South African information technology (IT) company Dimension Data (Didata) said on Wednesday that agreement has been reached with a black economic empowerment consortium on the transfer of a 25,01% interest in Dimension Data South Africa (DDSA). The stake has been valued at R380-million.
Ngcaba Holdings — a company led by Andile Ngcaba, Safika Holdings and a group of broad-based black economic empowerment (BEE) participants including current and future DDSA staff members — has entered into an agreement with DDSA that will result in the BEE consortium receiving a 25,01% interest in DDSA through a shareholder facilitated transaction.
The 25,01% interest in DDSA has been valued at R380-million and will be substantially facilitated through a notional vendor finance mechanism, with the balance being funded by the BEE consortium through a cash payment of R23-million.
DDSA’s profit before tax for the year ended September 2003 and the value of its net assets on that date were R59,4-million and R697,8-million respectively. Its profit before tax included net interest income of R18,9-million, which was added to operating profit of R40,5-million.
According to Didata, “the transaction shall be of full force and effect from April 1 2004”.
The BEE consortium’s has stated its intention “to be a long-term investor in DDSA”.
“Accordingly, the BEE consortium has undertaken that its entire stake in DDSA (ie, the ordinary shares and the A ordinary shares) will be subject to a lock in provision until the end of the empowerment period, irrespective of whether or not the BEE consortium has settled the annual hurdle value.”
DDSA, Didata’s wholly owned subsidiary, is a specialist IT services and solution provider that helps clients plan, build and support their IT infrastructures. Didata applies its expertise in networking, security, operating environments, storage and contact-centre technologies and its unique skills in consulting, integration and managed services to create customised client solutions.
Internet Solutions — a 60%-held subsidiary of DDSA — is the leading internet enabler in South Africa, focusing on providing corporate internet access and e-commerce solutions. In addition to the above operations, DDSA holds interests in a number of subsidiaries and associates. These include Plessey (49%), Conscripti (80%) and the listed Paracon Holdings (28,3%).
DDSA at forefront of BEE
Didata said the rationale behind the transaction is that it is DDSA’s intention to be at the forefront of BEE and transformation in accordance with the proposed information communications technology (ICT) charter, which is due to come to life on March 1 2005.
“The charter seeks to address the imbalances of the past, improve the lives of a broad base of historically disadvantaged South Africans and create long-term economic benefits for South Africa,” the group said.
“When searching for BEE partners, DDSA considered individuals and BEE groups with knowledge of the ICT industry. DDSA considered it an imperative to involve partners which could play a major role in promoting transformation but also be active in the management of the business, and lead DDSA to further growth in South Africa.”
In addition, the BEE consortium incorporates persons with whom DDSA has long-standing relationships, including its historically disadvantaged South African staff. DDSA and the BEE consortium believe that the transaction will encompass both the spirit and stated requirements of the charter on a basis that is commercially sustainable for both parties.
Together they will address the broader requirements of the charter necessary to achieve this transformation, the group said.
This will include compliance with procurement requirements, thereby allowing DDSA to operate within the preferred procurement parameters of its customers, and contribute to maintaining a sustainable business environment for DDSA.
“In 2003, DDSA signed a statement of intent on its BEE objectives, which are set out in the DDSA transformation charter. Included in this charter are a number of initiatives relating to employment equity, skills development, preferential procurement, enterprise development and social spend.
“The BEE consortium, together with DDSA, has undertaken to advance the DDSA transformation charter. The vendor financing period and senior management’s key performance measurement criteria are aligned to the achievement of the objectives of this charter.” — I-Net Bridge