NetStar Australia Networks has finalised a private investment deal that will see its management purchase the organisation from its former parent Anixter in a bold move to avoid a competitive takeover.
The Australian network integrator has endured months of negotiations with potential investment suitors, one of which is believed to include a South African distributor, before coming to an agreement with ING Group's new Baring Asia Private Equity fund.
The capital injection, rep-ortedly the largest ever single investment by the $US300 million Barings fund, supports significant personal investments by company management to secure its future as an independent company. The investment offer will also be made available to NetStar staff.
Kent Brooks, NetStar's Australian managing director, said the company is determined to retain control of its future. "We want to be the masters of our own destiny."
Brooks added that he believes it is important to maintain a strong local flavour to the company instead of watching it become confounded with the interests of a multinational.
"We don't have to sell our soul, our flexibility and our destiny to foreign-owned companies. I like the idea of being able to help Australian companies . . . and say 'this is how you build your business'."
One of the greatest advantages of ING Group's investment over a competitive buyout is that it leaves the company board free to determine its strategic direction, he added.
"They have invested in a management team and in a history of success."
The sale agreement, signed on October 26 and to be made public this week, caps off a remarkable run of success for the company, which only began operating as NetStar in February this year.
As of Monday this week, NetStar is no longer part of the Anixter group, which has been looking to sell off its network integration arm for some time, Brooks reported. One of the immediate changes will see NetStar's Trevor Boal assume responsibility for the NSW operations as NSW location manager.
Brooks also reports NetStar will use the buyout to prepare the company for a possible stock exchange listing or buyout in the future, giving staff and the ING Group the opportunity to make a return on their investments.
In addition, it now positions the company to become a strong Asia-Pacific regional player. NetStar's operational headquarters is now located in Hong Kong, with five offices in Australia and additional offices in Taiwan and China. It has plans to open new offices in Singapore and elsewhere in Southeast Asia in 2000.
One of NetStar's vendor partners to have closely followed the company's progress is Gary Jackson, the Singapore-based director of Cisco's Asia-Pacific service provider line of business and former Cisco Australia MD.
"I think it is a good courageous move from the local management guys and I wish them, genuinely, all the best," he said.
Jackson also warned it will be a tough road ahead. "One of my issues with the Australian market is that price, not quality of service, is dominating a lot of people's decision-making processes. It will therefore be a challenge for NetStar to maintain customer loyalty in this scenario," he said.
"I also believe that it will be necessary for NetStar to become more focused on a few supply partners. Time will tell if this is their strategy."
Jackson added that if NetStar had to report directly to a South African or New Zealand company it would have made the job more challenging "especially around world cup times".
According to Brooks, NetStar plans to hit revenues of $US200 million per annum in the next 12 months, a feat possible through further organic and acquisition growth. Brooks said the company will now start looking for potential suitors.
Part of this growth will see NetStar relocate to new premises in Sydney's North Ryde to accommodate more staff, he said.
Mitch Radomir, NetStar's business development manager, said the com-pany plans to expand its core technical capabilities in network integration as a result of its new independence from Anixter.
This includes developing new Internet infrastructure solutions such as caching and content filtering, Web solutions, e-commerce infrastructure, call centres, and CRM solutions.
The company will also explore its role in the emerging ASP market. "You may well see us in that space in four months time," he said.