DiData bought out in £2.1bn deal

Johannesburg, 15 Jul 2010

London- and Johannesburg-listed Dimension Data is being bought for £2.1 billion (R24.2 billion) by Japan-based Nippon Telegraph and Telephone Corporation (NTT).

The consolidation of the companies will create one of the world's largest integrated telecoms and technology groups, and is a significant platform of growth for NTT to expand into markets outside of the Far East.

DiData and NTT made the unexpected announcement this morning, which immediately sent DiData's shares shooting 20% higher in early morning trade to R13.92.

NTT is the world's second-largest telecoms company, second only to AT&T, with an annual turnover of more than $100 billion, while DiData is the largest technology company listed on the JSE.

DiData has a market capitalisation of R23.5 billion, well ahead of its peers, such as GijimaAst, which is valued at R834 million by shareholders, and Business Connexion at R1.5 billion.

The deal, expected to be wrapped up in mid-October, will see about R12 billion flow into SA. DiData will no longer be listed on either the JSE or the London Stock Exchange.

DiData's board has unanimously recommended the offer, and shareholders holding more than 52% of the company have indicated they will vote in favour of the bid. The offer, at 120p a share, is a 30% premium on the 30-day weighted average share price over the past six months.

Committed to SA

Although DiData will cease to be listed on the Johannesburg-based board, there are no plans to exit SA.

CEO Brett Dawson says it will remain an independent entity, and will retain its brand, culture and “all that makes Dimension Data magic”.

Dawson says the company will also remain based in SA, and the deal is likely to see further investment flow into SA as NTT seeks to expand in emerging markets.

“If anything, we'll see a stronger push into SA, Africa and South America. This is an investment in inwards strategy,” says Dawson.

Geographic fit

NTT employs almost 200 000 people in its 479 subsidiary companies, which operate in countries such as Cambodia and the US. However, NTT's operations are mainly focused on Asia, Europe and the US.

DiData has a presence in most of the world, including Asia, Australia, Europe, the Middle East and Africa, as well as the Americas, and has 11 500 staff across the globe.

DiData chairman Jeremy Ord says the two companies will be a “powerful combination” in the telecommunications and hosted services space. He adds that the “geographic fit is excellent”.

Dimension Data over the years

* Dimension Data was founded in 1983 in SA, and operates in 49 countries on six continents.
* The company listed on the Johannesburg Stock Exchange in 1987 at 150c a share.
* In 1993, the company expanded into Africa, and Dimension Data Botswana was founded.
* From 1995 to 1997, DiData cast its net outside the African continent and focused on expansion in the Asia Pacific region.
* The year 1996 saw the 25% acquisition of Internet Solutions by DiData.
* From 1998 to 2000, a series of key acquisitions ensured the company a primary listing on the London Stock Exchange.
* The company continued its aggressive global strategy and in 2003 DiData announced its revenue exceeded $2 billion.
* By 2008, DiData's revenue exceeded $4.5 billion.
* Dimension Data employs over 11 500 people across the globe.
(Compiled by Leigh-Ann Francis)

Ord says “we believe our alliance with NTT will now allow Dimension Data to accelerate the execution of our medium- and long-term strategy at a rapid pace. NTT and Dimension Data have a shared vision of how the market will evolve. The combination of NTT's global resources and Dimension Data's system integrator capabilities is an extremely powerful combination.”

Ord says he does not expect to encounter any regulatory hurdles.

NTT president and CEO Satoshi Miura, speaking through a translator during a conference call this morning, said the Japanese company would leverage DiData's entrepreneurial culture to accelerate growth. Miura says the ICT industry is entering a time of revolutionary change with the advent of cloud computing.

Branching out

Independent ICT analyst Paul Booth says the marriage between the world's second largest telecoms company and DiData will enable NTT to enter the African market, which will be the first major inroad into the continent by a Japanese company.

Booth explains, however, that NTT will remain in the number two spot, as buying out DiData is not significant enough to make it bigger than AT&T. DiData turns over about 45% of NTT's revenue each year.

Booth says the deal will take NTT into places around the globe where it previously had small operations. He explains Japanese companies do not have a large presence in the European and US markets, and NTT will be able to leverage off DiData's presence in those markets.

The buyout will make NTT “much more of a real global player,” says Booth, pointing out that its operations have been focused on the Far East. “This is in many ways a new venture in terms of getting out of its comfort zones.”

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