BUSINESS TECHNOLOGY MEDIA COMPANY
Companies
Sectors

Shareholder snag in Datatec, Comztek deal

Read time 3min 00sec

London- and Johannesburg-listed Datatec is in talks to buy Comztek for R97 million, but one of the distributor's largest shareholders has yet to pledge its support for the deal.

Yesterday afternoon, Datatec voluntarily told the market it had made a conditional offer to buy the distributor for R97 million, which will be paid for in cash and shares.

Datatec wants to add Comztek to its local Westcon operations. However, Mustek seems to be holding back the marriage. In its announcement, Datatec says all of Comztek's management and shareholders, apart from Mustek, have indicated they would support the deal.

Mustek, a distributor of hardware, owns close to 42% of Comztek, which may be enough to scuttle the proposed transaction, should it vote against the deal. Mustek, which is listed on the JSE, failed to fully consolidate Comztek into its operations after buying the 42% stake in 1999.

Datatec has given Mustek until the end of the month to accept the offer, but has not indicated what it will do if Mustek does not want to sell.

Complementary products

Comztek is a South African-based distributor of networking, security and other hardware and software products. Datatec says these products are “highly complementary to the activities of the Westcon Distribution business of Datatec in SA”.

The distribution company also has operations in the rest of Africa, which can be added to Westcon's existing pan-African footprint to create a “strategically significant player across many African markets,” Datatec says.

Comztek was founded in 1995 and operates in SA, East Africa, Namibia and Zambia. It provides products in several categories, including consumer electronics, security, software and services, for the data centre environment. The Mustek subsidiary turned over R789 million in the year to June.

Westcon is Datatec's largest subsidiary. The company distributes converged communications solutions, focusing on voice, security, mobility, storage and power. It has operations in several countries in east and west Africa. Last year, it accounted for 69% of Datatec's $3.7 billion revenue.

Consolidation wave

Paul Booth, independent ICT analyst, says Datatec's move is another example of the rationalisation in the industry.

In July, JSE-listed Pinnacle Technology Holdings said it was buying Axiz Technology for R170.9 million. Just two months before that announcement, MB Technologies (MBT) said it was acquiring the half of Ingram Micro it did not already own for an undisclosed amount. Ingram Micro SA was formed three years ago as a joint venture between Ingram Micro and MBT.

Booth says the deal would result in four larger distributors in the local market: MBT through its Tarsus subsidiary, Mustek, Pinnacle and Westcon. He expects this situation to place pressure on smaller organisations, such as Sahara and First Technology, which may result in yet more merger and acquisition activity.

The analyst explains that customers increasingly want to trim the amount of vendors with which they deal. This creates opportunities for vendors to merge in order to secure more business and reduce costs.

Mustek directors were unavailable for comment this morning, and Datatec has indicated it is too early to talk about the deal.

Mustek's shares were flat, at 340c, in early morning trade, as were Datatec's at R35.

See also