------------------------------------------------------------------
<S> <C> <C> <C>
3/24/98 100.0 100 100
4/6/98 100.4 101.41323 105.81395
4/20/98 115.5 101.63934 108.13953
5/1/98 108.2 101.38496 112.7907
5/14/98 101.8 101.07405 106.97674
5/28/98 99.7 99.265122 98.837209
6/10/98 90.2 100.59356 97.093023
6/23/98 90.2 101.24364 90.697674
7/7/98 98.3 104.43754 123.25581
7/20/98 101.7 107.0944 124.4186
7/31/98 83.0 101.3567 113.95349
8/13/98 78.2 97.230073 110.46512
8/26/98 69.6 98.049746 98.837209
9/9/98 73.1 91.011871 90.697674
9/22/98 68.5 93.131713 94.186047
10/5/98 61.8 89.429056 84.883721
10/16/98 64.4 95.5342 93.023256
10/29/98 68.3 98.219333 113.95349
11/11/98 74.7 101.38496 125.5814
11/24/98 76.0 107.00961 118.60465
12/8/98 79.9 106.84002 118.60465
12/21/98 74.0 108.79028 108.13953
1/5/99 75.3 112.57773 124.4186
1/19/99 80.7 113.22781 126.74419
2/1/99 75.4 115.1498 125.5814
2/12/99 72.5 111.24929 158.13953
2/26/99 68.2 112.01244 148.83721
3/11/99 63.6 117.3827 161.62791
3/24/99 57.3 114.16054 153.48837
</TABLE>
Page 6 BROADVIEW INT'L LLC
<PAGE> 21
<TABLE>
CONFIDENTIAL
------------
PUBLIC COMPANY COMPARABLES ANALYSIS
- ----------------------------------------------------------------------------------------------------------------------------
Select Billing and Customer Care Companies
($Thousands Except Per Share Data)
Operating and Valuation Statistics
<CAPTION> -------------------------------------------------------------------------------------
TTM Revenue Revenue TTM EBIT TTM Net Projected Net Cash
Company (1) (2) Growth (3) Margin (2) Margin (2) 12/31/99 EPS (Cash - Debt)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LHS Group. Inc. (LHSG) $163,182 54.8% 23.3% 15.6% $0.72 $105,524
CSG Systems International, Inc. (CSGS) 236.640 37.7% 22.5% 12.1% 1.03 (88,657)
Saville Systems plc [SAVLY] 167,705 56.7% 25.4% 21.1% 1.15 85,528
Billing Concepts Corp [BILL] 167,813 23.5% 23.9% 16.7% 0.87 148,966
International Telecom.
Oats Systems. Inc. [ITDS] 115,460 NM 19.5% 11.0% 1.05 40,560
SCC Communications Corp. [SCCX] 34,449 27.2% 11.0% 6.3% (0.05) 7,408
-------------------------------------------------------------------------------------------------------------
Mean 147,542 40.0% 20.9% 13.8% 49,888
High 236,640 56.7% 25.4% 21.1% 148,966
-------------------------------------------------------------------------------------------------------------
Median $165,444 37.7% 22.9% 13,8% $63,044
-------------------------------------------------------------------------------------------------------------
Low 34,449 23.5% 11.0% 6.3% (88,657)
-------------------------------------------------------------------------------------------------------------
WIZTEC SOLUTIONS LTD. $20,297 69.5% 28.8% 27.7% $0.94 $16,433
</TABLE>
<TABLE>
<CAPTION>
TTM Projected Projected
Equity Market TTM TMC/R TMC/EBIT (2) TTM P/E (2) 12/31/99 12/31/99 P/E
Company (1) Capitalization (2)(4) (4)(5) (5) TMC/R (4) (6)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LHS Group. Inc. (LHSG) $1,836,741 10.61x 45.53x 73.67x 7.69x 48.36x
CSG Systems International, Inc. (CSGS) 1,682,968 7.49x 33.25x 60.86x 5.54x 31.67x
Saville Systems plc [SAVLY] 490,191 2.41x 9.50x 14.44x 1.94x 10.94x
Billing Concepts Corp [BILL] 363,745 1.28x 5.35x 12.31x 1.03x 11.32x
International Telecom.
Oats Syxtems. Inc. [ITDS] 177,274 1.18x 6.07x 12.60x 0.92x 9.79x
SCC Communications Corp. [SCCX] 27,696 0.59x 5.35x 14.88x 0.52x NM
--------------------------------------------------------------------------------------------------------------
Mean 39.3x 17.51x 31.46x 2.94x 22.42x
High 10.61x 45.53x 73 67x 7.69x 48.36x
-------------------------------------------------------------------------------------------------------------
Median 1.85x 7.79x 14.66x 1.48x 11.32x
-------------------------------------------------------------------------------------------------------------
Low 0.59x 5.35x 12.31x 0.52x 979e
--------------------------------------------------------------------------------------------------------------
WIZTEC SOLUTIONS LTD. $121,573 5.18x 18.01x 21.6x 3.75x 17.7x
</TABLE>
NOTES:
(1) Valuation information calculated using the closing price on 3/24/99.
Projected financials calculated from selected analyst reports.
(2) TTM refers to the Trailing Twelve Months ending 12/31/98, except BCGI,
which refers to the period ending 9/30/98. TTM Wiztec Solutions Ltd.
financials refer to the period ending 12/31/98.
(3) International Telecom. Data Systems' revenue growth exceeds 200% due to its
January 2, 1998 acquisition of Intelicom, a subsidiary of Computer Sciences
Corporation.
(4) Total Market Capitalization (TMC) equals equity market capitalization plus
debt minus cash.
(5) Not Meaningful (NM) when net margin is less than 2.0%.
(6) Not Meaningful (NM) when relevant or projected figure is less than zero.
