JSE-listed Datatec Group`s South African operations are to merge with African Legend Technologies (ALT) to form an R800 million-a-year company.
The new company will operate under the name of existing ALT subsidiary, African Legend Indigo, and will include ALT`s second subsidiary, African Legend Solutions, as well as Datatec`s RangeGate.
Datatec expects its business units will contribute R500 million to the combined entities` revenue, while the African Legend businesses are estimated to contribute R300 million.
In a note to the Johannesburg-based bourse this morning, Datatec said it would have a 55% shareholding in the new company, while ALT will hold the balance.
Datatec CEO Jens Montanana comments: "We are excited about this deal on a number of levels. The merger will create an IT company that is 45% black-owned, which is significantly more than the ICT charter calls for."
African Legend Indigo and Technologies chairman Mashudu Tshivhase says the fit between the African Legend companies and RangeGate is "excellent".
"Culturally there are great synergies," he says. "And there is a limited overlap in our client base which presents great opportunity for cross-selling our services across the business."
Westcon to be empowered
Westcon AME, Datatec`s networking equipment distributor, will continue to operate as a stand-alone business. However, ALT will take a 45% shareholding in Westcon AME, which will result in it being 45% black-owned.
CEO Jacques Malherbe says the merger "confirms Datatec`s commitment to growing Westcon AME and to our partner and customer base". Westcon AME will continue to be majority owned by Datatec.
Malherbe believes the company`s BEE status will support business growth and will help management to achieve the aggressive growth targets it has set. "It will also enable our resellers to become more successful in delivering value to a much wider business audience, including the public sector."
No finance required
Because of the size and nature of the merged operations, no vendor finance is necessary. However, the Competition Commission must still sanction the deal.
In May, Datatec posted record revenue and profits for its financial year to end-February. It achieved an 18% increase in revenue to $2.98 billion, grew operating profit to $69 million and headline earnings rose by 650% to 26.91 US cents.
By 10.30am, Datatec`s shares had moved up 3.17% with two deals totalling 200 000 shares pushing the prices up 2c to 65c.
CEO Michael Jacobus, who has led African Legend Indigo for the past three years, will lead the new company, while key executives from African Legend and Datatec will take positions on the new board.
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