ERG shares rise on talk of end to ticket disputeMay 29 -------------------------------------------------------------------- Nicole Lindsay and Peter Klinger -------------------------------------------------------------------- Source: Australian Financial Review -------------------------------------------------------------------- Speculation that card technology group ERG has resolved its long-running dispute with the Victorian Government fuelled heavy trading in the shares of the former market darling yesterday. -------------------------------------------------------------------- ERG shares rose 6.5 per cent to close at 32¢, still well below its high of $4.26 in early 2000. -------------------------------------------------------------------- While neither ERG nor the Victorian Government would comment, it is understood that the parties recently reached agreement in the Melbourne public transport ticketing dispute. The information was kept well under wraps but nearly 39 million shares traded on Monday and Tuesday - more than all of last week's trading - suggesting that the news was leaking out. -------------------------------------------------------------------- Although, the specific terms of the settlement are unclear, analysts put the figure at well below the $270million that ERG had originally asked for. -------------------------------------------------------------------- An analyst suggested a settlement could be anywhere between $5million and $50 million, a far cry from the $100million-plus that ERG had invested. -------------------------------------------------------------------- "Even if it's $20 million, it's obviously going to be cash, and for ERG that is going to be a lot of money," the analyst said. -------------------------------------------------------------------- It is understood that a likely settlement with the Bracks Government could include upgrading the Melbourne system from magnetic strip cardboard tickets to ERG's smart cards, which would equate to another contract worth $10 million to $50 million for ERG. -------------------------------------------------------------------- The dispute arose in the mid-1990s when the high-profile Kennett Government awarded a $300 million tender to supply an automated ticketing machine system to the OneLink consortium, which was made up of ERG, Fujitsu and Mayne Nickless. But the development and implementation of the system stalled as the Kennett Government changed the terms of the contract. --------------------------------------------------------------------- It was finally delivered three years overdue in 1998. --------------------------------------------------------------------- The market is waiting for positive news on a number of fronts - not just the resolution of the Melbourne dispute - but that of the long-running legal spat taking place over the the $100 million Sydney ticketing contract. --------------------------------------------------------------------- ERG is in the running for ticketing contracts in Seattle, Berlin (where it has finished a pilot program), Stockholm, Washington and Brisbane. --------------------------------------------------------------------- It is also thought ERG is trying to refinance its Rome contract, for which it put up $80 million. --------------------------------------------------------------------- Daytraders were the most active in ERG's stock yesterday, with clients of Commonwealth Securities and E*trade heading the list. --------------------------------------------------------------------- Perth broking houses State One, Paterson Ord Minnett and Hartleys were also active. --------------------------------------------------------------------- ERG has been under heavy pressure to produce some returns on its projects after it reported a net loss of $199.4 million for the half year to December 31, following writedowns on its equity stakes in joint ventures which it received in exchange for software licences. --------------------------------------------------------------------- The company and its auditors also revealed significant risks relating to its business and its ability to operate as a going concern. --------------------------------------------------------------------- The company's shares dropped as low as 22.5¢ in April. ---------------------------------------------------------------------
ERG Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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