Telstra to snare Kaz in $333m deal

Telstra plans to buy technology services company Kaz Group Limited for a projected $333 million.

The telco intends to acquire 100 per cent of the shares, paying $0.40 per share in cash via a scheme of arrangement. Pending a review, Kaz halted trading earlier this week.

An official announcement is slated for later today.

Telstra chief executive officer, Dr Ziggy Switkowski, said in a statement the company was looking to bolster its presence in the managed services and information communications technology (ICT) markets.

Initial revenues from the combination of Kaz and Telstra’s current managed services activities are expected to approach $1 billion per year. “For Telstra, the transaction delivers increased capability in the ICT services market,” Switkowski said, “a key driver of growth for Telstra’s business and government division, by enabling us to serve an increasing number of customers who are looking to telecommunications companies as partners who deliver and manage their complex IT and business process outsourcing [BPO] services requirements.”

Kaz chief executive officer, Peter Kazacos, said the relationship would take the company to the next stage of its development as an IT and BPO provider.

"The combination of Kaz's and Telstra's strengths increases the solutions and services offering we can provide our customers and ensures we can be a competitive provider of all their communications, IT and BPO needs,” he said in a statement.

And while computer services spending is projected to increase among business and government sectors, IDC telecommunications analyst, Landry Fevre, said he was unsure how the two entities would fit together.

“It’s hard for me to read where the clear cut benefits are for Telstra," he said. "Where’s the fit?”

Telstra and Kaz were worlds apart, Fevre said.

“There’s a gap between Telstra skills and Kaz skills," he said. "Kaz offers a tier-two type approach, whereas Telstra owns its own network and adds additional services. So there’s no clear high-level consulting engagement like there is with an IBM.”

A Volante purchase would have been a good fit, he said.

“Volante is more on the network side, whereas Kaz are more on the outsource side,” Fevre said.

Contrasting the recent IBM buyout of Logicalis, which Fevre said was in line with revenue expectations, the Kaz purchase was steep.

“When you look at IBM and Logicalis – and compare prices and revenue – the buyout is fairly priced for IBM in the scheme of things because it fills the gap for IBM - they have a lack of skills in the ITS division,” he said.

The duo was a good fit and would lead business and government customers from the advisory and consulting phase through to the delivery and management phase, Telstra business and government group managing director, David Thodey, said.

"Kaz brings experienced people with skills in BPO, systems integration, consulting, applications development and IT management services to complement Telstra’s existing managed services business and telecommunications expertise," he said.

The company planned to operate Kaz as a stand-alone ICT business, Thodey said.

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