Hard on the heels of announcing its takeover of Wang New Zealand, US Office Products is about to acquire Sealcorp.
Specifically, it has entered into a heads of agreement to buy Canadian listed company Brocker Investments, which owns Sealcorp. The deal, worth $C15.28 million, is subject to board and shareholder approval. USOP recently bought 100% of Blue Star, whose founder, Eric Watson, has become the largest shareholder in the $US3 billion organisation.
Watson remains executive chairman of Blue Star and is now also president of US Office Products' international group.
Eleven days ago, Blue Star announced that it had bought two-thirds of Wang Laboratories' 30% holding in Wang New Zealand and that it would stand in the market for the outstanding shares.
The likely Sealcorp buy-out comes from an approach Sealcorp managing director Mike Ridgway made to Blue Star a year ago. Ridgway says a successful sale would create all sorts of opportunities. "USOP tends to acquire successful businesses and give them finance and resources. It's one of the most effective ways to grow a business, through acquisition and then consolidating a fragmented market."
Brocker Investments also owns Sealcorp Australia, Sourceware in Australia, and PCS and Technicon in New Zealand.
Ridgway says Sealcorp will have turnover of around $100 million this fiscal year. He expects that figure to double within 18 months.
Eric Watson says Ridgway will be given a free hand to acquire other companies. "Mike's a good operator. He could have $250 million worth of business in the next 12 to 18 months."
The heads of agreement acknowledges that Brocker Investments will continue to operate as an entity, charged with leading a similar acquisition-based strategy in IT, backed by USOP resources.
Watson says Blue Star/USOP has no immediate plans to buy other companies in the New Zealand IT market, though "we would like to make more investment in that segment of the market".
Several non-IT acquisitions in Australia will be announced soon and there are plans to buy other non-IT companies in New Zealand and in the UK.
At present, Blue Star has turnover of $400 million. Watson says that by the end of the year, on an annualised run rate, the company will probably have turnover of $600 to $700 million in New Zealand and up to $300 million in Australia, taking it close to a billion-dollar company.
At a presentation in Wellington last week to businessmen and government departments, Watson said that a few years ago Blue Star set itself a target of becoming a $100 million company within 10 years. It was turning over $6 million at the time, and achieved the target within two years. The next target set was $500 million, but this required additional capital.
Blue Star looked to the US for investment and became involved with USOP in an almost apocryphal way. Watson says he was playing in a golf foursome in Palm Springs where he met the chairman of USOP. They had a private round of golf the next day and decided to do business.
Watson's strategy is to acquire office products companies around the world and to build on that. He says office products is a highly fragmented market. In New Zealand, that's led to growth into the IT sector, driven initially by the purchase of Telecom's CPE business. The office automation sector of Blue Star is now generating 20% of the group's revenue.
Wang New Zealand will operate as a standalone company, Watson says.