Altron and subsidiary Altech both cautioned their shareholders within moments of one another on Friday that they were in talks that could have an impact on the share prices of the two companies.
The move has ignited speculation that Altron could have another go at delisting Altech, which owns companies such as vehicle tracking specialist Netstar and mobile phone service provider Autopage Cellular. Another possibility, though seen as less likely by analysts, is that Altech is in talks with a view to making a major acquisition.
“It is a possibility that Altron wants to buy out Altech minorities and consolidate Altech fully into the group. This has been the intention for some time,” says equities analyst Irnest Kaplan.
Altron attempted to buy out Altech minorities in 2007, but the proposal was shot down by government’s pension fund administrator, the PIC, and other shareholders. However, the group successfully bought out minority shareholders in another listed subsidiary, IT services group Bytes, and terminated its listing on the JSE.
At the time, Altron CEO Robbie Venter said the acquisition of Bytes and Altech minorities would “further simplify the corporate and operating structure” of Altron, improve liquidity of Altron shares and create a single point of entry into Altron for investors.
Analysts point out that Altech is significantly cheaper than it was a year ago — the company has lost more than a quarter of its value in the past 12 months and half its value over three years — and so buying out minorities would prove cheaper that the last time around, assuming shareholders accept whatever offer Altron might put on the table.
Altech recently disposed of its East African operations in a complex deal that resulted in fibre-optic telecommunications specialist Liquid Telecom taking over the assets. As part of the deal, Altech has taken an 8,6% stake in Liquid, which operates fibre infrastructure in southern and central Africa.
Due to writedowns in goodwill and the carrying value of Altech businesses in both East and West Africa, Altech reported an accounting loss before tax in the six months to end-August 2012 of R485m.
Altech’s share price leapt higher by more than 5% on Friday after the cautionary notices were issued, suggesting markets believe a buy-out of minority shareholders could be on the cards.
On Monday morning, the share was trading unchanged at R38,56/share, above its 52-week low of R35,07, giving it a market capitalisation of R4,1bn. This means that without a premium being offered to minority shareholders — something that will almost certainly be necessary to get their buy-in — Altron would have to offer more than R1,5bn to acquire the shares it doesn’t already own.
At the end of August 2012, Altron had R1,1bn in cash on its balance sheet, suggesting that if a deal is in the works, the group may either have to borrow money or make an offer partially made up of Altron shares.
Kaplan says Altron could issue new shares for cash to pay for an offer, offer cash (some of it raised through loans), or issue shares to Altech minorities, or a combination of these.
He thinks now is an ideal time for Altron to make a move on Altech given that the two group’s price:earnings multiples are roughly the same. This means Altron can use shares “without doing damage to either party”.
Shareholders may not even demand a significant premium over the current share price, Kaplan says, given that Altech’s previous growth engine, East Africa, has been sold and that its big South African businesses such as Netstar and Autopage Cellular are “ex-growth”. — (c) 2013 NewsCentral Media
