In one of the most significant developments in the IT sector in South Africa in recent years, two of the most successful local IT companies, Persetel Holdings and Q Data have agreed to merge their operations to form the undisputed leader in IT in South Africa.
The merger will be structured through Persetel Holdings buying all the businesses out of the Q Data group, merging them into Persetel Holdings and then changing the name of the enlarged company to Persetel Q Data Holdings. Persetel will pay for the assets of Q Data by issuing approximately 60 million new Persetel shares and passing these shares through to the current holders of Q Data shares. Current Q Data shareholders will receive approximately 281 new PQ Holdings shares for every 1000 Q Data shares held.
Based on the respective market capitalisations of R9.3billion and R2.7billion for Persetel and Q Data, the new giant is expected to have a market capitalisation of R12 billion, which puts it amongst the first 25 companies listed on the JSE.
Persetel was founded in 1979 and Q Data in 1986. It is considered to be a significant achievement that a South African group could have grown from nothing to the 22nd position on the JSE in less than 20 years.
The new PQ Holdings group will be headed by executive chairman Roux Marnitz, founder of Persetel. South African operations will fall under Leen van der Bijl, executive chairman and co-founder of Q Data, while international operations will be the responsibility of Hermus Erasmus who has in the past been in charge of Persetel Holdings` international operations.
Commenting on the merger Roux Marnitz said: "I am convinced that this transaction will be very positive for our shareholders, our employees and our customers. By combining our respective strengths we will be able to compete more effectively against the multinational competitors, particularly overseas where we see huge opportunities. In the process I believe we will create considerable value for our shareholders. Our employees will have enhanced career opportunities and our customers will be able to get more comprehensive service offerings from the enlarged group."
Leen van der Bijl confirmed his enthusiasm for the merger: "There are great synergies between the former Persetel and Q Data and our merger complements our respective strategies quite well. Persetel is very strong in the products and systems areas whereas Q Data is strong in the areas of consultancy, software products and services.
Both companies have strong networking divisions which will now be further strengthened, not only by the merger but also by the addition of the Cisco product range. Moreover, Persetel`s well established position overseas will enhance our ability to provide products and services in those markets."
Top electronics sector analysts Dr Duarte da Silva of Merrill Lynch, Smith Borkum Hare and Johan Snyman of Union Bank of Switzerland Securities were equally positive about the transaction.
Said Duarte da Silva: "The deal goes beyond earnings enhancement for Persetel - it creates value for both Persetel shareholders as well as the South African Information Technology industry. The merger catapults the joint operation into the number one networking and systems integration slot (by market share), whilst at the same time providing the old Q Data operation with strategic direction and removing both the pressure on Q Data to expand internationally and the momentum hiatus created by recent set backs. A word of caution is that mergers, by definition, are difficult and even though the two operations have a good cultural fit, progress will have to be monitored and carefully evaluated.
Johan Snyman observed: "The benefits of the transaction are more visible in the domestic environment, with the combined entity joining forces in areas such as systems integration, networking, software and specialist services. The transaction would also remove some of the pressure put on Q Data to expand its operation offshore, which has been done successfully by Persetel Holdings with established operations in Europe.
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