Spicer Holdings and the IQ Business Group have announced their intention to merge into an entity with an expected market capitalisation of R1.4 billion rand. (
See related story for financial details
.)
"This gives us something neither of us could do on our own," says Sas du Toit, Spicer executive chairman. He is to be executive chairman of the new entity while IQ MD Johan Roets takes the position of CEO.
The name of the new entity has not been decided, but Du Toit says it will reflect the nature of the merger. "At a business unit level we will keep the Spicer and IQ brands, which are very strong," he says.
Du Toit says the deal began as discussions between him and Roets as early as February this year. "We started talking after Brainware," he explains. Spicer withdrew from a deal with Brainware as agreement could not be reached on the pricing of the group. According to Du Toit Spicer and IQ started to do business together, and the merger was a natural step thereafter.
"This is not about the share price," Du Toit says. "It is not to save costs, because there is very little overlap. Both of us are dealing from a position of strength." He names mass as one reason for the deal. "Everyone wants to be bigger in this industry." And he says IQ will bring significant intellectual capital to the Spicer management team. "There is a problem in the market with execution. We now have solid people behind us." He says the goal is not short-term gain, but to take advantage of unique opportunities in the South African market and abroad.
Roets expects no problems with the integration of the two businesses. "Our cultures are much the same." As one attendee at the announcement pointed out, IQ and Spicer have similar corporate identities, down to their almost identical office d'ecor.
"We are both very young companies," Du Toit says. Spicer was created from engineering focussed Spicer-Mitchell Holdings, with Du Toit appointed to lead the change in mid-1998. The IQ Group was formally launched in August 1998.
Future plans include a more aggressive offshore strategy, but both Du Toit and Roets are adamant that the local market is the first priority. "When we move overseas it is to test our business model, not for hard currency earnings," Du Toit says. "The focus remains on the home base."
"You have to become the dominant player in your area of focus," Roets concurs. "But to become a first tier player we have to expand our geographical focus."
Related stories:
Share