Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.
Who will buy NextGen?
Leighton Holdings looks set to make a killing provided it can find a willing buyer for its telecommunications assets. The construction giant has put its fibre-optic network NextGen, data centre designer-operator Metronode and cloud services provider Infoplex on the block, and the move is another important juncture in the company’s stated strategy of divesting its non-core assets.
Analysts are putting a hefty price tag to the assets with UBS saying that the sale could fetch between $780 million and $1.05 billion, while Credit Suisse reckons NextGen alone is worth a cool billion. Leighton will love the sound of that given that it picked up the network for around $30 million in 2002.
Of the three outfits up for sale, NextGen is by far the major prize and apparently the list of contenders that could join the race includes Telstra. The telco has reportedly indicated that it might be interested in picking up the NextGen fibre with Telstra spokesman Scott Whiffen telling Fairfax papers that "we wouldn't rule anything out if it made commercial sense".
However, both Telstra and Optus will have to sit this one out because neither will be allowed by the government to join the process. The NBN Co looks like a good candidate on paper but will wisely steer clear lest it open up another regulatory can of worms. With the revised SAU now in front of the ACCC the last thing the company needs is to rile up the telcos.
That leaves the likes of iiNet, TPG, AAPT and private equity operators as likely candidates and Citigroup has its money on TPG, which certainly has the financial wherewithal for the deal.
Private equity guys won’t be interested unless the price tag is substantially lower, while iiNet will have to think carefully about how aggressively it wants to get involved. The Perth-based ISP is a big believer in building scale through acquisition but a billion dollar price tag will be too high a price.
One final scenario could be the entry of a brand new player but the thing to keep in mind is that these assets have been up for sale for almost six months, so there is a distinct lack of competitive tension.
Unless that situation is remedied Leighton may have to get ready for some combative negotiations, especially with TPG which enjoys a reputation for driving a hard bargain.
MYOB, Intuit, Reckon get ready to rumble
Competition in the local accounting software market is heating up rapidly with the MYOB beefing up its cloud and client support credentials, while US powerhouse Intuit is showing signs of serious intent when it comes to making a mark down under.
MYOB last week launched 24x7 access to its local client support team for its business division’s SME products, with a significant update to the MYOB website and the unveiling of a new-look community forum. A timely move as it gets ready to take its flagship AccountRight product to the cloud later this month.
MYOB CEO Tim Reed said that the company was keen to ensure that the its customer service channels kept pace with its business solutions
“It’s a really important step for us to provide a greater range of more accessible, immediate support to those who rely on MYOB,”
MYOB is keen to help businesses make the jump from the desktop to the cloud and make that transition as painless as possible. Apart from investing in solutions MYOB is also upping the ante with its support and product/service information channels.
A key driver for MYOB’s ambitions is the fact that its private equity owner Bain Capital has been very supportive.
Reed told Technology Spectator that MYOB’s cloud strategy was already well advanced before the sale to Bain and the private equity outfit was more than happy to back MYOB’s vision.
“They are intelligent, challenging and they have really dug in to understand our business at an operational level. The fact that we have increased our R&D investment, increased our market investment only being one year into the deal speaks volumes of how supportive they are as investors,” Reed says.
This smooth relationship, that has afforded MYOB to have a healthy post-acquisition strategic continuity, will be important because the global powerhouse Intuit is flexing its muscles in Australia.
Intuit has launched a cloud-based accounting solution for the local micro-business segment called Quickbooks Online.
Quickbooks Online global product management team leader Barb Anderson told Technology Spectator that the Australian market offers enormous potential for Intuit
Anderson adds that Intuit sees Australia as a ‘tech forward’ market that is ready for small business cloud computing and high on the priority list.
“This is a market that is ripe for our expertise and businesses should see us as a viable third player in the Australian market” Anderson says.
Intuit is evidently focused on global growth and the one million or so local micro businesses, which typically have fewer than five employees, represents a market worth up to $200 million.
“We have priority markets like Australia, market where we want to double down and invest. So we are making sure that we have products that are right for the markets,” Anderson says.
The third player in this game, Reckon, has so far been the exclusive distributor of Intuit’s accounting software in Australia but that link will be broken after 2014. What happens next is up in the air.
