Comparex Africa (Pty) Ltd and Business Connexion Solution Holdings (Pty) Ltd (BCSH) will merge to form SA`s largest black empowered ICT company with annual revenues in excess of R3 billion.
The newly-merged entity is also expected to be the most cash generative black-empowered ICT business in SA.
The merger is subject to the approval of the competition authorities. It will effectively give Business Connexion Investments (Pty) Ltd, the current holding company of BCSH, a 25.01 % interest in the merged business. Comparex Africa Group (Pty) Ltd will own the balance of the equity.
The deal excludes Nanoteq, Perago, Mosaic, DHS and other interests within the Comparex Holdings group as well as the surplus cash reserves.
It is the intention that, once the proposed transaction has been implemented, Comparex Africa will consider changing its trading name and branding to reflect the new profile and positioning of the merged business. Further details in this regard will be announced in due course.
The newly-merged company will be led by Comparex Africa CEO Peter Watt. Benjamin Mophatlane, CEO of Business Connexion, will assume the role of deputy CEO. Key Business Connexion executives will take positions on the board and on the executive committee of the merged entity alongside current Comparex Africa executives.
According to Watt, the merger will create a truly empowered ICT company and has the potential to unlock substantial value for all stakeholders. "The fit between our respective organisations is excellent," he says. "The new company has a strong corporate and government client base. However, there is currently limited overlap of clients which provides the opportunity for both businesses to cross-sell into each other`s respective bases.
"Business Connexion`s market leadership in Microsoft solutions is complementary to Comparex Africa`s expertise in outsourcing, professional services, technology infrastructure and business applications."
The merger also supports both parties` vision to build a market-leading business that is truly representative of the demographics of SA.
The merger has a significant impact on the BEE ownership profile of Comparex Africa. In terms of the key elements of an empowerment strategy, we believe that it will contribute to shareholder value, further empower employees, support the community, encourage small business and continue to contribute to social and economic transformation.
Benjamin Mophatlane, who was voted CSSA`s 2002 IT Personality of the Year in recognition of his achievements for transforming the IT industry, says the newly-merged entity will follow the philosophy that was adopted by Business Connexion. "We will continue to build an ICT company that represents the aspirations of all South Africans.
"We believe that government and the private sector wishes to partner with organisations that are committed to transformation at all levels and that have the capacity to deliver world-class service and solutions."
Mophatlane says the merger provides an opportunity for Business Connexion to create the operational capacity to leverage off its strong Microsoft capability and track record to pursue the significant growth opportunities.
Both Comparex Africa and Business Connexion have been strong cash generators. Commenting on the financial effect of the merger, Alan Farthing, Financial Director of Comparex Holdings, says: "The effect on headline earnings is neutral as BCSH`s earnings are adequate to offset the dilution of the group`s share of Comparex Africa`s earnings."
Following the transaction, Comparex will apply to list the Comparex Africa Group (CAG) on the JSE. Thereafter it will unbundle its shareholding in CAG to Comparex shareholders. Comparex will then be restructured and will distribute to shareholders, surplus cash after providing for and taking account of working capital requirements and actual and contingent liabilities. An announcement in this regard will be made in due course.
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