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What's in a whisper

What's in a whisper

For the past couple of weeks, I have been visiting members of the channel community for a video series that is due to go live on our website at the start of next month.

With this being an industry where rumour and speculation spread like wildfire, I have been asking for merger and acquisition predictions. As much as anything else, I thought it could turn out to be a good source of news leads for the team to chase. You can't blame a bloke for trying.

Although some were hesitant, the topic did throw up some interesting thoughts on possible vendor mergers of the future. You will have to tune into Channel Watch from March 5 for further details. But looking closer to home, there have been recent rumours of an international company tabling a bid for Queensland-based distributor, Cellnet.

The ASX-listed outfit is due to release it half-yearly results for the six months to December 31 at the start of next week. It made an announcement to the stock exchange on January 31 advising that profits would be more than 15 per cent better than the same reporting period last year.

Cellnet expects to report a net profit of $2.9 million compared to $700,000 in the corresponding period but the improved figure includes $2 million for the sale of property in New Zealand. Once you take that out of the equation, it seems nothing much has changed.

Until more detailed financial results are published, it is impossible to know how much acquisitions have taken off the bottom line. Cellnet has been aggressively pursuing buyouts for at least the past six months and completed two deals during the back half of 2006 - SanDisk specialist, VME Systems, in October and Adelaide-based HiTech Distribution in December.

These could go some way to explaining the negligible profit levels.

Whatever the reasons behind its financial performance, the January 31 announcement seems to have done little for stakeholder confidence. The distributor's share price has fallen from $1.45 to $1.36 in just over two weeks at the time of writing.

Managing director, Adam Davenport, has positioned Cellnet's acquisition strategy as a way of achieving growth in a tough market where plenty of players are looking to get out.

Speculation is mounting that venture capitalist firm, CVC Limited, is acting as a mediator behind a takeover bid. Having made an initial investment of $4.2 million for a 7.25 per cent voting stake in November 2005, it held more than 19 per cent at the end of the last financial year.

The most obvious candidate behind any such move would be US-based Tech Data. It is the second largest IT distributor in the world but has yet to enter the Asia-Pacific market - something it must surely do to remain competitive with Ingram Micro. Cellnet would certainly give it a fantastic lineup of local blue-chip vendor contracts including HP and IBM. We will keep you posted on any developments.


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