Mustek Rejects Datatec R101m Offer for Comztek

Mergers, Acquisitions and Financial Results

Datatec’s plans to bolster its African operations suffered a setback on Friday when Mustek 's board rejected its R101m offer to buy Comztek Holdings. Mustek, which owns 41.84% of Comztek, said its board considered the offer and "unanimously resolved to reject" it. Last month, Datatec offered R97m for Comztek and last week added R4m after completing due diligence.

Datatec planned to incorporate Comztek's operations in Africa into its technology distribution unit Weston SA's business to create a strategically significant player across the countries where both companies operate. Contributions from Datatec's Africa operations are minuscule and the group is aggressively looking for opportunities to bulk up its businesses.

Comztek is a distributor of networking, security and other hardware and software products. It has offices in Zambia, Namibia and Kenya. It distributes products from vendors including 3Com, Adobe, Microsoft and Symantec, and supplies the products to retail outlets. Datatec said last weeky the offer had lapsed and it will not pursue it.

Mustek MD Hein Engelbrecht said that Comztek was a strategic fit to Mustek's growth plans. "Comztek is the envy of many local companies. There are growth opportunities that it has identified and we believe that it is well positioned to take advantage of those new opportunities," he said. Engelbrecht expected demand for storage, security and network products to increase. He said Comztek will exploit opportunities in cloud computing, but no acquisitions had been planned.

Comztek reported revenue of R394.9m for the year to June and profit after tax of R79.1m. Mustek's total revenue for the period was R3.,4bn. Last month it bought South African-based Biodata to grow its local networking, convergence and security distribution business.

Datatec CEO Jens Montanana said last week Comztek's acquisition could "create regional leadership position for Westcon in Africa". However, it will continue pursuing acquisitions in Asia, Latin America and Africa. The company has been targeting acquisitions in emerging markets to enhance margins, facilitate consolidation in proven markets and to extend its geographical reach. It is interested in small to medium enterprises such as unified communications and software security.

Datatec's emerging markets segment - Africa, India and the Middle East - represents 7% of group revenue of R2.13bn in the six months to August. Last week, Datatec reported a 37% rise in first-half underlying earnings per share to 0.158c, helped by the strengthening recovery and robust top-line growth in the US, its largest market, and continued growth in emerging markets.