South African IT Firm Completes Sale Of US Business To Fortune 500 Company

South African IT Firm Completes Sale Of US Business To Fortune 500 Company

South African IT firm Datatec has completed the sale of U.S. subsidiary Westcon-Comstor’s operations in North America and Latin America, as well as 10 percent of Westcon-Comstor to Fortune 500 company SYNNEX.

The deal could be worth up to $830 million, with $630 million paid in cash and up to $200 million payable as a cash earn-out, subject to Westcon Americas meeting pre-approved gross profit performance targets, according to Businesstech.

This sum gives the total Westcon-Comstor division an equity valuation of $1.1 billion, with Datatec shareholders recently voting in favor of the deal at a general meeting to discuss the sale, ITWeb reports.

Of the 76.72 percent of shares represented at the meeting, 100 percent voted to approve the deal.

Operating in 70 countries across North America, Latin America, Europe, the Middle East, Africa and the Asia-Pacific region, Datatec is an international ICT solutions and services group based in Sandton, Johannesburg.

“The strategic partnership between Westcon International and Synnex will provide significant growth opportunities for both businesses, while working together to serve vendors and customers globally,” said Datatec CEO Jens Montanana, according to Techcentral.

Sale to Fortune 500 company impacts investor sentiment

SYNNEX, based in California, is a technology supply chain services company worth $14.1 billion that employs around 110 000 people.

The Johannesburg- and London-listed technology group’s sale of Westcom-Comstor to SYNNEX saw Datatec’s shares rise 8.2 percent on Monday, according to Businesslive.

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The year had already been positive for Datatec among the tech stocks on the Johannesburg Stock Exchange ahead of this week’s renewed gains.

Datatec’s share price on the JSE had risen 17 percent between January and August, with most gains arriving in June after the sale of U.S. subsidiary Westcon-Comstor was first announced, Businessday reported.

“The board will review options for the use and distribution of the cash proceeds received on closing of the transaction,” Datatec said in a statement.

“The board will consider returning the majority of the remaining $500m to shareholders by way of share repurchases and/or a specific dividend, but in the meantime the proceeds will be retained in U.S. dollars,” the statement added, with $130 million set to be retained for various operational and working capital purposes.

As part of the deal, Datatec CEO Jens Montanana will be appointed to the board of SYNNEX in a non-executive capacity.