Datatec Limited - Datatec to list on aim with mark
17 October 2006 8:09
DTC
 DTC                                                                             
Datatec Limited - Datatec to list on aim with market capitalisation of          
                  approximately GBP332 million (zar 4.6 billion)                
Datatec Limited                                                                 
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1994/005004/06)                                           
ISIN: ZAE000017745                                                              
Share Code: DTC                                                                 
("Datatec")                                                                     
DATATEC TO LIST ON AIM WITH MARKET CAPITALISATION OF APPROXIMATELY GBP332       
MILLION (ZAR 4.6 BILLION)                                                       
Datatec Limited ("Datatec" or "the Group", JSE and LSE: DTC), the international 
Information & Communications Technology (ICT) group, announces that it will list
on AIM in London with a market capitalisation of approximately GBP332 million   
($617 million).  As part of the listing, the Group is raising approximately     
GBP13.9 million ($25.8 million),before expenses, through an institutional       
placing of new ordinary shares.                                                 
Admission details                                                               
The admission will allow the Group to gain greater access to capital in order to
support the continued growth of the Group"s international businesses, both      
organically and by acquisition.  It will also provide an internationally        
accepted acquisition currency                                                   
7,234,673 new ordinary shares are being placed at a price of 192 pence per share
(ZAR 26.64*), raising GBP13.9 million ($25.8 million), before expenses, for the 
Group.  The number of ordinary shares in issue immediately following completion 
of the Placing will be 154,416,507                                              
Conditional dealings are expected to commence on AIM at 8.00am today.           
Unconditional dealings are expected to commence on 20 October 2006              
Dresdner Kleinwort is acting as Global Co-ordinator and as Nominated Adviser and
Broker to Datatec.  Metier is acting as Datatec"s adviser on the South African  
aspects of the transaction.                                                     
*  as at the GBP/ZAR exchange rate on 13 October 2006                           
Jens Montanana, Chief Executive of Datatec, comments:                           
"We have achieved our objective of listing on the AIM market of the London Stock
Exchange, a leading global exchange, which will help facilitate our             
international growth.  With access to a wider international investor base,      
together with increasing our existing substantial cash position, we are now in a
much stronger position to make selective acquisitions of complementary          
businesses.  We are currently considering a number of opportunities to develop  
and extend our successful business model and broaden and deepen our services    
portfolio."                                                                     
Background on Datatec                                                           
Datatec is a networking, IT and services company focussed on the supply of      
advanced ICT technology and the delivery of professional services into the      
higher growth segments of the global market.                                    
In the year ended 28 February 2006, the Group reported an 18% increase in       
revenues from ongoing activities to $2.98 billion (2005: $2.52 billion), EBITDA 
increased to $85.2 million (2005: $28.4 million), operating profit increased to 
$69.0 million (2005: $10.9 million) and headline earnings per share to 26.91    
cents (2005: 3.59 cents).                                                       
The Group expects to publish its results for the six months ended 31 August 2006
on 1 November 2006.                                                             
Datatec has a number of key strengths that provide it with a competitive        
advantage.  These include:                                                      
Datatec operates three focussed ICT supply chain businesses which gives it      
multiple points of access to the growing ICT market as well as a reduced risk   
profile in the event of a market downturn.                                      
The Group has a broad international presence, with operations in over 20        
countries.  Of the Group"s $3 billion revenue generated in FY06, more than 50%  
was generated from North America, 36% from the UK and Europe and 6% from Asia   
Pacific.                                                                        
The Group is principally focussed on providing a higher value offering to mid-  
market and large enterprise customers (both commercial and public sector), which
the Directors believe represents the most attractive target market for the      
Group"s businesses.  The Group provides networking, security and convergence    
products and services and the growth rates for such products have been, and are 
expected by the Directors to continue to be, significantly higher than for the  
general ICT market.                                                             
The Group has long established, strategic relationships with all of the leading 
product vendors, such as Cisco, Nortel, Avaya, IBM, HP, Nokia and Checkpoint,   
and is a key partner for most of these vendors in each of the Group"s key       
geographic markets.                                                             
One of the key elements of the Group"s success has been the development of new  
business lines and geographical markets, in order to broaden the Group"s        
portfolio of business activities and to maintain the Group"s focus on higher    
growth and higher margin activities.                                            
Datatec has demonstrated a successful track record of organic and acquisition-  
led growth.  The Group has grown revenues by 44% and has completed seven        
acquisitions over the period from FY04 to FY06, all of which have been          
successfully integrated into the operating businesses.                          
