NEC to buy CSG tech solutions

By Allie Coyne, David Binning on May 30, 2012 9:05 AM
Filed under Services

Updated: print services to undergo restructure.

NEC has emerged as one of the mystery buyers circling Australian print services and IT integrator CSG.

CSG announced to the ASX this morning it would sell its technology solutions business to the Japanese technology giant for $227.5 million.

A potential further $32.5 million is on offer pending CSG's financial results to June 30.

The transaction is expected to be completed by July 2.

The news follows CSG’s shares entering a trading halt yesterday, reigniting speculation that an acquisition was in the offing, following an initial takeover offer last year.

NEC Australia managing director Alan Hyde told CRN the CSG acquisition was a key strategic step for the company and would support its goal of becoming one of Australia's top 5 ICT companies within the next five years. 

Hyde said while NEC had a strong story in communications - especially business broadband solutions -  CSG's strengths as an IT integrator meant it would be able to offer customers "a true “end-to-end offering".

NEC was also attracted to CSG's IT services offerings, such as for project and infrastructure management, as well as a sophisticated cloud capability which was expected to complement NEC’'s own offerings in this space.

"We will now compete for even bigger projects and open doors into new markets,"” Hyde said.

While the name isn’’t yet decided, the CSG business will be brought in as newly branded IT solutions division within NEC. Key CSG customers include Chevron, Lockheed Martin and the Northern Territory government.

CSG confirmed to CRN it would remain trading under its current name. 

Hyde said negotiations begun with CSG in January, not September 2011 when news of a potential acquisition first emerged. CSG declined to comment on the identity of the original bidders.

As to whether NEC would seek to buy more companies in Australia, Hyde said he wouldn't rule it out.

“Committed” to print

Contrary to expectations, it wasn't CSG's print services division the mystery suitor was after.

CSG affirmed to the market today it remained committed to its print business, announcing a number of measures designed to streamline the business across A/NZ, cutting $13 million in costs this year, and a further $4 million in 2013.

CSG denied the restructure was a move to make the print division more attractive to potential buyers. 

“This is a really exciting time. It’s a real opportunity to restructure Print Services Australia and New Zealand to deliver annualised cost savings and return really significant value,” a CSG spokesperson told CRN. “Our vision is to become a leading print provider.”

“We will end up with a stabilised print business that gives shareholders the opportunity to participate in a business that’s got the potential to significantly improve its profitability and deliver a revenue stream to support an attractive dividend yield.”

The company confirmed 30 jobs from the 600-strong workforce would be cut. 

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