In a move which catapults Dimension Data Holdings well into the forefront of "New Age" business communications, the JSE-listed IT systems integration company has acquired 100% of South Africa`s largest Internet business solution provider, The Internet Solution (IS).
IS will form part of the Dimension Data Group`s Software Division.
The deal will be settled with the transfer of some 15-million Dimension Data Holdings shares to IS shareholders over a two-year period. Based on the current share price, this values IS in excess of R400-million.
Rob Taylor, director of Dimension Data`s Software Division, says the real benefits of the deal for both companies will be realised in two areas: the resultant dominant position of the Group with a unique range of products and services in a high growth market sector; and secondly by incorporating the entrepreneurial and energetic management of IS into the Dimension Data Group.
"The valuation of the deal, which was supported by independent parties, was based on various factors including historical growth and P/E ratios as well as the intellectual capital inherent in IS management and staff - the major strategic advantage gained from the deal which served to enhance our comfort with the valuation.
"At the same time, IS shareholders are assuming a risk in Dimension Data and indicating their willingness to participate in the growth of the company," he explains.
"By increasing our 25% stake in IS, Dimension Data will be able to harness an array of specialised technical and management resources. These, combined with our existing skills base, will position Dimension Data as the undisputed leader in a market which is rapidly developing around the Internet."
IS joint MD Alon Apteker says a significant portion of future IT growth will result from the development of `New Age` technologies associated with the Internet such as intranets, e-commerce, electronic banking and other emerging, value added applications including Internet-linked call centres.
"The disciplines and methodologies built up by the Dimension Data Group over the years in the mission critical application arena, are crucial for the effective exploitation of the Internet as a viable and effective interactive business communications medium," he adds.
According to Apteker, Dimension Data Software company SPL has these significant skills in its projects division, while IS - which currently provides Internet access to some 70% of on-line corporate South Africa - has amassed high levels of Internet-related expertise.
Taylor adds that the 100% deal introduces the flexibility to capitalise on the clear synergies between the two companies for their mutual benefit.
"In addition, IS brings an entrepreneurial energy essential to the success of this new technology and adds critical mass to the Software Division," he explains and points out that this will have a positive impact on Dimension Data Group earnings in the future.
"The deal is being driven by market demand. Many companies which have a Web presence - including a large proportion of IS` existing client base - are looking to derive additional value from the Net."
Apteker says one of the main reasons for selling IS to Dimension Data is to enhance the company`s ability to deliver to the market, and instead of developing additional skills and competencies required, has joined forces with Dimension Data to meet market needs.
"We are tremendously excited about the future. The Dimension Data deal will enable us to add even greater value to our customers," Apteker concludes.
Note to editors: The finalisation of the deal was delayed until the South African Telecommunications Regulation Authority (SATRA) had delivered its ruling against Telkom`s bid to gain exclusive rights to provide Internet access within SA.
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