Mergers, Acquisitions and Financial Results

Shares in Business Connexion went into overdrive last week on news that the company may be bought out, in what would be the biggest technology take-over to date in SA.

Its shares soared 14,65% or 93c to close at 728c as CEO Peter Watt said he had received expressions of interest from several potential bidders.

Bytes Technology is the most likely candidate, however, as Bytes CEO Dave Redshaw has a permanent policy of acquisitive growth, and first made a play for Business Connexion three years ago. Bytes also issued a cautionary notice last week in a move confirming it as a candidate.

But the share price surge could make negotiations tricky, as Business Connexion's market cap leapt from R1,6bn to R2bn in a couple of hours.

One source said it now looked over-priced compared with the rest of the market, and the price may sink an easy deal.

Watt said he was obviously unable to comment due to stock exchange rules, but he confirmed that overtures had come from several bidders, "which is why we have had to look at it seriously".

The company supplies and maintains information technology (IT) systems, handles data processing on an outsourced basis, and recently acquired Bidvest Network Solutions to broaden its voice and data services.

Those skills make it an attractive target for other IT groups and for large industrial groups requiring an in-house IT specialist.

Another potential bidder is Dimension Data, which is also expanding its voice and data skills and, like Business Connexion, is expanding further into Africa.

Last week, however, Didata CEO Brett Dawson said he was more interested in organic growth than in major acquisitions.

A third suitor may be Telkom, which is sniffing around IT groups as voice and data become increasingly inseparable.

One source said Business Connexion may be willing to accept a buy-out because although its managers own the bulk of the shares, they own too little to prevent any unwelcome party buying enough to wield control.

Business Day