Datatec has delivered improved financial performance and productivity since the 
ICT market downturn. Revenue and gross profit by employee increased by 24% and  
20% respectively, from the start of FY04 to FY06.  The Group has also made      
significant improvements in its working capital management over the last three  
years, with net working capital remaining at approximately $197 million at the  
FY06 year end (FY04: $194 million) despite a 27% increase in revenues since     
FY04.                                                                           
The Group has a strong operational management team, with considerable experience
in the international ICT industry and a track record of delivering organic and  
acquisition-led growth.                                                         
Group Strategy                                                                  
The Group"s strategy is to deliver long-term, sustainable, above average returns
to shareholders through the development of its three principal operating        
divisions. The Group acts as a value-added intermediary, operating at three key 
points in the ICT supply chain. These divisions are run as pure-play standalone 
businesses, which, the Directors believe, enables them to deliver enhanced      
operational and financial performance as well as to react faster to technology  
change.                                                                         
The key elements of the Group"s strategy include continued focus on the higher  
value, faster growing sectors of the ICT market; targeted geographic expansion; 
investment in higher margin services activities; and value-enhancing            
acquisitions.                                                                   
Application for trading                                                         
Application is being made for the whole of the ordinary share capital of the    
Company, issued and to be issued pursuant to the Placing, to be admitted to     
trading on AIM.  It is expected that Admission will become effective and that   
unconditional trading in the ordinary shares will commence on 20 October 2006.  
Enquiries:                                                                      
Datatec Limited                                                                 
(www.datatec.co.za)                                                             
 Jens Montanana, Group Chief        +44 (0) 1753 797 118                        
 Executive                                                                      
David Pfaff, Group Finance        +44 (0) 1753 797 118                         
 Director                                                                       
 Wilna de Villiers, Group          +27 (0) 11 233 1013                          
 Marketing Manager                                                              
Dresdner Kleinwort                                                              
 Paul van Issum, Equity Capital    + 44 (0) 20 7623 8000                        
 Markets                                                                        
 Simon Russell/James Rudd, Global                                               
Banking                                                                        
Metier                                                                          
 Paul Botha/ Greg von Holdt,       +  27 (0) 11 268 4000                        
 Metier Advisory                                                                
College Hill (UK press)                                                         
 Adrian Duffield/Corinna Dorward   +  44 (0) 20 7457 2020                       
Fleishman-Hillard (SA press)                                                    
 Michelle de Pons/Lucien Vallun    + 27 (0) 11 548 2000                         
This announcement is not for publication, release or distribution, directly or  
indirectly, in or into the United States of America, Canada, Australia, the     
Republic of Ireland, or Japan, or their respective territories or possessions.  
The contents of this announcement, which has been issued by the Company and is  
the sole responsibility of the Company, have been approved by Dresdner Kleinwort
Limited solely for the purposes of section 21 of the Financial Services and     
Markets Act 2000 ("FSMA").  Dresdner Kleinwort Limited, which is authorised and 
regulated by the Financial Services Authority, is acting for the Company and for
no-one else, in connection with the contents of this document and will not be   
responsible to anyone other than the Company for providing the protections      
afforded to customers of Dresdner Kleinwort Limited or for affording advice in  
relation to the contents of this announcement or any matters referred to herein.
