Westcon-Comstor is edging towards a sale after parent company, Datatec, revealed potential plans to sell a major share in the distributor for US$800 million.
Subject to contract and exclusivity provisions, the proposed transaction follows three months of speculation as to the future ownership of the US-based value-added distributor.
As a parent company based in South Africa, Datatec operates across three core divisions, controlling technology distribution through Westcon Group, integration and managed services through Logicalis and consulting and research through Analysys Mason.
But despite the market update, the international ICT solutions and services provider was quick to stress that a deal has yet to be signed, with the company still in the negotiation stages.
“There can be no certainty that the transaction will be completed, nor as to the precise terms on which the transaction might be completed,” a cautionary statement by Datatec read.
“Shareholders are therefore advised to continue to exercise caution when dealing in the company’s securities.”
Looking ahead, Datatec said it will announce further details of a potential transaction “as soon as practicable”.
The update comes as the Johannesburg-listed company reported that its underlying earnings per share for the financial year ended February 28 are expected to be more than 50 per cent lower than the prior year.
“The year over year expected decline in earnings is as a result of a worse than expected result in Westcon-Comstor,” a company statement read. “There was a decline in fourth quarter financial performance in the Europe Middle East and Africa (“EMEA”) region.
“Westcon-Comstor experienced disruption to the business as a result of final stages of SAP implementation in EMEA. Westcon-Comstor has made adjustments to the operating model and Datatec expects this to support a rapid recovery.”
Meanwhile, and according to Datatec, Logicalis trading was in line with management’s expectation.
As reported by ARN in late January, the market update validates industry speculation that a sale for the multi-billion dollar distributor is on the cards, reflecting increased consolidation in the global channel.
Should a deal be struck, the sale of Westcon-Comstor would add to a growing list of distributor related M&A activity during the past 12 months, both locally and globally.
With the ink barely dry on HNA Group’s $US6 billion acquisition of Ingram Micro, Tech Data taking control of Avnet Technology Solutions and Distribution Central now fully integrated into Arrow Electronics, this latest move would add further consolidation to a changing channel.