Telecom NZ will pay NZD 26 million ($16.8 million) to buy Ceritas, which provides consulting, system and network integration, and has 580 staff based across the country.
The target company made a profit before interest, tax and amortization of NZD 3.6 million ($2.3 million) in the year to December 31, 2003, on sales of NZD 100 million ($64.8 million), and the two companies said that Telecom NZ is paying a price/earnings ratio of 14.1 times last year’s net profit.
Ceritas is currently 80% owned by Singapore Computer Systems (SCS), a Singapore-based outsourcing vendor, which said that it expects to close the sale by the end of August. Telecom NZ will also acquire the remaining 20% of Ceritas that is owned by the target company’s management.
SCS president and CEO Pek Yew Chai, said: Due to stiffer competition, SCS expects Ceritas to experience margin pressure as it does not have the size to compete with bigger players…Competition is heating up in the New Zealand IT market and Ceritas’ main rivals have been taken over.
The takeover will be Telecom NZ’s second major IT services acquisition this year, following its NZD 26 million purchase of Gen-I in June. Telecom NZ claimed that takeover made it the largest IT services company in the country ahead of EDS Corp.
Telecom NZ is not the only major telecoms operator building up its IT services business to supplement growth in its fixed line and wireless operations. Australia’s largest operator Telstra announced a deal in April 2004 to acquire the country’s largest indigenous IT services company Kaz Group for AUD 333 million ($235 million).
