JSE-listed Datatec has acquired the assets of US and UK IP video and audio conferencing products distributor ReView Video, for a cash consideration of $25 million.
The move follows a notice in its annual report that its dependence on vendors - particularly Cisco, which accounts for approximately 49% of its revenue - constitutes a risk to the company.
The report says if any one of its principle vendors "especially Cisco" terminates, fails to renew or materially adversely changes its agreement or arrangements with the group, it could materially reduce the group's revenue and operating profit.
International technology vendor Cisco provides a variety of networking technologies, including products and services for audio, network, videoconferencing and voice over IP (VOIP) solutions.
Previously a multi-vendor distributor, ReView became the exclusive distributor for Polycom at the end of 2006 and is one of the largest Polycom distributors in the US. ReView also has rights to sell Polycom's IP video and audio conferencing products in the UK.
Rapid growth
The worldwide market for Polycom products is growing rapidly, as video conferencing solutions become an integrated component of enterprise communication, and as environmental considerations drive customers to consider alternatives to reduce emissions, says Datatec.
ReView generated revenue and earnings before income tax depreciation and amortisation (EBITDA) of approximately $57 million and $4 million, respectively, in the year ended 31 December 2006. The net assets of the business were approximately $1.2 million, as at 31 December 2006.
The move is an important strategic acquisition for its Westcon division, says Datatec CE Jens Montanana.
"It immediately positions Westcon as a leading voice and videoconferencing distribution company. Significantly, this acquisition makes Westcon one of the leading Polycom distributors in the world. ReView's strength in IP-based video conferencing products and services, combined with Westcon's focused technology solutions and operational infrastructure, represents an enormous opportunity for their customers."
The business is being acquired on a debt/cash free basis, and the $25 million purchase price will be paid entirely from Westcon's cash resources. The transaction is expected to be accretive in the current financial year, says Datatec.
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