Page 7 BROADVIEW INT'L LLC
<PAGE> 22
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
FINANCIAL STATISTICS OF PUBLIC COMPANY COMPARABLES
- ------------------------------------------------------------------------------------------------------------------
Select Billing and Customer Care Companies
($Thousands Except Per Share Data)
SAVLY LHSG CSGS ITDS BILL SCCX
-------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATISTICS
Revenue $167,705 $ 163,182 $ 236,640 $115,460 $167,813 $34,449
Revenue Growth 56.7% 54.8% 37.7% NM 23.5% 27.2%
EBIT 42,597 38,023 53,282 22,508 40,178 3,795
EBIT Margin 25.4% 23.3% 22.5% 19.5% 23.9% 11.0%
Pretax Income 45,961 42,580 45,995 21,318 45,466 3,501
Pretax Margin 27.4% 26.1% 19.4% 18.5% 27.1% 10.2%
Net Income 35,452 25,500 28,517 12,700 27,946 2,171
Net Margin 21.1% 15.6% 12.1% 11.0% 16.7% 6.3%
EPS $ 0.87 $ 0.47 $ 0.54 $ 0.81 $ 0.80 $ 0.21
Forward 12/31/99 Revenue 209,000 225,000 320,000 148,900 208,675 38,950
Projected 12/31/99 EPS 1.15 0.72 1.03 1.05 0.87 (0.05)
BALANCE SHEET STATISTICS
Cash & Equivalents $ 87,822 $ 105,524 $ 39,593 $ 40,735 $149,248 $15,519
Total Debt 2,294 0 128,250 175 282 8,111
VALUATION STATISTICS
Share Price as of 3/24/99 $ 12.63 $ 34.63 $ 32.75 $ 10.25 $ 9.81 $ 3.13
Common Shares Outstanding 38,827 53,047 51,388 17,295 37,070 8,863
Market Capitalization $490,191 $1,836,741 $1,682,968 $177,274 $363,745 $27,696
Total Market Capitalization 404,663 1,731,217 1,771,625 136,714 214,779 20,288
- ------------------------------------------------------------------------------------------------------------------
TTM TMC/R 2.41x 10.61x 7.49x 1.18x 1.28x 0.59x
TTM TMC/EBIT 9.50x 45.53x 33.25x 6.07x 5.35x 5.35x
TTM P/E 14.44x 73.67x 60.86x 12.60x 12.31x 14.88x
Projected 12/31/99 TMC/R 1.94x 7.69x 5.54x 0.92x 1.03x 0.52x
Projected 12/31/99 P/E 10.94x 48.36x 31.67x 9.79x 11.32x NM
- ------------------------------------------------------------------------------------------------------------------
Page 8 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 23
CONFIDENTIAL
------------
DESCRIPTIONS OF PUBLIC COMPANY COMPARABLES
- --------------------------------------------------------------------------------
Select Billing and Customer Care Companies
COMPANY DESCRIPTION
- --------------------------------------------------------------------------------
LHS Group, Inc. Provider of convergent client/server customer care,
billing and customer acquisition software and services
for the telecommunications industry.
CSG Systems Company provides customer management software and
International, Inc. processing services for cable, satellite,
telecommunications and on-line industries. Products
automate billing, sales support and order processing,
invoicing, reporting and customer analysis.
Saville Systems plc Develops comprehensive, customized convergent billing
solutions for telecommunications providers.
COMPANY DESCRIPTION
- --------------------------------------------------------------------------------
Billing Concepts Corp. Provides third-party billing clearinghouse and
information services to the telecommunications
industry.
International Telecom. Company offers transactional billing and customer care
Data Systems, Inc. services to providers of wireless, long distance and
satellite telecommunications services.
SCC Communications Provider of 9-1-1 operations support Systems (OSS)
Corp. services to incumbent local exchange carriers (ILECS),
competitive local exchange carriers (CLECS) and
wireless carriers in the United States.
Page 9 BROADVIEW INT'L LLC
<PAGE> 24
CONFIDENTIAL
------------
SELECTED M&A TRANSACTION COMPARABLES
- --------------------------------------------------------------------------------
Select Telecommunications Software Related Transactions Since January 1, 1997
With Revenue Less Than $100 Million
($Millions)
Announce
Date Buyer Seller
- --------------------------------------------------------------------------------
03/02/1999 Amdocs Ltd. Architel Systems Corp.
xx/xx/1998 Confidential Confidential
12/18/1998 Confidential Confidential
03/18/1997 Card Clear plc Transaction Billing Resources
Inc.
05/12/1997 Billing Concepts Corp. Computer Resources
Management, Inc.
11/18/1998 Billing Concepts Corp. Communications Software
Consultants, Inc.
01/02/1997 LCC International Inc. European Technology Partner
AS
xx/xx/1997 Lightbridge Inc. Coral Systems Inc.
07/31/1997 Logica plc Aldiscon Ltd.
Adjusted
Adjusted Price/
Seller Description Price (1) Seller Revenue Revenue
- --------------------------------------------------------------------------------
Develops, markets and supports $350.9 $39.3 8.93x
advanced operations support
systems employed by
telecommunication service
providers.
Develops, markets, and 75.4 13.0 5.79x
supports tour major lines of
products for the wireless
industry: customer care,
billing, and inventory
management.
Pre-paid calling software 78.1 19.0 4.11x
solutions for mobile
operators.
Provides credit card fraud 10.5 3.2 3.28x
prevention services to the
telecommunications industry as
well as call authorization and
settlement services.
Provider of direct billing 17.2 6.0 2.86x
services utilizing proprietary
software systems and
telecommunications billing
services.
Provides convergent billing 39.9 17.1 2.33x
solutions to mid-range
independent telephone and
cellular carriers.
Provides network information 13.8 6.5 2.12x
and quality of service
software for mature wireless
operators.
Develops of churn and fraud $18.8 $9.9 1.91x
software products for the
telecommunications industry.
Develops software products for 74.2 43.8 1.69x
GSM wireless network operators
including short message
systems and services.
Page 10 BROADVIEW INT'L LLC
<PAGE> 25
CONFIDENTIAL
------------
SELECTED M&A TRANSACTION COMPARABLES
- --------------------------------------------------------------------------------
Select Telecommunications Software Related Transactions Since January 1, 1997
With Revenue Less Than $100 Million
($Millions)
Announce
Date Buyer Seller
- --------------------------------------------------------------------------------
xx/xx/1998 Confidential Confidential
Adjusted
Adjusted Price/
Seller Description Price (1) Seller Revenue Revenue
- --------------------------------------------------------------------------------
Develops, markets and sells 9.5 7.0 1.36x
customer acquisition software
products to the wireless
communications marketplace.
- --------------------------------------------------------------------------------
---------------------------------------------
Mean 3.44x
High 8.93x
---------------------------------------------
Median 2.60x
---------------------------------------------
Low 1.36x
---------------------------------------------
NOTES:
(1) Prices paid have been adjusted for cash and debt on the seller's balance
sheet at the time of acquisition if known.
