Datatec merges in Brazil

Johannesburg, 17 Mar 2008

Datatec subsidiary Logicalis is to merge its Latin American operations with the Brazilian network integration businesses of Promon Tecnologia (PT).

Logicalis will pay PT's owner, Promon SA, up to $77.2 million (R624.5 million) in cash and new Datatec shares for a 70% holding in the company. Promon SA will retain a 30% interest in the business. As part of the transaction, Logicalis will acquire net tangible assets of $11.6 million, including approximately $15 million of net cash.

Datatec this morning told shareholders that PT is Cisco's largest partner in Brazil. In the year ended 31 December, PT generated over $140 million in revenue.

"Its customers include most of the major service providers and telcos operating in Brazil, but more recently the business has started diversifying into other vertical markets, including energy (oil and gas), financial, manufacturing and public sector markets," it said.

Datatec noted the strong growth of the ICT solutions market in Latin America. This transaction would provide Logicalis with a platform for further growth in the region, it said.

"There is considerable opportunity for an integrator with a national and international presence and capabilities to provide ICT solutions across the continent. The transaction is also in line with Datatec's strategy of increasing the proportion of revenues and profits generated from developing countries and emerging markets. The enlarged business is expected to have annual revenues in excess of $250 million," it explained.

Jens Montanana, Datatec CE, commented: "This is a key strategic transaction for Datatec as it catapults Logicalis into becoming the leading independent integrator, not only in Brazil but across the whole of Latin America. It also adds a significant new geographic revenue and profit stream to Logicalis in the largest economy in South America."

Logicalis is expected to complete this transaction in late April, early May. The deal is still subject to regulatory approvals from relevant Brazilian federal and state authorities, material customer and supplier consents, and various other conditions.