NEL, the electronic arm of steel group NatSteel Ltd, said it bought Singapore IT distributor ECS Computers (Asia) Pte Ltd, Malaysia distributor K.U. Systems Holdings Sdn Bhd (KUS) and its subisidiaries, and Thailand's The Value Systems Co Ltd.

The companies, with estimated combined sales of Singapore $200 million for 1998 and a network of 2,500 dealers, would be held under newly-incorporated ECS Holdings Ltd.

NEL would hold an 80 per cent stake in ECS Holdings.

The effective date of the merger is January 1999.

NEL chairman Ang Kong Hua told journalists and analysts at a briefing that the acquisitions were not bailouts.

"I would like to say that all these companies are profitable and have positive growth," Ang said, adding that none of the firms nor NEL need worry about taking up the slack from anotherpartner.

Explaining the reason for the purchases, NEL chief executive officer Chester Lin said:

"NEL will inherit a strong distribution network with potentials for further growth in Asia and across the world while ECS Holdings will now be part of a world class contract manufacturing group serving global technological leaders."

"Together we now have the opportunity to venture into the areas of product customisation that will require build-to-order and configure-to-order capabilities," Lin said.

The build-to-order business accounts for less than 10 per cent of the market today and this is dominated by Dell Computer Corp.

Managing director of the new group, Ng Hock Ching, said ECS Holdings was targetting to enter the build-to-order market by 1999 or 2000.

Growth markets for ECS Holdings included China, Australia and India in the near-term with America and Europe long-term targets, Ng said.

"So that in five to eight years time, we will be a global player," Ng said.

NEL would pay a total of S$42million for ECS Holdings in four years on a yearly installment depending on the performance of the companies.

"The S$42 million is based on the bottomline growth of 25 to 30 per cent. In a case where they don't achieve that, the amount would be less," NEL's chief financial officer Chay Yee Meng said.

The purchases, to be funded by NEL's own funds, would raise NEL's gearing by a total of 5.7 per cent from about 40 per cent now, Chay said.

He said the acquisition terms for the three companies were quite similar -- at 50 to 60 per cent of their net tangible assets and future payments to be based on profit performance and a price-earnings multiple within 6.4 and 9.6.