Lesley Stones
28 August 2007
Johannesburg — TECHNOLOGY group Simeka BSG has made a bold bid of R867m to swallow a company twice its size, and the offer has been accepted by its chosen target, Sahara.
Simeka's revenue of R447m for the year to May is less than half the R1bn a year generated by Sahara, one of the largest hardware resellers in southern Africa.
Sahara's private owners include the black investment groups Mvelaphanda Holdings and AfriPalm, led by the black investment bigwigs Tokyo Sexwale and Lazarus Zim. Both groups are poised to make a decent profit, as they bought into Sahara only in September last year by taking dual stakes of 12,1% each for a total of R173m, a 33% discount to their market price at the time.
In the deal announced yesterday, Simeka would issue up to 510-million shares at R1,70 each to those investors and to Sahara's major shareholders, the founding Gupta family.
Sahara has operations in SA and India and holds 50% of a joint venture in Mozambique.
Chairman Atul Gupta said yesterday he chose to accept the bid to strengthen Sahara's offerings, as its computers would now be backed by Simeka's technology services to generate a wider range of income.
About 70% of Sahara's revenue comes from assembling and selling notebook computers and the rest from reselling imported printers and computers.
Simeka CEO Mohammed Varachia said the deal had the dual objectives of extending the JSE-listed company's footprint in Africa and establishing a global presence through consolidation. The deal would specifically expose Simeka to the booming technology markets in India.
Simeka released its results for the year to May yesterday, showing its revenue of R447m was 37% up from R326m. Headline earnings per share of 12,6c were up 33% from 11,3c, with Varachia saying organic growth lay behind its performance. Healthy cash flow and strict credit vetting policies had boosted its cash resources to R38,6m, up from R16,4m a year ago.
Its consulting and applications activities contributed 53% of the revenue.
It also plays in telecommunications space, and 50% of its revenue is annuity-based. Varachia said that despite 90% of its executive directors and 50% of its executive managers being black, it had not realised its full potential in the public sector, and that would be a key focus this year.
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