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Workplace snaffles LanBase

More consolidation in UK networking channel

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Workplace Technologies is shelling out up to £19.56 million in cash and shares for the acquisition of rival networking equipment reseller LanBase Holdings. Berkshire-based LanBase increases the company’s turnover by more than £20 million. Judging from its historic growth rate of 20 per cent, LanBase should be on course for £24 million t/o for 1998. In its last interims, Workplace sales were £40 million. DKB is forecasting £79 million sales for the full year. Workplace also gains a foothold in the Spanish market through the acquisition of outstanding shares of Madrid-based LanBase Espana not already owned by LanBase Holdings. LanBase Espana sales are consolidated into LanBase Holdings figures and contribute around 8 per cent of turnover. Keith Berry, founder and MD of LanBase, is to join the Workplace board. The enlarged group aims to leverage better purchasing terms from its suppliers. Workplace is "3Com's biggest UK reseller, Cisco's fastest growing UK reseller and (following the acquisition of LanBase)the UK's largest Bay Networks reseller", according to Andrew Vaughan, Workplace MD. It also expects to achieve “key operational synergies such as training and stock management.” Workplace is presenting the deal as the next strategic step in the expansion of the company. Although LanBase trawls the same networking equipment market as Workplace, it brings a different customer base, concentrated in the London financial sector, and increased geographic coverage. LanBase will also deliver a big boost to Workplace's post-sales support business. Support contracts account for 20 per cent of LanBase turnover. The enlarged group operates out of 11 branches in the UK and Ireland, and will have a workforce of over 500. Redundancies are not envisaged "at present", according to Vaughan. "With the market growing at 20 per cent a year, there is plenty of opportunities for jobs," he said. Workplace’s historic strength is in cabling and maintaining data networks in gigantic buildings -- it numbers the Ministry of Defence and Hong Kong Airport Authority among its customers. The company blames late payments from the latter client for full-year interest charges that are “likely to be somewhat greater than current market expectations”. Berkshire-based LanBase produced operating profits of £1.52 million on sales of £19.9 million for the year to 31 December, 1997. Workplace is paying a maximum of £8.8 million in cash, £1 million in loan notes, and the issue of 6.5 million Consideration shares, dependent on LanBase achieving an operating profit of £2 million in the year ending 31 December, 1998. As it is November, LanBase shareholders must be pretty sure of hitting their target. Certainly, they are highly incentivised to hit the £2 million operating profit target. For every £100 profit shortfall their payout is chopped by £520 in cash and 338 consideration shares. LanBase owners have also warranted that the companies net assets will be at least £2.1 million on 30 November, 1998. Any shortfall will be adjusted pound for pound in the payment. There is plenty more goodies to come for LanBase shareholders, as Workplace is buying only 68.8 per cent of the share capital of LanBase Holdings and the 49 per cent of shares in LanBase Espana not owned by LanBase Holdings. The outstanding balance of LanBase shares are covered by option agreements. Workplace has the right to acquire up to 24.7 per cent of the 31.2 per cent optioned shares after 2 January, 1999,on the same terms as the first tranche. Workplace needs shareholder approval to wave through the deal. Vaughan is confident the deal will get approval. "This is our first acquisition and it is low-risk...Lanbase is a good, solid growing business." The company was advised on the acquisition by Hawkpoint Partners. ®

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