Page 11 BROADVIEW INT'L LLC
<PAGE> 26
CONFIDENTIAL
------------
PREMIUM OVER SELLER'S SHARE PRICE 1 TRADING DAY PRIOR TO ANNOUNCEMENT FOR
SELECTED SOFTWARE COMPANIES IN TRANSACTIONS WITH TOTAL CONSOLIDATION BETWEEN
$50 AND $250 MILLION SINCE JANUARY 1, 1997
<TABLE>
<CAPTION>
Number of Transactions
----------------------
<S> <C>
Below 0% 2
0% - 20% 15
20% - 40% 13
40% - 60% 4
60% - 80% 3
80% - 100% 1
Above 100% 4
</TABLE>
Premium Paid Over Seller's Share Price One Trading Day Prior to Announcement
Page 12 BROADVIEW INT'L LLC
<PAGE> 27
CONFIDENTIAL
------------
PREMIUM OVER SELLER'S SHARE PRICE 20 TRADING DAYS PRIOR TO ANNOUNCEMENT FOR
SELECTED SOFTWARE COMPANIES IN TRANSACTIONS WITH TOTAL CONSOLIDATION BETWEEN
$50 AND $250 MILLION SINCE JANUARY 1, 1997
<TABLE>
<CAPTION>
Number of Transactions
----------------------
<S> <C>
Below 0% 3
0% - 20% 4
20% - 40% 14
40% - 60% 8
60% - 80% 1
80% - 100% 4
Above 100% 8
</TABLE>
Premium Paid Over Seller's Share Price 20 Trading Days Prior to Announcement
Page 13 BROADVIEW INT'L LLC
<PAGE> 28
CONFIDENTIAL
------------
PREMIUM OVER SELLER'S SHARE PRICE 1 TRADING DAY PRIOR TO ANNOUNCEMENT FOR
TRANSACTIONS WHERE BUYER PREVIOUSLY HELD GREATER THAN 50% AND
SUBSEQUENTLY ACQUIRED 100% SINCE JANUARY 1, 1997
<TABLE>
<CAPTION>
Number of Transactions
----------------------
<S> <C>
Below 0% 4
0% - 20% 9
20% - 40% 3
40% - 60% 0
60% - 80% 2
80% - 100% 1
Above 100% 0
</TABLE>
Premium Paid Over Seller's Share Price One Trading Day Prior to Announcement
Page 14 BROADVIEW INT'L LLC
<PAGE> 29
CONFIDENTIAL
------------
PREMIUM OVER SELLER'S SHARE PRICE 20 TRADING DAYS PRIOR TO ANNOUNCEMENT FOR
TRANSACTIONS WHERE BUYER PREVIOUSLY HELD GREATER THAN 50% AND
SUBSEQUENTLY ACQUIRED 100% SINCE JANUARY 1, 1997
<TABLE>
<CAPTION>
Number of Transactions
----------------------
<S> <C>
Below 0% 3
0% - 20% 11
20% - 40% 1
40% - 60% 1
60% - 80% 2
80% - 100% 1
Above 100% 0
</TABLE>
Premium Paid Over Seller's Share Price 20 Trading Days Prior to Announcement
Page 15 BROADVIEW INT'L LLC
<PAGE> 30
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- --------------------------------------------------------------------------------
Transactions With Total Consideration Between $50 Million and $250 Million
at Announcement(1)
Since January 1, 1997
ANNOUNCE
DATE BUYER SELLER
- --------------------------------------------------------------------------------
10/26/98 Legato Systems, Inc.(2) FullTime Software, Inc.
11/12/98 Eltrax Systems, Inc.(2) Sulcus Hospitality
Technologies, Corp.
7/20/98 HBO & Company US Servis, Inc.
10/12/98 Applied Materials, Inc. Consilium, Inc.
7/28/98 Network Associates, Inc. Cybermedia, Inc.
3/24/99 Sterling Software, Inc.(2) Interlink Computer
Sciences
3/9/99 SunGard Data Systems Inc. Oshap Technologies Ltd.
9/1/98 VERITAS Software Corp.(2) TeleBackup Systems, Inc.
PREMIUM PAID 20
PREMIUM PAID TRADING DAYS
ONE DAY BEFORE BEFORE
DESCRIPTION ANNOUNCEMENT ANNOUNCEMENT
- --------------------------------------------------------------------------------
Designs, develops and markets 186.7% 326.7%
high availability, backup and
recovery management and
security auditing software for
the Unix and Windows NT
environments.
Develops, installs and markets 128.8% 217.8%
computer systems designed to
automate the handling, storage
and retrieval of information
and documents for the
hospitality and real estate
markets.
Provider of outsourcing 151.6% 137.6%
services to physician delivery
systems and hospital business
offices.
Develops integrated 169.2% 129.6%
semiconductor and electronics
manufacturing execution
systems (MES) software and
services.
Desktop utility software 25.6% 120.3%
products that provide
automatic service and support
to PC users in the Windows
environment.
Designs, develops and markets 21.7% 115.4%
network transport software for
enterprise server TCP/IP
connectivity, fault tolerance
and network file transfer.
Israeli-based group of 60.9% 105.5%
technology software firms.
Data backup, archiving and 42.2% 103.4%
retrieval solutions to the
remote desktop.
Page 16 BROADVIEW INT'L LLC
<PAGE> 31
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- --------------------------------------------------------------------------------
Transactions With Total Consideration Between $50 Million and $250 Million at
Announcement(1)
Since January 1, 1997
ANNOUNCE
DATE BUYER SELLER
- --------------------------------------------------------------------------------
10/3/97 HBO & Company National Health
Enhancement Systems, Inc.
11/18/97 Borland International, Inc. Visigenic Software, Inc.
12/14/98 Misys Plc C*ATS Software, Inc.
9/8/97 Avanti Corp. Technology Modeling
Associates, Inc.
7/31/97 DataWorks Corp. Interactive Group
1/18/99 SunGard Data Systems, Inc.(2) FDP Corp.
3/16/98 PLATINUM technology, Inc. Logic Works, Inc.
4/16/98 Phoenix Technologies Ltd. Award Software International, Inc.
PREMIUM PAID 20
PREMIUM PAID TRADING DAYS
ONE DAY BEFORE BEFORE
DESCRIPTION ANNOUNCEMENT ANNOUNCEMENT
- --------------------------------------------------------------------------------
Medical software systems that 2.9% 95.8%
manage demand and specialized
health information.
CORBA distributed object 87.4% 92.0%
technology for integrating
heterogeneous software
environments.
Provides specialist risk 60.0% 90.5%
management products for
financial institutions
worldwide. C*ATS' CARMA(R)
product provides risk
management functions which
enable financial institutions
to measure and predict firm
wide exposure to market,
credit and liquidity risks.
Physical simulation software 64.9% 87.5%
for integrated circuit design
and manufacturing.
Business information systems 54.4% 71.5%
that enable discreet
manufacturers to manage their
enterprise.
Develops and sells a variety 31.3% 57.2%
of application software
systems that facilitate the
sales, marketing and
administration functions of
life insurance companies and
employee benefit administrators.
Database modeling software 13.0% 57.2%
tools and business process
reengineering software.
System enabling and management 12.8% 55.9%
software for personal
computers and embedded
systems.
Page 17 BROADVIEW INT'L LLC
<PAGE> 32
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- ------------------------------
Transactions With Total Consideration Between $50 Million and $250 Million at
Announcement(1)
Since January 1, 1997
ANNOUNCE
DATE BUYER SELLER
- --------------------------------------------------------------------------------
4/15/97 Lernout & Hauspie Speech Kurzweil Applied
Products NV Intelligence, Inc.
12/19/97 IBM Corp. Software Artistry, Inc.
3/23/98 Cognizant Corp. Walsh International, Inc.
3/17/98 CBT Group plc The ForeFront Group
2/11/97 HBO & Company Amisys Managed Care
Systems, Inc.
7/20/98 Lernout & Hauspie Speech Globalink, Inc.
Products NV
6/4/97 Electronic Arts, Inc. Maxis, Inc.
1/5/98 PLATINUM technology, Learmonth & Burchett
Inc. Management Systems, Inc.
2/22/99 Science Applications Oacis Healthcare Holdings
International Corp.(2) Corp.