This announcement does not constitute or form part of an offer for sale or      
subscription of, or any solicitation of an offer to purchase or subscribe for,  
securities and any purchase of or subscription or application for shares in the 
proposed placing of an as yet undetermined number of ordinary shares ("Placing")
should only be made on the basis of information contained in the admission      
document to be issued in connection with the Placing.  This announcement does   
not and the admission document will not constitute and the Company is not making
an offer of transferable securities to the public within the meaning of sections
85 and 102B of FSMA.  The price and value of, and income from, shares may go    
down as well as up. Persons needing advice should consult an independent        
professional adviser.                                                           
The shares to be placed in the Placing have not been, and will not be,          
registered under the US Securities Act of 1933 or under the US Securities       
Exchange Act of 1934, as amended, or under the securities legislation of any    
state of the United States of America, nor under the relevant securities laws of
Canada, Australia, the Republic of Ireland, the Republic of South Africa or     
Japan, and may not be offered or sold in or into the United States of America.  
There will be no offering or placing of shares in or into the United States of  
America, Canada, Australia,  the Republic of Ireland, the Republic of South     
Africa or Japan or in any country, territory or possession where to do so may   
contravene local securities laws or regulations.  This announcement (or any part
of it) is not to be reproduced, distributed, passed on, or the contents         
otherwise divulged, directly or indirectly, in or into the United States,       
Canada, Australia,  the Republic of Ireland, or Japan, in any country, territory
or possession where to do so may contravene local securities laws or            
regulations.                                                                    
Information contained in this announcement may include `forward looking         
statements". All statements other than statements of historical facts included  
herein, including, without limitation, those regarding the Group"s financial    
position, business strategy, plans and objectives of management for future      
operations (including development plans and objectives relating to the Group"s  
business) are forward-looking statements.                                       
Such forward-looking statements are based on a number of assumptions regarding  
the Group"s present and future business strategies and the environment in which 
the Group expects to operate in the future. These forward-looking statements    
speak only as to the date of this announcement and cannot be relied upon as a   
guide to future performance. The Company expressly disclaims any obligation or  
undertaking to disseminate any updates or revisions to any forward-looking      
statements contained in this announcement to reflect any changes in its         
expectations with regard thereto or any change in events, conditions or         
circumstances on which any statement is based.                                  
FURTHER INFORMATION ON THE GROUP                                                
The Group is an international ICT business, focussed on the provision of ICT    
products and solutions. The Group has operations in North America, Europe, South
America, Africa, the Middle East and the Asia Pacific region and has            
approximately 2,500 employees. Whilst the Company is a South African registered 
company whose shares are listed on the JSE, the Group generates more than 98% of
its revenue in foreign currencies outside South Africa.  In FY06, the Group     
generated 53% of its revenue from North America, 36% from Europe, 6% from the   
Asia Pacific region, 3% from South Africa and the Middle East, and 2% from South
America.                                                                        
The Group"s operating divisions act as industry intermediaries, enabling        
information technology users to gain access to a broad range of advanced        
technologies and professional services, in order to implement secure, converged 
computing and communications infrastructures (including wireless, IP            
communications, storage and data management, intelligent networking and         
security). The Group addresses three key areas in the ICT supply chain:         
networking distribution, IT integration solutions and services,                 
telecommunications and technology consulting. The Group has partnerships with a 
portfolio of leading vendors in the ICT industry, including Cisco, IBM, HP,     
Nortel, Avaya, Nokia and Checkpoint.                                            
The Group has three principal operating divisions:                              
Westcon - an international distributor of advanced networking and communications
convergence products from vendors such as Cisco, Nortel, Avaya, Checkpoint and  
Nokia operating in the high growth security, convergence and mobility markets of
North and South America, Europe and the Asia Pacific region. Westcon is         
headquartered in New York, US with operations in sixteen countries, and         
approximately 1,100 employees. Westcon adds value to its distribution activities
by providing resources such as technical expertise, training, sales support and 
services. Westcon provides solutions that include the design and configuration  
of convergence networks, network extensions such as video conferencing, network 
storage and unified messaging and network security to over 7,900 customers      
worldwide. These customers include value-added and general resellers, systems   
integrators and service providers that resell networking products and solutions 
to small and medium sized businesses, large enterprises and governments. In     
FY06, Westcon represented 77% of the Group"s revenue and 78% of the Group"s     
EBITDA;                                                                         
Logicalis - an international provider of integrated ICT solutions, delivering   
secure, converged computing and communications infrastructure and services which
sources it products from OEMs and distributors. Logicalis is headquartered in   
Slough, UK and with operations in nine countries in North America, South America
and Europe and approximately 1,000 employees. Logicalis provides the            
architecture, deployment, integration and management of networks and systems to 
deliver solutions for customers. These customers include mid market and large   
enterprise customers. The Directors believe that Logicalis is well positioned to
continue to play a consolidating role in its core markets of the US and UK, and 
elsewhere. In FY06, Logicalis represented 18% of the Group"s revenue and 20% of 
the Group"s EBITDA; and                                                         
Analysys Mason - an ICT consultancy, headquartered in London in the UK, with    
operations in seven countries and approximately 250 employees. Analysys Mason"s 
activities include strategic telecommunications and networking consulting,      
technology consulting and implementation, research, project and change          
management and contact centre and customer relationship management. Analysys    
Mason"s customers primarily comprise telecommunications operators, industry     
regulators, financial institutions, service providers, central and local        
governments, educational entities and banking institutions.  In FY06, Analysys  
Mason represented 2% of the Group"s revenue and 7% of the Group"s EBITDA.       
