Arivia buyer to be named soon

By Martin Czernowalow for arivia.kom
Johannesburg, 12 Nov 2008

The protracted sale of state IT outsourcer arivia.kom could finally reach conclusion by the end of the year, say sources close to the process.

The IT services provider, which was initially established to service state-owned enterprises such as Transnet, Eskom and Denel, was put on sale at the beginning of 2006, as part of government's overall privatisation drive.

“It appears that government is planning to finalise the deal by year-end. It is also understood that the bidders could (unofficially) know as early as the end of this month who the eventual winner is,” says one of the sources.

Currently in the running for the company are T-Systems and Dimension Data, and it is understood that both have by now concluded their due diligence studies. Three other bidders - IBM, Siemens and Accenture - dropped out during the initial stages of bidding.

“Everything has been done and the bids are now in the evaluation stage. Government is expected to announce a winner soon,” says another source close to arivia.

Arivia's current stakeholders are Transnet and Eskom, respectively holding 41.5% and 58.5% in the company.

So far, the sale has been characterised by a media blackout on the part of arivia's shareholders, who have steadfastly refused to comment throughout the process. Similarly, bidders have been gagged through non-disclosure agreements.

However, constant delays in the sale have fuelled market speculation about the state of the company and the viability of the privatisation. At one stage, industry observers were sure the deal had been derailed, while in July this year rumours abounded that the sale had already been concluded.

Should the sale be finalised by year-end, it would be about a year after government's original deadline.

Transnet CEO Maria Ramos recently commented: “We are trying to extract the maximum value for our stake in arivia. That is why there have been delays. I want a good deal. For the same reason, I won't tell you how much I hope to get for arivia. I want the maximum possible and putting our views out in the market could limit our ability to do so.”

From the start, sources close to the privatisation have expressed reservations about arivia's attractiveness to potential buyers, saying it would most likely be a hard sell. However, in order to attract bidders, government included two large-scale contracts with the company. The five-year outsourcing agreements are worth around R400 million and R200 million a year for Eskom and Transnet, respectively.

During the initial stage of the privatisation, several of the bidders did admit the outsourcing deals attracted them, while arivia, as a whole, was seen as worthless.

A Transnet spokesman could not immediately comment.