In a deal worth R119 million, Siltek Limited has acquired two Datatec Distribution companies, Workgroup and Crew, with effect from 31 March.
The acquisition will result in Datatec becoming a strategic minority shareholder in Siltek and Siltek positioned to leverage Datatec`s international base to expand its IT supply chain business globally.
The deal will be settled by the issue of Siltek shares to Datatec Distribution, giving Datatec an effective 20% share in Siltek.
The latest move follows hot on the heels of Siltek`s R57.5 million acquisition of One Technology Group (OTG) from Softline Ltd as part of its strategy to become major force in the technology supply chain in sub-Saharan Africa, Australia, North America and Europe.
According to Siltek director Rob Matthews, the latest acquisitions cement Siltek`s position as the first choice in technology distribution in Africa. Together, the deals will boost the Siltek`s annual turnover from R1.96 billion to around R2.8 billion.
Dave Lello, chief operating officer of Datatec SA, says the sale of Workgroup and Crew and the simultaneous acquisition of a significant stake in Siltek are in line with Datatec`s strategy to partner with leading players in markets in which it operates but is not dominant.
"Datatec`s objective is to be the premier global value-added distributor of networking products. This is driven by our distribution company, Westcon, which was acquired by the group in June last year. Westcon is a major worldwide distributor of high-performance speciality networking products and a recognised leader in value-added service and support," he explains.
Workgroup supplies and supports software products from some of the world`s leading software developers and vendors while Crew focuses on distribution of branded software, educational software, PC and handheld games and related products into the retail IT supply channel.
Workgroup and Crew will retain their identities and continue to operate independently under Doug Woolley (Datatec Workgroup executive director) and his team, alongside Siltek`s other IT supply chain operations.
These include Siltek Distribution Dynamics (SDD), a focused distribution company with 11 divisions offering best-of-breed PCs, peripherals and software; Siltek`s specialist distribution arm which focuses on high-end, niche market IT products; OTG which markets its own-brand and white-box quality hardware and related IT products; and offshore operations which currently contribute some 9% to group revenues.
"Had the Workgroup and Crew acquisition taken place on July 1 last year, it would have resulted in a 24.5% increase in earnings per share in Siltek in the six months to end-December.
"In addition, Siltek has cash resources of some R100 million and is continuing negotiations with other parties offering products and services which will contribute to the fulfilment of the group`s vision to become an international dominant supplier of IT."
Lello says the partnership with Siltek is the ideal vehicle for the group to continue its role in the SA IT supply chain into the future, while focusing on network distribution through Westcon globally.
"Siltek offers a best-of-breed operation and complements the value-add philosophy to which Datatec adheres," he adds.
Matthews agrees and notes that successful international IT distribution models are based on high volumes which translate into economies of scale benefits, including the ability to implement the critical back-office infrastructure required to accommodate the changing nature of IT distribution.
"Siltek is restructuring itself to emulate companies like Ingram Micro, the world`s largest wholesale distributor of technology products with an annual turnover in excess of $16.5 billion.
"Individual group companies will continue to add value to their target customers while leveraging the group`s infrastructure to provide the IT supply chain with best-of-breed products and service practices," Matthews concludes.
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