Bidders keep watch over BCX

By Paul Vecchiatto for Bytes Technology Group
Cape Town, 05 Dec 2006

Bytes Technology Group (BTG) and the "mystery bidder", who had expressed interest in purchasing Business Connexion (BCX), say they are keeping an eye on developments, but maintain that Telkom is offering too much.

The two bidders also believe the long, drawn-out process the Telkom bid is facing is proving to be detrimental to BCX in terms of customer confidence and staff morale - concerns that BCX CEO Peter Watt expressed at his group's annual general meeting last week.

Peter Riskowitz, BTG financial director, says: "We don't see the value [of BCX] anywhere near to where Telkom is at. BCX's May results were below expectations. If we had to bid again, we would have to revise our numbers."

BCX's May results showed the group's revenue increased by 14% to R3.2 billion, but it stated that second-half growth had slowed due to a paucity of big outsourcing contracts.

Telkom has offered BCX shareholders 926c a share, or R2.36 billion. However, the Competition Commission has recommended against the deal and it will now be up to a higher authority, the Competition Tribunal, to examine the merits of the case.

BTG never publicly stated it was interested in acquiring BCX, although in November 2005 it issued and withdrew cautionary announcements that it was entering into negotiations with an undisclosed party. The timing of those announcements coincided with the BCX negotiations.

Wait and see

Riskowitz says BTG would have to first wait and see if BCX's shareholders agree to extend the 15 December deadline for consummating the Telkom deal.

"If they do, then at least another four months would be needed to find out if Telkom's application is successful to have the deal approved by the Competition Tribunal. If the deadline is not extended, then we may have another look. However, we are entering 'silly season' and this means not much will be done in the short-term," he says.

The mystery bidder, who is known to ITWeb, expressed similar views and says while it is watching developments, it has decided not to pursue any takeover bid yet.

"We are watching, but the issue is not on our radar screen yet," it says.

The mystery bidder made its appearance in May, with BCX issuing a statement to that effect. However, the expression of interest was withdrawn later that month.

Better chance

BTG's Riskowtiz believes that if his company had to bid for BCX, it would stand a better chance of getting Competition Commission approval than Telkom.

"In none of the areas where we compete with BCX will we make a significant market impact, if such a deal had to go through. We are not big in the outsourcing arena, and other businesses, such as Microsoft licensing and SAP implementation, already have other major market players," he says.