Listed electronics company Jasco is buying Spescom, in a deal that will create a R1 billion merged entity in the converged telecommunications space.
Jasco will pay Spescom R11.8 million, and issue 31.9 million new shares in return for Spescom, the companies said in a joint statement early this morning.
The announcement follows a cautionary issued by Spescom on 2 July, and one issued by Jasco on 17 August.
Jasco will swap one share for 2.47 Spescom shares. Jasco's share closed at 130c last night, potentially valuing the deal at around R53 million in total. However, the value of the share swap will depend on share price movements.
The deal will create an integrated business that will combine Jasco's telecommunications experience and Spescom's ICT expertise, to allow the companies to take part in the growing move towards converged telecommunications.
Critical mass
Jasco, which was founded in 1976 and listed on the bourse in 1987, employs more than 1 000 people. It has a diversified portfolio of four divisions operating in the telecommunications, domestic products, security and electrical sectors.
It recently launched NewTelco SA, a carrier-neutral co-location services provider that provides a telecommunications inter-connection hub for national, regional and international carriers.
The companies expect to enhance earnings through the merger by extracting synergies and benefiting from cross-selling opportunities.
In the year to June 2009, Jasco reported revenue of R600 million, while Spescom turned over R362.7 million in the year to September 2009. The companies expect combined revenue to hit R1 billion.
Harnessing potential
Jasco CEO Martin Lotz explains that the main driver for the deal is the huge potential the companies see in the telecoms sector in Africa, because more broadband is becoming available as undersea cables land.
Lotz says Jasco wants to play across the entire telecoms value chain, and acquiring Spescom will aid it in reaching this target. Spescom will bring its telecoms skills, data centre expertise and broadcasting ability into Jasco, he notes.
Lotz adds that the companies offer complementary product sets, and will be able to cross-sell as they do not have common customers of products. He explains there is very little overlap, and no conflicting business units between the companies.
In addition, several divisions within the merged entity can work together to create integrated and more diverse client offerings, which includes Spescom NewTelco's co-location facility, the ECNS and ECS licences, and Jasco's hi-site network, which provides an opportunity for a wider service offering in the telecoms sector.
Spescom's presence in East Africa can also be leveraged, together with Jasco's presence in West Africa to grow African revenue, the companies say.
Spescom group CEO Jene Palmer says the merger is in line with the company's growth plan, as it allows it to add more building blocks to its communications supply chain. She explains that the company has been looking for a way of adding critical mass for some time, and the merger with Jasco will fast-track its growth objectives.
The deal is expected to take three months to wrap up, and there are a number of conditions that need to be met, such as Competition Commission approval. Lotz does not foresee any problems in acquiring the relevant approvals.
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