subscribe: Daily Newsletter

 

Sahara, Simeka merger not the start of a new ‘listing frenzy’

0 comments

In what could be seen as a reverse takeover, Sahara and Simeka BSG have merged to form a R1,5-billion IT giant.
The deal sees Simeka buying most of the Sahara operational businesses in exchange for 510-million shares, which would give Sahara shareholders well over 50% of the equity in Simeka BSG. 

Industry analysts tell IT-Online that the agreement is a good move on Sahara's part as acts almost like a reverse takeover, giving Sahara automatic status as a listed company.
The general consensus among many in the distribution arena is that while we may not see the same kind of listing frenzy the industry went through in the late 1990s, the valuation of the Sahara/Simeka deal could signify that the IT sector is no longer viewed with trepidation and that there could be a return to the "glory days" it once experienced.
David Kan, MD of JSE-listed Mustek, says he doesn't envisage the current merger as sparking a rush of IT companies to list on the stock exchange.
"A listing frenzy? I don't think so," Kan says. "The market is still pretty tough. But what the valuation of the Sahara deal does indicate is that the IT sector seems to be in a lot better shape than a lot of people thought."
Arnold Fourie, MD of Pinnacle Holdings, comments: "I am surprised that the IT market has not seen a flurry of listings similar to what's been happening in the construction industry," he says. "However, the market has turned negative now and the opportunity to list has been postponed."
Fourie believes the deal may, however, signal a period of consolidation in the IT market and particularly in distribution.
"I think we are going to see more corporate activity rather than listings. For a privately-owned company an acquisition will probably be a better deal that a listing."
In recent months, one of South Africa's largest independently-owned distributors, Drive Control has been the subject of much media speculation in terms of acquisition.
Only a couple of weeks ago, merger talks between DCC and Sahara were scuppered when financial terms could not be agreed. And, it is reliably learnt, as recently as this past weekend, Simeka was still interested in holding merger discussions with the distributor.
Neil Rex, MD of DCC, would, however not be drawn on the subject.
"I think Sahara has to be congratulated on this deal," was all Rex would say.
In terms of Friday's Sahara/Simeka BSG deal, Simeka BSG will now hold 100% of Sahara Computers, Annex Distribution, Sahara Consumables, Sahara Systems, Sahara Distribution and Sahara Computers & Electronics Ltd India, as well as 50% of the Sahara joint venture in Mozambique.
The acquisition was effective from 1 July 2007, but still awaits regulatory approval before going ahead.
Bradley Hopkinson, speaking on behalf of Simeka BSG, explains that all current Simeka board members will remain in place, but additional members from Sahara will be added.
He also points out that, while more than 50% of the Simeka shares will change hands, about 25% of those will go to Sahara's BEE equity partners and so dilute Sahara's shareholding in the group to significantly less than half.
The Sahara companies will fit in under Simeka BSG's TSS cluster, but will continue to operate independently, at least until their profit guarantee period is concluded.
The deal is predicated on Sahara achieving an after-tax profit of at least R75-million for the period ending 30 June 2008; and an asset value of at least R134,7-million at the effective date of the merger.