Agate shoots for the stars

Agate shoots for the stars

Siltek, the distribution group best known in Australia for its Agate subsidiary, is set to be catapulted into the distribution big league with a series of acquisitions aimed at making it a top-three, $500 million plus organisation within the next 18 months.

It appears the first major acquisition target will be Prion, with ARN sources confirming that the two companies are deep in negotiations.

Agate also last week made a much smaller purchase of storage sub-distributor Advance Pacific Peripherals for an undisclosed amount. While Hugh Evans, Agate's managing director, refused to confirm or deny reports that Siltek Asia-Pacific was close to buying Prion, he did outline exclusively to ARN the business model that Siltek Asia-Pacific will move forward with, as well as revealing plans for a float in as little as 18 months time.

"We have a stated policy of growing through acquisition," he said. "We have purchased Advance Pacific Peripherals but any talk of an acquisition or merger with any other party is at this stage pure speculation," Evans said.

Prion's managing director Michael Bosnar refused to comment.

Siltek Asia-Pacific, which is majority owned by South African distribution giant Siltek, will act as an umbrella company for its various subsidiaries which now include storage and server specialists Agate Technology Australia and Agate Technology New Zealand, voice distributor Siltek Communications Australia as well as printer specialist CIE Pacific.

Any major acquisitions made by Siltek would be run as separately managed subsidiaries, Evans suggested.

However, the strategy is to consolidate the back-office services such as IT, finance and administration, operations, human resources and quality assurance in order to take advantage of economies of scale and best practices, Evans said.

"Ingram Micro took ERA, which was a predominantly Asian-run distributor of components and commodities, and the Australian-run ITG and stuck them together with American glue and I don't think that works," Evans said.

The structure that Siltek is putting in place will enable the front-office functions such as sales to remain individually managed and focused, while achieving the cost efficiencies of consolidating the back office.

"There's the old saying that you get big or get niche. Well we're going to be both," Evans said.

"We see ourselves not so much as distributors, which suggests you add very little value, but as supply-chain managers focusing on various niche areas and value-add."

In Australia, the plan is to build up the Siltek brand as a group of supply-chain companies, with an eye to listing on the Australian Stock Exchange some time in the next 18 to 36 months.

Evans said Siltek would look at any of the various distribution niches including software, components and systems but hinted that finding a strong networking distributor was a top priority.

"Agate has moved heavily into storage area networks so we need that expertise in the local area network side of the market," Evans said.

If the Prion acquisition/merger takes place it will give Siltek a system distributor and will immediately catapult it into being a top-five player with revenues of over $300 million.

Prion earlier this year was courted by international giant CHS; however, doubts surrounding the financial soundness of CHS after it reported disastrous financial results soured those negotiations. Prion is part of the AAG group of companies, which also owns resellers AMS and NetBridge.

Regarding Advance Pacific Peripherals, Evans said that company would be integrated into Agate. "It is a tremendous business fit," he said. "They have a very strong focus on the Apple Macintosh market and they have some agencies which we have a very definite interest in it."

Agate will retain all Advance Pacific Peripherals staff, Evans said.

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