AST and systems integrator Red Rock Consulting have mutually agreed to cancel AST`s proposed plan to acquire the Australian company. The purchase was announced to the market in September last year.
All obligations relating to the original contract have been cancelled and no consideration has been paid by AST.
AST also announced that no further transactional costs will be incurred as a result of it cancelling the deal.
Reasons for the cancellation include deterioration in operating conditions in Australia as a result of the global slowdown and decreased demand in the Australian ICT market.
According to AST, the cash flow of its Australian subsidiaries is insufficient to fund the aggressive roll-out AST had planned for Red Rock, and the rand`s rapid decline has made rand funding of the Australian company unwise.
When the acquisition was announced, AST planned to pay Red Rock A$13 million for the business, but at the time of the announcement the rand was trading at R4.40 to the Australian dollar. It now costs R5.90 to buy the Australian currency.
AST CEO Gerrie de Klerk says the company`s strategy to enter the services market in Australia remains intact, and that the cancellation is merely a delay.
"We are strong in products and management in Australia; it is sensible for us to enter the integration space. It will just be done in a sensible manner when it suits us."
De Klerk says that since the announcement was made late on Friday, he has received a number of calls from investors.
"The feedback we`ve had has been positive. The consensus we`ve received from the market has been that it was a gutsy move and people are happy we have reduced our exposure to the Australian market while things are tough, and they understand that the roll-out strategy we had planned for Red Rock doesn`t fit right now."
Figures released by AST show the pro forma effects of the cancellation to be only a 2% decline in headline earnings per share for the six months to December 2001.
De Klerk also points out that while AST is growing its European operations strategically, Australian growth can only be facilitated through acquisitions, which he says is not possible right now.
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