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Second time the charm for Datatec

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 30 Nov 2012
Merging Comztek and Westcon SA will create a company with annual turnover of R2.6 billion, says Datatec CEO Jens Montanana.
Merging Comztek and Westcon SA will create a company with annual turnover of R2.6 billion, says Datatec CEO Jens Montanana.

Dual-listed Datatec has finally succeeded in buying PC distributor Comztek, although for a lower amount than what it offered two years ago, as it will pay up to R88 million to buy the pan-African company.

The merger between Datatec's Westcon unit and Comztek, which is partially owned by JSE-listed Mustek, will create SA's largest value-added distributor with revenue of more than R2.6 billion.

About two years ago, a previous bid by London- and Johannesburg-listed Datatec to buy Comztek, for R101 million, fell through. At the time, Mustek was not keen to sell its share, wanting rather to up its almost 42% share, and Datatec said it would not pursue the buyout any further.

Mustek's sale is part of its ongoing drive to reduce debt by disposing of non-core assets. CEO and founder David Kan says Mustek, which did not have a controlling stake, had tried to buy out other shareholders, but failed.

Mustek acquired the Comztek stake when it helped management purchase the company in 1999. Comztek was established in September 1999, but was initially formed in 1995 as Comzlink, a subsidiary of Centera, which was owned by Siltek and Q Data.

Four years after it was initially formed, Leen van der Bijl and current Comztek MD Paul Conradie bought out the distributor with Mustek's assistance.

Across Africa

Datatec CEO Jens Montanana says the deal 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".

The combined business will have revenue across Africa of more than $300 million, around R2.6 billion, says Montanana. Datatec will buy Comztek from its current shareholders, which includes Mustek and various members of the management team through family and employee trusts.

"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."

Expanding scope

Montanana adds that Comztek has a complementary vendor portfolio that has little overlap with Westcon's vendor portfolio, which adds strong new vendor relationships, and the addition of staff will allow Datatec to widen its offering to both customer bases.

Comztek supplies computing equipment to 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, data centre and software infrastructure and unified communications solutions.

The unlisted company has annual revenue of more than R1 billion and about 200 staff members. Comztek MD Paul Conradie says that by joining forces with Westcon, it can further develop the markets where it has a presence and bolster the breadth of its offerings.

Conradie says the merger will also allow Comztek to tap into Datatec's scale and there are many synergies between the two companies' product offerings. He adds that the deal will make Westcon SA the largest value-add channel player in SA.

Datatec will pay R27.4 million in cash to Mustek, and R12.6 million to the management sellers, and will issue R40 million-worth of shares. Another R8 million will be paid in cash to management if Comztek meets certain financial targets.

Once the deal has been completed, Comztek will be integrated with Westcon SA, although there will be an internal re-organisation that will see empowerment partner Mineworkers Investment Corporation increasing its stake in Westcon SA to 40%, Comztek management getting 9.9% of Westcon SA, and Datatec's share ending up at 50.1%.

The deal is subject to the approval of various competition boards, including those in Africa, as well as other conditions.

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