Datatec shareholders to cash in on Westcon-Comstor sale

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Datatec CEO Jens Montanana.
Datatec CEO Jens Montanana.

Datatec shareholders could cash in on around $500 million (R6.5 billion) in proceeds from the recently completed sale of the group's value-added technology distributor Westcon-Comstor to Synnex for $830 million (R10.8 billion).

Datatec says in a statement that its board is reviewing options for the use and distribution of the cash proceeds received on the closing of the transaction.

"As previously communicated to shareholders, the board intends to retain $130 million [R1.7 billion] for various operational and working capital and expansion funding requirements. The board will consider returning the majority of the remaining $500 million [R6.5 billion] to shareholders by way of share repurchases and/or a specific dividend, but in the meantime the proceeds will be retained in US dollars," the group says in a statement.

"This transaction crystallises excellent value for our shareholders - we will revert to shareholders with our plans for the use and distribution of the cash in due course," says Datatec CEO Jens Montanana.

The board previously communicated that any cash payments received on the earn-out would be returned to shareholders. The international ICT group's shareholders voted to approve the transaction at the general meeting held on 30 August and the group now says all other conditions precedent to the completion of the deal have been satisfied.

In June, Datatec announced it had entered into a definitive agreement to dispose of its Westcon-Comstor business in North America and Latin America (Westcon Americas) to Synnex for a maximum consideration of $800 million (R10.4 billion) and to sell 10% of the remaining part of Westcon (Westcon International) to Synnex for $30 million (R390 million).

"The strategic partnership between Westcon International and Synnex will provide significant growth opportunities for both businesses, while working together to serve vendors and customers globally," adds Montanana.

The proceeds of the transaction comprise $630 million (R8.2 billion) in cash on completion and up to $200 million (R2.6 billion) payable as a cash earn-out, subject to Westcon Americas meeting certain agreed gross profit performance targets. Datatec says the maximum consideration of $830 million (R10.8 billion) equates to an equity valuation of the total Westcon-Comstor division of $1.1 billion (R14.3 billion).

Datatec is an international ICT solutions and services group operating in more than 70 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The group's service offering spans the technology, integration and consulting sectors of the ICT market. Its shares are listed on the Johannesburg Stock Exchange and it has a secondary listing on AIM in London.

In its audited provisional results for the year ended 28 February, Datatec's revenue declined by 5.8% year-on-year to $6.08 billion from $6.45 billion the previous year. It said the year ended with a challenging set of circumstances, as Westcon-Comstor's SAP and business process outsourcing implementation negatively impacted the results of the EMEA region.

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