UK-listed reseller Dimension Data is poised to snatch US Internet
consultancy Proxicom from under the nose of industry giant
Compaq.
Proxicom, which lists AOL Time Warner, General Electric and Merrill
Lynch as clients, cancelled the merger agreement it made with
Compaq after it received a counter bid from Dimension Data earlier
this week.
Dimension Data's offer at $7.50 per share was 30% higher than the
Compaq bid.
Karen Cramer, head of investor relations at Dimension Data, said
that the premium price was aimed at deterring Compaq and at
persuading Proxicom's board to consider a second bid.
"Our offer is designed to discourage Compaq from getting into a
bidding war with us," she said. "We also had to offer a price that
would remain attractive to Proxicom."
Compaq has until Monday to match Dimension Data's offer or pull
out. If Compaq walks away it will pick up a $10m (£7m) termination
fee from Proxicom.
Compaq's profits have fallen with the decline in the PC market and
the firm is looking to expand into high margin areas like IT
consultancy and services. Acquiring Proxicom could help it enlarge
its global services portfolio.
Dimension Data, which is based in South Africa and listed in
London, operates in more than 30 countries. Acquiring Proxicom
would give it the foothold it needs to make an impact in the US.
Sandy Fitzpatrick, a senior analyst with Canalsys, said: "Both
companies are after Proxicom's services and client base. Its
services and skills complement both.
"Integration with Compaq would be a different experience from
joining with Dimension Data. They are very different organisations.
It is not just a commercial issue for Proxicom, which is probably
looking at where its people would best survive."
Anthony Miller, an analyst with Ovum, said: "In terms of Compaq,
this is a bit like Hewlett-Packard trying to acquire
PricewaterhouseCoopers. Whether this is going to be an appropriate
fit for them, I don't know. Compaq services have not performed well
under Compaq ownership in the past and Proxicom may find there is a
culture clash.
"Compaq traditionally offers lower level services and Dimension
Data is more medium- to higher level. Proxicom would find
integrating with Compaq like fitting a square peg in a round hole,
whereas Dimension Data has a services culture."
Arlene Martin