A new services conglomerate with over $40 million in the coffers is likely to start trawling the channel for potential acquisitions after the boards of DVT Holdings and Utility Services Corporation (USC) agreed to a reverse takeover last month.
Under the terms of the intended merger, DVT will trade 18.6 shares for every one USC share. Upon completion, USC's current shareholders will control 76 per cent of DVT, with the share-swap offer set to close at 5pm on August 30.
DVT Holdings owns storage specialist e-Data Group, which acquired Powerlan's storage services business XSI in May for $4.6 million. The combined storage group is expected to generate revenues of around $40 million per annum, according to company officials.
Having already sold its flailing telecommunications business DavTel to Japanese giant NTT for $16 million last year, Jean-Marie Simart, chairman of DVT Holdings, said DVT was "left with around $10 million in the bank".
"This wasn't enough to make a significant acquisition," said Simart, so the decision was made to find another way to grow the company.
USC, on the other hand, acts like an investment and holding company for 19 systems integrators, utility services businesses, and telecommunications software and consulting businesses. Its ranks include Eclipse Computing Australia, Integ Communications and e-BI Solutions.
USC is debt-free and currently has more than $40 million in the bank. Combined with DVT the entity will have annual revenues of around $168 million, according to Geoff Lord, executive chairman of USC.
The merged company expects to have annual revenues of $500 million within five years, said Simart.
The reverse takeover bid is hoped to increase revenue, profitability and market capitalisation, which should assist in the positive re-rating of USC's and DVT's flagging share prices.
But it is the potential for massive infrastructure savings, buying power and cross-selling opportunities that USC is most interested in. To maintain accountability and brand power across each of its companies, Lord said that USC will not integrate its IT services businesses, à la Solution 6. However, the companies will be able to leverage common customers, financing agreements, supplier relationships and a significant amount of back-office infrastructure such as payroll and cash management.
For the full story, read this week's ARN (out now).