The Group also has other operations, being Westcon AME (operating in South      
Africa), OnLine (operating in the Middle East) and Rangegate (operating in South
Africa) which in aggregate accounted for 3% of the Group"s revenue and made a   
loss before interest, tax, depreciation and amortisation of $4.4 million in FY06
(includes Group head office costs).                                             
The Group"s strategy is to deliver long-term, sustainable, above average returns
to shareholders through the development of its three principal operating        
divisions. The Group acts as a value-added intermediary, operating at three key 
points in the ICT supply chain. These divisions are run as pure-play standalone 
businesses which, the Directors believe, should enable them to deliver enhanced 
operational and financial performance as well as to react faster to technology  
change. Against this background, the key elements of the Group"s strategy are as
follows:                                                                        
Continued focus on the higher value, faster growing sectors of the ICT market   
The Group will continue to be focussed on higher growth and higher margin ICT   
products and services, including the early adoption of new, emerging            
technologies where the Group"s operating businesses can provide added value to  
customers in distribution, systems integration and consulting. The Group is well
positioned to take advantage of advances in networking, security and convergence
technologies (such as VoIP); the growth and consolidation of IT solutions       
integration and managed services; and the increasing demand for professional    
services and consulting, brought about by regulatory and enterprise business    
needs for expertise by customers.                                               
Targeted geographic expansion                                                   
Whilst the Group is already a large international business, the Directors intend
to leverage further the Group"s position as a value-added intermediary by       
extending the successful business model of each of its principal operating      
divisions into specifically targeted geographic markets. The principal          
geographies that will be targeted are the US, the UK, the major markets of      
continental Europe and selected emerging markets.                               
Investment in higher margin services activities                                 
In FY06, over $178 million of the Group"s revenues were derived from services   
representing approximately 6% of the Group"s revenues. However, at a gross      
margin level, the contribution was approximately 17%, or over $57 million, of   
the Group"s gross profits in FY06. The Group intends to broaden its services    
offerings and grow the overall proportion of gross margin and operating profit  
derived from services in Logicalis and Analysys Mason. The substantial product  
sales component of the Group will continue to fund and act as a catalyst for the
development of services activities by Logicalis, as the major vendors           
increasingly rely on channels to deliver higher value solutions and services,   
particularly in the early adoption stage of advanced technologies and the       
deployment of complex solutions.                                                
Value-enhancing acquisitions                                                    
Organic growth will be supplemented by strategic acquisitions across all three  
of the Group"s operating divisions. The Group will continue to adopt a          
disciplined approach to its acquisition policy, applying the requisite due      
diligence to ensure that acquisitions are both value enhancing and capable of   
being integrated effectively. In addition to extending the Group"s geographic   
reach, where appropriate, the Group will also consider acquisitions that allow  
it to grow market share, increase exposure to certain technology sectors and    
broaden its service offering.                                                   
TERMS AND CONDITIONS OF THE PLACING                                             
1.   Introduction                                                               
These terms and conditions apply to persons making an offer to subscribe for    
Placing Shares under the Placing.                                               
References in these terms and conditions to Placing Shares shall be deemed,     
where the context requires, to include references to the depositary interests   
(the ``Depositary Interests"") in respect of the underlying Placing Shares,     
details of which are set out in Part IX of the Admission Document. Successful   
applicants in the Placing will be allocated Depositary Interests.               
