BCX buys up UCS units

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JSE-listed outsourcing company Business Connexion (BCX) is buying out the bulk of retail specialist UCS's business, in a deal worth R614.2 million.

The retail software specialist is selling five service business units to BCX in a deal that will see it continue managing the entities, but allow it to focus on its software and value-added service offerings. The deal is being paid for through a combination of shares and cash and will result in UCS shareholders owning a large chunk of BCX.

UCS is selling Accsys, CEB Maintenance Africa, Destiny Electronic Commerce, UCS Solutions, as well as UCS Technology Services. All of the subsidiaries - apart from Destiny in which UCS has a 70% stake - are wholly-owned by the listed software company.

The companies being bought out by BCX will continue to operate in their current form and under the UCS brand. UCS senior management will continue to manage the UCS retail services businesses to make sure that skilled management are kept in place, as well as to ensure continuity.

The BCX and UCS joint announcement, early this morning, follows cautionaries issued by both companies at the end of September, indicating merely that each company was in talks. The cautionaries, however, did not indicate that the companies were in negotiations with each other.

Tapping resources

BCX's acquisition of UCS subsidiaries, which is taking place through what is essentially a share swap, will allow the units to grow by taking advantage of BCX's size, position in Africa, strong empowerment rating, its data centre and cloud computing platforms.

Business Connexion CEO Benjamin Mophatlane says the deal “heralds the creation of a leading African ICT services business, in line with Business Connexion's strategy to become market leaders in providing on-demand cloud-based services integral to the retail industry.

“The market has seen a number of consolidations within this sector, with a bias towards stronger economies of scale and more extensive delivery capacity. We will look to capitalise on the new growth opportunities that this merger brings. We look forward to an ongoing and strategic partnership with the remaining UCS group over the long-term,” says Mophatlane.

UCS deputy CEO Dean Sparrow says once the deal has been wrapped up, UCS will become BCX's single largest shareholder. “It is also an opportunity for UCS to execute its strategy to separate out the service businesses from the software businesses. It is a win-win outcome for all concerned.”

Sparrow explains the company's initial vision at the start of the century was to develop its software and services units into two standalone entities, and spin the software unit off into an international listing. However, he says, there is still much work to be done to get the software business to where it needs to be, which will happen over the next two to three years.

UCS will be able to take advantage of BCX's data centres to grow its software business, says Sparrow, which will spur on development of its software as a service strategy.

Business Connexion will issue 101 million new shares as part payment for the acquisition. As a result, UCS shareholders will own just over 25% of BCX. The rest of the deal, about R30 million, will be paid for in cash.

BCX shares rose in early morning trade on the back of the announcement, and were trading at 658c, an 8c or 1.23% gain. UCS's shares also gained on the news, shooting up 11.39%, or 23c, to trade at 225c.

The deal is subject to various conditions, but has the support of UCS's board and should be wrapped up in the first quarter of 2011.

Related story:
BCX, UCS issue cautionaries

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