PREMIUM PAID 20
PREMIUM PAID TRADING DAYS
ONE DAY BEFORE BEFORE
DESCRIPTION ANNOUNCEMENT ANNOUNCEMENT
- -------------------------------------------------------------------------------
Automated speech recognition 75.0% 55.6%
software used to create
documents and interact with
customers by voice.
Help desk and network 38.0% 55.6%
management software.
Sales and marketing 8.8% 53.3%
information systems to assist
pharmaceutical companies.
Software and training 17.3% 48.5%
solutions for technical
professionals.
Managed healthcare software 38.6% 43.1%
and information systems.
Language translation software 21.1% 40.0%
products.
CD-ROM and disc-based 1.8% 38.4%
entertainment software which
runs on several microcomputer
platforms.
Process management software 37.0% 37.0%
tools.
Develops, markets, licenses, 3.9% 36.9%
installs and supports
flexible, enterprise wide,
open architecture clinical
information systems, enabling
physicians and other
clinicians to view and act on
information in real time at
the point of care.
Page 18 BROADVIEW INT'L LLC
<PAGE> 33
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- -------------------------------------------------------------------------------
Transactions With Total Consideration Between $50 Million and $250 Million at
Announcement(1)
Since January 1, 1997
ANNOUNCE
DATE BUYER SELLER
- -------------------------------------------------------------------------------
2/17/99 Investor Group(2) Equitrac Corporation
3/5/99 Hummingbird PC DOCS Group
Communications Ltd.(2) International Inc.
3/25/97 IDX Systems Corp. PHAMIS, Inc.
6/29/98 Information Advantage 1Q Software Corp.
Software, Inc.
1/27/98 Sage Group plc State Of The Art, Inc.
5/7/98 Peregrine Systems, Inc. Innovative Technologies
Systems, Inc.
12/29/98 W.R. Hambrecht & Co.(2) Interlinq Software Corp.
10/15/97 Hummingbird Andyne Computing Ltd.
Communications Ltd.
9/15/97 IBM Corp. Unison Software, Inc.
10/23/97 Harbinger Corp. Premenos Corp.
PREMIUM PAID 20
PREMIUM PAID TRADING DAYS
ONE DAY BEFORE BEFORE
DESCRIPTION ANNOUNCEMENT ANNOUNCEMENT
- -------------------------------------------------------------------------------
Provides computer systems 25.5% 35.6%
solutions to law and other
professional service firms for
automated cost recovery and
expense management of office
equipment.
Develops, markets and supports 14.9% 34.7%
object-oriented client/server
and internet document
management systems.
Systems which support 4.2% 32.4%
enterprise-wide decision
making in patient care,
finance and administration.
Client/server tools for data 9.2% 31.1%
access and report writing.
Enterprise accounting and 33.3% 30.4%
financial applications.
Develops SPAM*FM facility and 12.7% 27.9%
technology management software
and remote data collection
systems.
PC-based, loan-origination 19.4% 27.6%
software system to the
residential mortgage lending
industry.
Integrated decision and 29.1% 26.6%
business support software.
Distributed systems management 7.1% 22.4%
software for UNIX and Windows
NT.
Electronic commerce software 56.3% 20.1%
products and services
Page 19 BROADVIEW INT'L LLC
<PAGE> 34
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- --------------------------------------------------------------------------------
Transactions With Total Consideration Between $50 Million and $250 Million at
Announcement(1)
Since January 1, 1997
ANNOUNCE
DATE BUYER SELLER
- --------------------------------------------------------------------------------
10/13/98 Platinum Software Corp. DataWorks Corp.
4/15/98 Slebe plc Simulation Sciences, Inc.
3/14/97 HBO & Company Enterprise Systems, Inc.
4/17/98 Sterling Commerce, Inc. XcelleNet, Inc.
2/11/97 MetaTools, Inc. Fractal Design Corp.
9/20/98 Summit Design Orcad, Inc.
6/15/98 NetManage, Inc. FTP Software, Inc.
PREMIUM PAID 20
PREMIUM PAID TRADING DAYS
ONE DAY BEFORE BEFORE
DESCRIPTION ANNOUNCEMENT ANNOUNCEMENT
- --------------------------------------------------------------------------------
Develops client/server-based 20.0% 18.6%
enterprise resource planning
software for mid-sized
manufacturing companies.
Process simulation software 24.0% 11.9%
and services for the
petroleum, petrochemical and
industrial-chemical-process
industries.
Cost containment, materials -0.5% 10.0%
management, logistics and
patient scheduling software.
Remote computing software. 6.1% 5.5%
Electronic painting and image 38.3% -0.1%
editing tools.
Windows EDA software and -2.0% -8.1%
services to electronics
companies.
Network software products that 13.7% -26.5%
provide TCP/IP network
transport functionality.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mean 39.7% 61.2%
High 186.7% 326.7%
- --------------------------------------------------------------------------------
Median 24.7% 41.6%
- --------------------------------------------------------------------------------
Low -2.0% -26.5%
- --------------------------------------------------------------------------------
NOTES
- -----
(1) Purchase price per share in stock transactions calculated using the buyer
share price before announce.
(2) Transaction pending.