There is a chance that Intuit might look to acquire Reckon but for now the ASX-listed company and its rival MYOB will both be busy working out just how much damage Intuit co uld do to their market share. The good thing about Reckon and MYOB is that both are local companies with substantial brand equity in the SME space, but with the focus turning to the cloud and Intuit keen to carve out a niche in the micro-business market the gloves are about to come off.
Fujistu keeps winning deals
Fujitsu is picking up more work in both the big and small end of town with the company picking up a five year contract from Asciano and a smaller contract from the Western Australia Department for Child Protection (DCP).
The Asciano deal will see the port and rail operator outsource its entire IT infrastructure and applications to Fujitsu over the next 18 months. The program will deliver an upgrade of Asciano’s entire IT infrastructure and applications utilising enterprise grade cloud services. Asciano’s IT team will retain the responsibility for the delivery of ICT services across its businesses while leveraging the capabilities of key partners to create a leading technology environment.
Fujitsu will also be providing consulting services as part of a five year contract.
Meanwhile, the IT company has been awarded a $10 million contract by the Western Australia Department for Child Protection (DCP) for the support of its mission-critical PeopleSoft CRM system.
DCP is focused on the protection of at risk children and young people. Through a distributed network of field and social workers across Western Australia, DCP provides care to these children as well as family support services. The Department is also responsible for administering adoptions and criminal records screening for people who work with children in the broader community.
GLENTEL likes Allphones; Engin goes to Eftel
In other telco-related news, Canada's largest independent multi-carrier mobile phone retailer, GLENTEL, has finalised the purchase of an 83 per cent stake in AMT Group Pty Ltd, the parent company of Australia’s largest independent telecommunications retailer Allphones
The Canadian company is paying $70.6 million for its stake, with executive shareholders hanging on to a share of AMT and the senior management remaining in their roles
The price tag is pretty much in line with the $100 million figure that was touted when the sales process for AMT kicked off in November last year.
AMT consists of five brands – Allphones’ network of 170 stores, the My Number sale portal of unique mobile numbers, All Distribution, the Walk n Talk accessories unit and Australian Retail Management Services.
Meanwhile, Kerry Stokes’ Seven Group Holdings has finally washed its hands off internet calling provider Engin with small cap telco Eftel buying it for $9.1 million.
The deal was always on the cards ever since Optus picked up wireless broadband operator Vividwireless for $230 million and at $9.1 million Seven has sold Engin for about one-tenth the company's peak value and for less than half what Seven has invested Engin over the past six years,.
Seven paid $26 million for a 33 per cent stake in the company in 2006 and a further $4.6 million for an additional 24 per cent of Engin in 2008.
As for Eftel, it has managed to beat listed players like MyNetFone and Amcom to the prize.
Microsoft’s crawls over SAP to Hastings ERP deal
Microsoft has scored its largest ever Dynamics enterprise resource planning (ERP) in Australia, edging out rival SAP to a multi-million-dollar deal with Hastings Deering.
Brisbane-based Hastings, which is one of the biggest supplier of Caterpillar heavy equipment in the world, will replace its existing legacy systems with Microsoft’s Dynamics AX 2012.
According to Hastings, the decision to deploy the 10,000 user Microsoft business solution, was part of a wider transformation project which will see the company double its workforce over the next few years.
CargoWise spreads wings in the Gulf
Supply chain management software and integrated logistics solutions provider CargoWise has forged a distribution partnership with warehouse management systems provider ATMS. The move will see Sydney-based CargoWise expand its presence in the Middle East.
“With a regional office in Dubai and extensive experience in the local market, ATMS is ideally positioned to sell and support CargoWise’s ediEnterprise platform into its existing customer base of trading houses and third party logistics suppliers throughout the Gulf region,” CargoWise said in a statement.
Tower Watson broadens Microsoft alliance
Towers Watson has broadened its existing relationship with Microsoft with the professional services company to adapt some of its software applications for the Windows Azure platform.
The alliance with Microsoft will strengthen the modelling software developed by Towers Watson’s risk management businesses and specific applications are already in the pipeline, the firm said in a statement.
Towers Watson’s software solutions are currently used by clients, ranging from pension funds, insurers, multinational companies and sovereign funds.