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May 16, 2008

Altron still believes single listed entry point is the way to go

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Electrical engineering, electronics and technology group Altron – which reported record revenues of R20-billion and a record after-tax profit of R1-billion for its financial year ended February 2008 – would continue to pursue its stated ambition of setting itself up as the single listed entry point for shareholders by buying out the minorities in its JSE-listed subsidiary, Altech.

Last year, Altron withdrew its bid to acquire the 38,2% of the issued ordinary share capital of Altech it did not already own, follow-ing opposition from the State-owned Public Investment Corporation (PIC), which is a key Altech shareholder.    

However, speaking at a presentation held at the JSE auditorium last week, CEO Robert Venter indi-cated that it was still keen on pursuing a simplification of the group’s structure, indicating, though, that it was a “process, not an event”.

Speaking separately to Engineer-ing News, Venter said that it was continuing to engage on the issue internally and externally, including with the PIC, as it was convinced that significant benefits would flow both for the company and its shareholders.

The main benefit would be in creating an environment where capital could be allocated from the centre, with the current situation, where most of its R2-billion in cash resided within Altech, limiting efficient capital allocation.

In fact, as of year-end, R1,6-bil-lion worth of that cash resided within Altech, which was led by Venter’s brother, Craig Venter – some of that money had subsequently been spent on three acquisitions concluded post year-end.

Venter also told Engineering News that the initial rationale for the proposed buyout of minorities at both Bytes Technologies (which was successfully completed last year)and Altech (which was thwarted) was to enlarge the scale of the single entry point to that of an Alsi 40 company.

Such scale was perceived as especially necessary to attract interest from international investors and investment funds.

He indicated that the main constraint to achieving the goal remained that of convincing the PIC, while ensuring that any ensuing deal did not lead to an erosion of the Venter family’s controlling interest in Altron.

The other proviso was to achieve a transaction without overly leveraging the company’s balance sheet, with Venter insisting that it had no intention of raising a “couple of billion rand” simply to buy out minorities.

“So, it might take a little longer to generate that cash internally and we will then review the situation,” he added.

When Venter took over at Altron in 2001, the group had six listed entry points, which had been reduced to two following the buyout of the Bytes minorities.

Earlier in the presentation, it was indicated that the timing could involve anywhere between six months and three years, with Venter adding that the board had again discussed consolidation options at its recent meeting.

However, he stressed that nothing formal was on the table.

“All options will be considered,” Venter added, stressing that these would continue to take account of the company’s performance, the relative share price values, and the impact a transaction would have on Altron
shareholders.

In the meantime, Altron would be keen to buy back its own shares as well as buy more of Altech.

However, it had only limited leverage to do so and it would, thus, seek additional authority to do so at its next annual general meeting.

“Some of our best buys have been either to buy back our own shares, or to buy out partners in businesses we already own and know well,” Venter concluded.

Edited by: Martin Zhuwakinyu
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