Each person to whom these conditions apply, as described above, who confirms his
agreement to subscribe for Placing Shares under the Placing (the ``Investor"")  
hereby agrees with each of Dresdner Kleinwort Securities Limited, Dresdner Bank 
AG, London Branch, the Company, and the Company"s registrar (the ``Registrar"") 
to be bound by these terms and conditions as being the terms and conditions upon
which Placing Shares will be subscribed under the Placing. An Investor shall,   
without limitation, become so bound if Dresdner Kleinwort Securities Limited    
confirms to such Investor (i) the Placing Price and (ii) its allocation.        
2.   Agreement to Acquire Placing Shares                                        
Conditional on (i) Admission occurring and becoming effective by 8.00 a.m. on or
prior to 20 October 2006 (or such later date as the Company and Dresdner Bank   
AG, London Branch may agree (not being later than 3 November 2006)) and (ii) the
confirmation mentioned under paragraph 1 above, the Investor agrees to          
subscribe, at the Placing Price, for the number of Placing Shares allocated to  
it under the Placing in accordance with the terms and conditions set out in this
announcement. Settlement of such subscriptions shall be effected by the issue to
Investors of Depositary Interests. To the fullest extent permitted by law, each 
Investor acknowledges and agrees that it will not be entitled to exercise any   
remedy of rescission at any time. This does not affect any other rights such    
Investor may have.                                                              
3.   Payment for Placing Shares                                                 
Each Investor undertakes to pay the Placing Price for the Placing Shares        
subscribed by such Investor in such manner as shall be directed by Dresdner     
Kleinwort Securities Limited. Liability for any UK stamp duty and/or SDRT in    
respect of the Placing Shares (or the issue of Depositary Interests in respect  
of such Placing Shares) is described in paragraph 1.8 of Part VII of the        
Admission Document. In the event of any failure by an Investor to pay the       
Placing Price as so directed by Dresdner Kleinwort Securities Limited, the      
relevant Investor shall be deemed hereby to have appointed Dresdner Kleinwort   
Securities Limited or any nominee of Dresdner Kleinwort Securities Limited to   
sell (in one or more transactions) any or all of the Placing Shares in respect  
of which payment shall not have been made as so directed and to have agreed to  
indemnify on demand Dresdner Kleinwort Securities Limited in respect of all     
costs, damages, losses, expenses and liabilities incurred by Dresdner Kleinwort 
Securities Limited arising out of or in connection with such failure.           
4.   Representations and Warranties                                             
Upon becoming bound to subscribe for Placing Shares allocated to it under the   
Placing, each Investor and any person acting on behalf of an Investor, is deemed
to represent and warrant to each of Dresdner Kleinwort Securities Limited,      
Dresdner Bank AG, London Branch and the Company that:                           
(a)  in agreeing to subscribe for Placing Shares under the Placing, the Investor
is relying on the Admission Document, and not on any other information or       
representation concerning the Group, the Placing or the Placing Shares. Without 
prejudice to paragraph 6 below, such Investor agrees that neither the Company,  
Dresdner Kleinwort Securities Limited or Dresdner Bank AG, London Branch nor any
of their respective officers or directors will have any liability for any such  
other information or representation;                                            
(b)  if the laws of any place outside the United Kingdom are applicable to the  
Investor"s agreement to subscribe for Placing Shares under the Placing and/or   
acceptance thereof, such Investor has complied with all such laws and none of   
the parties mentioned under paragraph 1 above will infringe any laws outside the
United Kingdom as a result of such Investor"s agreement to subscribe for Placing
Shares under the Placing and/or acceptance thereof or any actions arising from  
such Investor"s rights and obligations under the Investor"s agreement to        
subscribe for Placing Shares under the Placing and/or acceptance thereof or     
under the Articles;                                                             
(c)  in the case of a person who confirms to Dresdner Kleinwort Securities      
Limited on behalf of an Investor an agreement to subscribe for Placing Shares   
under the Placing and/or who authorises Dresdner Kleinwort Securities Limited to
notify the Investor"s name to the Registrars as mentioned under paragraph 1     
