The systems integrator and services company Istel Group Ltd is to be acquired by the US telephone giant AT&T Co following a cash offer that values Istel at UKP180m. AT&T is offering UKP33.74 for each Istel ordinary share, 102.8 pence for each group preference share, and 111.8 pence for each holdings B preference share. A loan note alternative, issued in multiples of UKP1 is also being offered for each type of share. The acquisition is being handled by Kleinwort Benson Ltd and Robert Fleming & Co. Istel’s Board of Directors has unanimously recommended the offer and shareholders accounting for 53.7% have agreed to accept it. In addition the Rover Group has agreed to sell its minority shareholding of 21.7% to AT&T so the bid is a done deal. Istel began its life in 1979 as British Leyland Systems servicing British Leyland’s computer systems. By 1983 the company was attracting business from outside the automotive industry and to express this it changed its name to Istel in 1984. In June 1987 the company was put up for sale and was eventually subject to a management buyout.
Global basis
It is already on target this year for a profit of UKP11m on a turnover of UKP108m which means it will achieve its planned 1991 performance this year. Consequently, it is currently the size it wanted to be to float. However, software and services in Europe in the 1990s will be dominated by much larger companies than Istel could hope to be by itself. In order to keep its customers Istel would have to operate on a global basis and, therefore, decided to find an appropriate parent to help nurture its ambitions. About 60 companies were considered (including several strong but unnamed offers from within the UK), but the best partner was felt to be AT&T because, in chairman John Leighfield’s words, it won’t extinguish the Istel spirit. In fact AT&T does expect all its business units to be independent, but skills within the group as a whole are expected to reinforce each other. From AT&T’s point of view, the acquisition helps its globalisation (or what used to be called imperial ambitions) by strengthening its position in the UK, as well as giving it the benefits of being able to offer the US-based multinationals that make up the bulk of its custom a total business solution. For this reason both Istel and AT&T claim that no part of Istel’s business will be divested or discontinued and that includes its manufacturing and disaster recovery interests. Indeed, John Berndt, president of AT&T’s Integrated Computer Services business stressed that Istel clients will notice no change in their transactions with Istel. Except, he added, that in the long run they will benefit from AT&T’s strength in the Unix field, and the greater integration of Istel and AT&T products. In particular, Istel is looking forward to marketing its electronic data interchange services on an AT&T platform as well as drawing on the research and development facilities available in the Bell Laboratories. Despite the acquisition, Rover will remain Istel’s most precious customer, although its custom obviously will not grow as fast as the rest of Istel’s business. Once the bid goes through Istel will be encouraged to expand within Europe via acquisitions and joint ventures, while AT&T itself is on the prowl for further acquisitions now it is free to offer computer services.
