Wang Sale Heralds More Global IT Deals
Wang Sale Heralds More Global IT Deals
By Nick Wakeman
The $2 billion acquisition of Wang Global by Getronics NV of Amsterdam will give Wang's government unit more heft to pursue large outsourcing and network services contracts, analysts and industry officials said.
The acquisition, announced May 4, will create a major global player in the network services market with about $4.8 billion in revenue and 33,000 employees in 44 countries.
Wang Global of Billerica, Mass., had about $3.1 billion in revenue in 1998; Getronics had about $1.7 billion. The government share of the combined company's revenue will be more than $750 million, sources said.
The new company will be the No. 1 supplier of desktop and network services in Europe and the fourth largest provider globally, said Jim Hogan, president of Wang Government Services in McLean, Va. His unit has 2,300 employees with offices in 15 states and overseas.
Both companies' primary business is providing networking and desktop support services to commercial and government customers worldwide. Approximately 23 percent of Getronics' business is government-related; roughly 12 percent of Wang's business comes from the government.
"This is a good marriage because, essentially, it is two like-minded companies," Hogan said.
No layoffs or restructuring are expected as a result of the acquisition because there is little or no overlap in the customer base the two companies serve, he said.
"Our strategies won't change, because they are in the same space we are in. What they are looking for is to build market share in that space," he said.
The planned acquisition is expected to close by the end of June after it receives requisite government approvals. The deal will give Getronics its first foray into the U.S. market. Major competitors of the new company will be IBM Corp., Fujitsu and Electronic Data Systems Corp.
"Getronics is getting size and presence," said John Allen, an associate at the investment banking firm Quarterdeck Partners of Los Angeles. "And Wang has got some great technical talent."
This acquisition comes as European companies race to scoop up U.S. companies in 1999. This trend is "more and more popular," said William Loomis, an analyst with Legg Mason Inc. of Baltimore.
The previous major deal in the government market was the General Electric Co. plc of London buying Tracor Inc. of Dallas for $1.4 billion in June 1998.
"You're going to see more of these deals because the U.S. information technology market is so strong," Loomis said.
Wang's major government customers include the Immigration and Naturalization Service, NASA, the Pension Benefit Guaranty Corp., the U.S. Postal Service, and the Defense Intelligence Agency.
It also leads teams that won the General Services Administration's Seat Management and NASA's Outsourcing Desktop Initiative (ODIN) contracts two of the most recent, large, desktop and networking outsourcing contracts. Getronics major customers include NATO and the Dutch and Norwegian governments.
"This is going to give us much more mass globally, and it gives us the opportunity to share resources and build our market position worldwide," Hogan said. No decisions have been made about whether Wang will continue to operate under its name or a new name, he said.
Joseph Tucci, Wang Global's chairman and chief executive, will become deputy CEO under Cees van Luijk, president and CEO of Getronics. Mias van Vuuren, who was president of Wang's international business, also will become a member of Getronics' management board.
"The impact [of the acquisition] on Wang Government Services will be positive, because we'll have a parent that is bigger and more financially able to support us in terms of going after future opportunities," said Hogan. "They are totally in support of the strategy we have, and they want to see us grow."
A bigger company also means more resources for future acquisitions, Hogan said.
"Wang does not comment on acquisitions. But certainly Wang's history has a lot of acquisitions, and Getronics has made acquisitions, so I'm sure, going forward, they will take a look at opportunities," Hogan said.
But at least one analyst thinks Wang will be out of the acquisition picture for awhile. "It may take some time to integrate everything," said Allen.
The timing of the deal took some analysts by surprise. "I was surprised it was now and not a year from now," said Thomas Browne Jr., an analyst with Prudential Securities of New York.
He expected Wang would wait to sell until after it had integrated the Olsy Group, a unit Wang bought in March 1998 from Olivetti SpA of Milan, Italy, for $390 million.
Getronics' motivation is clear, Browne said: "They want to get bigger and build a global presence."
But Wang officials said the timing was right. The companies' strategies matched, no Wang employees would lose their jobs, and the price was right, Hogan said.
"A year from now, someone may have wanted to acquire us who was not positive on one or more of those fronts," he said.
Getronics will pay $29.25 a share for Wang under terms of a cash tender offer that expires June 7. Wang's shares rose more than $3 on news of the deal, closing at $28.63 May 4.
"They are getting a fair price, but not a great price," Browne said.
Wang has not received high values on Wall Street because of past baggage, Allen said. The company managed to remake itself in the early 1990s after emerging from bankruptcy.