Datatec, the JSE-listed networking technology and services group, today announced that its Logicalis subsidiary has sold its Australian and New Zealand operations to IBM for US$66 million (about R435 million) in cash, inclusive of working capital adjustments.
The sale of Logicalis A/NZ came after an unsolicited offer from IBM. Logicalis A/NZ is a provider of IT integration solutions including the design, deployment and management of IT infrastructure.
Logicalis A/NZ employs over 300 staff in Australia and New Zealand and has partnerships with technology leaders such as Cisco and IBM. At Datatec`s interim reporting date of 31 August 2003, Logicalis A/NZ represented 26% of Logicalis` consolidated revenue and 25% of its net assets.
Jens Montanana, chief executive of Datatec and Logicalis, says that until the IBM offer there had been no intention to sell Logicalis A/NZ.
"These operations were central to our integration and services strategy internationally. However, the nature and value of this unsolicited offer was very compelling, particularly given that the suitor was IBM and the payment is entirely in the form of cash. The Datatec board is of the opinion that the disposal will enhance shareholder value. The total consideration represents a significant premium to the historical investment cost," he says.
The transaction comprises a cash consideration of US$46 million for the shares and a repayment of intercompany loans and payables amounting to US$20 million. The effective date of the transaction is 1 March 2004. There are no conditions precedent in the sale agreement between Logicalis and IBM. The proceeds will be used to strengthen the balance sheet of the group and for potential acquisitions.
The Logicalis A/NZ operations were originally formed through the acquisition and merger of Anite`s operations in Australia and New Zealand, CNI and later CSI. The transaction value represents a significant return on the total cost of developing the region through a series of acquisitions which started in 1997. All the Logicalis A/NZ employees and management will be transferred to IBM Australia and IBM New Zealand.
"That IBM is prepared to pay this price, in cash, reflects well on the way Logicalis` Australian and New Zealand operations have performed and been managed. The transaction represents a significant realisation for Logicalis Group after a number of years of cost cutting and restructuring internationally," says Montanana.
"The deliberations we went through in considering this transaction necessitated a strategic review of where and how the group should be positioned. To that end we have decided to focus our management and financial resources on the US and UK markets. We believe that by investing further in these areas we will be able to create a sharper focus and over time extract superior returns in these two geographies where we have considerable experience and scope for growth," he says.
Brendon Riley, General Manager, IBM Global Services Australia, says the acquisition enhances IBM`s ability to deliver business value to clients of all sizes. "Over the past 20 years Logicalis has built a world-class reputation as a leader in network services. The acquisition of Logicalis enhances IBM`s capabilities in network consulting and integration - an area our clients have identified as fertile ground for business transformation projects."
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