Redington eyes possible IPO

Redington is mulling over the possibility of a 2005 IPO after Taiwanese distribution giant Synnex picked up a 36% stake in the distribution group for US$24m.

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By  Stuart Wilson Published  November 30, 2004

Synnex Technology International, Taiwan’s largest IT distributor, has splashed out US$24m to pick up a 36% stake in distributor Redington. The deal marks a significant step in Synnex’s quest to develop its presence in fast-growing markets such as India, the Middle East and Africa. Raj Shankar, director at Redington, gave his views on the deal and its impact on the company’s future plans. “This is a cash deal and strengthens the capital base of Redington giving us a much stronger balance sheet. The current management and business model stays in place but we do see additional value in terms of Synnex’s relationship with many leading global IT vendors,” said Shankar. Redington is also exploring the possibility of floating the company once it has concluded its current financial year ending March 2005. Shankar believes that having Synnex on board as a stakeholder can only strengthen its credentials in the eyes of the investment community. “Sooner or later we would like to take the company public,” says Shankar. “With that in mind it makes abundant sense to bring on board a strategic investor such as Synnex.” Building up a components business is also on Redington’s 2005 agenda. “We have been actively pursuing this space,” confirms Shankar. “Nothing has been consummated yet but there are plans. Redington is one of Intel’s largest distributors in sub-Saharan Africa but we do not yet have a relationship with them in the Middle East. We are looking into getting Intel rights in some Middle East countries next year and also talking to other components vendors.” “Synnex will help Redington build relationships with vendors. If we want to look at opportunities in the motherboard or hard drive market, or even explore building our own brand PCs, the Synnex brand will help us,” adds Shankar. Redington’s MEA presence covers major markets including the UAE, Saudi Arabia, Iran, Egypt, Qatar, Oman and Nigeria. Group sales including India hit US$655m in 2003. The MEA operation contributed US$207m of this total and expects sales growth of close to 50% during 2004. Synnex is itself part of the MiTAC-Synnex Group, an IT conglomerate comprising 40 separate companies, more than 20,000 employees and forecast sales of US$10bn in 2004. While Redington will continue to pursue its planned geographic and portfolio expansion, the company is also considering a fundamental revamp of its distribution infrastructure in the region. “There are some plans under consideration to build up and improvise our supply chain and distribution model but it is a little premature to share them,” explained Shankar. “Right now, some of our warehouses are outsourced facilities and we might want to look at building a more sophisticated and integrated infrastructure,” he added. HP’s proposed plan to build a regional stocking point in Jebel Ali is one factor driving Redington — a major distributor for HP — to assess its existing infrastructure. “At this point in time there is not enough clarity to understand if there will be an overlap,” said Shankar. “Will HP’s logistics hub clash with the logistics service providers (LSPs) there today or will it work at a higher level? Is it going to limit the opportunity for LSPs in the Middle East or will it in fact be used to open up opportunities for HP across the wider International Sales Europe (ISE) territory?”

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