Page 20 BROADVIEW INT'L LLC
<PAGE> 35
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------------------
Transactions Since January 1, 1998 Where Buyer Previously Held
Greater Than 50% and Subsequently Acquired 100%
PREMIUM
PREMIUM PAID 20
PAID ONE TRADING DAYS
ANNOUNCE DAY BEFORE BEFORE
DATE BUYER SELLER ANNOUNCEMENT ANNOUNCEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4/29/98 COMNET Group 1 Software Inc. 71.6% 83.0%
1/22/98 Buhmann NV BT Office Products Intl 32.5% 76.0%
9/29/98 Newmont Mining Corp. Newmont Gold Corp. (5.2%) 70.5%
3/3/98 Xerox Corp. XL Connect Solutions 12.6% 50.1%
(subsidiary of Intelligent Electronics)
3/24/99 Investor Group Knoll Inc. 63.9% 30.7%
10/19/98 Affiliated Computer Services BRC Holdings Inc 16.9% 18.8%
3/15/98 Investor Group BET Holdings 15.6% 17.9%
9/23/98 Usinor SA J&L Specialty Steel Inc. 80.4% 15.0%
4/30/98 Dow Chemical Corp. Mycogen Corp. 0.0% 11.6%
6/24/98 Liberty Media Group TCI Ventures Group 7.9% 9.9%
1/8/98 Rayonier Inc Rayonier Timberlands 11.2% 8.3%
3/19/98 Investor Group International Franchise Systems (10.1%) 6.2%
10/27/98 Allmerica Financial Corp. Citizens Corp. 5.2% 5.5%
7/21/98 Host Marriott Corp. Forum Retirement Partners L.P. 0.0% 2.9%
10/21/98 Union Planters Bank, National Association Capital Factors Holding, Inc. 6.5% 2.6%
3/10/98 IP Forest Resources Company IP Timberlands Ltd. 33.0% 2.4%
Page 21 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
PUBLIC SELLER PREMIUM ANALYSIS
- ---------------------------------------------------------------------------------------------------------------
Transactions Since January 1, 1998 Where Buyer Previously Held
Greater Than 50% and Subsequently Acquired 100%
PREMIUM PAID 20
PREMIUM PAID ONE TRADING DAYS
ANNOUNCE DAY BEFORE BEFORE
DATE BUYER SELLER ANNOUNCEMENT ANNOUNCEMENT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/13/98 Lonrho plc Hondo Oil & Gas Company 38.9% (9.1%)
2/20/98 Golden Star Resources Ltd. Pan African Resources Corp. (28.8%) (28.8%)
9/23/98 Inland Steel Industries, Inc. Ryerson Tull, Inc. (19.6%) (44.1%)
- ---------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------
Mean 17.5% 17.3%
High 80.4% 83.0%
-------------------------------------------------------------------
Median 11.2% 9.9%
-------------------------------------------------------------------
Low (28.8%) (44.1%)
-------------------------------------------------------------------
Page 22 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 37
CONFIDENTIAL
------------
PRESENT VALUE OF PROJECTED WIZTEC SOLUTIONS LTD. SHARE PRICE
- --------------------------------------------------------------------------------
52 Week High $20.88
Current Share Price as of 3/24/99 $16.69
52 Week Low $ 8.00
Calculation of Implied Share Price Based on Median P/E of Comparables
- --------------------------------------------------------------------------------
Wiztec Solutions
Median P/E of Ltd. Projected EPS Implied Future
Comparables (12/31/00) Share Price
- ------------- ------------------ --------------
14.7x $1.23 $18.05
Diluted EPS For TTM Period Ending 12/31/98 $0.77
Projected Diluted EPS for Fiscal Year Ending 12/31/00 $1.23
Current Wiztec Solutions Ltd. P/E 21.62x
Median P/E of Public Company Comparables 14.66x
Present Value of Share Price Based on Earnings
for Twelve Months Ended 12/31/00 at Various Discount Rates (1)
- ---------------------------------------------------------------------------
7.86% (2) 10.00% 12.65%(3) 15.00% 20.00% 25.00%
- ---------------------------------------------------------------------------
$15.68 $15.12 $14.47 $13.92 $12.86 $11.92
Sensitivity Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Present Value of Share Price Based on EarnIngs
for Twelve Months Ended 12/31/00 at Various Discount Rates (1)
Implied Future Share ---------------------------------------------------------------------------
P/E (4) Price 7.86% (2) 10.00% 12.65% (3) 15.00% 20.00% 25.00%
- ------- -------------------- ---------- ------- ---------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
4.00x $ 4.93 $ 4.28 $ 4.13 $ 3.95 $ 3.80 $ 3.51 $ 3.25
6.50x $ 8.00 $ 6.95 $ 6.70 $ 6.41 $ 6.17 $ 5.70 $ 5.29
9.00x $11.08 $ 9.63 $ 9.28 $ 8.88 $ 8.55 $ 7.90 $ 7.32
11.50x $14.16 $12.30 $11.86 $11.35 $10.92 $10.09 $ 9.35
14.00x $17.24 $14.98 $14.44 $13.82 $13.30 $12.29 $11.39
- ------------------------------------------------------------------------------------------------------------------
14.66x $18.05 $15.68 $15.12 $14.47 $13.92 $12.86 $11.92
- ------------------------------------------------------------------------------------------------------------------
16. 50x $20.32 $17.65 $17.02 $16.28 $15.67 $14.48 $13.42
19.00x $23.40 $20.33 $19.60 $18.75 $18.05 $16.67 $15.45
19.00x $23.40 $20.33 $19.60 $18.75 $18.05 $16.67 $15.45
21.50x $26.48 $23.00 $22.18 $21.22 $20.42 $18.87 $17.49
21.50x $26.48 $23.00 $22.18 $21.22 $20.42 $18.87 $17.49
24.00x $29.55 $25.68 $24.76 $23.69 $22.79 $21.06 $19.52
</TABLE>
Notes:
(1) Assumes that results are reported thirty days after end of period.
(2) Based on CAPM and Wiztec Solutions Ltd.'s historical beta.
(3) Based on CAPM and median beta (adjusted for capital structure) of the
public company comparables.
(4) Range based on analysis of public company comparables,
Page 23 BROADVIEW INT'L LLC
<PAGE> 38
<TABLE>
CONFIDENTIAL
------------
Wiztec Discounted Cash Flow Valuation
- ----------------------------------------------------------------------------------------------------------------------------------
Historical and Pro Forma Income Statements(1)
($ Thousands Except Per Share Data)
<CAPTION>
December 31,
1996(A) 1997(A) 1998(A) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 8,332 $ 11,975 $ 20,297 $ 28,007 $ 37,809 $ 49,152 $ 61,440 $ 73,736
Cost of Sales 4,258.5 5,992.2 9,316.0 12,917.9 17,439.2 22,671.0 28,338.7 34,009.9
-------- -------- --------- --------- --------- --------- --------- ---------
Gross Profit 4,073.5 5,982.5 10,981.0 15,089.1 20,370.2 26,481.3 33,101.6 39,725.9
Gross Margin 49% 50% 54% 54% 54% 54% 54% 54%
Operating Expenses
Selling, General & Administrative $ 2,138 $ 3,652 $ 4,956 $ 6,133 $ 8,318 $ 10,814 $ 13,517 $ 16,222
Product Development Costs 586.7 234.4 187.0 1,094.0 1,6636 2,162.7 2,703.4 3,244.4
-------- -------- --------- --------- --------- --------- --------- ---------
Total Operating Expenses 2,724.9 3,886.3 5,143.0 7,226.9 9.981.7 12,976.2 16,220.3 19,466.2
Operating Income $ 1,349 $ 2,096 $ 5,838 $ 7,862 $ 10,389 $ 13,505 $ 16,881 $ 20,260
Operating Margin 16.2% 17.5% 28.8% 28.1% 27.5% 27.5% 27.5% 27.5%
Financial Income, Net and Other $ 279 $ 322 $ 425 $ 425 $ 463 $ 753 $ 1,079 $ 1,523
Pretax Income $ 1,628 $ 2,418 $ 6,263 $ 8,287 $ 10,852 $ 14,258 $ 17,961 $ 21,783
Pretax Margin 19.5% 20.2% 30.9% 29.6% 28.7% 29.0% 29.2% 29.5%
Taxes $ 14 $ 289 $ 640 $ 1,436 $ 1,880 $ 2,471 $ 3,112 $ 3,775
======== ======== ========= ========= ========= ========= ========= =========
Net Income $ 1,613 $ 2,130 $ 5,623 $ 6,851 $ 8,971 $ 11,788 $ 14,849 $ 18,008
Net Margin 19.4% 17.8% 27.7% 24.5% 23.7% 24.0% 24.2% 24.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues Growth 46.2% 43.7% 69.5% 38.0% 35.0% 30.0% 25.0% 20.0%
Cost of Sales/Revenue 51.1% 50.0% 45.9% 46.1% 46.1% 46.1% 46.1% 46.1%
SG & A/Returns 25.7% 30.5% 24.4% 21.9% 22.0% 22.0% 22.0% 22.0%
Product Development Costs/Revenue 7.0% 2.0% 0.9% 3.9% 4.4% 4.4% 4.4% 4.4%
Interest Rate on Excess Cash 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Effective Tax Rate (2) 0.9% 11.9% 10.2% 17.3% 17.3% 17.3% 17.3% 17.3%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1 1999 results provided by Wiztec management Projections for 1999 - 2003
based on Wiztec management, Convergys management and Broadview
estimates.
