Alviva in talks to acquire rival Tarsus: sources

South Africa’s largest technology distribution group, JSE-listed Alviva Holdings, is in talks to acquire rival Tarsus, well-placed sources have told TechCentral.

A due diligence has apparently already been concluded and an announcement of a deal is probably not far off, one source said. Alviva has, however, not cautioned shareholders about any discussions and TechCentral understands a deal hasn’t yet been signed.

Alviva is the holding company of both Axiz and Pinnacle, two of South Africa’s largest technology distributors.

Tarsus, formerly known as MB Technologies, represents major international brands, including Dell, Hewlett-Packard, HP Enterprise, Lenovo, Microsoft and Samsung. It was founded in the mid-1980s by Leo Baxter and Mike McGrath, who have both since exited the business.

Tarsus’s major shareholders include Investec and Royal Bafokeng Holdings.

It’s not known how much Alviva intends offering to Tarsus shareholders. The company is also not listed, so it’s financial information is also not readily available to determine a possible range of valuations. Valuation could still prove a sticking point.

The Spies connection

Alviva last month reported a 50% decline in full-year earnings. Revenue for the 12 months to end-June 2020 fell by 7% to R14.8-billion, while core earnings per share fell by 36%.

Interestingly, Alviva Holdings CEO Pierre Spies is a previous CEO of Tarsus and is therefore intimately familiar with the business. He led the company from January 2007 to April 2014, before joining Axiz as CEO in May 2014. Eighteen months later, in January 2016, he was appointed as CEO of Alviva. In all, Spies spent 22 years with Tarsus, including as financial director and chief operations officer.

Spies could not immediately be reached for comment. An attempt to reach Tarsus CEO Miles Crisp on his mobile phone was also unsuccessful.

Equities analyst Irnest Kaplan said on Tuesday that a deal, if it were to happen, would “make a lot of sense”.

“In distribution, the margins are slim, and the market size isn’t growing because the South African economy is not doing well,” Kaplan said. “You have volumes not growing much and there is always pressure on margins. The only way to do well in this kind of game is to have much bigger volumes. If the market is not growing organically, the only way to grow is to buy another player…”

One challenge, though, could be in securing the necessary approvals from the competition authorities. Alviva is the biggest technology distribution group in South Africa, while Tarsus is probably the second biggest, Kaplan said. There might be concerns that an acquisition would lessen competition. Layoffs might also be inevitable if the businesses were merged.  — © 2020 NewsCentral Media