Creation of leading Latin American network integrator through $77.2m investment in merger with Brazil's largest Cisco partner

Logicalis Group Limited, a wholly owned subsidiary of Datatec Ltd ("Datatec", "the Group", JSE and LSE: DTC), the international information and communications technology (ICT) group, has agreed to merge its Latin American operations with the leading Brazilian network integration businesses of Promon Tecnologia ("PT")(the "transaction").

Under the terms of the transaction, Logicalis will pay PT's owner, Promon S.A, up to $77.2 million in cash and new Datatec shares ("the consideration") for a 70% equity holding in the combined business. Promon S.A will have a 30% equity interest in the business.

PT is the leading independent Brazilian network integrator and Cisco's largest partner in Brazil. PT generated over $140 million of revenue in the year ended 31 December 2007 and pro-forma EBITDA of $18.3 million. As part of the transaction, net tangible assets of $11.6 million will be acquired, including approximately $15 million of net cash.

PT's product and service offering encompasses Cisco Advanced Technology offerings (unified communications, security and wireless solutions), with strong consulting and service offerings. PT has over 200 employees, including 140 highly skilled technical engineers and project managers, based in Sao Paulo and Rio de Janeiro.

PT enjoys a market leading position in the Brazilian service provider and telco market. Its customers include most of the major service providers and telcos operating in Brazil, but more recently the business has started diversifying into other vertical markets including energy (oil and gas), financial, manufacturing and public sector markets.

The ICT solutions market in Latin America is growing strongly. Brazil is Latin America's largest market, the world's fifth-most populous country and the world's tenth-largest economy in GDP terms.

The transaction will provide Logicalis with a platform for further growth in the region as there is considerable opportunity for an integrator with a national and international presence and capabilities to provide ICT solutions across the continent. The transaction is also in line with Datatec's strategy of increasing the proportion of revenues and profits generated from developing countries and emerging markets.

The combination of Logicalis' Latin American businesses in Argentina, Uruguay, Chile, Peru and Paraguay with PT in Brazil will create the largest network integrator in Latin America, with almost 500 employees. In addition, Logicalis' local operation in Brazil, the largest economy in South America, will be transformed. PT's telco and service provider expertise will complement Logicalis' existing Latin American operation and commercial sector experience.

The enlarged business is expected to have annual revenue in excess of $250 million.

Jens Montanana, Chief Executive of Datatec, commented:

"This is a key strategic transaction for Datatec as it catapults Logicalis into becoming the leading independent integrator, not only in Brazil but across the whole of Latin America. It also adds a significant new geographic revenue and profits stream to Logicalis in the largest economy in South America.

"We believe Brazil has the best corporate governance of any of the BRIC countries as well as having the most advanced economy in the region. We have been operating in the country for over 10 years and merging with PT is a rare opportunity to secure a market leading business with a strong management team. Significantly, this transaction gives both Logicalis and PT access to new skills which will enable the enlarged business to target new markets and customer verticals across the continent.

"This earnings enhancing transaction also fits well with our group strategy to widen our geographical footprint and comes shortly after Westcon, our global distribution business, also significantly increased its presence in Brazil."

The consideration payable comprises an initial cash consideration of $25 million from the group's existing cash resources and Datatec shares to the value of $25 million (comprising 6 674 312 shares at an issue price of 185.33 pence, being the 30-day VWAP on 12 March 2008) which will be issued to Promon S.A. on completion of the transaction. Deferred cash consideration of up to $27.2 million is also payable over the next two years contingent upon the future financial performance of PT and the Datatec share price.

50% of the shares issued to Promon S.A. will be subject to a one-year selling restriction and the remainder will be subject to a two-year selling restriction.

Following the transaction, Logicalis South America Limited will be renamed PromonLogicalis Latin America Limited ("PLLAL") and Promon S.A. will have a 30% interest in PLLAL. Promon S.A. will have a put option to sell its 30% interest in PLLAL to Logicalis Group Limited at a price to be determined between Promon S.A. and Logicalis Group Limited at the time. The put option expires in September 2012 and can be exercised annually commencing in September 2009, subject to a maximum sale in any one year of a 15% interest in PLLAL.

The financial effects have been prepared for illustrative purposes only and because of its nature may not fairly present the issuer's financial position, changes in equity, results of operations or cash flows. The financial effects are the responsibility of the directors.

The transaction would have had the following effect on Datatec's earnings per share, headline earnings per share, underlying earnings per share, net asset value ("NAV") and net tangible asset value ("NTAV") per share for the six months ended 31 August 2007, based on the assumptions set out below:

The pro-forma earnings per share, headline earnings per share, underlying earnings per share NAV and NTAV have been prepared on the following assumptions:

* Figures before the transaction are the unaudited interim results of Datatec for the six months ended 31 August 2007;
* 169 million Datatec shares in issue at 31 August 2007;
* Funds are invested at an interest rate of 4.75%;
* The results of PT are the pro-forma unaudited results for the six months ended 31 December 2007;
* Intangible fixed assets will be recognised on completion and amortised in accordance with Logicalis' existing accounting policies;
* A tax rate of 34% in Brazil and 29% in South Africa;
* The NAV and NTAV pro-forma assumes the transaction was concluded effective 31 August 2007 and uses PT's projected un-audited balance sheet at the transaction date;
* All contingent and deferred consideration has been included in the calculations as having been paid at the transaction date; and
* Underlying earnings per share is calculated after adding back the amortisation of intangibles that are created upon the transaction.

Completion of the transaction is expected to take place in late April or early May 2008 and is subject to the satisfactory fulfilment of the following conditions precedent:

* Regulatory approvals from the relevant Brazilian federal and state authorities;
* Material customer and supplier consents; and various other conditions relating to the effective administration of the transfer of the business.