The sale of state IT services provider arivia.kom to T-Systems has received the green light from the Competition Commission, bringing to an end one of the most anticipated deals in the local ICT sector.
In a statement issued to ITWeb, the commission confirmed the sale was unconditionally approved yesterday, after it was submitted for approval on 1 September. As it is categorised as an intermediate merger, the deal does not require Competition Tribunal confirmation.
This means IT outsourcing group T-Systems, the local subsidiary of global telecoms giant Deutsche Telekom, can take possession of its new asset, as soon as the final contracts have been signed between it and arivia's stakeholders. This is expected to be done before the end of the year.
Arivia's shareholders are power and transport utilities Eskom Enterprises and Transnet, which own 58.5% and 41.5% of the company, respectively. State defence group Denel held a 22.98% stake in the IT service provider, but disposed of its share in April 2006, which was absorbed by Eskom and Transnet.
T-Systems, led by CEO Mardia van der Walt-Korsten, would not comment this morning, having been gagged by non-disclosure agreements, which form part of a larger media blackout by government over the protracted sales process. The sale was first announced in October 2006 by then public enterprises minister Alec Erwin, who spearheaded a privatisation drive that saw the state dispose of non-core assets.
The sale was complicated by the inclusion of two large-scale contracts, for the provision of IT services to Eskom and Transnet. The five-year outsourcing agreements are reportedly worth around R400 million and R200 million a year, respectively. It is understood that negotiations around these deals and arivia's final price tag - which has not been revealed - held up the sale.
T-Systems received the nod from government for the purchase of arivia as far back as January, when it qualified for the next phase of the transaction, which was intended to explore terms and conditions, as well as commercial details of the deal.
The company pipped four rival suitors to the post, after initial interest was shown by Dimension Data, IBM, Siemens and Accenture. However, these soon fell by the wayside, and rumours surfaced that the state-owned enterprise was worth little, bar the two lucrative outsourcing contracts.
But it appears the company has clawed its way back to profitability, after its earnings went into a freefall in 2004. In the 2006/7 financial year, arivia's losses stabilised at R5 million a month and it has seen a recent recovery. At company-level, arivia reported revenue of R1.3 billion at for the 2009 financial year, while profit before tax amounted to R87 million - up from a loss of R32.7 million in 2007. Similarly, at group-level, arivia achieved revenue of R1.9 billion in the 2009 financial year and profit before tax of R141 million.
As the sale of arivia is nearing completion, the company is also finalising the fate of its subsidiaries. Computer Foundation was recently sold to an unnamed consortium, for an undisclosed amount. Meanwhile, the sale of Face Technologies is understood to be at an advanced stage and details about this the deal are expected to be revealed next week.
Arivia.kom Consulting and Csiper Consulting - the two other main arivia subsidiaries - are to be sold to T-Systems as part of the larger deal.
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