The proposed sale of Renaissance’s IT distribution division will give Exeed the scale to become the second-largest player in the New Zealand distribution scene. Justin Tye talks to Heather Wright about the logic behind the proposed deal.
A desire to keep on a high growth path and bolster its retail practice was behind Exeed’s decision to acquire Renaissance’s IT distribution division, according to Justin Tye, Exeed managing director.
In a deal still subject to Renaissance shareholder approval, Renaissance has agreed to sell its IT distribution division for $2.3 million in goodwill. Exeed will also acquire the fixed assets associated with the distribution business, valued at about $570,000, and stock worth about $2.5 million.
The deal, which comes after nine months speculation, will see Exeed taking over key distributorships, including Apple, Fuji, Cygnet, Belkin and Ozaki. Renaissance will continue to own Yoobee and Yoobee Design College.
Tye says if the deal is approved, he expects the Renaissance business to be transitioned across to Exeed by July 17.
Responding to reports that Exeed has yet to secure the Apple distribution, Tye says simply: “The deal will not proceed if Apple is not included”. Renaissance chief executive Shaun Rendell has said he’s ‘pleased, with Apple’s blessing and subject to shareholder approval, to hand the [Apple] brand on to [Exeed]’.
“Apple is at the top of its game right now and the opportunity to get involved with them is fantastic,” says Tye. He was unable to confirm whether rumours Yoobee will purchase direct from Apple in Australia, were true.
In April, Renaissance was confirmed as one of three Apple suppliers under the Ministry of Economic Development’s All-of-Government procurement scheme. The deal was to be handled through the Yoobee division.
Exeed won’t be taking on all of Renaissance’s agencies. “We need to see which want to come across, because our business is a little different to Renaissance’s, and also which we don’t want to take because they may conflict with current agencies or lead to too much doubling up,” says Tye.
“In the past 10 years, our journey with HP has been incredible. We have done huge things. But if we project out to the next five years and ask ‘can we do half or more again with our current agencies?’, the answer is we can’t. It’s just not possible to grow that much with our current agencies,” Tye says. “So a couple of years ago we started looking at our options.”
He says the company was also keen to reduce its dependence on vendors. “That started with us bringing on Samsung. There are parts within HP which could be seen by some as a risk,” he notes.
The focus turned to potential acquisitions and discussions with Renaissance have been underway since late last year, with Exeed chairman, and former Ingram Micro managing director, Tony Butler leading the negotiations for Exeed.
“Our goal is to be number two in this market,” Tye says. He’s hoping the acquisition will ‘nearly double our business straight up’.
The purchase is expected to make Exeed the second largest distributor in New Zealand, behind Ingram Micro, which also distributes Apple, though Tye says ‘there may be some debate from the guys at Westcon’. Earlier this year, Westcon claimed annual revenue of $126+ million.
Tye says the deal will enable Exeed to ‘buy in expertise in retail’. “That will be beneficial across all our agencies, so it will be good to have access to that channel.”
He denied March rumours that Exeed was looking at buying Renaissance as part of a deal with Dimension Data — parent company of Express Data — describing it as ‘awkward’ given Express Data’s ownership of Simms International. “That was never true,” he says.
“This transaction is good for New Zealand distribution — we remain a New Zealand entity and profits will remain here in New Zealand.”
Apple has notoriously tight credit requirements for distributors leading some in the industry to question where finance for the deal has come from. However, Tye says the deal has been ‘funded locally and has not resulted in any changes in shareholding [for Exeed]’