2 Assumes profits are reinvested or remain in Israel.
Page 24 BROADVIEW INT'L LLC
<PAGE> 39
<TABLE>
CONFIDENTIAL
------------
<CAPTION>
Wiztec Discounted Cash Flow Valuation
- -----------------------------------------------------------------------------------------------------------------------------------
Historical and Pro Forma Balance Sheets(1)
($Thousands Except Per Share Data)
1996(A) 1997(A) 1998(A) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 7,144 $ 10,015 $ 16,433 $ 22,920 $ 33,574 $ 45,417 $ 60,205 $ 78,471
Accounts Receivable 1,954.0 3,919.1 5,107.0 6,138.5 6,215.3 8,079.8 10,099.8 12,120.9
Inventory 55.9 30.5 29.0 40.2 54.3 70.6 88.2 105.9
Other Current Assets 187.0 415.3 910.0 840.2 1,134.3 1,474.6 1,843.2 2,212.1
-------- --------- --------- -------- --------- --------- --------- ---------
Total Current Assets 9,340.8 14,379.6 22,479.0 29,939.1 40,977.5 55,042.5 72,236.5 92,909.7
Non-current Trade Receivables $ 478 $ 809 $ 159 $ 219 $ 296 $ 385 $ 481 $ 578
Loan (due in Q2 - 99) $ 0 $ 0 $ 450 $ 0 $ 0 $ 0 $ 0 $ 0
Property, Plant & Equipment $ 2,047 $ 2,713 $ 3,003 $ 4,001 $ 4,726 $ 5,783 $ 6,827 $ 7,762
Less Accumulated Depreciation 703.3 924.2 1,244.0 1,670.1 2,173.4 2,789.2 3,516.3 4,342.9
-------- --------- --------- -------- --------- --------- --------- ---------
Net Property, Plant & Equipment 1,343.4 1,788.7 1,759.0 2,330.9 2.552.8 2,993.4 3,310.4 3,418.8
Capitalized Software $ 2,012 $ 3,377 $ 3,982 $ 4,640 $ 5,192 $ 5,341 $ 5,769 $ 6,142
Less Accumulated Amortization 741.6 870.5 1,435.0 2,092.8 2,828.8 3,586.0 4,403.9 5,274.6
-------- --------- --------- -------- --------- --------- --------- ---------
Net Capitalized Software 1,270.5 2,506.7 2,547.0 2,547.0 2,363.1 1,755.4 1,365.3 867.5
Goodwill $ 1,394 $ 1,394 $ 1,394 1,394 $ 1,394 $ 1,394 $ 1,394 $ 1,394
Less Accumulated Amortization 67.2 206.5 346.0 485.4 624.7 764.1 903.5 1,042.9
-------- --------- --------- -------- --------- --------- --------- ---------
Net Goodwill 1,326.6 1,187.2 1,047.7 908.4 769.0 629.6 490.2 350.9
Total Assets $ 13,760 $ 20,671 $ 28,442 $ 35,945 $ 46,959 $ 60,806 $ 77,884 $ 98,125
======== ========= ========= ========= ========= ========= ========= =========
Average Collection Period (days) 85.6 119.5 91.8 80.0 60.0 60.0 60.0 60.0
Inventory Days 4.8 1.9 1.1 1.1 1.1 1.1 1.1 1.1
Other Current Assets/Revenue 2.2% 3.5% 4.5% 3.0% 3.0% 3.0% 3.0% 3.0%
Non-current Trade Receivables/Sales 5.7% 6.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8%
Sales/PP&E 4.1 4.4 6.8 7.0 8.0 8.5 9.0 9.5
Annual Depreciation Rate 34.4% 8.1% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6%
Sales/Net Capitalized Software 6.6 4.8 8.0 11.0 16.0 28.0 45.0 85.0
Annual Amortization Rate 6.3% 3.8% 14.2% 14.2% 14.2% 14.2% 14.2% 14.2%
Goodwill Amortization Period (years) 10 10 10 10 10 10 10 10
</TABLE>
Notes:
(1) 1999 results provided by Wiztec management. Projections for 1999 - 2003
based on Wiztec management, Convergys management and Broadview estimates.
Page 25 BROADVIEW INT'L LLC
<PAGE> 40
<TABLE>
CONFIDENTIAL
------------
<CAPTION>
Wiztec Discounted Cash Flow Valuation
- ----------------------------------------------------------------------------------------------------------------------------------
Historical and Pro Forma Balance Sheets
($Thousands Except Per Share Data)
1996(A) 1997(A) 1998(A) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
--------- --------- --------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Current Liabilities
Accounts Payable $ 531 $ 657 $ 349 $ 1,315 $ 2,152 $ 2,817 $ 3,535 $ 4,256
Advances from Customers 467.5 255.4 1,069.0 0.0 0.0 0.0 0.0 0.0
Other Current Liabilities 376.6 1,142.6 2,435.0 2,672.3 3,607.6 4,689.9 5,862.3 7,035.5
--------- --------- --------- ---------- --------- -------- -------- ---------
Total Current Liabilities 1,375.2 2,055.2 3,853.0 3,987.1 5,759.5 7,506.9 9,397.8 11,291.3
Advances from Customers $ 300 $ 263 $ 163 $ 614 $ 829 $ 1,077 $ 1,347 $ 1,616
Accrued Severance Pay, Net 31.5 67.4 91.0 157.6 212.8 276.6 345.8 415.0
Total Liabilities $ 1,707 $ 2,385 $ 4,107 $ 4,759 $ 6,801 $ 8,861 $ 11,090 $ 13,323
Equity
Common Stock & Additional
Paid in Capital $ 11,666 $ 15,769 $ 16,195 $ 16,195 $ 16,195 $ 16,195 $ 16,195 $ 16,195
Retained Earnings 387.2 2.5169 8,140.0 14,991.1 23,962.4 35,749.9 50,598.4 68,606.8
--------- --------- --------- ---------- --------- -------- -------- ---------
Total Equity 12,053.1 18,285.7 24,335.0 31,186.1 40,157.4 51,944.9 66,793.4 84,801.8
Total Liabilities & Equity $ 13,760 $ 20,071 $ 28,442 $ 35,945 $ 46,959 $ 60,806 $ 77,884 $ 98,125
========= ========= ========= ========= ========= ========= ========= =========
Accounts Payable Days 31.5 25.2 25.2 25.2 30.0 30.0 30.0 30.0
Other Current Liabilities/Revenue 4.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5%
Advances from Customer/Sales 3.6% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
Accrued Severance Pay/Sales 0.4% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%
Additional Equity 8,123.2 4,102.8 0.0 0.0 0.0 0.0 0.0 0.0
</TABLE>
Notes:
(1) 1999 results provided by Wiztec management. Projections for 1999 - 2003
based on Wiztec management, Convergys management and Broadview estimates.
