Datatec to return R7bn to shareholders with special dividend

International ICT company Datatec is to return more than R7bn to shareholders through the payment of a special dividend, a move which boosted its share price by almost 10% in early Monday trade on the JSE.

This follows the conclusion in June, through its subsidiary Westcon International, of agreements with Atlantic Park Strategic Capital II Designated Activity Company and Atlantic Park Strategic Master Fund III for the refinancing of the Westcon International Group Holdings (WIGHL), the intermediate holding company of the Westcon group of companies, and a minority investment in WIGHL.

The transaction was completed on August 4, and Datatec will return an amount of R7.05bn (about $435m) to shareholders by declaring a special cash dividend of R29 per share, it said on Monday.

All transaction-related costs will be absorbed by the company to maximise the distribution to shareholders, Datatec said.

The special cash dividend will be paid out of Datatec’s distributable retained profits, it said.

A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt from it, and after that deduction the net special cash dividend is R23.20 per share.

Shareholders may elect to receive new shares as an alternative to the special dividend, Datatec said.

By 9.30am on Monday on the JSE, Datatec’s share price was up 9.67% at R87.45, valuing the company at just over R21bn.

In June, Business Day reported Datatec’s R7bn deal with Atlantic Park injects fresh capital into its Westcon business while bringing in new equity partners that will help fund the business in the future.

With operations in more than 50 countries, the group is one of the JSE’s largest ICT services firms. It operates predominantly from two main divisions, Logicalis and Westcon International, the latter distributing security and networking technology products.

Proceeds from the transaction components generated cash proceeds to Datatec of about $434m.

The business is experiencing growth driven by AI-enabled infrastructure investment and demand for more cybersecurity solutions.

The first component of the transaction is a partial refinancing of the company’s existing $450m intercompany fixed return shareholder loan advanced by Westcon International to WIGHL through a new six-year $375m senior secured debt facility provided by General Atlantic.

Second is a cash equity co-investment by General Atlantic of $25m to acquire 5% of the share capital of WIGHL from existing shareholders.