Datatec lets go of African Legend Indigo

Johannesburg, 28 Apr 2009

Johannesburg- and London-listed ICT group Datatec has decided to divest its 55% shareholding in empowerment business African Legend Indigo (AL Indigo).

The company announced this morning that after “a review of its South African assets”, it has decided to rather turn its focus to growing its Westcon investment.

Datatec owned 55% of both AL Indigo and Westcon, and the decreased shareholding in AL Indigo will be put into an increased stake in Westcon, which will see Datatec become a 75% shareholder in the ICT distributor.

Essentially the transaction will see Datatec take over 19.9% of shares and shareholder equity loans from African Legend Computing. The deal will see a consideration of R12.7 million made up of 55% of share and equity loans in AL Indigo, on top of which will be 275 578 new Datatec shares, valued at R4 million.

This will give African Legend Computing 100% of AL Indigo and the remaining 25.1% of Westcon and Datatec will take a majority 74.9% of Westcon.

Datatec now has to list the new shareholding with both the JSE and the London exchange, which it expects to have completed by 6 May.

Where to now?

Datatec's reasons for the withdrawal of its shareholding in AL Indigo are still unclear; however, its statement hints AL Indigo's significant partnership with Sun Microsystems may have something to do with the transaction. (Oracle has acquired Sun for $7.4 billion.)

According to Datatec's Web site, AL Indigo employs around 202 people in SA and has offices in Johannesburg, Cape Town, Durban and Port Elizabeth. It also claims a turnover of over R500 million per year.

However, the true value of the business is unclear, since Datatec does not report individual revenue for businesses like Westcon and AL Indigo.

The full implication of the share trade is still unclear, since AL Indigo could not be reached at the time of publication.

However, IDC analyst Richard Hurst says: “I think that the overall implications are that clearly Datatec sees the potential and growth of Westcon in SA and the rest of Africa. According to their last results, the company earned around 72% of total revenue. For AL Indigo, I think that it will be business as usual.”

Datatec's latest trading statement indicated Westcon is performing stronger than expected. Its year-end results are expected in early May.