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LONDON (Dow Jones)Dimension Data Holdings PLC (O.DDT), South Africa's largest information technology company, is confident its surprise counterbid for U.S. Internet consultancy Proxicom Inc. (PXCM) will win out over Compaq Computer Corp's (CPQ) lower cash offer.
Chairman Jeremy Ord told Dow Jones Newswires Wednesday that Proxicom is set to respond to its $7.50 a share cash offer within 24 hours.
"We think it will work out," he said.
The South African group's cash offer dwarfs Compaq's $5.75 bid, made last month, which values Proxicom at about $328 million. Dimension Data's bid values Proxicom at about $428 million.
A Compaq spokeswoman said Wednesday that the company is aware Proxicom is evaluating at Dimension Data's competing offer.
"As far as Compaq is concerned, the Proxicom deal continues in effect," she said.
There has been no indication that Compaq would come back to the table with a higher offer.
Dimension Data's counteroffer surprised the market, which believed Compaq was on the verge of closing the deal. Compaq will receive a $10 million fee if its deal is terminated.
Ord maintains that the Proxicom bid to be funded in part by a $1.4 billion warchest shouldn't be seen as a hasty move. He said Dimension Data had been one of the suitors who had been in discussions with Proxicom before Compaq submitted its offer.
"Contrary to what people like to believe, we've had extensive discussions with the company," he said.
Dimension Data spent the past 12 months scouring the North American ebusiness market, looking for possible targets before shortlisting a number of candidates, Ord said.
"Proxicom is a company we knew well," he said. "We felt that in terms of ecommerce companies available it was one of those offering good value. It was one of those we researched the most thoroughly."
Although based in South Africa, Dimension Data generates nearly 80% of sales outside of the African continent, and is trying to grow a strong presence in the U.S. The company now capitalized at GBP4.07 billion moved its primary listing from the Johannesburg Stock Exchange to the London Stock Exchange in July 2000, where it joined the FTSE 100 index. The group designs and maintains computer and communications networks for blue chip clients with operations in 30 countries worldwide.
Ord said the Proxicom acquisition would offer synergies to its existing network services operations in the North American market. The chairman declined to provide a forecast for cost synergies, but said they could come from back office operations.
"Early next week we'll be able to provide a full appraisal," he said.
That will depend on how the bidding melee shapes up over the next few days. Compaq has said Proxicom would help boost its telecoms and financial services operations and would allow the group to expand into retail, manufacturing, media and entertainment.
Although there is no shortage of U.S.based internet consultancies, Proxicom is highly regarded, because it provides specialist ebusiness services to companies such as AOL Time Warner Inc. (AOL) and General Electric Co. (GE). Nevertheless, some analysts question Dimension Data's hefty offer price.
UBS Warburg analyst Michael Briest said Dimension Data is "buying a business that's going through a difficult time and they are paying a hefty price."
Proxicom warned in lateMarch that it expected disappointing first quarter figures, and announced a restructuring program as well as layoffs. Sure enough, first quarter results, released last week, did show that sales had fallen 33% sequentially to $39 million. It posted a net loss of $51.6 million.
Dimension Data shares fell 7.5% to 310p Tuesday in early trade in London after the company unveiled its bid for Proxicom. The shares closed down nine pence Wednesday at 305 pence.
Company Web site: didata.com
By Elena Berton; Dow Jones Newswires; 442078429267; elena.berton@dowjones.com
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