Page 26 BROADVIEW INT'L LLC
<PAGE> 41
<TABLE>
CONFIDENTIAL
------------
<CAPTION>
Wiztec Discounted Cash Flow Valuation
- ----------------------------------------------------------------------------------------------------------------------------------
Discounted Free Cash Flows(1)
($Thousands Except Per Share Data)
1997(A) 1998(A) 1999(P) 2000(P) 2001(P) 2002(P) 2003(P)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $ 2,130 $ 5,623 $ 6,851 $ 8,971 $ 11,788 $ 14,849 $ 18,008
Non-Cash Expenses
Depreciation $ 221 $ 320 $ 426 $ 503 $ 616 $ 727 $ 827
Amortization 128.9 564.5 657.8 736.0 757.2 817.9 870.7
Change In Net Working Capital ($1,488) $ 117 ($839) $ 1,388 ($474) ($515) ($514)
Capital Expenditures
(Increase) Decrease In PP&E ($666) ($290) ($998) ($725) ($ 1,056) ($ 1,044) ($935)
(Increase) Decrease In Capitalized Software (1,365.1) (605) (658) (552) (150) (428) (373)
After-Tax Interest Add-Back(2) $ 284 $ 382 $ 351 $ 383 $ 623 $ 892 $ 1,259
Free Cash Flow ($756) $ 6,111 $ 5,792 $ 10,704 $ 12,103 $ 15,299 $ 19,143
======= ======== ======== ======== ======== ======== ========
Present Value of Free Cash Flow(3) $ 5,609 $ 9,203 $ 9,237 $ 10,365 $ 11,513
</TABLE>
Notes:
(1) 1999 results provided by Wiztec management. Projections for 1999 - 2003
based on Wiztec management, Convergys management and Broadview estimates.
(2) After-Tax Interest is added back to remove capital structure effects
from the calculation of entity value.
(3) The present value of free cash flow in 1999 represents the partial year
of cash flow occurring between the valuation date and the fiscal year
end.
Page 27 BROADVIEW INT'L LLC
<PAGE> 42
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
WIZTEC SOLUTIONS LTD. DISCOUNTED CASH FLOW VALUATION
- --------------------------------------------------------------------------------------
Discounted Free Cash Flows
TERMINAL VALUE BASED ON TERMINAL GROWTH RATE
- --------------------------------------------
<S> <C> <C> <C>
Discount Rate 12.65%
Terminal Growth Rate 4.0% 5.0% 6.0%
Terminal Value Multiple of Free Cash Flow (1) 12.0 13.7 15.9
Terminal Value of Company $230,148 $262,733 $305,117
Present Value of Terminal Value 122,871.7 140,268.2 162,896.4
Sum of the Present Value of Free Cash Flows $45,927 $45,927 $45,927
Wiztec Solutions Ltd. Entity Value 168,799.1 186,195.6 208,823.7
Plus Cash $16,433 $16,433 $16,433
Less Debt 0.0 0.0 0.0
--------- --------- ---------
Wiztec Solutions Ltd. Equity Value $185,232 $202,629 $225,257
--------- --------- ---------
Wiztec Solutions Ltd. Equity Value per Share $25.43 $27.81 $30.92
========= ========= =========
TERMINAL VALUE BASED ON EARNINGS MULTIPLE
- -----------------------------------------
Discount Rate 12.65%
Terminal Value Multiple of Earnings 14.0 16.0 18.0
Terminal Value of Company $252,118 $288,135 $324,152
Present Value of Terminal Value 134,601.0 153,829.7 173,058.5
Sum of the Present Value of Free Cash Flows $45,927 $45,927 $45,927
Wiztec Solutions Ltd. Entity Value 180,528.4 199,757.1 218,985.8
Plus Cash $16,433 $16,433 $16,433
Less Debt 0.0 0.0 0.0
--------- --------- ---------
Wiztec Solutions Ltd. Equity Value $196,961 $216,190 $235,419
--------- --------- ---------
Wiztec Solutions Ltd. Equity Value per Share $27.04 $29.67 $32.31
========= ========= =========
NOTES:
- ------
(1) The terminal value multiple is a multiple of cash flows in the terminal year
calculated as a growing perpetuity.
Page 28 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
WIZTEC DISCOUNTED CASH FLOW VALUATION
- -------------------------------------------------------------------------------------------------------
HISTORICAL AND PRO FORMA INCOME STATEMENTS (1)
Discounted Free Cash Flows Sensitivity Analysis - Discount rate vs. Terminal Growth Rate
Equity Value
($ Thousands)
Discount Rate
Terminal
Growth Rate 7% 9% 11% 13% 15% 17%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1% $40.32 $30.10 $24.05 $20.07 $17.27 $15.19
2% 46.87 33.34 25.91 21.25 18.06 15.75
3% 56.69 37.66 28.25 22.66 18.98 16.39
4% 73.05 43.71 31.24 24.39 20.08 17.13
5% 105.77 52.78 35.24 26.55 21.39 17.99
6% 203.93 67.89 40.83 29.32 22.99 19.00
Discounted Free Cash Flows Sensitivity Analysis - Discount rate vs. Multiple of Earnings
Equity Value
($ Thousands)
Discount Rate
Multiple of
Earnings 7% 9% 11% 13% 15% 17%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
14 $33.60 $31.01 $28.69 $26.61 $24.74 $23.05
16 37.05 34.14 31.54 29.20 27.10 25.20
18 40.51 37.27 34.38 31.79 29.46 27.36
20 43.96 40.40 37.23 34.38 31.82 29.51
22 47.41 43.54 40.07 36.97 34.18 31.67
24 50.86 46.67 42.92 39.55 36.54 33.82
26 54.32 49.80 45.76 42.14 38.90 35.98
28 57.77 52.93 48.60 44.73 41.26 38.13
30 61.22 56.06 51.45 47.32 43.62 40.29
Page 29 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
DISCOUNT RATE CALCULATION
- ---------------------------------------------------------------------------------------------------------------------------------
($ Thousands Except Per Share Data)
LEVERED EQUITY MARKET CORPORATE UNLEVERED
PUBLIC COMPANY COMPARABLES BETA (1) CAPITALIZATION TOTAL DEBT TAX RATE (2) BETA (3)
- -------------------------- -------- -------------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Saville Systems plc [SAVLY] 1.390 $490,191 $2,294 37% 1.386
LHS Group, Inc. [LHSG] 1.700 1,836,741 0 34% 1.700
CSG Systems International, Inc. [CSGS] 0.560 1,682,968 128,250 49% 0.539
International Telecom. Data Systems. Inc. [ITDS] 1.030 177,274 175 41% 1.029
Billing Concepts Corp. [BILL] 0.560 363,745 282 39% 0.560
SCC Communications Corp. [SCCX] (4) NA 27,696 8,111 38% NA
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIAN OF COMPARABLES 1.030 1.029
WIZTEC SOLUTIONS LTD. 0.390
- ---------------------------------------------------------------------------------------------------------------------------------
CALCULATION OF WIZTEC SOLUTIONS LTD. LEVERED BETA BASED ON MEDIAN BETA OF COMPARABLES
- ---------------------------------------------------------------------------------------------------------------------------------
UNLEVERED EQUITY MARKET CORPORATE LEVERED
WIZTEC SOLUTIONS, LTD. BETA (3) CAPITALIZATION TOTAL DEBT TAX RATE BETA
- ---------------------- --------- -------------- ---------- ---------- --------
WIZTEC SOLUTIONS LTD. 1.029 $125,959 $0 36% 1.029
CALCULATION OF CONSILIUM COST OF EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
Market Risk Premium (5): 7.50%
Risk Free Rate (6): 4.93%
CAPM: [Risk Free Rate + (Levered Beta * Market Risk Premium)]
-------------------------------------------------------------------------
Cost of Equity Based on Beta of Comparables (7) 12.65%
Cost of Equity Based on Wiztec Solutions Ltd. Historical Beta 7.86%
-------------------------------------------------------------------------
---------------------------------------------------------------------------
NOTES:
- ------
(1) Levered betas derived from Compustat.
