Alviva in talks to buy Tarsus as part of strategy to grow through acquisition
The technology group says it has spent R629m on buying new businesses in the last few years
Technology group Alviva Holdings says it is in talks to acquire privately owned Tarsus, a distributor of IT hardware products.
Alviva, which provides a range of technology products and services including assembling of computers, distribution and software, said on Tuesday the due diligence for the potential deal had been completed and, if successfully concluded, “this transaction may have a material effect” on the share price.
Alviva shares, down almost 43% in 2020, closed 2.62% firmer on Tuesday at R8.22, giving the company a market capitalisation of R1.13bn.
Alviva has not disclosed the value of the deal.
Started more than 35 years ago, Tarsus, formerly known as MB Technologies, distributes computers and cloud computing services, including hardware products from international brands such as Dell and Hewlett-Packard.
Alviva operates in most African countries, including Kenya, Zambia and Nigeria.
The move to buy Tarsus underlines Alviva’s strategy of growing through acquisition.
Alviva says it has spent R629m on buying new businesses “in the last few years”, but the benefits of that capital outlay are yet to be fully realised. During the period, the units would have contributed about R63m to group profits, but after accounting for amortisation and finance costs, they lost R68m for Alviva.
Irnest Kaplan, MD of Kaplan Equity Analysts, said the potential transaction “makes sense”. He said “in this tough market where margins are under pressure and there isn’t much growth, consolidation makes sense.”
“Distribution is all about scale and efficiency, so it makes sense to become bigger to get more volumes,” said Kaplan.
In 2020, Alviva acquired 70% of enterprise software company Synerg SA, through its subsidiary DCT Holdings, for R69m. Alviva also took a 51% position in Synerg UAE and Synerg UK for a combined R120m. Alviva also acquired an additional 10% in Digital Generation, a black women-owned information and communications technology company, for R15m, increasing its shareholding in the company to 80%.
But Alviva has said that within the next two years, “once the intangible assets have been fully amortised, it is expected that these new acquisitions will contribute meaningfully to the group”.
Until then Alviva will be fighting to return to profitability.
Alviva reported a 50% decline in profits in its year to end-June as the Covid-19 lockdown put pressure on customers and supplies of components from China.
Revenue fell 7% to R14.8bn and headline earnings fell 53% to R197.1m. During the year, the technology group wrote down some of its businesses and made provisions for customers who are struggling to pay debts.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.