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Microcap & Penny Stocks : NTWK OTC BB Netsol International Inc (Formerly MGHI)
NTWK 3.315-0.5%3:39 PM EDT

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From: QualityStocks7/21/2010 9:25:20 AM
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NetSol Technologies, Inc. (NTWK) Subsidiary Makes Move to Acquire NetSol’s European and North American Subsidiaries

NetSol Technologies, Inc., a worldwide provider of global IT and enterprise application solutions, announced this morning that it has received a proposal to transfer ownership of its two wholly owned subsidiaries, NetSol Technologies Europe (“NTE”) and NetSol Technologies North America, Inc. (“NTNA”), to NetSol Technologies Ltd. (“NTPK”), the Company’s majority-owned subsidiary in Pakistan.

The Pakistan subsidiary has proposed to purchase the two subsidiaries from NetSol at a premium to book value in an all-stock transaction. NetSol currently owns 58% of NTPK and 100% of both NTE and NTNA. If approved, the internal sale of both NTE and NTNA would increase NetSol’s ownership stake in NTPK from 58% to 76%. The total estimated value of both NTE and NTNA by an independent appraisal firm is approximately $20 million.

Once the transaction has been made, the subsidiaries will continue to operate in their present locations, but the reporting of NetSol’s three subsidiaries would be consolidated under one entity, NTPK. Currently, each subsidiary operates under NetSol, however, while the revenue of NTPK is reported and disclosed as part of NetSol’s gross revenues, the bottom line profitability of NetSol is reduced by the minority interest ownership in NTPK. In its current form, the transaction will increase NetSol’s ownership in NTPK, thereby reducing its minority interest. Because the increase in ownership would allow NetSol to recognize a greater portion of NTPK’s revenues and earnings as its own, the Company would expect a net accretive effect on its earnings per share.

Najeeb Ghauri, Chairman and CEO of NetSol, stated, “If approved by the NetSol board, the agreement is a win-win situation for our employees, shareholders and customers worldwide. We expect this transaction to strengthen the symbiotic relationship between our subsidiaries, resulting in increased operating efficiency. Furthermore, we expect NetSol Pakistan’s higher margins to result in improved profitability for the Company. We anticipate that this internal transaction will improve our bottom line and ultimately enhance value for our shareholders.”

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