After operating 39 years without taking any outside equity
investment, the decision by Brazilian IT services contractor Politec to take on strategic
venture investment was not taken lightly. The $310 million global IT services
provider has ambitions to build its fledgling U.S. operations from about $1
million in sales last year to $100 million by 20011, and expects to
launch an initial public offering within 18 months. To support those goals, it's recruiting a partner that
can provide equal measures of growth capital, access to potential
customers and credibility with financial markets.
Politec's announcement that it will take on $80 million from Japanese
conglomerate Mitsubishi Corp. is the result of a perfect fit, says Politec executive
vice president Alexander Schmitz-Kohlitz. After rebuffing an ever-growing
roster of financial and strategic suitors over the last few years as Brazil's economy soared, the company
took funding from Mitsubishi as a key part of its global expansion strategy,
particularly targeting the U.S. and Japan.
The deal calls for an immediate investment of $30 million
for a 10% stake in the company, valuing Politec at $300 million, with another
$50 million coming into the company before the end of the year, leaving
Mitsubishi with a 25% stake. Perhaps more important,
however, will be Politec's role as Mitsubishi's premier IT services partner
worldwide.
"In the capital markets in Brazil right now, it is not hard at all to
raise money," Schmitz-Kohlitz says. "There is a good chance Brazil
will become investment grade
within the next 12 to 15 months, and we have been approached by many interested
investors, but this is a strategic investment and more about getting access to
their captive partners."
Schmitz-Kohlitz says Politec worked with Daniel Goldberg
of the Sao Paolo office of Morgan Stanley to put the deal together, but never
really entertained other offers once the opportunity to work with Mitsubishi
arose. Politec had been working with
Mitsubishi on implementation projects of SAP software in the U.S. and saw a huge opportunity to
extend is services by working with the company's business partners on
integrating their IT services, he adds. But Schmitz-Kohlitz also saysthat the reputation of Japanese
companies for doing extremely thorough due diligence was a factor in
selecting Mitsubishi as an investor, adding that the full year of scrutiny it
put in will serve Politec well when it goes to the public markets.
Founded in 1970 as a printing services contractor, Politec has expanded
to offer a full range of IT services, handling all aspects of
information management except operating data centers. The company has
been in the U.S. for seven years and in Japan for two, and has goals of
becoming a major outlet for IT outsourcing. The company has about 6,500
employees, and in addition to Brazil it recently has opened service
centers in Argentina, which has retained a favorable wage differential
in relation to other countries even as wages in Brazil have
risen. -- Clifford Carlsen
See April 28 press release from Politec
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