Andile Ngcaba’s Convergence Partners will acquire 100% of Datacentrix Group from former JSE-listed technology group Alviva.
On Wednesday, the firm said it had agreed to make the acquisition through its Convergence Partners Digital Infrastructure Fund (CPDIF) in partnership with the existing Datacentrix management team, which has led the company for more than 20 years.
Founded by Ngcaba, who serves as chair, Convergence Partners specialises in digital infrastructure investments, raising $296m (R5.6bn) for its third fund in January. This was being earmarked for opportunities across Sub-Saharan Africa.
In total, the firm has more than $600m under management.
Alviva is said to be exiting Datacentrix following its delisting from the JSE in early 2023, “to concentrate on its core hardware distribution operations”.
Alviva is one of Africa’s largest providers of information communication technology (ICT) services. It operates in most African countries and sells in the Sub-Saharan African markets through resellers and national retail chains. Its delisting came after a consortium comprising its two large empowerment shareholders, THAM Investments and DY Investments, made a binding offer to buy it out for R2.5bn.
Convergence Partners said the Datacentrix transaction “aligns with CPDIF’s strategy of investing in high-growth companies with strong management teams and deep customer and vendor relationships”.
The firm is taking a bet on the apparent resilience of IT companies in turbulent economic times.
“The IT market in SA has shown resilience even during economic downturns and is expected to grow faster than the country’s GDP. Convergence Partners believes Datacentrix is well positioned to capture this growth,” it said.
Ngcaba’s firm expects the deal to be finalised by the end of the first quarter of 2024, subject to customary regulatory approvals, which includes getting the green light from competition authorities and the Independent Communications Authority of SA (Icasa).
Datacentrix will continue to operate independently as it has in the past. Convergence Partners says it does not “envisage any changes in operations or staff”. Once the deal goes through, Datacentrix will look to expand into technologies such as digital transformation solutions and cloud computing.
As to the possibility of listing the business down the line, Ngcaba told Business Day this will depend on market conditions.
“We really are very open. The influence of exit is basically driven by market conditions at the time.”
The JSE has seen a spate of exits by tech companies in recent years, including Jasco, Adapt IT, Alaris, Etion, and soon MiX Telematics. Bytes Technology and Karooooo chose to only have their secondary listings on the local exchange.
Private equity (PE) investment is usually characterised by investment into private companies, with the aim of exiting that investment after having made a good return.
“We’re here to assist management to build very attractive companies. Whether there’ll be a trade buyer, another PE fund, a merger or listing doesn’t matter, really, for us. We’ll consider options that are best for clients, staff, management — all the stakeholders. We are very open because we have seen market dynamics change and shift over time,” he said.
The former communications department director-general and his team have been busy in recent years allocating capital to a number of projects.
In November, Convergence Partners increased its stake in African broadband infrastructure business CSquared, buying shares previously held by Google.
In April 2023, it announced that it had invested $10m into 42 Markets Group, an incubator, investor and builder of fintech companies.
In June 2022, the firm backed Yellow, a provider of pay-as-you-go finance for off-grid solar home systems and connectivity solutions for low-income consumers in parts of East Africa.
Ngcaba’s Convergence Partners Investments was recently rebranded to Solcon Capital and spun out of the group as it aims to strengthen its deep tech portfolio.
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