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VST Holdings, a leading distributor of computer products in the mainland, agreed to buy a majority stake in Singapore-based bigger rival ECS Holdings for HK$659 million.

The combined company would be Asia's third largest computer products distributor by sales, after Taiwan-based Synnex and mainland-based Digital China Holdings, a sister company of computer maker Lenovo Group.

VST plans to buy a 52.5 per cent stake in ECS for 66.8 Singapore cents (HK$3.45) a share, a 6 per cent premium over the closing price of 63 Singapore cents ont Friday before trading in ECS was suspended.

VST chairman David Li said his company was confident that the acquisition would work despite the bigger scale of the target company.

ECS sales reached HK$12 billion last year, about three times VST's. The Singaporean firm employs 1,900 staff in 32 cities in Asia, while Hong Kong-based VST has about 170 in the mainland and Hong Kong.

'ECS's product lines, which include hardware, software, PC, laptop and networks, will be great complements to ours, which is mainly computer parts,' Mr Li said.

The purchase would also give VST access to ECS's sales networks that covered Singapore, the mainland, Indonesia, Malaysia, the Philippines and Thailand, he added.

VST will seek shareholder approval within 11 weeks. Following the deal's completion, it will make a general offer to buy the remaining ECS shares at the same price.

VST will finance the purchase by bank borrowing, internal resources, new shares and convertible securities. ABN Amro, which owns 9.7 per cent of VST, is advising the company.

Singapore Technologies Engineering, Southeast Asia's biggest defence company, said in a separate statement yesterday it agreed to sell its 20.8 per cent stake in ECS to VST for S$50.7 million.

Shares of ECS were unchanged at 63 Singapore cents yesterday, after a two-day suspension. Shares of VST closed at HK$3.10, down 1.2 per cent.



ECS to sell majority stake to VST