ASX-listed mobile phone and IT distributor, Cellnet, has acquired another IT distributor, this time paying $1.47 million plus other considerations for Queensland-based components wholesaler CASSA Australia.
Chris Hill, who used to be involved with the ill-fated MJS distribution group, founded CASSA which began life on Queensland's Sunshine Coast in 1994. The company had recently made a successful move to Brisbane and built itself into a business turning over in excess of $20 million in annual revenues.
It boasts a strong relationship with the rapidly expanding Asustek organisation and concentrated mainly on notebooks, motherboards, memory products and multi-media cards.
The company also distributes Netgear products as well as Transcend, Big Blue Internet, GlacialTech, EverCase, ElanVital, Corsair and Axus.
According to an ASX statement from Cellnet the communications distributor will pay "$1.47 million in cash and assume debts of $2.31 million". The announcement also says that there is "a deferred consideration component of up to $2.5 million" involved in the deal. This is dependent on CASSA achieving a range of targets during the next 12 months to end of the 2004 financial year.
Cellnet chairman, Darryl McDonough, saw CASSA as a "strategic fit" for the company's IT operations.
"CASSA allows us to expand into new IT markets and complements our IT Wholesale business," McDonough said.
Cellnet launched into the IT distribution business when it acquired IT Wholesale in October 2000 and has grown that operation substantially by taking it national.
According to the press statement, Cellnet plans to do the same thing with CASSA which generated the large majority of its sales in Queensland.
Cellnet executives were unavailable at the time this story was posted. However, one prominent distributor in the components game, who wished to remain anonymous, expressed surprise at Cellnet entry into the "low margin, highly-competitive" components business.
"This is a good deal for Chris [Hill, CASSA's founder]," the unnamed distributor said. "I am not so sure if it is good for Cellnet. I am not sure if they will be able to handle the components business which is very dynamic and very tough.
"CASSA is a very small business in the big picture of components distribution and it will take a lot of resources to grow it substantially against seasoned existing players."
In the ASX announcement, Cellnet managing director, Stephen Harrison, said the acquisition of CASSA "represents a new opportunity" to capitalise on its infrastructure and ride "the growing convergence between telecommunications, IT products and customers".
In March this year, Cellnet announced an after-tax profit of $2.2 million on sales of $154.7 million for the six months to December 31, 2002.