| Thu 22 May 2003, 10:45 | | Connection Group disposal sets up empowerment firm |
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Black owners for equipment and technology firm
Information Technology Editor
TECHNOLOGY retailer Connection Group is disconnecting its Enterprise Connection arm by selling it to four black entrepreneurs trading as Canal Square Investments.
Connection Group has long debated shedding Enterprise Connection, which supplies technology equipment and services to corporate clients. The unit is the last vestige of its origins as a technology player rather than a retail outfit, with the Incredible Connection chain stores at its heart.
Canal Square is giving away little information about the financial side of the deal, disclosing neither how much it is paying nor where the cash is coming from. It initially bought 50% and has committed to acquiring the other 50% by next February.
Connection Group CEO Toni Fourie said that the two-part process would ensure that the operation was transformed into a sustainable, black-owned private business without any hitches, as its customers and suppliers would see that it was being run on the same lines as usual.
Control would remain with its current managers and existing MD Paul Moses, with Canal Walk director Mncedisi Mayekiso joining as the director for new business development. Mayekiso was previously a sales manager at Microsoft.
Fourie said the move would serve a dual purpose by letting Connection Group exit a noncore activity and striking an empowerment deal bound to boost the success of Enterprise Connection. The division has a staff of 96 and operates in Johannesburg, Cape Town and Durban. Most of its clients are private companies, but its new black ownership would enable it to target government and parastatal business that it previously lacked the credentials to tackle.
The deal was also cash-enhancing for the Connection Group, said Fourie.
Although the value of the deal is too small to need declaring on the JSE-Securities Exchange, Fourie said Canal Square was paying above the net asset value. "They are getting a good business. A year ago it was a loss-maker and we have turned it around, but it still has a huge upside," he said.
Connection Group's results for the six months ending November 2002 had an aftertax profit of R7,9m on a revenue of R391m. That came after turning around long-standing losses within Enterprise Connection, which clocked up an operating profit of R2,8m on a revenue of R86m.
Canal Walk's Litha Nkombisa, a senior manager in corporate banking at Nedbank, said this was their first major investment, but hopefully not their last. "We plan to identify companies where we can extract value by buying-in and being operationally involved."
The two other entrepreneurs in Canal Square are Ciko Thomas, the general manager of retail banking services at Absa, and Mzwandile Nomkonwa, an investment banker with African Harvest.
Fourie described them as young, dynamic professionals with a vision for their business. "We wanted to find new empowerment players rather than to enrich the already rich highprofile contenders. It was important to find guys who have a lot of value to add but who did not form part of the new elite," he said.
Now that Enterprise Connection is being hived off, Fourie said the group would step up efforts to find an empowerment partner for its Incredible Connection operations.
May 22 2003 05:47:40:000AM Lesley Stones Business Day 1st Edition
Thursday
22 May 2003
