Westcon and Logicalis owner issues 'cautionary announcement' over potential transaction

Datatec says it is in negotiations relating to a 'transaction' that would have a material effect on its share price

The parent company of distributor Westcon and integrator Logicalis says it has entered into negotiations relating to a "transaction" by the company.

In a stock exchange announcement, Johannesburg-listed Datatec said that, if concluded, the transaction in question would have a material effect on its share price, but did not specify if it is an acquisition or disposal.

"Accordingly, shareholders are advised to exercise caution when dealing in their Datatec shares until a further announcement is made," it said.

Datatec generated three quarters of its $6.5bn (£5.2bn) revenues in its last financial year from Westcon, a global distributor which operates through the Westcon and Comstor brands.

Global Cisco, HP and IBM integrator arm Logicalis generated sales of $1.5bn, 24 per cent of the group total, with research arm Analysys Mason creating the remaining one per cent.

When approached, Datatec said it had no further comment beyond the formal announcement.

The wording of the statement appears to be deliberately vague, but some channel onlookers believe that Westcon could be a candidate for disposal, particularly in light of Avnet's impending takeover by Tech Data.

Westcon's revenues fell 8.4 per cent year on year in constant currency in Datatec's fiscal first half, with Europe generating about a third of sales. Its two largest vendors are Cisco and Avaya, the latter of which recently entered bankruptcy. It also works with the likes of Polycom, Juniper, Check Point, F5 and Palo Alto.

"With the Tech Data-Avnet acquisition, everyone is in the window," said one source.

Conversely, Datatec is no stranger to the acquisition game in recent years, with Logicalis snapping up a string of firms around the world including US solutions provider Advanced Technology Integration Group in 2015 for up to $42m.

Datatec advised shareholders to "exercise caution" when dealing in their Datatec shares until a further announcement is made, adding that it will not be issuing its usual voluntary interim management statement at this time.