Solution 6 in $3.5 billion merger with Sausage Software to create leading e-business entity

Sausage's core offerings perfect fit with Solution 6's e-business platform

Solution 6 Holdings Limited (ASX:SOH), a world leading provider of IT solutions to professional service firms and innovator in ASP services, today announced that it has proposed a merger with Sausage Software Limited. Sausage offers Internet tools, e-commerce systems, business software and multimedia solutions for SMEs.

The directors of Sausage believe the proposed merger has strong strategic benefits for Sausage, its employees and shareholders.

Proposed Merger Terms

The proposed merger will be effected by way of a takeover bid using Solution 6 shares, with Solution 6 offering 6 ordinary Solution 6 shares for every 10 ordinary Sausage shares. Solution 6 also proposes to acquire all outstanding Sausage options on similar terms. The proposed takeover bid is subject to certain conditions.

Solution 6 realises the potential value that SMS brings to the merged entity (SMS recently announced a recommended takeover bid made by Sausage) and intends to fully support Sausage¿s current bid for SMS. The Solution 6 offer would also extend to the shareholders and optionholders of SMS on the successful completion of this acquisition.

Based on Friday¿s closing price of $9.55 for Solution 6, the merger represents a value of $5.73 per Sausage share, valuing Sausage at $1.6 billion on a fully diluted * basis and the combined entity at $3.5 billion on a fully diluted* basis.

Telstra currently holds approximately 10 per cent of the issued capital in Sausage (with options to move to 40% on a fully diluted * basis) and approximately 24 per cent of the issued capital in Solution 6 (with the option to move to 25% on a fully diluted basis). Under the terms of the proposed takeover and the proposed asset acquisition with Telstra, Telstra would hold a 40 per cent interest (on a fully diluted * basis) in the merged Solution 6/Sausage entity.

Full acceptance of the proposed merger by Sausage shareholders and option holders is expected to result in Sausage shareholders and option holders holding approximately 47 per cent of the combined entity on a fully diluted * basis.

Under the terms of the proposal, Solution 6 proposes to offer Sausage two Board seats. Wayne Bos will be asked to assume a Director role in the combined entity.

Powerhouse in e-Business

The proposed merger follows the proposed acquisition by Solution 6 of eConnect, TFMS and a 30% equity stake in PlesTel from Telstra and creates a combined entity that will be a powerful force in e-Business.

Sausage

Sausage Software helps organisations move into the ecommerce arena using the experience and skills of its specialist Internet Tools. It provides packaged ecommerce solutions, customer relationship management software (CRM), core portal architecture, Hotdog Internet tools, website development, Pronto enterprise resource planning software and end-to-end professional services.

Sausage's PRONTO ERP software has over 800 SMEs as customers in the Asia Pacific region, USA and Europe. Sausage HotDog has a total of over 1 million registered users in more than 120 countries. Independent reports show HotDog Professional as the world¿s most popular web authoring tool for professional webmasters and HotDog Express as the most popular consumer web site design product globally, even though there are an estimated 400 direct competitors.

Sausage has 1100 employees (including SMS employees). Customers include Ansett, Melbourne Symphony Orchestra and Telstra. It has strategic relationships with Intel, America Online/Netscape, St George Bank, Broadvision, Telstra, Looksmart and Sun MicroSystems.

Complementary Product Offerings

A merger with Sausage will expand the offerings in Solution 6's robust, end-to-end eBusiness platform. Sausage's PRONTO ERP software in particular provides a low-end solution for SMEs. The Open Trade Network provides a trade hub for businesses to buy and sell online, using a unique, automated tendering process. In addition, Zeo is a core customer relationship management system for enterprises and the Hotdog Internet tools provide Internet enablement/WAP technology which are important in effectively controlling the interplay between the Internet, Extranet and Intranet in Solution 's eBusiness model. Sausage¿s acquisition of SMS will also deliver additional capability in high-end IT project management and integration of ERP and e-Business systems.

According to Chris Tyler, chief executive officer, Solution 6, "Solution 6's and Sausage's approach to e-Business have converged in many ways. This is a very logical move for us. Every aspect of Sausage's product and service set, fits neatly within our e-Business platform.

Of Sausage's latest initiatives, Business in a Box (an e-commerce solutions package for SMEs that will offer instant templates of web pages, online links to accountancy and inventory systems and revenue collection/processing facilities) in particular, will very nicely complement what Solution 6 is doing currently with our ASP and portal initiatives," he said.

Customer Base & Distribution Channels

"Sausage has well established distribution channels and good global reach, which is important for Solution 6 as we grow our business in overseas markets. Sausage also provides access to over 800 SMEs around the world, into which Solution 6 can market our e-Business platform. On the flip side, Solution 6 will be able to market Sausage ecommerce and ERP solutions via our 10,000 accounting firms to their clients - the SMEs. I see that we will get a tremendous amount of synergy from this merger," Mr Tyler concluded.

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About Solution 6

Solution 6 is the world's leading supplier of IT solutions to professional service firms. The company currently holds the largest market share in Australia, New Zealand, South Africa and the UK in the practice management, client accounting and taxation markets and it also has a strong presence in the US and Continental Europe.

Solution 6 is currently leading the market with its new application service provider (ASP) business. An ASP enables customers to operate business software via the Internet or through private networks.

Solution 6 was established in 1981, became a publicly listed company in 1987 and currently has approximately 1,500 employees in 13 countries. Additional information on Solution 6 is available by sending email to info@solution6.com

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