Datatec moves to focus on distribution
April 29, 2009
By Thabiso Mochiko
Nearly three years after unveiling its joint venture with black-owned technology firm African Legend Computing (ALC), listed technology firm Datatec has pulled out of the R800 million entity, citing its strategy of focusing on distribution.
In 2006 Datatec merged its local subsidiary RangeGate with African Legend Indigo and African Legend Solutions to form African Legend Indigo (ALI), which was 55 percent owned by Datatec and 45 percent by ALC.
Datatec's Westcon South Africa, which distributes technology equipment, was not part of the merged entity, but ALI had a 45 percent stake in Westcon SA.
The merger was aimed at boosting Datatec's empowerment status, and helping to expand its offerings and footprint in technology solutions.
ALI resells software from companies such as US-based BMC Software and hardware products from Sun Microsystems. It provides maintenance and support to its clients.
Datatec will buy back a 19.9 percent stake in Westcon SA for R12.7 million, thereby increasing its Westcon SA stake to 74.9 percent from 55 percent. ALC will then hold 25.1 percent of Westcon SA.
Datatec said it wanted to focus on growing its Westcon distribution business in South Africa. ALI will be 100 percent owned by ALC.
Mashudu Tshivhase, ALI's executive chairman, said ALI and Datatec had parted ways amicably after a meeting held recently regarding ALI's strategic direction and the value that each partner brought to the merged entity.
"We wanted to expand Indigo in Africa, but we were not on the same page" with Datatec, he said.
"It was not a train smash. We were not reaching that agreement. We sat back and looked at value add, and whether it does make sense to continue" with the merged entity, Tshivhase explained.
ALI, which has annual revenue of R500 million, already has operations in Nigeria, and Tshivhase wants to capitalise on that to expand to other African countries.
He said Datatec and ALI had a cordial relationship, which was why ALC had taken a minority shareholding in Westcon SA.
ALI will continue with its strategy of expanding to east Africa, with some contracts already in the pipeline. Tshivhase said it would explore opportunities to provide technologies to help bridge the digital divide.
Datatec shares rose 3.18 percent to R16.20 yesterday. The software and computer services sector fell 0.68 percent.
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