Mergers, Acquisitions and Financial Results

Computer manufacturer Pinnacle Technology is spending R33,4m in a deal that will see it take over information technology distributor Workgroup.

Workgroup is one of the divisions within Explix, which runs a handful of companies in the hi-tech sector. Pinnacle already owns 50% of Explix, and is now buying out two different sets of shareholders to gain full control.

In one deal Pinnacle will pay R25,7m for a 35% stake owned by Hendev, and in the second deal it will pay R7,6m for a 15% stake owned by ITCM Channel Management.

Workgroup has been trading for 16 years and is well established in SA and southern Africa with a presence in Angola, Botswana, Mozambique, Namibia, and Zambia. It is SA's largest distribution company, dealing purely in software, and has branches in Johannesburg, Cape Town, Durban and Port Elizabeth. Its core technologies include the products of Microsoft, Symantec, Corel, Borland, McAfee and IBM.

It sister companies in the Explix stable are Crew, which focuses on the retail market, Merchandise IT, which offers merchandising and marketing services to the Explix group's customers, and Horizon, a southern African channel partner for Sun Microsystems. That task sees Horizon develop the market so Sun can sell more of its hardware and software in the region.

Overall, the Explix group supplies its products to more than 3000 technology resellers, retailers and technology integration specialists.

The company has a staff contingent that is 44% previously disadvantaged, and as a wholly owned subsidiary of Pinnacle it will gain a 30% black shareholding. Pinnacle produces the locally manufactured Proline PCs, but is aiming to offer a broader range of technologies to its clients.

Acquiring the remaining 50% of Explix would increase the number of products it could supply, and would help it to enter new markets, the directors said. It should also generate operational efficiencies and give it the critical mass to expand further into Africa.

Hendev is owned and controlled by Cyril BiddleCombe, the chairman and a large shareholder in Pinnacle. ITCM is owned by the family trusts of three directors of Explix, the industry veterans Dave Lello, Douglas Woolley and Vaughn Parkin. Woolley is the MD of the Workgroup division.

Their vested interests in the deal mean that Pinnacle must obtain independent financial advice to assess the fairness of the takeover transaction.

Business Day