A new IT procurement and services powerhouse is set to appear on the horizon as AAG Technology Services reviews a merger offer by the Volante Group worth over $30 million.
The two companies have revealed the off-market scrip deal is based on 30 million Volante shares valued last Friday at around $1 each.
The announcement ends weeks of speculation about a merger between the two after Volante completed due-diligence on AAG recently.
AAG brings to the table its technical and services arm Netbridge, and the procurement business of Applied Micro Systems.
Both companies contribute to what AAG reports is a 14-year history of profitable growth to June 2000, with results of $195 million in sales and $4 million before-tax profit for the year.
AAG reports its training company, Affinity Contracting and Search, is expected to achieve $11 million in revenue this year.
AAG is also the former owner of Prion Technology, sold to Siltek in November 1999.
Simon Duncan, Volante Group's executive director and acting CEO, explained the deal will see the company boost its services business.
Primarily a box mover, the addition of Netbridge's technical services and revenues of $30 million will give Volante 10 per cent services revenue, he said.
Once the scrip for scrip deal is completed, AAG managing director Allan Brackin will assume the role of CEO.
The chief executive post was vacated by Wayne Morris in early May. Morris was running Volante when it listed in December last year, achieving an estimated market capitalisation of $61 million and raising $30 million for expansion plans. Volante's turnover is reportedly around $400 million a year.
Should the merger be approved by AAG's board and shareholders, it will fulfil AAG's long-held plans for an ASX listing.
On 12 May 1999, ARN reported that Brackin believed he was close to floating the company. At the time, he was considering the future of its HP-focussed distributor Prion. His option was to sell Prion and "use the money for future expansion or as funds for the shareholders". Prion was later sold to South African distribution giant Siltek in November last year as part of that company's Asia-Pacific startup plans.
Brackin told ARN late last week he believed the merger would create a strong channel company that would worry its competitors. "We'll become the biggest procurement services company in the country," he said.
In addition to the "truck-load" of money, AAG has invested in Netbridge's service capabilities, AMS and Volante still had a strong future in procurement, or traditional box moving, Brackin said.
"You can still make a lot of money if you do it right," he commented.
Volante chairman Robin Crawford said AMS' HP and Toshiba products will complement Volante IBM and Compaq products.
In addition, AMS is expecting to benefit from having access to Volante's e-commerce system "Customer Connect", at www.volante.com.au.
The site gives customers access to product information, pricing and availability in addition to online ordering capabilities.
The company claims the site turns over around $1 million a month.
The merger talks come at a pivotal time in Volante's history as it grapples with a rapidly changing market.
Volante states the official reason for pursuing AAG is to "achieve a stronger strategic position in a rapidly changing industry in which Volante and AAG compete".
The company believes as a result of the merger the group can achieve in excess of $2 million per annum in rationalisation benefits from the integration of warehousing, integration, systems, purchasing, finance and administration operations.
Volante's vendor partnerships include IBM, Compaq, Toshiba, Hewlett-Packard, Microsoft, Novell, Citrix, Cisco, 3Com, Nortel Networks and Sun Microsystems.