Softchoice sees new opportunities after Teachers sells controlling stake

TORONTO - Softchoice Corp. (TSX:SO) shares should become more valuable now that its biggest shareholder has sold its entire stake, the head of the Toronto-based software developer said Friday.

"It gives us a lot more flexibility in terms of liquidity and we think, over time, the share price will appreciate and it will be more efficient," said Softchoice's president and CEO David MacDonald.

Ontario Teachers' Pension Plan Board announced earlier Friday that it has sold its entire stake in Softchoice Corp. (TSX:SO) for about $51 million.

Teachers, which had been the Toronto-based technology company's largest shareholder, said Friday it sold nearly 5.1 million Softchoice shares in a single block and received about $10 per share for the stock.

In doing so, the pension group, which had previously owned about 25.7 per cent of Softchoice's common stock, severed a 10-year relationship.

The stake was picked up by a number of smaller investors, Softchoice said.

Deborah Allan said Teachers decided to sell the stake because it was "balancing" its portfolio. However, the pension plan said that, depending on market conditions, it may repurchase shares in the company in the future.

MacDonald said the company had been in ongoing conversations with Teachers about how their investment was keeping its shares undervalued, despite a 42 per cent increase in earnings so far this year.

"This is for us, a great opportunity to get more shareholders in," he said.

"Having 25 per cent of the shares in one set of hands really created a lot of liquidity issues and didn't allow our stock to reflect the value that we had generated from an earnings growth perspective."

Softchoice — which works with organizations to select, acquire and manage their software and hardware technology resources — has reported improved results for the last few quarters as it sees software and hardware sales improve.

The issue has been trending upward for the better part of a year but still hasn't recovered fully from a 2008 correction.

The shares hit an intraday high of $10.62 on Thursday — approaching the stock's pre-recession valuation. It fell slightly Friday to close at $10.32 on the Toronto Stock Exchange.

The one-time sale allows the company to diversify its investor base, while avoiding what MacDonald characterized as overhang on its stock price if the pension plan were to engage in a number of smaller deals.

MacDonald said he doesn't believe the absence of a big stakeholder like Teachers leaves Softchoice more vulnerable as a takeover or merger target, nor does it alter the company's strategy.

Despite faltering business confidence in the economy, MacDonald said demand for its products continues to be strong as it focuses on high growth areas like creating cloud networks, or private virtual storage databases, for its customers.

The company in November signed a deal to buy technology consulting firm Unis Lumin for $17 million in cash.

It has more than 1,150 employees in more than 46 branch offices.

Softchoice develops information technology solutions for more than 14,000 small and medium-sized businesses. Its software includes networking, security, education and licensing products.

It partners with brands such as Apple, Hewlett-Packard, Intel, IBM and Cisco Systems.