above, that person represents and warrants that he has authority to do so on    
behalf of the Investor;                                                         
(d)  the Investor is not, and is not applying as nominee or agent for, a person 
which is, or may be, mentioned in any of Sections 67, 70, 93 and 96 of the      
Finance Act 1986 (depositary receipts and clearance services);                  
(e)  the Investor is a person (i) who falls within paragraph (5) of Article 19  
and/or paragraph (2) of Article 49 of the Financial Services and Markets Act    
2000 (Financial Promotion) Order 2005 and (ii) is a ``qualified investor""      
within the meaning of Section 86(7) of FSMA;                                    
(f)  in the case of an Investor located in any member state of the European     
Economic Area which has implemented the Prospectus Directive, the Investor is a 
``qualified investor"" within the meaning of Article (2)(1)(e) of the Prospectus
Directive;                                                                      
(g)  in the case of an Investor (or any person acting on its behalf) who        
confirms to Dresdner Kleinwort Securities Limited on behalf of an Investor an   
agreement to subscribe for Placing Shares and who is acting on behalf of a third
party, that the terms on which the Investor (or any person acting on its behalf)
are engaged enable it to make investment decisions in relation to securities on 
that third party"s behalf without reference to that party; and                  
(h)  it is aware that the Placing Shares have not been registered under the     
Securities Act or with any securities regulatory authority of any state or other
jurisdiction of the United States, and it is purchasing the Placing Shares in an
offshore transaction meeting the requirements of Regulation S.                  
5.   Supply and Distribution of Information                                     
If any of Dresdner Kleinwort Securities Limited, Dresdner Bank AG, London       
Branch, the Company and the Registrar or any of their agents request any        
information about an Investor"s agreement to subscribe for Placing Shares, such 
Investor must promptly disclose it to them.                                     
6.   Miscellaneous                                                              
The rights and remedies of Dresdner Kleinwort Securities Limited, Dresdner Bank 
AG, London Branch, the Company and the Registrar under these terms and          
conditions are in addition to any rights and remedies which would otherwise be  
available to each of them and the exercise or partial exercise of one will not  
prevent the exercise of others.                                                 
Each Investor who is a discretionary fund manager may be asked to disclose, in  
writing or orally, to Dresdner Kleinwort Securities Limited the jurisdiction in 
which the funds are managed or owned.                                           
Any documents sent to Investors in connection with the purchase of the Placing  
Shares will be sent at the Investor"s risk. They may be sent by post to such    
Investor at an address notified to Dresdner Kleinwort Securities Limited.       
Each Investor agrees to be bound by the Articles (as amended from time to time) 
and the deed poll relating to the Depositary Interests (as described in         
paragraph 15.1 of Part IX of the Admission Document) once the Placing Shares    
which such Investor has agreed to purchase have been transferred to such        
Investor.                                                                       
The contract to subscribe for Placing Shares and the appointments and           
authorities mentioned herein will be governed by, and construed in accordance   
with, the laws of England. For the exclusive benefit of the parties mentioned   
under paragraph 1 above, each Investor irrevocably submits to the exclusive     
jurisdiction of the English courts in respect of these matters. This does not   
prevent an action being taken against an Investor in any other jurisdiction.    
In the case of a joint agreement to subscribe for Placing Shares, references to 
an ``Investor"" in these terms and conditions are to each of such Investors and 
such Investors" liability is joint and several.                                 
Dresdner Kleinwort Securities Limited, Dresdner Bank AG, London Branch, and the 
Company expressly reserve the right to modify the terms end conditions of the   
Placing at any time before an Investor"s agreement to subscribe for Placing     
Shares becomes binding in accordance with paragraph 1 above.                    
17 October 2006                                                                 
Date: 17/10/2006 08:09:31 AM Produced by the JSE SENS Department