Daisy in talks with Phoenix for IT-comms mega-merger
Bid values Phoenix at £132.8m
Daisy Group looks set to pounce on Phoenix IT Group in what some are branding the UK channel's largest ever IT-comms union.
As analysts were predicting as far back as last August, Daisy, along with its shareholder Toscafund Asset Management, has entered "advanced discussions" to acquire Phoenix IT Group in a cash offer of 160 pence per share, valuing the company at £132.8m.
Toscafund has been a common owner since Daisy was privatised in January.
Daisy's executive chairman, Matthew Riley (pictured), recently revealed his firm's desire to push more into the IT space and the importance of holding IT services skills in its portfolio. But when CRN broached the question in February of whether there could be closer collaboration between Daisy and Phoenix, Riley was dismissive of the idea and said there "are no plans at this moment in time".
Phoenix chief executive Steve Vaughan also appeared to have closed the door on the possibility of a sale after taking charge last year, following a tumultuous few years for the managed services and channel services specialist.
Despite this, Daisy has approached the services player and is "well advanced with the finalisation of the necessary financing arrangements". It now has until 18 June to confirm its offer.
The development follows on from Daisy's acquisition of comms VAR Damovo in January, a move which Riley told CRN would not be the last acquisition his firm makes in the IT space. Riley also signalled his intention to drive Daisy - whose revenues were at £352.7m for the 12 months to 31 March 2014 - to become a £1bn-turnover company over the next five years via acquisitions and organic growth.
According to Megabuyte, the deal would represent the largest telecoms and IT union the UK has ever seen.
"This frankly unsurprising move by Daisy would boost its EBITDA by an estimated 42 per cent before synergies and, more importantly, create an unparalleled £200m revenue business selling IT and telecoms services to the UK mid-market," the analyst said.
"Notwithstanding the integration challenges, it would also represent the biggest convergence of telecoms and IT service provision to date in the UK, leaving Daisy well placed for an increasingly off-premise and hybrid cloud world."
The analyst also said the deal would see Daisy move ahead of Talk Talk Business and Virgin Media Busines, with its combined revenues at £620m, and only behind BTEE, Vodafone and O2 in the UK B2B marketplace.
Neil Roberts, chief executive of Concorde IT Group - a VAR run largely by former management of ICM/Phoenix - said the deal would "super-charge" Daisy's IT services business.
"This is a logical move and not unexpected. Daisy has morphed from a telco company into the datacentre space, and more recently into IT services with Indecs, so Phoenix is right on their strategy map," he said.