Deals
Datatec Limited Acquisition of Comztek
Datatec Limited ("Datatec" or "the Group") (JSE/AIM: DTC), the international Information and Communications Technology (ICT) group, has signed an agreement dated 29 November 2012 ("signature date") to acquire Comztek Holdings (Pty) Ltd ("Comztek"), a major ICT and networking distributor in Africa for a consideration of up to a maximum of R88 million ("the acquisition").
Comztek is a leading systems distributor with coverage in 26 countries in Africa with operations in South Africa, Namibia, Zambia, Kenya and Mauritius. It distributes a range of hardware and software products focused on networking, security and storage, datacentre and software infrastructure and unified communications solutions. Comztek has annual revenues in excess of R1bn (approximately $120m) and more than 200 employees. Based in Johannesburg, its activities are highly complementary to those of Datatec's Westcon business. Comztek has a strong reputation in the African market and brings good channel access as well as a comprehensive ICT solution model.
Datatec will acquire 100% of Comztek from its current shareholders who include Mustek Limited (JSE: MST) and various members of the management team ("Management Sellers") through family and employee trusts.
The acquisition will be settled by the payment of R40 million in cash funded from new loan finance (R27.4 million to Mustek, R12.6 million to the Management Sellers) and R40 million in Datatec shares (R12 million, to Mustek, R28 million to the Management Sellers). A further R8 million will be paid in cash to the Management Sellers, subject to Comztek meeting certain EBITDA performance conditions for the 6 months ending 31 December 2012. The contingent consideration is therefore highly likely to be finalised before completion of the Transaction.
The acquisition will be subject to the approval of the South African and other African Competition authorities and other commercial approvals. The time period for the various Competition Authorities' decisions is uncertain but is expected within 3 months from the date of this announcement. These and other conditions precedent are listed below. A further announcement will be made in due course specifying the completion date which will be the effective date for the acquisition.
Following completion and finalisation of the contingent consideration, the Comztek business will be integrated with Westcon South Africa (Pty) Ltd ("WSA") in an internal reorganisation which will involve Datatec's BEE partner, the Mineworkers Investment Corporation ("MIC") and several members of the Comztek management team subscribing for shares in WSA to increase MIC's share of the combined business to 40%, and Comztek management's share to 9.9%, leaving Datatec, through its subsidiary Westcon Emerging Markets Group (Pty) Ltd with a shareholding of 50.1% ("the reorganisation"). The proceeds of the subscriptions for new shares in WSA involved in the reorganisation will be applied to fund WSA's working capital. The effective date for the reorganisation will be upon the fulfilment of the conditions precedent set out below. The acquisition and the reorganisation are steps in a planned overall transaction ("the Transaction").
Jens Montanana, Datatec's Chief Executive commented:
"This is an exciting opportunity to create a market leadership position across the continent which will extend and augment our existing emerging Africa and South African operations and bring a strong business with an excellent reputation into the Group. Comztek brings a complimentary vendor portfolio that has minimal overlap with Westcon's own vendor portfolio, thereby adding strong new vendor relationships, along with highly skilled and experienced staff that will allow us to widen our offering to our respective customer bases. With revenues across Africa exceeding $300m the combined business will boast the scale and addressable market to attract new vendors wishing to create a regional presence. "
"Africa remains a key growth market for us and this deal significantly expands our footprint and offering into many new markets. As the continent continues to develop our solutions and services will play an important part in the rapid adoption of more advanced IT and telecoms infrastructure."
Additionally Paul Conradie, Managing Director of Comztek commented:
"This acquisition is a positive move for Comztek's customers, our suppliers and our people. By joining forces with Westcon we will be able to further develop the markets where we have a presence as well as bolster the breadth of our offerings. We are delighted that both organisations have remained focussed and committed throughout this process which will result in the creation of a business that will have a market leading position across many parts of the African continent."
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