South Africa’s Datatec Sheds 55 Percent Stake in Empowerment Group

Mergers, Acquisitions and Financial Results

Technology company Datatec has wound up a three-year-old partnership that was initially designed to boost its empowerment profile, by shedding its 55% stake in African Legend Indigo (ALI).

The company said the move was made after reviewing its South African assets and deciding to focus instead on growing its internationally successful Westcon distribution business in SA.

ALI was formed in 2006 when Datatec combined one of its South African divisions, which traded as RangeGate, into a new entity along with some of the technology operations owned by African Legend Computing (ALC).

The deal had taken two years to negotiate, and Datatec took 55% in the new entity as its operations generated more than the business that was folded in by African Legend. At the time, Datatec CEO Jens Montanana said combining its local assets with an existing black technology player to create a larger operation with broader skills would be far more effective than simply selling some shares in the business to a black investor.

Although Westcon was not included in the new entity, ALC took a 45% stake in it. That meant that both Westcon SA and ALI were 55% owned by Datatec with the rest held by ALC.

The deal announced last week has seen Datatec pay R12.7m to buy 19.9% of the shares and the shareholder equity loans in Westcon SA that were held by ALC. That leaves Datatec owning 74.9% of Westcon SA, with ALC still owning 25.1%, but taking 100% control of ALI.

ALI is a systems integrator and a local value-added reseller for Sun Microsystems. The company generated a revenue of $51.1m and a gross profit of $1.7m last year after losing money in 2007. Westcon SA distributes information technology equipment from vendors including Cisco.

Business Day