Potential bid for PC Direct examined by Blue Star

Blue Star Solutions is waiting to see if an expression of interest in buying its PC Direct subsidiary is 'kosher', says chief executive Anthony Howard. Howard won't say whether the potential bidder is a local or overseas company, but he says Blue Star has been approached before. Amid rumours of poor performance in recent times, PC Direct has recently gone through substantial restructuring.

"We're waiting to see whether it's kosher," says Blue Star Solutions chief executive Anthony Howard of an expression of interest in buying Blue Star subsidiary PC Direct.

"I guess they will make an indicative bid and we will see whether it's worth selling."

Howard won't say whether the potential bidder is a local or overseas company.

But he says Blue Star has been approached before.

"US Office Products [which owns Blue Star] is always evaluating its investment here. The businesses have performed pretty well [for them]."

Eric Watson, who set up the Blue Star empire which he sold to USOP, still retains shares in the US company.

But it's understood his payment for Blue Star — made in stages — is based, in part, on the group's performance.

Having gone on the acquisition trail again in his own right, it's not hard to envisage that a substantial injection of capital would not go amiss for Watson. Most recently he acquired maintenance company Excell from Manukau City Council, paying $23.5 million in a joint venture between Cullen Investments (Watson's company) and construction company Hartner Group. Another of his com-panies, Fernhill Investment, has paid $23 million for half of United Electricity.

Amid rumours of poor performance in recent times —the company maintains it is profitable but won't say by how much — PC Direct has recently gone through substantial restructuring, focusing much more on services.

"We've spent the past six months transitioning from Maurice and Sharon [former owners Maurice Bryham and Sharon Hunter]," says Howard.

"We've met with Intel and Microsoft and they say having PC Direct in the market is a bloody good thing. Customers say the more choice, the better."

Bryham and Hunter are easing out of the business. Howard says Bryham is spending time with the company in an advisory capacity and Hunter is on maternity leave.

The one-time high-flier of the local PC assembly market has struggled in recent times, falling from number two in the market in the fourth quarter of 1997 to fifth in the second quarter of this year.

As the SOHO market flattened last year, PC Direct needed to find a new niche. It had insufficient differentiation to move strongly into the corporate space — where prices of leading brands were tumbling — and has struggled in the small business market, which has also flattened.

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