Loyalty makes $5.5m merger magic

Melbourne marketing applications developer Loyalty Magic has received a financial shot in the arm through a $5.5 million merger with ASX- and NASDAQ-listed POS provider Catuity.

Chris Leach, managing director at relationship marketing and marketing automation applications developer Loyalty Magic, said Catuity had signed a deal to acquire all outstanding shares of Loyalty Magic.

Loyalty Magic, an award-winning Australian Technology Showcase (ATS) software developer, has built and sold marketing software to organisations including gaming giant Harrahs in the US, Jigsaw Clothing, pharmacy operator Amcal and the ABC, he said.

"In the world of direct marketing, response rates are between two and four percent. But our customers are getting 20 to 30 percent response rate," Leach said.

Loyalty Magic ASP centre can use customer's existing POS systems to provide member customers with personalised, barcoded plastic cards. Customer purchases are swiped on to the POS barcode reader, and sales history downloaded to the ASP centre, he said.

Loyalty Magic then manages marketing outreaches to qualifying members, using numbered vouchers that can ben tracked. The system enabled cross-vendor cooperation -- helping small retailers compete against market giants -- and much more efficient direct marketing, Leach said.

"It uses Microsoft .NET on an SQL Server database. We use ADO.NET and ASP.NET," Leach said. "Now we're getting ready for the fund-raising part."

A statement filed to the ASX on 17 March revealed Catuity would pay $5.5 million for all outstanding shares of Loyalty Magic. Some 35 percent would be issued in new shares while Loyalty Magic's management team and an investor would hold the majority.

John Racine, chief executive at Catuity, was quoted as saying Loyalty Magic had become a "vital part" of the customer marketing strategies of some of "Australia's best-known" retail brands.

"They manage [membership] programs that affect two million consumers -- nearly one in 10 Australian households," he said.

Loyalty Magic offered services that would appeal to the types of retailers Catuity was focused on in North Amercia, Racine said in the statement.

Catuity is a US-based holding company incorporating the Australian incentive marketing program specialist formerly known as Chip Application Technologies. It was dual-listed on the NASDAQ and the ASX in November 1999, but 85 percent of its shares were still traded on the ASX in March 2005.