Nedcor to Become SA's Second Largest IT Stock
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[Johannesburg, SOUTH AFRICA] Convergent banking and IT group Nedcor announced a number of measures on Monday designed to consolidate its IT investments, which will result in the banking group becoming the second largest IT stock on the Johannesburg Stock Exchange (JSE).
Nedcor announced two measures designed to raise its IT profile, upping the value of its technological investments to R9.1 billion (US $1.3-billion).
The first measure will see Nedcor swap its existing 20 percent stake in Dimension Data International for a 10 percent holding in the LSE-listed parent company, Dimension Data. By transferring this shareholding between the international and London-listed Didata operations, Nedcor will be able to report a R5.2 billion (US $753 million) gain in Didata stock pushing the value of its investment in the IT company to over R8 billion. The company revealed, however, that it is considering converting a portion of this equity into cash, settling instead for a lesser eight to nine percent stake plus a cash amount of about R1.6 billion (US $231.7 million).
The second Nedcor initiative is the acquisition of a 25.1 percent stake of the IQ Business Group for R142.4 million (US $20.6 million). Together, these two announcements catapult Nedcor into the top echelon of the JSE's IT companies.
Nedcor's decision, for all the headlines that it has spawned, was not an unexpected one. Speculation was rife last month that the banking group would be making a switch of this nature within a few months, fueled by comments from Nedcor's CE Richard Laubscher.
Two weeks ago Laubscher indicated that his group would be focusing on expanding its IT profile and suggested that along with two acquisitions planned for later in August, the group would be reassessing its Didata shareholding.
Only one of these anticipated acquisitions has been announced so far by Nedcor, the R142.4 million (US $20.6 million) IQ deal. In terms of the IQ deal, Nedcor retain an option to up their stake in the as-yet unlisted IQ Business Group to 45.1 percent after two years.
Since the banking group's attempt to assume control over rival Stanbic floundered three months ago, the company has been aggressively pursuing an IT expansion policy, seeking to capture an unassailable lead in the convergent banking and technology sector. Beginning by taking a 20 percent stake in corporate ISP, The Internet Solution, Nedcor then snapped up 26% of smart card company Aplitec and subsequently merged its NedTel Cellular operation with Nashua's cellular division.
In July, the company invested $10 million for a 75 percent stake in the Indian IT company, Nihilent Technologies and two weeks ago launched an e-procurement solution, Miraculum, along with Old Mutual and Didata. Even taking into account Stanbic's bluebean.com online banking offering launched last week, the speed at which Nedcor has been expanding into this sector make it easily the dominant player in the South African convergent banking and IT sector.
Laubscher dismissed notions that the bank might appear willing to trade development of its banking services for increased expansion into the IT sector. "The key is an integrated e-commerce environment as opposed to a series of disparate offerings unconnected with each other," he said.
Investors appeared unconc