Telecom Eireann has acquired Irish networking communications company, LAN Communications, for £8.5 million (€10.79 million). The announcement follows prolonged industry speculation about the deal, which will be valued at around £10 million when a provision to join Telecom's Employee Share Option Programme (ESOP) after one year is taken into account.
LAN Communications recently became an acquisition target for Telecom following the trend towards consolidation of the telecommunications and data communications industries.
The deal was verbally accepted last month, and finally concluded yesterday in advance of Telecom's planned stock market flotation in June. According to Mr Sean McNamee, managing director of LAN Communications, the company had been approached by a number of telecoms operators recently, but Telecom was always the most likely buyer.
"We have had a strong association with Telecom since we started out five years ago. They placed a substantial order with us then which gave us the capital and cash flow to expand the company."
LAN Communication's four primary shareholders will each receive £1.9 million. Each holds a 22.5 per cent stake in the company, and they include Mr McNamee, technical directors Mr John Dolan and Mr Mike McGrath, and non-executive chairman and former Sharptext co-founder, Mr Eddie Kerr.
The remaining 10 per cent is owned by finance director Ms Anna-Marie Cunningham, sales director Mr Neil Wisdom, Mr Eamonn McGonigle and Mr Andrew O'Reilly.
LAN Communications is the last indigenous network integration company of scale to be purchased, and has achieved the highest price to date.
Last May Esat Telecom bought cable and networking company, BridgeCom, for £8 million, and the following month Lake Communications acquired Topology for £6.5 million.
LAN Communications will continue to operate as a wholly owned subsidiary of Telecom, and says it will retain its name and 25 existing employees.
It stands to gain considerably, as Telecom offers access to a State-wide customer base, where LAN would have been mainly Dublin based.
Telecom will benefit from the acquisition as it can now offer a range of local area network services (LAN) to its customers. LAN services are primarily enterprise oriented, and LAN Communications would specialise in installing networks with remote connectivity, firewalls, network security and electronic commerce systems.
Its current customer portfolio includes 10 government departments, Lotus, Hibernian Group, Gateway 2000, Dell, ESB, PricewaterhouseCoopers and KPMG.
Last year LAN Communications recorded turnover of £7.5 million, and, according to Mr McNamee, it expects to increase revenues 50 per cent to £11 million this year.
