Bump in Datatec shares as it inks deal to sell Westcon-Comstor

Listed ICT company, Datatec has entered into an agreement to dispose of its Westcon-Comstor business in North America and Latin America for $800 million.

Key to this deal is the Cisco business from Comstor which has always been a missing piece at Synnex.

SYNNEX Corporation (NYSE:SNX) is a Fortune 500 corporation and a leading business process services company, providing a comprehensive range of distribution, logistics and integration services for the technology industry and providing outsourced services focused on customer engagement strategy to a broad range of enterprises.

Datatec Ltd, a South African information technology company, is to sell its Westcon businesses to Synnex Corp, a USA technology supply chain services company, for up to USD830 million. Depending on share-price levels at the deal's closure - which is subject to shareholder and regulatory approval - Synnex could opt to settle this portion of the deal's fee with a cash payment, although this is not the intention, explained Datatec CEO Jens Montanana.

Synnex Corporation has revealed plans to become a minority shareholder in the Asia Pacific business of Westcon-Comstor, alongside outright acquisitions of the distributor's Americas business.

It says there is the potential to enhance growth and consequently the value of Westcon International with Synnex as a minority player.

Synnex today is the only North American broadline distributor not carrying Cisco products.

"Westcon-Comstor is a recognised leader in the security, UCC and networking space".

"The transaction also realises value for our shareholders as a result of the strategic relationship with Synnex through its shareholding in Westcon International - a business which is yet to benefit from the Enterprise Resource Planning and Business Process Outsourcing transformation programmes now being implemented", he said.

"The Westcon-Comstor brand has been built over time by a very deep and talented team and we are excited to welcome the Americas team to our family", Murai added, in a prepared statement.

Seventy-seven percent of Westcon-Comstor's $2.2 billion FY2017 revenue is generated in North America, and 23 percent in Latin America. Until the transaction is completed, the companies will continue to operate independently.

Additionally, while the company is going through the normal quarterly close and reporting process, revenues for the second quarter ended May 31 are now estimated to come in above the high end of our guidance range of $3.575-$3.775 billion and Non-GAAP EPS is estimated to come in above the high end of our guidance range of $1.70 - $1.78.

  • Zachary Reyes