Arivia sale pushed back to next year

Johannesburg, 12 Jun 2007

The sale of state-owned IT services outsourcer arivia.kom has been pushed back to March next year, as government will only issue formal requests for proposals by mid-July.

Initially, the Department of Public Enterprises (DPE) said the sale was scheduled for completion by the end of the year.

Shareholders Eskom and Transnet have been ordered to disinvest from the company, in line with public enterprises minister Alec Erwin's directive for state-owned enterprises to disinvest from non-core assets. Eskom and Transnet hold 58.5% and 41.5% of arivia, respectively.

Last month, it emerged that Accenture, Business Connexion, Dimension Data, Siemens Business and T-Systems had been shortlisted following their submissions of expressions of interest for the company.

However, it now appears government's deadline is too ambitious. A source close to the process says that, at a recent pre-briefing, the potential bidders were informed they would be sent formal requests for proposals in the middle of next month.

"The RFP will outline the scope of the deal and the bidders will then see exactly what there is to play for," says the source. It is understood each bidder will then be able to conduct their own due diligence studies on the company.

Much speculation has surrounded the sale since the process was launched last year, with the industry saying arivia is virtually "worthless", bar the two large outsourcing contracts, to provide IT services to Eskom and Transnet that will be included in the sale.

eNatis factor

Sources say the five-year contracts are worth around R400 million and R200 million a year for Eskom and Transnet, respectively. However, the latter is expected to be boosted by the inclusion of services for the National Ports Authority, which, until now, have been provided in-house. It is expected that, upon privatisation, the combined value of the contracts will be about R900 million a year.

Speculation has also surrounded the impact the eNatis debacle might have on arivia, as the system's developer, Tasima, groups together two black empowerment consortiums and arivia subsidiary Face Technologies.

Until the Department of Transport yesterday announced that no penalties would be levied against Tasima, market concern had been raised about the effect this could have on the sale of arivia.

However, the source says it is unlikely this would have been a "deal-breaker", and is not the cause of the delay in the process.

"This would not have affected the attraction of the contracts or any of the bidders' decisions. The contracts are too enticing. It [potential penalties] could have been a headache, but not a deal-breaker."

Industry sentiment is that the sale is about securing two large state outsourcing contracts, rather than buying a company. An eventual buyer will likely strip arivia and sell off the company piece by piece.

Transnet, Eskom and the Department of Public Enterprises could not comment by the time of publication.

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