JSE-listed IT services firm Business Connexion (BCX) hopes its sale to Telkom is finalised by late November or early December, although the company has admitted it could be delayed if the transaction is challenged at the Competition Commission. It’s also revealed that Telkom intends reversing its Cybernest data centre business into BCX once the deal has been concluded successfully.
BCX deputy CEO Vanessa Olver says Telkom’s all-cash offer of R2,7bn — or R6,60/share — will be put to the company’s shareholders on 11 August. If accepted, the parties will then seek regulatory approval for the transaction.
“Consolidation in IT is a reality,” says Olver. “Telkom brings the communications and connectivity, which is critical in this country, while Business Connexion brings all the IT skills. Between the two companies, we will be able to build on what we have today.”
It’s the second time in seven years that Telkom has made a play to buy BCX. The first time around, the competition authorities blocked the proposed deal. But newly appointed BCX CEO Isaac Mophatlane says the market has changed significantly since then and Telkom is not in the dominant position it once was. Both the Competition Commission and the communications regulator Icasa will have to give the deal the nod, according to Mophatlane.
Mophatlane recently took the reins at BCX following the death of his twin brother, Benjamin, in June. He describes his appointment as “bittersweet” and says the personal support he has received from employees, stakeholders and other people IT industry has been “overwhelming”.
He says Telkom has concluded an extensive due diligence into BCX. Post-transaction, the BCX brand will remain. “[BCX] management is key as part of the transaction and there will be independence within the Telkom group.”
If BCX shareholders vote against the proposed transaction, JSE regulations mean Telkom will have to wait 12 months before they are allowed to re-engage with the company, he says. “This takes a lot of management time and it will allow us an opportunity to realign our strategies.”
According to Olver, BCX will “reverse-acquire” Cybernest from Telkom. The company will also take on responsibility for Telkom’s internal IT and servicing Cybernest’s exernal client base.
“What’s nice about Telkom is they have a tier-4 data centre in Belville,” says Olver. “BCX doesn’t have a lot of data centre space in the Western Cape … and will now have access to Belville data centre.”
She says there will be “cross-pollination” between the Telkom and BCX client bases. “Telkom has large public sector clients, while Business Connexion has 92-odd municipalities and we’ll be able to take Telkom into these.” — © 2014 NewsCentral Media