THE cautionary announcements issued by Altech and its parent, Altron, on Friday last week have sparked speculation that a consolidation into one listing could be on the cards.
On Friday, Altech and Altron issued separate cautionary announcements warning investors that they had entered into negotiations that may affect their share prices. Speculation is rife that Altron could once again put in an offer to buy out minority shareholders in Altech. Altron owns 56.48% of Altech.
Altech would not comment because it is in a closed period.
In 2007, Altron made a R4.8bn offer to buy out minority shareholders in Altech and technology firm Bytes to create a single point of entry into the Altron Group, headed by Robert Venter.
While the Bytes transaction went through, the Altech deal was thwarted by the Public Investment Corporation (PIC), which raised concerns about Altron’s lack of transformation. The PIC said it was against the deal because Altron was going to give it nonvoting shares, which would have disempowered "us in assisting Altron’s transformation endeavours".
Altron now has a transformation programme to address the elements of the black economic empowerment codes.
Irnest Kaplan, MD of Kaplan Equity Analysts, said there was a possibility that Altron could be looking at buying out minority shareholders. He said if that was the case, the timing was ideal, given that Altech’s share price was low compared to six years ago when Altron first attempted to buy out minority shareholders. The share price also saw some declines in the past few months.
"A couple of years ago the share price was flying high and it would have been (expensive) to do the deal," said Mr Kaplan.
He said the price-to-earnings ratio of both companies was similar, making a share deal possible. Moreover, Mr Kaplan said the market had expected this as Altron had said previously that, when the time was right, it would pursue the deal again.
Warwick Lucas, a fund manager at Imara SP Reid, said the deal might be on the table given the way the companies’ share prices had been behaving.
Mr Lucas said Altech’s weak financial performance in recent years could have led to Altron’s decision to put in an offer to buy out minority shareholders.
"The recent performance of Altech is nothing to be pleased about," he said.
In recent years, Altech has been reporting substantial declines in earnings because of poor performance from its East and West Africa operations, which have since been sold. It entered East Africa with the hope of taking advantage of the business opportunities brought by the undersea telecommunication cables.
Altech CEO Craig Venter said this month, after the company completed the sale of its East Africa business to Liquid Telecommunications, that although "our initial foray into East Africa was immensely successful, as shareholders are aware in recent years these activities have been problematic and unprofitable. I promised an effective solution and I believe the Liquid transaction opens a positive new chapter for Altech, in partnership with a group with proven expertise in its sector."
Altech jumped 7.3% to R38.59 on Friday after the negotiations were announced, and gained a further 0.41% to close at R38.75 on Monday, while Altron remained nearly flat at R21.70.