Allied Electronics Corporation Ltd. (ATN) is probably discussing terms to take full control of Allied Technologies Ltd. after both companies said last week they were in unspecified talks, two equities analysts said.
Altron and Altech, both based in Johannesburg and run by brothers, issued separate statements on March 22 saying they had “entered into negotiations which if successfully concluded may have a material effect on the company’s securities.” They advised shareholders to “exercise caution” until “a full announcement is made.” Neither gave further details about the discussions.
Altron already owns 56 percent of Altech, according to data compiled by Bloomberg, while Chief Executive Officer Robert Venter is the brother of his Altech counterpart Craig. Altron tried to buy the Altech shares it did not already own in 2007, only for the takeover to be blocked by the Public Investment Corp., which oversees the pension funds of South African government workers.
“The announcement is very cryptic,” Dirk Noeth, electronics analyst at Avior Research Pty Ltd, said in a phone interview from Cape Town. “It does seem that they are are making an offer again.” Altron may buy out minority investors and delist Altech, Johannesburg-based TechCentral said today, citing equities analyst Irnest Kaplan.
Altech declined 1.2 percent to 38.30 rand by 4.34 p.m. in Johannesburg, giving it a market value of 4 billion rand ($447 million). The company advanced 7.3 percent when the companies issued their statements last week. Altron stock gained 2.2 percent to 20.90 rand, giving it a market value of 7.2 billion rand.
“This is market speculation which we unfortunately cannot comment on as we are currently in a closed period,” Altron CEO Robert Venter said in an e-mailed response to questions.
Altech’s Group Executive for Marketing, PR and Communications Shenanda Janse van Rensburg declined to comment.
A takeover “makes sense from Altron’s point of view,” Drikus Combrinck, a portfolio manager at Pretoria-based PSG Konsult Ltd., said in a phone interview. Other shareholders may be willing to cede their holdings “for a 15 to 20 percent premium over the three-month share price average.”
That would put the offer to minority shareholders at as much as 46.14 rand a share, according to Bloomberg calculations.
The structure of the takeover would probably be different from the all-share bid tabled in 2007, according to the analysts. “It is going to be a tough deal for Altron to push through especially if they plan to issue shares,” said Avior’s Noeth. “Shareholders will not want preference shares but voting shares.”
Altron and Altech are both holding companies for electronics and telecommunications operations.
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