Arivia.kom under the hammer

By Nicola Mawson for arivia.kom
Johannesburg, 14 Feb 2007

With arivia.kom under the auctioneer's gavel, market commentators expect bids from international firms.

Eskom and Transnet, which jointly own the IT services firm, have published advertisements calling for interested companies to buy their stake. However, they have scuttled any chances of a new entrant making a bid, paving the way for "the usual suspects" to put in an offer, note commentators.

The "invitation to submit information to pre-qualify" to buy out the companies' stake in arivia.kom and act as an outsourced IT service provider for Eskom and Transnet, outlines several requirements.

It requires bidders to have at least three years' experience in the local IT services industry and three years' experience in the local IT industry in five of the seven areas Eskom and Transnet may outsource to the successful firm.

These seven areas cover expertise such as mainframe services; mid-range server services; desktop and infrastructure server services; IT help-desk services; network services, application maintenance, support and hosting services; and professional services such as consulting, project management and procurement.

Companies wishing to bid must also have minimum revenue of R500 million from local customers a year, or R7.5 billion a year from international clients in the listed expertise areas. In addition, bidders must have a minimum of five clients, with at least one customer contributing R200 million in revenue yearly.

Usual suspects

One analyst - who asked not to be named - says this leaves all the usual suspects as contenders. He says all the major locally listed and international players would be likely candidates.

Dimension Data, Datatec, GijimaAst, Bytes Technology Holdings, Business Connexion and Datacentrix are on his list of qualifying firms. Looking offshore, he says firms such as Computer Sciences Corporation, T-Systems, HP and IBM could be likely bidders.

Out of this 'shortlist', the analyst says it is probable an international company will take the plunge. "It's likely to be an international company as all the companies I have spoken to have indicated they are not interested because of legacy issues."

In its 2006 annual report, arivia.kom records revenue of R1.48 billion and profit for the year of R20.1 million. In 2005, it reported revenue of R1.6 billion and profit of R67.6 million.

Another analyst says the criteria cited in the tender exclude companies such as EOH and Faritec. He believes Dimension Data is an "unlikely" bidder and adds other international companies to the list, such as Accenture, Unisys, Siemens Business Solutions and EDS.

"I think it will be an offshore company for the simple reason that we haven't seen a new outsourcing opportunity for some time. This is a big opportunity, especially when it comes to public utilities."

The analyst adds local companies are likely to be wary of buying into arivia.kom, which could sell for between R300 million to R500 million.

Companies wishing to bid must indicate their intention to pre-qualify by noon on 21 February and all expressions of interest must be in by 14 March, at a R50 000 cost.

Divesting from arivia.kom will be a lengthy process, predict the commentators, especially as Competition Commission and possibly Competition Tribunal hearings will have to be held. "At least [the process is] starting to happen," says one.