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Russian Softline Opens Brazil
Wednesday, January 20, 2016

Softline, a Russian IT company, has announced its purchase of Compusoftware, a Brazilian IT company. A Compusoftware spokesperson confirmed to Vedomosti, referring to the company’s CEO Jose Azevedo, that Softline had bought the company. Softline supplies IT products and offers outsourcing and system integration services, while the Brazilian Compusoftware is concerned with distribution and IT services.

The price of the deal is not disclosed. Softline will pay for Compusoftware 60% in cash and 40% in shares of the parent company, according to Elena Volotovskaya, Softline’s Investment Director. She clarified that Softline was preparing for an IPO and that the owners of Compusoftware would be able to sell their equity stake during the placement.

Sovcombank, which provided funds for this deal, will also be able to make money on the IPO. It has recently provided Softline with a 4 billion ruble loan for the purchase of an IT company in Latin America and South-East Asia. With the help of these deals, the company wants to speed up growth and conduct an IPO. The bank is providing debt financing and, at the same time, is acquiring an equity option within this mezzanine loan.

Volotovskaya clarified that the Russian company paid for Compusoftware with a Sovcombank loan and that the deal was closed in late December.

She added that the monetary payment for the deal would be divided into two phases. The bulk of the funds would be transferred in 2017 based on the 2016 EBITDA. The partners are using the Brazilian real and Softline is considering currency hedging.

By the end of the fiscal year, in March 2016, Compusoftware’s revenue is expected to reach $65 million, said Azevedo through his representative. He believes that the merger of the company should double Softline’s revenue in Latin America in 2016-2017 to $206 million.

According to an assessment by Ruben Israelyan, Ernst & Young (CIS) Director for Mergers and Acquisitions responsible for deals with telecommunication and technology companies, Compusoftware is Brazil’s fifth largest distributor and it that may cost from $25 million to $35 million. In Russia or Brazil such a company may cost from 5-6 EBIDTA, while in a developed country it may be sold for 10-12 EBIDTA. However, the multiple depends on the share of cloud and other IT services in the structure of the company’s revenue and it may be lower for a pure distributor, noted Israelyan.

Igor Borovikov, the sole owner of Softline, estimates that in 2015 the turnover of Softline would be almost $1 billion. He also said that sales in the CIS and other countries accounted for 40% of the revenue structure and in Russia for 60% and expressed a hope that on the eve of an IPO there would be three equal parts: Russia, Latin America and Asia.

By buying Compusoftware, Softline is counting on consolidating its position of Microsoft supplier in Latin America, but its operations would not be limited by the products of the American vendor, said Mr. Borovikov. He assured that Softline would also be promoting Russian technologies in the BRICS countries.

Gartner assessed the Brazilian software market in 2015 at $2.47 billion, in 2016 it will grow to $2.8 billion and by 2019 it should reach $4.1 billion.

Source: Vedomosti

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