National distributor Computer Hardware Australia (CHA) will this week announce it has been acquired by ASX-listed broadband products and solutions distribution company, Quadtel.
Roger Bushell, CHA's colourful managing director, told ARN on Friday the deal would be completed "on Monday or Tuesday". He said that, in Quadtel, the company had finally found the buyer it has been desperately looking for since its failed alliance with the now-defunct US-based distributor CHS Electronics in 1999.
"The rumour mill is correct," Bushell said. "Our paths were closing in on each other. We, as a national distributor of mobile solutions, and Quadtel, as a distributor of broadband products, had obvious synergies. They were looking for a national distribution infrastructure and additional cashflow while we needed the support of a cashed up parent company."
Bushell said all staff would be retained and that he would stay on as managing director for at least a couple of years. The deal sees Bushell, the only remaining director of CHA, settle for a figure based 20 per cent on cash and 80 per cent on stock in Quadtel. He described it as "a fair deal".
Despite Quadtel CEO David Ramsay claiming "most" IT distributors "run on the smell of an oily rag", he also confirmed it was close to making an announcement about the acquisition of an "IT distributor with a national infrastructure".
Bushell admitted things will get a little tougher with investors as masters. "There are now some additional outside forces on the company's direction, but I'm quite happy to gamble on where Quadtel is heading," he said.
"However, I see a lot of positives in being linked to Quadtel. We are mainly Victorian based and Quadtel is mainly Sydney-based so there is obvious growth poetential for both operations while being public offers alls sorts of liquidity advantages.
"I'm quite happy to gamble on where Quadtel is going. This is a go-forward strategy for both parties. We are really pleased."
The move by Quadtel follows a convergent trend emerging in telco and IT product supply lines. Early in October, the $240 million ASX-listed Brisbane-based mobile phone and accessories distributor Cellnet bought fellow sunshine state distributor IT Wholesale for approximately $7 million.
Meanwhile, earlier this month digital network integrator NetStar acquired significant voice network skills in buying out specialist voice over IP integrator Convergent Communications for an undisclosed sum.
Quadtel's Ramsay had earlier confirmed the purchase of CHA was no rash or rushed decision. CHA was one of two companies it was assessing to acquire and it is just formalities precluding the dotted line being signed and Quadtel securing its stake in the channels which will be servicing future converged networks.
Ramsay said the deal was hoped to be ratified at last Friday's Quadtel AGM, but some last minute glitches precluded that from happening.
"I hope it's true," was all Ramsay could say last week when asked if Quadtel had acquired CHA. "We have been looking at four and there are two still in the game. Yes, they [CHA] are one of the companies.
"We are down the due diligence track, but in terms of which way it is going to go it is not confirmed. We expect to make an announcement very soon."
Ramsay said Quadtel floated earlier this year to raise money for just such an acquisition, and other growth vehicles. "We are not a telco," he said. "We are in the distribution game. Our customers are ISPs, ASPs and service carriers, but it is a lot more complicated than just that.
"Our interest in an IT distributor is to fast-track our position in that market and to increase coverage [in a reseller base]. A national distribution infrastructure introduces a much wider audience to our products. It will carve six to eight months off our growth curve."
According to Ramsay, Quadtel's vision is focused on the product and service opportunities around the back end of broadband infrastructure and wireless networks. Voice, data and personal digital assistants (PDAs) are converging into the networks and Internet of the future, he said, and that this "requires diverse skills and a broad customer base" for survival as a wholesaler.
Ramsay also said Quadtel's future place in the IT&T market involves raking the above-average margins available from broadband hardware -- a market he claims is currently enjoying a rapid technology turnover and exponential growth in usage.
In theory, these revenues are to be complemented by integration services, partnerships with content providers and the high cashflow of low-margin IT distribution as an organisation such as CHA knows it.
A national distribution network like the one CHA has assembled introduces thousands of new value-adding and retail resellers to Quadtel's existing customer base. Ramsay said it also offers enormous opportunities for these resellers to expand their range of products and services. Quality sales staff and the customer intimacy that comes with them are also of significant value, he said.