Altron and its subsidiary Altech are still engaged in talks, the outcome of which could have a material effect on the share prices of the two JSE-listed groups.
Though neither has said what the discussions are about, it’s widely speculated that Altron is preparing to make an offer to minority shareholders in Altech and to delist the company.
If it does so, it will be the second time in the past six years that it has attempted to take Altech off the stock market.
Altech, whose share price is at a multi-year low following the disastrous performance of its now-sold East Africa operations, owns well-known South African companies such as vehicle tracking specialist Netstar and mobile service provider Autopage Cellular.
Altech and Altron first cautioned investors about their talks on 22 March, igniting speculation of an offer to minorities. At the same, equities analyst Irnest Kaplan told TechCentral that there was a strong possibility that Altron wanted to consolidate Altech fully into the group. “This has been the intention for some time.”
Altron attempted to buy out Altech’s other shareholders in 2007, but the proposal was shot down by government’s pension fund administrator, the PIC, among others. It successfully bought out minorities and delisted another of its subsidiaries, IT group Bytes.
At the time, Altron CEO Robbie Venter explained that buying out the other shareholders in Bytes and Altron was meant to simplify Altron’s corporate and operating structure, improve the liquidity of the group’s shares and create a single point of entry for investors.
At the end of August 2012, Altron had R1,1bn in cash on its balance sheet, suggesting that if a deal is on the cards, the group may have to borrow money or make an offer partially made up of Altron shares. Altech’s market capitalisation was R3,6bn on Tuesday, its lowest level in more than five years.
Altron will report its annual results for the year to 28 February 2013 on Wednesday, which will provide a more up-to-date picture of its net cash position and its ability to self-finance a deal.
Altech has lost more than a third of its value in the past 12 months as it struggles with significant financial losses caused by problems at its now-sold East African and West African businesses. The East African business, in particular, contributed to the group’s R1,2bn operating loss for the 2013 financial year. Discontinued operations lost R1,6bn, dragging Altech deep into the red and prompting its CEO, Craig Venter, to forgo an annual bonus.
Despite talk that an offer to Altech minorities is on the cards, the group’s share price has failed to be buoyed, weighed down by the financial difficulties it’s in. On Tuesday, it was trading down by a further 2,2%, shortly after the cautionary notices were published on the JSE’s news wire. — (c) 2013 NewsCentral Media
