International ICT solutions and services group Datatec is looking to sell a major stake in value-added technology distributor Westcon-Comstor for $800 million.
The dual-listed Datatec made the announcement this morning, saying the proposed transaction is subject to contract and exclusivity provisions.
Datatec is an international ICT solutions and services group operating in more than 70 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The group's service offering spans the technology, integration and consulting sectors of the ICT market.
In October last year, Datatec saw interim revenue drop by 7.6% year-on-year, for the six months ended 31 August, from $3.29 billion to $3.04 billion. Headline earnings per share dropped by 24% to 9.1 US cents, from 12c in the previous corresponding period.
On 25 January 2017, the company issued a cautionary announcement, informing shareholders that it had entered into negotiations around a possible transaction. The company renewed this cautionary announcement on 8 March 2017.
"The company can now disclose that the cautionary announcement relates to a possible sale of a major share of Westcon-Comstor's operations for a consideration (current and deferred) of more than $800 million. The proposed transaction is subject to contract and exclusivity provisions," says Datatec in a statement.
However, it says there can be no certainty that the transaction will be completed, nor as to the precise terms on which the transaction might be completed.
"Shareholders are, therefore, advised to continue to exercise caution when dealing in the company's securities. The company undertakes to announce further details of the potential transaction as soon as practicable," it adds.
Datatec is still in the process of finalising the results for FY17 and will provide a more detailed trading statement as soon as practicable.
It says the year-over-year expected decline in earnings is as a result of a worse than expected result in Westcon-Comstor, adding that there was a decline in fourth quarter financial performance in the Europe Middle East and Africa region.
Datatec explains that Westcon-Comstor experienced disruption to the business as a result of final stages of SAP implementation in EMEA. Nonetheless, it says Westcon-Comstor has made adjustments to the operating model and Datatec expects this to support a rapid recovery.
Datatec's share price has since jumped 18% to R63 following the announcement this morning.
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