(2) All corporate tax rates aggregate federal, state and foreign tax rates from each company's latest 10-K filing, excludes all
net operating loss carryforwards and tax credits.
(3) Unlevered Beta = Levered Beta * (Equity Market Capitalization / (Debt * (1- Corporate Tax Rate) + Equity Market
Capitalization)).
(4) SCC Communications Corp. went public on 6/28/98; thus there have not been a sufficient number of trading occurrences to
compute a beta.
(5) Source: Ibbotson Associates, Inc., Stocks, Bonds, Bills, and Inflation 1997 Yearbook, Ibbotson and Associates, Chicago,
1997.
(6) 10 Year U.S. Treasury Bond Rate.
(7) Calculated using the levered beta derived from the median unlevered beta of the public company comparables and Wiztec
Solutions Ltd.'s capital structure.
Page 30 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
CONFIDENTIAL
------------
DISCOUNT RATE CALCULATION
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC)
($ Thousands Except Per Share Data)
TARGET COMPANY COST OF DEBT
- -------------- ------------
<S> <C> <C>
Wiztec Solutions Ltd. NM
-------------------------------------------------
WIZTEC SOLUTIONS LTD. COST OF DEBT NM
-------------------------------------------------
WIZTEC SOLUTIONS LTD. EQUITY VALUE TOTAL DEBT COST OF EQUITY COST OF DEBT TAX RATE (1)
- --------------------- ------------ ---------- -------------- ------------ ------------
Wiztec Solutions Ltd. $125,959 $0 12.65% NM 36.00%
(1) All corporate tax rates aggregate federal, state and foreign tax rates from each company's latest 10-K filing, excludes all
net operating loss carryforwards and tax credits.
-----------------------------------------------------------------------------------------------------------
WACC: [Debt/(Debt + Equity)*Cost of Debt*(1-Tax Rate)]+[(Equity/(Debt+Equity)*Cost of Equity]
-----------------------------------------------------------------------------------------------
WIZTEC SOLUTIONS LTD. WACC 12.65%
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Page 31 BROADVIEW INT'L LLC
</TABLE>
<PAGE> 46
SUPPLEMENT DATED APRIL 22, 1999
TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING ORDINARY SHARES
OF
WIZTEC SOLUTIONS LTD.
AT
$18.30 NET PER SHARE
BY
CONVERGYS ISRAEL INVESTMENTS LTD.
A WHOLLY OWNED SUBSIDIARY
OF
CONVERGYS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON APRIL 28, 1999, UNLESS THE OFFER IS EXTENDED.
------------------------
To the Holders of Ordinary Shares of Wiztec Solutions Ltd. (including persons
who may become Holders during the course of the Offer as a result of the
exercise of options and warrants):
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated April 1, 1999 (the "Offer to Purchase") of Convergys Israel Investments
Ltd., a company limited by shares duly registered under the laws of the State of
Israel ("Sub") and a wholly owned subsidiary of Convergys Corporation, a company
incorporated under the laws of the State of Ohio, U.S.A. ("Parent").
The terms and conditions previously set forth in the Offer to Purchase and
the related Letter of Transmittal remain applicable in all respects to the
Offer, and this Supplement should be read in conjunction with the Offer to
Purchase. Capitalized terms used herein and otherwise not defined are used as
defined in the Offer to Purchase.
<PAGE> 47
SPECIAL FACTORS
CERTAIN LITIGATION
The information set forth under "Special Factors - Certain Litigation" is
hereby amended and restated to read in its entirety as follows:
Since the announcement by Parent and Sub of the intention to commence the
Offer, five lawsuits have been commenced by shareholders who are unaffiliated
with the defendants (the "unaffiliated shareholders"). Four of the lawsuits are
in the Court of Common Pleas, Hamilton County, Ohio: Carrazza, et al., vs.
Wiztec Solutions, Ltd., et al., Case No. A9901656; Tucker vs. Wiztec Solutions,
Ltd., et al., Case No. A9901672; Papier vs. Wiztec Solutions, Ltd., et al., Case
No. A9901742; and Kuris vs. Steven G. Rolls, et al., Case No. A9901848. The
fifth lawsuit is in the United States District Court, Eastern District of New
York: Forman, et al. vs. Wiztec Solutions Ltd., et al., Case No. CV 99 1731.
Each of the actions purports to be a class action brought on behalf of
unaffiliated shareholders and asserts claims against the Company, Parent and
members of the Company Board of Directors. The actions each allege that, through
the conduct of the defendants, Parent has proposed to acquire the Shares at an
unfair and inadequate price, in violation of fiduciary duties allegedly owed by
the defendants to the unaffiliated shareholders. The complaints purport by their
terms to seek injunctive relief preventing consummation of the Offer, or
rescission if it is successfully consummated, compensatory damages, and
attorneys' fees and expenses. The time within which the defendants who have been
served have to respond to the complaints has not expired. The Company and its
Israeli directors believe they have the basis to challenge the exercise of
personal jurisdiction by, and venue in, a United States court. The defendants
who have been served anticipate that the complaints filed in the Hamilton County
Court of Common Pleas will be consolidated into a single action. Parent believes
the actions to be without merit and intends to contest the actions vigorously.
It is the present intention of Parent and Sub not to extend the Expiration Date
or raise the Offer Price as a result of the pending litigation.
Convergys Israel Investments Ltd.
April 22, 1999
