Two of Australia's biggest IT providers to merge

Melbourne-based IT provider DWS has entered a scheme of arrangement to buy fellow reseller SMS Management and Technology in a deal that values the company at $124 million.

DWS is offering $1 in cash and 0.39 shares for each SMS share, for a total of $1.66 per share. The offer represents a 30 percent premium on SMS' February 22nd closing price of $1.28 per share.

DWS said the mix of cash and scrip gives shareholders immediate proceeds, as well as the opportunity to have a say in the combined group's future.

SMS' board has recommended shareholders vote yes to the proposal.

If successful the deal will combine two of the country's largest IT solutions companies.

The joint entity would offer consulting, digital, managed services, and recruitment solutions to customers in the financial services, government, industrial, technology, media, and telecommunications sectors.

It would create a combined workforce of around 2000 across Australia and a small presence in South East Asia. SMS currently employs 1334 workers to DWS' 645.

DWS expects near-term cost synergies of $5 million from the deal.

If approved the acquisition would be implemented in June this year.

DWS celebrated its best results in three years for its full fiscal 2016 year, while SMS reported an "extremely disappointing" result with earnings down 45 percent and revenue falling 8 percent.