Arivia sale drags on

By Nicola Mawson for arivia.kom
Johannesburg, 25 Jun 2009

Although Transnet still plans to sell arivia.kom this year - one of two non-core assets that still have to be disposed - it may rethink its strategy if the deal is not “advantageous”.

Acting CEO Chris Wells says the sale has been a “complex negotiation” because of its two-part nature. Arivia provides IT services to Eskom and Transnet, and the company that buys it would enter a service agreement with the state-owned enterprises.

Wells, speaking yesterday at Transnet's annual results presentation for the year to March, said the unit should be sold this year, but if a deal is not “advantageous”, Transnet would rethink its strategy.

However, ITWeb understands final negotiations between arivia and T-Systems SA are ongoing, and the sale should be wrapped up soon. This would be a relief to staff, who have been caught in the middle since the sale was announced.

Continuing regardless

Irnest Kaplan, MD of Kaplan Equity Analysts, says the deal could be dragging on because the way the sale is being handled is not conducive to a fast sale, or because the assets were not what they initially appeared to be.

He says the company does have some good skills, but does not seem to be able to move into a more outsourced role.

ITWeb understands it is business as usual at arivia.

The sale is not only of arivia, but also two large-scale arivia outsourcing contracts, for the provision of IT services to the electricity and transport utilities. The five-year outsourcing agreements are worth around R400 million and R200 million a year for Eskom and Transnet, respectively.

In January, T-Systems SA received the nod from government stakeholders for the purchase of state IT services provider arivia. The company qualified for the next phase of the transaction, which was intended to explore terms and conditions, as well as commercial details of the deal.

At the time, it seemed the deal would be complete in the first quarter of this year.

Waiting game

The lengthy sales process started in early 2006 and stakeholders Transnet and Eskom, respectively holding 41.5% and 58.5% in the company, pushed back the finalisation deadline several times during this period.

Earlier this year, an internal e-mail was leaked to ITWeb. The memo, from acting CEO Kiruben Pillay, indicated T-Systems SA has been “down selected” to the next phase of the arivia.kom outsource/sale transaction.

During this phase, Eskom and Transnet will negotiate with T-Systems SA on the terms, conditions and commercial details relating to the deal. However, the e-mail said, Eskom and Transnet “reserve the right to engage and/or negotiate with the alternative bidder”, Dimension Data.

Three other bidders - IBM, Siemens and Accenture - fell by the wayside during the initial stages of bidding.

While the sales bid experienced various delays since being announced as part of government's general privatisation drive - originally championed by then public enterprises minister Alec Erwin - little has been communicated to industry by government.

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.