Datatec sells management consulting unit for R4bn
The move is part of a broader effort by management, led by CEO Jens Montanana to unlock value trapped in the group’s international structure
Datatec’s share price shot up more than 22% on Thursday as the technology group said it had sold its consulting unit for just over R4bn as it looks for ways to unlock value from its vast IT services empire.
Having evolved for 35 years, Datatec — its operations span more than 50 countries — has two main divisions: Logicalis and Westcon International, which distributes security and networking technology products. Valued at R8.9bn, Datatec is one of the JSE’s largest information and communications technology (ICT) services firms.
The group said it signed a deal to sell 100% of its managing consulting subsidiary, Analysys Mason, for £210m (R4.12bn) to UK fund manager Bridgepoint Development Capital. The share price had leapt 22.48% at close of trade on the JSE to R41.19. The gain was its third biggest on record, according to Infront data going back to 1999.
The move is part of a broader effort by management, led by CEO Jens Montanana to unlock value trapped in the group’s international structure. The firm does not disclose its net asset value but analysts have told Business Day that with the right strategy Datatec could be valued at as much as R60 a share.
To deal with its valuation gap, Montanana has assembled a team from Lazard, the world’s largest independent investment bank, to seek ways to unlock value. Datatec previously said it is considering all options, including separately listing Logicalis and Westcon International or selling to a larger group, as Adapt IT did when it was taken over by Canada’s Volaris.
In line with that plan, Datatec said in May it had entered into a potential sale of its management consulting business, which contributed about 2% of group revenue in 2022, and about 7% of core profit.
With the deal signed, Montanana said in a note to investors: “Analysys Mason has developed significantly with Datatec’s support over the past 20 years to become one of the world’s leading telecommunications, media and technology management consultancies with an enviable track record. We believe that the time is right to realise our investment now as part of our strategic review process and we see Bridgepoint Development Capital as the ideal partners to take the business forward on its next growth phase.”
Datatec’s share of the proposed maximum transaction value, equating to about 38% of Datatec’s current market capitalisation, “represents a great value realisation opportunity for shareholders”. He said net proceeds from the deal will be returned to shareholders.
Datatec has been working, through Analysys Mason, to beef up its expertise and assets in new technologies such as 5G. The unit has been seeking to specialise more in areas where telecoms and IT are converging, referring to a trend where previously separate technologies become more integrated.