IBM buys GSA shares from Telstra, Lend Lease

IBM will acquire the remainder of IBM Global Services Australia (GSA) from joint venture partners Telstra and Lend Lease for a combined total of $313.5 million, the companies announced today.

IBM will pay Lend Lease $160 million in two equal tranches for its share of the business and Telstra's shares will be bought for $153.5 million, according to a joint statement from the companies.

Big Blue currently owns 54.4 per cent of IBM GSA, while Telstra and Lend Lease own 22.6 per cent and 23 per cent respectively.

The purchase, which is subject to review by the Foreign Investment Review Board, is slated to be finalised by early September.

The change of ownership reflected 'changing business priorities of the three companies,' the statement said.

'We have made it clear for some time that our investment in IBM GSA was non-core and, so it's appropriate that we are exiting the joint venture,' Lend Lease chief executive Greg Clarke said in the statement.

For Telstra, the sell out takes place as the company is believed to be planning cost cutting and restructuring in its technology division.

Telstra's chief financial officer David Moffatt, said the sale is 'a key part of the transformation of Telstra's IT processes which focus on aligning the interests of key vendors with Telstra's vision which is to improve its internal IT skills base'.

Brendon Riley, general manager of IBM Australia's Global Services organisation, said that attaining full ownership would allow IBM to 'simplify our internal structure and processes'.

Big Blue intends to integrate its two consulting organisations--BCS and BIS--making the combined IBM Business Consulting Services possibly the largest business consulting practice in Australia, Riley said.

According to analyst firm International Data Corporation (IDC), IBM Global Services is the leading provider of IT services in the Australian market, with an estimated 15 per cent share.

Riley said: 'IBM's increased investment in the Australian IT and consulting services business will allow us to improve our ability to respond rapidly to changes in the marketplace and anticipate the emerging needs of our customers'.

IBM GSA will continue to operate as part of IBM's Global services organisation when the transaction is complete.

IBM and Lend Lease originally formed the joint venture, then called Integrated Systems and Services Corporation (ISSC) in 1994. It was renamed when Telstra became a partner in 1997.