Axiz R170.9m Takeover 'Will Open New Markets for Pinnacle'
Pinnacle Technology has acquired Axiz Technology for R170.9m to create one of the largest distributors of technology products in the country.
Pinnacle CEO Hano Coetzee said the transaction would add new products that could open new markets for Pinnacle, and also add 40% to Pinnacle's market size.
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Axiz is a distributor of products made by companies such as LG Electronics, Acer, Hewlett- Packard, Samsung, Seagate, and Asus. It also has its own branded hardware products such as personal computers. Outside SA, Axiz has a presence in Botswana, Namibia and Zambia.
Axiz and Workgroup IT, a subsidiary of Pinnacle, would merge facilities, operations and eventually systems over time to leverage off a combined infrastructure, said Mr Coetzee.
"This combination will facilitate growth in distribution volume as new brands and brand segments are made available to an extended customer base. The distribution market is heavily segmented. There are a lot of players," he said.
Workgroup is Pinnacle's second-largest unit, with revenue of just more than R1bn for the year to June last year. The transaction would improve return on equity for Pinnacle shareholders because Axiz's financial performance is expected to outperform the finance and associated costs of the transaction. Axiz has an annual turnover of R2bn.
The deal is a cash offer but Axiz's principal sellers, such as Axiz Employee Ownership Limited and The Brandy Trust, have an option to take up to 3-million Pinnacle shares as part of the settlement.
If they exercised the option, Coetzee said, there would be a "small dilution" of the existing shareholding of Pinnacle. Its shareholders include Amabubesi Technology Holdings, which owns 19,9%.
Pinnacle will pay R19.69m to settle outstanding liabilities owed by Axiz Employee Ownership Limited and the Axiz Employee Ownership Trust, which facilitated the black economic empowerment deal on behalf of staff. Coetzee said he expected the deal to be concluded by the end of September.
The takeover of Axiz by Pinnacle is subject to a number of conditions, including tacit approval by the major Axiz distribution agencies ; the completion of employment contracts to ensure a minimum service period of 18 months for certain key employees; and approval by the Competition Commission. Pinnacle's footprint outside SA is in Namibia, Zambia and Botswana.
It has a market capitalisation of R795m. Its revenue for the year to June last year rose 14% to R2,8 bn and net profit attributable to ordinary shareholders increased 2.5% to R105.5 m during the same period.