Dimension Data is offering $276 million for the 44.9% of Singapore-listed Datacraft Asia that the group does not already own.
SA- and London-listed Dimension Data says it plans to buy the stake for $1.33 per share, representing a 34% premium to the Asian subsidiary's closing share price of $0.99 yesterday.
Kevin Handelsman, Dimension Data investor relations spokesman, says $120 million will be paid through placing new shares, while the balance will be in cash.
"We didn't want to use up all our cash resources, so we decided to use a combination of cash and equity," he explains.
The group is placing about 136 million ordinary shares, fully underwritten by VenFin subsidiary R&V and Allan Gray.
Dimension Data has proposed a scheme of arrangement to carry out the acquisition. A scheme of arrangement is a court-supervised process in which a company proposes an acquisition. If it is approved by the requisite majority of shareholders, it is binding on all shareholders.
The largest minority shareholder in Datacraft is investment group Invesco, which Handelsman says holds between 8% and 9%.
He says, while Dimension Data has been in touch with some of the subsidiary's shareholders, it has not formally sought commitments from them.
"People's first reactions are always: 'It's not enough'," he says. However, there has not been any outright formal opposition to the proposal.
Poor performance
Handelsman says the Datacraft share has not performed well in the past five to six years. "It did spike once, but that was on a rumour. And it's not very liquid - it doesn't trade a lot."
He says maintaining the Singapore listing "is not really proving anything. It's not raising funds and it is taking a lot of management time and effort."
The group says Datacraft Asia has not raised any funds from the capital markets since 2000, and the fact that it has $162.7 million cash holdings means it is unlikely to need to do so in the foreseeable future.
Dimension Data bought a controlling stake in Datacraft in 1997. The group says that since then, there has been an increasing alignment of the strategic and operating models of both companies. Greater efficiencies would result from 100% control, it says.
Handelsman says, while Datacraft would most likely be renamed at some point, that would not be "in the foreseeable future". The operation would also continue to do "business as usual".
While he would not comment on the effect of the acquisition on Dimension Data's net asset value, Handelsman says the purchase will have a positive effect on earnings per share.
The placing of the shares represents an increase of about 8.7% in Dimension Data's current issued share capital.
The acquisition is subject to various regulatory and shareholder approvals, and Dimension Data expects the process to take several months.
The Dimension Data share was trading 4c, or 0.59%, down at R6.75 this morning. It closed at R6.79c yesterday, which was 6c down on the previous close.
Datacraft was last trading at $1.28, a 29.3% gain from yesterday's close.
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